Strange Austerian Fears

Every once in a while you come across some feature articles and letters to the editor in the Central Virginian which come from so far out in left field, disconnected from any contextual references or for that matter reality- that they leave you thinking “huh.”

The first was the unattributed “Dough not Rising” article of 1-30-14 which was buried on the very last page which talked about a business owner’s perspective on why his business went under.

While I found many of Mr. Alessi’s statements in that article not particularly accurate; he did identify one issue which affects us all, the lack of support for local businesses at the county and town level. Pointing out that in absence of such support that many new and existing businesses will have little choice but to concentrate their efforts high income parts of the county, like Lake Anna to the detriment of the towns of Louisa and Mineral.

The second was a lengthy letter responding to that article by Fred Byrd (2-6-14) titled “It’s not the lack of economic stimulus; it’s the customer’s choice.” His letter to the editor was unique in several respects, starting with being several hundred words over the Central Virginian’s 500 word limit.  In that regard, the CV’s application of their stated guidelines leaves something to be desired, and is as they say – another story.

I found Mr. Byrd’s comments to be typical of most local conservatives within the business community; overly fond of pulling hard on the Horatio Alger boot strap, claiming that when left alone…”businesses create their own economy,” and that “…nothing beats a positive attitude.”

If I didn’t know better I could have sworn I had been transported into a time warp into the last decade and administration and just heard someone from the Bushwacked era, claiming “we create our own reality.”

Those comments might have been accurate for his tractor businesses considering they enjoyed decades of virtual monopoly status being one of the few dealer/service providers in the region. But that same logic for success doesn’t hold true for most other businesses operating in this county.

His implication that if Mr. Alessi had simply tried harder and had a more positive outlook, things would have been different is magical thinking, reflecting a fundamental lack of understanding of economics and particularly the dynamics behind long term recessions. Failing to grasp the primary reason that Maria’s New York Deli and Pizzeria went out of business was because people don’t have any money to spend, not because they chose to go elsewhere.

Such misconceptions about how the free market works are not uncommon amongst local conservatives. The all too obvious fact that people around the country and here in Louisa County simply don’t have enough money to spend and how it affects businesses and the economy is just beginning  to be covered by the main stream media.

Like in the following article from the New York Times : Another related topic which is also starting to make the rounds in the media are the devastating effects that every growing social inequality has on our economy and particularly on small businesses.

One of the most noticeable aspects of this rising inequality has been the marked increase in long-term unemployment which is now at record levels. Historically, the long-term unemployed — defined as those who have been out of work for 27 weeks or more — has been between 10 and 20 percent of the total number of unemployment. Today the number is nearly 36 percent.

Now if you’re thinking the typical long-term unemployed person in American is one of “those people” — nonwhite, poorly educated, etc. — you would be wrong. According to research by the Urban Institute’s Josh Mitchell, half of the long-term unemployed are white. While college graduates are less likely to lose their jobs than workers with less education, once they do they are much more likely to join the ranks of the long-term unemployed. And workers over 45 are especially likely to spend a long time unemployed.

In a weak job market long-term unemployment tends to be self-perpetuating, because employers in effect discriminate against the jobless. Many people have long suspected that this was the case, and last year Rand Ghayad of Northeastern University provided a dramatic confirmation. He sent out thousands of fictitious résumés in response to job ads, and found that potential employers were drastically less likely to respond if the fictitious applicant had been out of work more than six months, even if he or she was better qualified than other applicants.

This suggests is that the long-term unemployed are mainly victims of circumstances — ordinary American workers who had the bad luck to lose their jobs at a time of extraordinary labor market weakness. Once that happened, their very unemployment makes it that much hard to find a new job when there are three times as many people seeking jobs as there are job.

Republicans justify refusal to help the unemployed by asserting that we have so much long-term unemployment because people aren’t trying hard enough to find jobs, and that extended benefits are the reason for that lack of effort.

People like, Senator Rand Paul — like us to believe that they’re being tough-minded and realistic.  When in fact, they’re peddling a fantasy at odds with all the evidence. For example: if unemployment is high because people are unwilling to work, this would reduce the supply of labor — so why aren’t wages going up?

The more their economic doctrine fails — remember how the Fed’s actions were supposed to produce runaway inflation? The more fiercely conservatives continue to cling to that doctrine. More than five years after a financial crisis plunged the Western world into a quasi-permanent slump, making nonsense of free-market orthodoxy, it’s hard to find a leading Republican who has changed his or her mind on — well, anything.

In their world view being unemployed is a choice, something that only happens to losers who don’t really want to work. One often gets the sense that contempt for the unemployed comes first, that the justifications for their tough policies are after-the-fact rationalizations.

The result is that millions of Americans have been written off — rejected by potential employers, abandoned by politicians whose fuzzy-mindedness is matched only by the hardness of their hearts

American’s collective economic confusion comes from rejecting the ideas of the economist, John Maynard Keynes which encouraged government intervention and provided the intellectual ballast for the New Deal. Instead, they are hell bent on following the principles of the anti-government economics of Austrians Friedrich A. Hayek and Ludwig von Mises.

Hayek and Mises perceived little difference between democratic governments which used their power to plan against recessions and dictatorships that did the same thing. In their view, the policies of Franklin Roosevelt would lead down to what Hayek called the “Road to Serfdom” and were little removed from the policies and actions of Hitler or Stalin.

One of the clearest indications how pervasive this mindset is and how widely accepted it is amongst Conservatives in this country came during the 2012 Republican presidential debates when Rand’s father, Ron Paul, triumphantly announced: “We’re all Austrians now!

At the time I sure many Americans were probably scratching their heads and wondering: Why do we want to be Austrians? They live in a nice country with stunning mountains and all, but aren’t we perfectly happy to be Americans?

To put Mr. Paul’s comments in context, he was trying to put a conservative Hayek-ing spin  on a line famously attributed to President Richard Nixon that “we’re all Keynesian’s now,”  which one of his supporters thought would be a good sound byte. He went on to comment that back in the days of Nixon , even Republicans “accepted liberal economics.” Those days are long gone.

His words are worth remembering because he has a point. To a remarkable degree, our politics are haunted by the principles of Austrian economics and their sweeping hostility to any actions by government that would keep downturns from becoming even greater catastrophes or to promote economic fairness.

This is an enormous  intellectual, political and financial policy change. When Nixon declared his allegiance to Keynesianism, he was reflecting an insight embraced across partisan lines that Government’s exertions, both during the New Deal and throughout World War II, helped rescue the U.S. economy from the Great Depression.

Postwar Keynesian approaches, including the Marshall Plan, unleashed an economic juggernaut across the Western world, allowing secular and Christian parties of the moderate right and social democratic parties on the moderate left to create free societies and regulated market economies which delivered the goods — literally as well as figuratively — to tens of millions throughout Europe and the rest of the free world.

Those who follow the philosophies of Hayek and Mises would have us forget this history or rewrite it beyond comprehension. They would also have us overlook that Hayek’s “own historical justification for apolitical market economics was entirely wrong,” Hayek believed, that “if you begin with welfare policies of any sort — directing individuals, taxing for social ends, engineering the outcomes of market relationships — you will end up with Hitler.

A early precursor to Goodwin’s law if you will, an Internet adage which states the longer an an online discussion (regardless of topic or scope) goes on, sooner or later someone will compare someone or something to Hitler or Nazism.

But to the contrary, postwar initiatives along Keynesian lines are precisely what prevented both the resurgence of fascism and the collapse of Western Europe into communist hands. Keynesian steps also kept the whole world from going into a much deeper and more disastrous slide after the financial crisis of 2008.

Yet today’s conservatives and much of the American public are in thrall to Austrian thinking, and this helps to explain much of what is going on in Washington. Broadly popular measures such as raising the minimum wage and extending unemployment insurance — normal, bipartisan legislation during the Keynesian heyday — are blocked on the assumption that people are better off if the government simply keeps its mitts off the market.

It is now difficult for Congress to pass even the kind of spending that all sides once saw as necessary public investment in transportation, infrastructure, research and education. Anything government does beyond enforcing contracts and stopping violence is reflexively denounced as the first step toward dictatorship.

While Ron Paul’s comments are typical of today’s pseudo-intellectual libertarian’s, he does deserve credit for unmasking the true source of gridlock in Washington: too many conservatives operate on economic theories which history and practice have discredited. And what passes for liberal Democrats have been more than reluctant to call the ideological right out on this.

I suspect because they never fully got over the shell shock of their losses Reagan and Bush II years and have developed a strange aversion to arguing about or standing for anything. When it comes to government policy, the Austrian economists have paved the road to paralysis.

Speaking of gridlocked ideas; Mr. Byrd’s lengthy commentary offers one last twist of the conservative knife, saying that if Mr. Alessi doesn’t like how things are done here in Virginia he’s free to take his New York “our pizza is the best in the world” attitude back to New York State and suck off of their socialistic teat.

Such a compulsion to resort to mean spirited knee jerk reaction is the strongest indicator that something is seriously wrong with his argument. Exactly what that might be,  I leave to the imagination of our readers.

Jon Taylor

Farrell promotes ALEC’s agenda

Below is a section taken directly from the latest “legislative update” email from our 56th District Delegate Peter Farrell. This update was sent exclusively to Republicans on is mailing list – not to the remainder of his constituents.

Medicaid Expansion

Medicaid expansion was a pressing issue last year and it’s an even more consequential issue this year. My office has received several inquiries from constituents on the status of Medicaid expansion in Virginia and where I stand on the issue. I believe there are multiple reasons why expanding Medicaid this session may not be the best choice for Virginia.

Under the Affordable Care Act (Obamacare), Medicaid could be expanded to cover an additional 400,000 new recipients in the Commonwealth. The Federal Government has promised to cover 100% of expansion costs for the first 3 years, and 90% after that.

In 2013, the General Assembly established the Medicaid Innovation and Reform Commission (MIRC) to review, recommend and approve innovation and reform proposals affecting Virginia’s Medicaid system. This Commission provided for legislative oversight in the process.

MIRC has held eight public meetings and worked over the last year to compile information on the current program’s operations and costs. In the latest MIRC meeting, Secretary of Health and Human Resources Bill Hazel reported 30% of all healthcare spending in Virginia is waste. Waste is primarily considered to be unnecessary services, excessive administrative costs, inefficient delivery services, and fraud. It’s sobering to think that 30 cents of every taxpayer dollar spent on healthcare is wasted.

Attorney General Cuccinelli recovered $200 million in Medicaid fraud settlements in 2013 alone. This highlights the potential level of loss to Virginia every year.

The House Republican Caucus believes expanding a broken Medicaid system is unwise.   Currently, Medicaid costs the Commonwealth almost $9 billion a year and consumes about 22% of our general fund budget. It is the fastest growing part of our budget, growing at an average of 8 percent annually. Expansion could potentially cost an additional $1 billion a year if the federal government doesn’t live up to their promise to pay 90 percent of the cost.

Historically, we have seen the actual costs far outpace the original projections for nearly every major entitlement program in the last 50 years. When Medicare was originally created in the 1960s, it was projected to cost $12 billion annually by 1990. In 1990, Medicare actually cost $110 billion. Today it’s over $500 billion.

What happens when Medicaid is no longer 22% of our budget, but instead 26% or 27%? Medicaid expansion without reforms would require drastic cuts to other core functions of government such as education, transportation, and public safety, or increased taxes on hard-working Virginians.

In addition, nearly 1/3 of all doctors presently will not see Medicaid patients. Medicaid expansion would result in decreased access to general practitioners for low-income Virginian families. Ultimately they’ll be forced into emergency room care. This means more expensive healthcare bills and decreased individualized, personal care.

Fundamentally, that’s why the decision to expand Medicaid requires serious reflection from the House of Delegates. We legislators have a fiduciary duty to you, the people of Virginia, to balance our budget every year. I cannot support expanding Medicaid before we have ensured that it will not grow unsustainably, decrease access to and quality of care, and be plagued with widespread waste and fraud.

House Republicans have called for a comprehensive financial and operational audit of Medicaid by the Joint Legislative Audit and Review Commission (JLARC), the oversight agency for the Virginia General Assembly.  JLARC was established to evaluate the operations and performance of state agencies and programs. We believe a JLARC audit will provide insight on several intricacies of the program, including the “Fee for service” system that covers our high volume/high-cost Medicaid services and the long-term care program for the elderly and disabled.

Ultimately we want to assess the challenges and make recommendations on how to make Virginia’s Medicaid system more beneficial for everyone in the Commonwealth. Citizens of the Commonwealth deserve a more efficient, effective, and accessible Medicaid system.

Such blatant misrepresentations and outright lies deserve the strongest response. It should be noted that Delegate Farrell’s survey was highly misleading, biased, and uninformative. Its statistical validity suspect considering the leading nature of the questions, and that it was comprised exclusively of conservatives already on his mailing list.

However, the extent of misrepresentations and lies which followed in his next email message took the survey’s misdirections to an entirely new level.  Some excerpts include: ….Secretary of Health and Human Resources Bill Hazel reports that 30% of all healthcare spending in Virginia is waste … and the House Republican Caucus believes expanding a broken Medicaid system is unwise.

Coupled with this outright lie; Medicaid expansion would result in decreased access to general practitioners for low-income Virginian families, along with….more expensive healthcare bills and decreased individualized, personal care. The only accurate statement was “…the House Republican Caucus believes…”

Somehow Delegate Farrell, transformed this disingenuous statement “….30 % of all healthcare spending in Virginia is waste” into implying it accurately reflects the level of Medicaid waste, when if fact,  Medicaid waste is somewhere in the low single digits.

However, that figure would be in the right ballpark figure if one were describing the amount of waste in  private health care in general, particularly when it comes to the administrative over head that existed in pre-ACA health insurance costs.

Delegate Farrell is using a rhetorical technique better known to the general public as comparing apples to oranges, trying to deceive his constituents, thinking they won’t know the difference between the two.

Finally we come to what will be the first of many outright lies about Medicaid expansion in Virginia. Your claim that it will cause “…low income Virginians to loose access to health care…”, albeit carefully qualified to read “reduce access to general practitioners” is not supported by any factual data I’m aware of.

Such a lie is far more likely to have come from the directives of Speaker Howell and his ALEC (American Legislative Exchange Council) based legislative agenda than any research you or your staff might have conducted.

A more accurate assessment of the situation here in the Commonwealth and around the country would be that not expanding medicaid will cause thousand of unnecessary deaths each year.

Delegate Farrell’s duty to the Commonwealth includes; ensuring that all citizens have adequate access to affordable health care so that they may live healthy and productive lives, contributing to the general welfare and ensuring the continued prosperity of future generations.

He and his party are attempting to hide behind the fictitious fig leaf of fiduciary responsibility is nothing more than rank hypocrisy and moral cowardice in the face of clear and present harm to the citizens of the Commonwealth.

Jon Taylor