THE BLOG
02/22/2009 05:12 am ET | Updated May 25, 2011

Right Hook

The ink is not yet dry on his Inaugural Address, and the sober but inspiring words breathed through the chill of a January afternoon and a collapsing economy have not yet entered the historic pantheon where they one day may reside. The afterglow of parties held long into the Inaugural night is not yet extinguished, as revelers recall their own celebratory dances with history and more than a few beers. And more or less as a bonus, we found out that The One can't just speak.

He can also dance.

Which is good.

Because he's going to need all the moves he has.

Lost in the banner headlines and generally favorable reviews in this post-Inaugural moment is the right wing's game plan for return. It's not easy to find. George Will is lauding President Obama's demure but no less direct admonition in his speech Inaugural Address that we grow up as a nation and realize there are no free lunches. Put childish things aside, says the President quoting the Bible, and Will reads that as a not so subtle demand that everyone realize Washington cannot be all to all. Then Andrea Peyser of Murdoch's NY Post waxes positively eloquent from a bar stool in a working class part of New York City, telling erstwhile populist conservatives that, hey, the new guy gets it. With his praise for "the doers," a "graceful" and "humble" Obama won over the heart of a self professed "fierce skeptic" who, as she put it, "didn't vote for him . . . trust him . . . [or] support him."

Wow. Maybe this whole Red/Blue thing is about to go the way of the dinosaur.

Then I read Dick Morris.

And my post-partisan love affair with the new bi-partisan bubble was burst.

Morris is never subtle and his post-Inaugural missive did not disappoint. His headline had to be music to Sarah Palin's ears -- "The Obama Presidency: Here Comes Socialism." Underneath it, Morris catalogued the forced march to European style socialism he envisions us making over the course of the next four years. It starts with Obama's emulation of the last President who ostensibly took us on this trip -- FDR. According to Dick, Obama will rescue the banking system "by nationalizing it," with the government getting preferred stock in exchange for troubled assets, and then follow up with a wish list of spending programs running the gamut from alternative energy sources and technology enhancements to school renovations and infrastructure repairs. This will bust the budget at precisely that point in time when tax credits and other middle class tax relief measures have expanded the group of non-federal tax paying citizens to a "clear majority of the American population," leaving only the well off (or, as Morris puts it, Republicans) to shoulder the tax increases needed to replenish the treasury's deficit laden coffers.

Meanwhile, in the world of Obama created by Morris, the imbalance between our demand for health care and the supply of available doctors, nurses and facilities will lead to price controls and rationing, the inevitable result of the President's supposed unwillingness to let medical prices increase so that investments can be made to increase supply. On the political side, Morris asserts that illegal immigrants will be given a "path the citizenship" and labor will get a check off system, the combined effect of which will be to turn red states like Texas into bastions of blue while union households (and therefore Democrats) proliferate as membership rises. Morris imagines the consequence of this putative parade of horribles will be that "Obama's name will be mud by 2012 and probably 2010," following which the "Republican Party will . . . regain much of its lost power." But the socialist die will have been cast. And it will be "too late to reverse."

It's a shame this sort of stuff is advertised as non-fiction.

Because Morris's diatribe mixes in equal parts deceit and conceit. As well as the usual dollop of fear.

The deceit is both historic and contemporary. Like most conservative revisionists, Morris believes that Roosevelt's New Deal was an economic failure. Designed to cure the Great Depression, FDR's program lowered unemployment from 23% when he was inaugurated to about 13% in 1937. Then it went back up to 17% in 1938, a sort of second Depression, and never got below 15% before World War II. Morris claims that Roosevelt's "policies of over regulation generated such business uncertainty that they triggered a second-term recession." Hence, Q.E.D. (it is demonstrated, for all you non-Latin scholars who weren't educated by the Jesuits) say the conservatives. The New Deal failed.

There is only one problem with this account.

It is wrong.

The New Deal didn't fail to end the Depression. It just failed to continue and the Depression was made worse as a result. FDR wobbled and for a time threw away his Keynesian compass. In his heyday of New Deal spending and fiscal stimulus, Roosevelt brought the unemployment rate down by ten points (which we would take in a heartbeat today). Unfortunately, after being re-elected in 1936, rather than increasing the stimulus, he tried to balance the budget and raised taxes to do so. This triggered a new recession, the child of pandering to conservative shibboleths that budgets must be balanced at all costs. What could have continued was thus abbreviated, and the country did not fully recover until the mother of all fiscal stimulus and spending plans was passed, which we know today as World War II.

Nor did FDR's legislative accomplishments create the kind of business uncertainty that led to a renewed recession. There was nothing uncertain about what the politicians had wrought, unless the captains of industry and finance in the '30s saw uncertainty in a hoped for return to the halcyon days of dog eat dog laissez faire where the aged and widows were poor, workers were broke, and gains from any productivity always migrated to the top. In fact, after World War II ended, there was real fear that a new Depression would emerge. And that was stopped by the GI Bill (which put cash in the pockets of veterans, educated a generation, and laid the groundwork for the productivity gains of the '50s and '60s), as well as the unionization FDR had heralded and Morris seems to lament. There is a reason the middle class emerged in the wake of the war. It is because the previous post-industrial imbalance between labor and capital had been addressed to some extent and productivity gains were thus more evenly distributed across the population.

Having distorted history, Morris then tries to do the same to Obama's program. He begins with the claim that the President intends to "nationalize the banking system," which is an odd charge, especially in light of current realities. What Morris posits is that the government will finally get around to buying up (or insuring the banks against the losses from) toxic assets, principally bad mortgage loans and the paper created to securitize them. In exchange, the government will get preferred stock in the banks, which is just a fancy term for an IOU. Like any loan, it will bear interest. Because, however, the assets are so toxic and the debt will be so large, Morris claims that upon recovering their positions the banks will essentially be able only to pay back the government and the common shareholders will in effect get nothing. When the common stockholders realize this, they will flee. And voila, the government will in effect own the banks, which will then have been "nationalized."

"Nationalization," of course, is always a bad thing to true conservatives. It is basically their polite way of calling you a socialist . . . or communist. From time to time, conservatives in fact nationalize things. But usually they call it a national security emergency or a war of some sort. Back in the '50s, the conservatives helped "nationalize" American transportation by building the interstate highway system. But they called it the National Defense Highway Act and told us we needed the interstates so tanks could easily roll from Kansas to New York in case the Russians invaded.

In any case, my first reaction to the nationalization charge was "So what." Then I realized this is exactly what Morris wants us east coast liberal Obama lovers to say. So my second reaction was to wonder what he would propose as an alternative. The government could always take the toxic paper in exchange for nothing.

That would save the common shareholders.

But screw the American taxpayer.

Which is probably not a good idea.

Every other preferred stockholder gets a dividend on what amounts to a quasi-loan to the corporation whose stock he has purchased. Why should John Q. Public be any different? The answer is he shouldn't.

The other answer is that Morris is overwrought . . . by a long shot. The notion that common shareholders in banks with toxic assets will be wiped out is neither certain nor likely. The whole purpose of recovery is to allow the institutions to function while they work off the debt. It may take awhile, but if the banks recover, so will the common shareholders, sooner or later. As the debt is lowered, the common shares will become more valuable. Thus, far from the Obama plan (assuming Morris's version is the one ultimately adopted) resulting in an inevitable "nationalization" of the banking system, the contrary is likely to be the case.

Now to the conceit.

The assumption throughout Morris's piece is that Obama is incapable of making hard choices. He will ration health care because he will not permit medical inflation. He will legalize illegals and unionize the workforce merely to insure the success of Democratic Party candidates. The first charge, however, is simply the result of a false choice. And the second assumes there are no good reasons for the policies, in which case the motive must merely be political . . . and cynical.

Nothing about this President, however, justifies these claims.

The supply/demand imbalance in our health care system today is largely a function of three flaws. First, the present system disincentivizes participation. We have encouraged insurance companies to cherry pick, the result of having allowed health administrators to serve as gatekeepers in a system of managed care that saves money by denying coverage and excluding claimants. Whether we get to universal coverage via a single payer system or by mandating that everyone have insurance, either approach will pump more money into the system and allow more investment in doctors, nurses, hospitals, equipment and care.

The conservative approach -- which generally relies on tax deferred medical savings accounts (MSAs) coupled with provisions for catastrophic insurance -- would disincentivize participation on an even larger scale because it would decrease the pool of those who pay into the system on a regular basis. The key to a sound insurance system is to get as many healthy people as possible into the pool. MSAs are only as valuable as the incomes which fund them, which means that the young (and healthy) or middle aged but not very well off are likely either to opt out or participate at levels insufficient to generate sufficient cash to cover Morris's investment gap; at the same time, an insurance regime limited to catastrophic care creates a dangerous incentive to avoid preventive care in favor of later catastrophic care, which is neither good for America's health nor particularly helpful in reining in medical inflation.

Second, the health care "market" is not free and hasn't been since World War II, when wage controls forced employers to give employees health insurance (which was then cheap) in lieu of prohibited cash. When the health care market was free, people did not get care and died as a result. That is a policy we could return to, and without admitting it, Morris and his followers seem to get there by default. Nevertheless, assuming we believe minimal care is a right people enjoy, not a commodity they can avoid, the market in health care is like the market in electricity. It has to be organized efficiently on the assumption that everyone needs it, all should get it, and we need not go broke providing it. Part of the way to do that, and this is the third problem with the present system, is that we have to use technology effectively, computerizing record keeping and generating user friendly outcomes based data bases so that providers everywhere can have access to the best research and treatment protocols and administrators are not endlessly duplicating patient data and billing files.

Morris,of course, mentions none of this. Instead, he avoids the problems, flinging around words like rationing and price controls with an abandon that in the end reveals him for what he is -- a health policy Wizard of Oz. There is nothing behind his curtain.

Ditto on illegal immigrants and labor policy. With Morris, it's all fear and no fact. In his most responsible hour last year, John McCain recognized that the present immigration system is a joke. Our borders are porous; our outrage is hypocritical; and our policy is unfair (both to those who are here and those who want to be). One need not be in favor of rationalizing that system merely to increase the votes obtained in the next election. McCain certainly wasn't motivated by that, and it is unfair to assume Obama is either.

The same is true of labor reform. In the '30s and beyond, unions were critical to equalizing the economy's distribution of productivity gains and making the middle class possible. Since the conservative ascendancy of the late '70s, there have been enormous productivity gains but they have by and large gone to the top 10%. If labor is strengthened and collective bargaining re-emerges as a real economic force, the likelihood is that any future gains will be distributed as they were when the Greatest Generation came of age, not as they were when that generation began to die.

When I listened to him at the Inauguration, I heard a President Obama inviting us to change, warning us that change would not be easy, advising us that old approaches and resentments would be dangerously counterproductive, and asking -- as had his 16th predecessor -- that we unleash the "better angels of our nature."

Dick Morris apparently missed that show.

Too bad.

'Cause this guy can dance.

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