“The capitalists,” the apocryphal quotation goes, “will sell us the rope with which we will hang them.” Vladimir Lenin, as far as we know, never actually said that, but it appears pretty close to the mantra of the gang currently in the White House.
But, in the Obama era, the saying needs a few amendments. First, it’s the lobbyists, not the capitalists, actually selling the rope. And it’s not the current CEOs, but their employees and successors, who will be hanged.
The first tweak matters because of what’s called the “principle/agent problem.”
Imagine USACorp, which wants to be utterly left alone by government (these days, I understand this stretches the imagination). It hires K Street Partners to lobby against regulations.
If the lobbyists get government totally out of USACorp’s hair, USACorp might thank K Street Partners and terminate the contract. On the other hand, if Congress reached its hands just a bit into USACorp’s business, K Street Partners would have job security. So K Street Partners (the agents) have different interests from USACorp (the principle).
Something like that may be going on in health insurance, an industry represented by Karen Ignagni, president of America’s Health Insurance Plans.
The current House bill would force every American to hold health insurance and require most employers to offer it — a sweet deal for insurers. Congress would lard on taxpayer subsidies for insurance.
Insurers, in return, would have to accept all applicants — and all at the same price, regardless of health. Also, in the current House bill, insurers would compete against a government insurer, the so-called “public option.”
Insurers will profit from the House bill, especially if they can weaken the government option. But they ought to take a lesson from the plight of private student lenders.
In 1965, President Lyndon Johnson and a Democratic Congress passed the Higher Education Act, which created a program of subsidized student loans. Private student lenders, for the past 44 years, have been pocketing taxpayer money.
Taxpayers, at various times, have paid the banks interest on the loans of current students, foot the bill when graduates defaulted and even made up the difference between a market rate and federally fixed low rate.
In 1993, President Bill Clinton and a Democratic Congress created a robust Federal Direct Loan Program, in which the Department of Education began issuing its own subsidized loans, competing directly against private lenders.
In 2009, Barack Obama and a Democratic Congress are advancing a bill, HR 3221, to kill the entire subsidized student loan business and extend direct federal loans to all student borrowers.
It looks like a 45-year seduction will end in murder. Philip Klein, writing for the conservative American Spectator, put it well:
“It’s hard to shed many tears for Sallie Mae and other providers that are able to make profits by earning interest on federally backed loans, while all of the risk is ultimately absorbed by the American taxpayers. So, there is a certain logic to saying, if the federal government is backing the loans anyway, they may as well make them directly rather than prop up an intermediary.”
In 2025, when a newly sworn-in President Gavin Newsom looks at the health insurance industry — subsidized up to its neck, benefiting from federal mandates that require us to buy their product and protected from competition by regulations — and decides that the modest “public option” should simply be expanded to a single-payer, government-run system, should free-market types rise to defend these subsidy-suckling regulatory robbers?
Congress will kill the private insurers some day, but between now and then, the companies will profit handsomely and easily. Are the HMO lobbyists and CEOs buying short-term profits at the price of their long-term survival? Are they selling the rope with which government will hang them?
Again, it depends on who “they” are.
By the time Aetna’s neck is in the noose, the current CEO will be retired in Aspen, Colo., and will have cashed out his Aetna options.
And the lobbyists? Well, if Karen Ignagni is still on K Street, she’ll get one last big pay day from the fight to ward off the nationalization of health care, which should finance her retirement to the Hamptons.
Big government typically spells profit for the biggest businesses. It always spells profit for lobbyists. The business’s profit may only last for the short run. But, heck, in the long run, we all sell our Aetna stock.
Timothy P. Carney is The Washington Examiner’s lobbying editor.
