Ruminations, November 3, 2013
Ted Cruz was wrong. Ted Cruz was right. Could he have been both?
-- Senator Ted Cruz (R, TX) is one of the best known senators in the country. And that’s good and bad.
From a political point, it’s bad. Politics is the art of the deal and, while Cruz has taken what he believes are principled stands; he has hurt himself and his party by his failure to take politics into consideration. Rightly or wrongly, Cruz is seen as the principal architect of the government shutdown. He believed that the shutdown would have a minimal effect on the public but seemed to forget that the mechanism for the shutdown was in the opposing political party’s control – along with a sympathetic press. Even if Cruz was right, the American perception was that he was wrong.
Is Cruz politically dead? Has he committed political suicide? To hear some experts, he’s politically deader than a doornail (although I don’t know why a doornail is the ultimate expression of deadness). Apparently he has, at least for the short term, hurt the Republican brand.
But maybe Cruz is not dead; maybe he’s trending upward. Cruz has claimed that the Affordable Healthcare Act (AHA, aka, Obamacare) will cause "enormous harm" to the economy. It hasn’t yet but might it?
Technical problems. The most apparent problems with AHA have, so far, to do with the Web site. As the system goes, access through the Web site should be the easiest part of the system. More difficult parts would be providing security, checking eligibility, subsidizing payments for those entitled to subsidies, etc. Here, in the scope of systems development, is something that should give us pause: There are hundreds of thousands of Web sites in operation and building one should be almost as easy as falling off a log. The fact that there are monumentous problems on the easy part of the system indicates that there are bigger problems to come.
Of course, it may be that only the Web site software had problems and everything else will work out splendidly – but don’t bet on it. As pointed out in a previous column, the book Mythical Man Month set warning flags (http://www.examiner.com/article/the-predictable-failure-of-obamacare-s-w...). Furthermore, a system of this magnitude that forgoes end-to-end testing of less than six months is extremely risky.
Enormous harm to the economy. Here is the elephant in the room. People are signing up for ACA – but who? Here we have only rumor. Apparently, the people who are signing up are older and sicker people -- those who cannot afford health insurance and are receiving subsidies through Medicare.
Now providing free health care for those at high risk may be a noble and moral thing to do. But, in the world of economics, there is no free anything. How do we pay for this largess?
One of the suggestions for modifying ACA would be to extend the enrollment period so that healthier people, who were not initially motivated to sign up have more opportunities; the thinking goes that those people can help fund the ACA while not drawing down benefits. This is not a good idea. While it might be more appealing to the healthy folks who have not enrolled in ACA, there is still no incentive for them to enroll. As a result, the funding of the plan will continue to be underfunded making ACA even more economically precarious. (Interestingly enough, this is one idea that has some bi-partisan support.)
Take a deep breath. This could be enormously destabilizing to the insurance market as a whole. What then? Causing the collapse of the insurance market would be a calamitous economic disaster.
Tax implications. Chief Justice John Roberts, in his ruling on the ACA, decided that the penalties for not purchasing ACA were a tax and therefore constitutional. However, there may be another constitutional challenge coming. If, to avoid the debacle of technically unavailable product and the extended enrollment period, can we constitutionally tax someone for failing to purchase an unavailable product? Probably not.
At this point, with regard to the ACA, the Internal Revenue Service has been defanged. The only way IRS can come after non-conforming taxpayers who owe money because they did not buy insurance, is to withhold refunds. If you are not due a refund and refuse to pay the extra “tax,” there is little the IRS can do – there is no penalty or criminal prosecution.
Political implications. If enrollment is delayed or (less likely) the entire plan is postponed, then it is likely that the new (much higher) rates will be instituted to make up for the funding shortfall. These new rates are scheduled to be published in the September-October 2014 period – just in time for the 2014 elections. This is not the scenario that Democrats want to see – especially since not one Republican voted for the ACA,
So, is Ted Cruz good or bad? He may have proved politically inept and he may be a prophet of gloom – and no one likes those guys either.
In times of crisis we often turn to unexpected leaders. History has shown these leaders are sometimes good and sometimes bad.
But don’t write off Cruz yet.
Quote without comment
Conservative commentator Mark Steyn, September 23: “… [Senator] Mitch McConnell’s [R, KY] line is now, ‘Oh, just let -- Obamacare is going to be so self-evidently destructive that when we win our spectacular victory in the Senate election and the next presidential election, we will be able to repeal it and roll it back.’ When do the Republicans ever do that? Those Carter-era innovations like the entirely useless federal Department of Education, the federal Energy Department, even the National Endowment of the Arts — when for decades it has been mocked for giving public monies to crucifixes floating in urine, homoerotic photography involving bullwhips attractively positioned — none of those nickel and dime things have the Republican Party succeeded in rolling back. What are the odds that when this thing implodes, the Republicans are going to be making a tremendous case for genuine free choice in health care that Obamacare will be repealed?”