Obama healthcare drive looking sick
– James Pethokoukis is a Reuters columnist. The views expressed are his own –
What just happened to American healthcare reform?
The political prospects for major U.S. healthcare reform have taken a decided turn for the worse in recent days (at least from the point of view of many Democrats). And you don’t need to be some totally plugged-in Washington insider to understand that.
Just take a look-see at the stock market performance of industry players such as Aetna Inc, Cigna, UnitedHealth Group, and WellPoint. Shares have been trending higher of late. What’s been slowly dawning on Wall Street is that the legislative process in Washington is unlikely to produce a national public health insurance option that could eventually squeeze out the private sector.
Fact is, the prospects for any sort of bill that would produce major changes are in as much doubt as at any time since President Obama took office. Worried that the plan was growing too expensive, the critical Senate Finance Committee appears to have jettisoned any idea of a public plan option and is also cutting back on subsidies to help fully insure the nearly 50 million Americans who don’t have health insurance for one reason or another.
So what just happened? How is it possible that Democrats cruised to a huge victory on Election Day in November 2008 and are yet again unable to make good on their top legislative priority? Why are the ghosts of Bill Clinton’s 1994 healthcare reform debacle suddenly flitting about Capitol Hill?
What happened was the Great Recession, the political impact of which the Obamacrats completely misunderstood. Oh, they knew the financial and economic crisis helped sweep them to office. That part they got just fine.
Leave pay to companies, shareholders
– James Pethokoukis is a Reuters columnist. The views expressed are his own –
For the populists who really, really want to make Wall Street pay by slashing their pay, Treasury Secretary Timothy Geithner certainly isn’t giving them what they want.
Yes, the top executives of the remaining TARP firms seem destined to be salary serfs to the “pay czar”, Kenneth Feinberg.
Of course, it’s hard for even the most die-hard free marketeer to feel sorry for financial firms that mismanaged their businesses terribly, took government bailout money and now find themselves under Uncle Sam’s thumb.
But as for everyone else? Well, here’s how Geithner put it: “We are not setting forth precise prescriptions for how companies should set compensation which can often be counterproductive. Instead, we will continue to work to develop standards that reward innovation and prudent risk-taking, without creating misaligned incentives.”
Even worse for those who wanted the Treasury secretary to bring down the hammer, he went on to highlight how the financial sector is already making changes on pay and how he looks forward to a “continuing conversation”. Yes, self regulation in action! Hardly what the torch-and-pitchfork crowd craved to hear.
That’s just too bad. To his credit, Geithner seemingly understands his goal isn’t to punish, but to play a constructive role in nudging financial industry compensation in a direction that better connects risk and reward.
The US needs to stop supporting a corporate aristocracy. The gross and outrageous compensations for some of these Top Managers is nothing more than the US paying to support these individuals in a lifestyle they have become accustom to. By no means are these individuals worth this much to the corporation. No one could be worth these kinds of compensations. Some are over 400 times the average compensation of their employees. No corporate board could begin to justify that one person is worth that kind of compensation. Yet, that kind of compensation exists today in publicly traded corporations. What else would you call it but the support for a corporate aristocracy?
Publicly traded companies fall under federal laws. The Government does not have to “own” a piece of them to set rules upon them in order to protect the public.
The compensation of top management should be tied to the compensation of the average employee. Let’s face it they all had a part of the success or failure of the business. Some countries have put limits on publicly traded company’s top management at 10 times the average employee compensation. Compensation would include salary, stock options, and bonuses. To compute this they take middle management, front line managers and their employees including all secretarial and office administrative staff and average their total compensation. No one in upper management can make more compensation than 10 times this amount. This value is recalculated each year to set limits on the next year. Within this limit salary, stock options and bonuses are paid. If upper management wants a raise, they need to raise the compensation of their employees.
This type of pay limitations provides incentive for profits and efficiency while ensuring the benefits of a job well done are given to those that do a good job. These benefits will flow up a year later. And I am all for upper management being given incentives to think in terms of the long haul by withholding some pay in the form of stock purchases.
I for one am against maintaining a corporate aristocracy. We need fiscal responsibility forced back upon the corporate industry.
Bair’s FDIC frenzy
– James Pethokoukis is a Reuters columnist. The views expressed are his own –
It’s an unhealthy sign for the U.S. economy that the most fascinating, if not divisive, player on the financial stage is the head of the Federal Deposit Insurance Corporation. But such is the case with Sheila Bair.
Although there is mounting evidence that the worst of the banking crisis may have passed, Bair continues to command center stage. The latest, if the unnamed sources chatting to the Wall Street Journal are to be believed, is that Bair wants to shake up top management at Citigroup. Presumably this would include the ouster of Citi’s chief executive, Vikram Pandit.
To be sure, Pandit would rank high on anyone’s list of “CEOs most likely not to make it to 2010.”
The Obama White House has mulled pushing out Pandit, but has hesitated to pull the trigger reportedly because of a lack of a compelling successor. And one could certainly make the argument that because of both moral hazard and governance issues, troubled banks should see management decapitated if forced to seek government support.
But that Bair would be the catalyst for Pandit’s dismissal is surprising, or at least weird. In a recent television interview, Bair said that management at U.S. banks “needs to be evaluated” with tough questions asked: “Have they been doing a good job? Are there people who can do a better job.” Queried whether she thought some managers should be replaced, Bair replied, “Yes”.
But before the program was even broadcast, the FDIC was out with a clarifying explainer that explicitly emphasized that Bair “did not suggest the federal government will remove the bank CEOs.”
“It seems a bitter irony that we have become that which 16 million Americans fought to defeat in 1945.” – Posted by Anubis
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No, Anubis, BHO doesn’t look like a Fuehrer – just yet.
However BHO administration looks more and more like Politburo, and he himself every day looks more and more like Secretary General rather than President.
GM shows Obama is no Vulcan
– James Pethokoukis is a Reuters columnist. The opinions expressed are his own –
Here’s why the U.S. government’s growing control over General Motors — Uncle Sam may soon own some 70 percent of the troubled U.S. automaker — is so vexing: This is supposed be the “no drama, no emotion” White House, a place where cool, calculating reason holds sway.
If George W. Bush was the presidential version of the impulsive Captain Kirk of “Star Trek”, then Barack Obama’s supposed counterpart is the superbrainy, hyperlogical Mr. Spock. (It’s a much-bandied about analogy here in Washington, one that the current president says he’s aware of. Indeed, he actually seems to dig it.)
Then you have the highly regarded White House economic team. It’s a bright group steeped in the latest behavioural economics research, a revolutionary field which theorizes that human decision-making is riddled with “cognitive biases” (such as seeing patterns in random sequences of information) and psychological quirks. Homo economicus and rational agents we usually aren’t, say behavioural economists.
Given all that intelligence and self awareness, it’s surprising to find Team Obama’s approach toward GM (and Chrysler, for that matter) marbled with so much illogical economic policy that could have a terrible long-run impact:
1) Bullying creditors. Yes, bondholders may well accept General Motors’ new proposed offer of 10 percent of a reorganized company and warrants to purchase another 15 percent. But that doesn’t change the topsy-turvy reality of unions being favoured over creditors.
Coming out of bankruptcy, the government could own 72.5 percent of the automaker, the United Auto Workers 17.5 percent and creditors 10 percent.
Any of you ever own a Yugo?
It was cheap, got good mileage, usually because it was pushed or towed more than it was running. It was also the product of a state run auto manufacturer.
Rather than have an American car company’s build cars with the same performance as the Yugo, the nation would be served better to allow GM and Chrysler to fail and allow new companies to emerge that can build a better car at an affordable price.
Did the GOP capitulate on healthcare?
– James Pethokoukis is a Reuters columnist. The opinions expressed are his own –
You can’t beat something with nothing” often passes for political wisdom in Washington. In 1994, Republicans defeated Bill and Hillary Clinton’s healthcare reform plan with pretty much nothing — well, at least with nothing positive.
Republican congressional solidarity, along with help from business group attack ads and the Clintons’ own political miscues, were enough to doom the landmark legislative effort. Back then, “No” was sufficient.
But 2009 is not 1994. A “Just say no” strategy seem laughably insufficient this time around. Economic anxieties are much higher, the Democrat president more popular, the Democrat-controlled Congress more committed and aggressive.
Want even more evidence of the changed economic and political landscape?
Just take a look at the 248-page Patients Choice Act, a comprehensive GOP healthcare reform plan drafted by Senators Tom Coburn and Richard Burr, and Representatives Paul Ryan and Devin Nunes.
A big feature of the plan calls for redirecting the $300 billion-a-year tax exclusion for employer-based health benefits into refundable tax credits to purchase private plans.
The real reason healthcare is so expensive is because healthcare companies decided that we should pay more to increase their shareholder value and executive pay. How can so many of these companies tell us that over the past years that healthcare costs would climb anywhere from 7% – 17% and then have their stock prices soar from less than $10 per share to some as close as $100 per share? It’s quite obvious where the money went. Look at UnitedHealth Group Inc. Chairman and CEO William McGuire’s 2006 compensation. He received $1.6 billion in unexercised stock options. The Wall Street Journal reported that the timing of McGuire’s stock options, when UnitedHealth stock was at its lowest so he would benefit as much as possible raised the possibility that they had been backdated. UnitedHealth Group’s medical loss ratio for 2005 was 78.6%. That means that UnitedHealth retained for its own intrinsic uses, including profits, 21.4% of premiums paid. Profit for 2005 was $3.3 billion. For that performance, CEO McGuire receives $1.6 billion in unexercised stock options. Take a look at other healthcare stock prices and executive compensation and you’ll see the same pattern.
What is going to happen to critically ill newborns and infants? I will probably not live beyond 65 because the government feels I should learn to live with my problems rather that receive treatment and watch my kids grow up. From what I understand, our once great nation was based on “LIFE, Liberty, and the pursuit of happiness”. Well, now our life will be determined by the government’s version of Darwin’s “survival of the fittest theory”, our liberties will be based on Socialism, hence I am not very happy right now. All I know I will NOT vote for Obama, I am sure he will not be re-elected. We need to take care of the citizens of the United States first. If you choose to come to this country, earn citizenship legally.