The Audacity of Hype

 A lot of big deficits have flowed over the till since Barack Obama’s best selling “The Audacity of Hope” helped propel him to the Presidency in 2008.  It seems, however, a current biography of our 44^th President might more aptly be titled “The Audacity of Hype”.

The reader will recall that the very media-savvy junior Senator from Illinois, Barack Obama, announced that he was running for President back in 2007 about three months after his “Audacity of Hope” was released and about two years after assuming his Senate seat.   He quickly learned that while Hope sells books, Hype wins votes.

And he has, indeed, won a lot of votes.  Most notable, The Affordable Care Act (Obamacare).   The greatest elements of hype in selling this newest and greatest of entitlements were (1) that it wasn’t going to add a dime to the deficit, (2) would cause insurance premiums to plummet during “my first term” and (3) allow everyone who likes his or her current medical plan to keep it.

President Obama certainly takes a back seat to no one when it comes to the grandiosity of what he proposes and promises.   We’ve come to expect grandiose promises from our politicians. But when grandiose promises, become grandiose entitlements, they always impose grandiose costs.  English playwright, Thomas Lupton knew that only too well when, in 1581, he wrote “Too Good To Be True.”  It’s a lesson we seem to have to endlessly keep relearning.

The country really shouldn’t be saddled with the runaway costs of Obamacare because the President, in his 2009 healthcare address to a joint session of Congress, promised to veto it if it “increased the deficit by one dime”.  We wonder if there was a single Congressman or Senator who believed that bit of audacity.  Well, we all do know of one Congressman who didn’t believe it, because he (Rep. Joe Wilson, Republican of South Carolina) blurted out his incredulity during the President’s sales pitch to the joint session with his famous “You Lie” retort.

So what are the facts?  President Obama said the ten-year cost of Obamacare would be about $900 billion.   The Congressional Budget Office (CBO) now estimates the ten-year cost (2013 – 2022) to be $1.3 trillion, an increase of nearly $200 billion since CBO’s prior estimate last August.

It was a spine-tingling, dramatic moment when Obama promised, 
”I will sign a universal health care bill into law by the end of my first term as president that will cover every American and cut the cost of a typical family’s premium by up to $2,500 a year.”  He got the first part right.  He did sign a universal health care bill into law.  It is the second part, the part about reducing premiums by up to $2500 a year that he got terribly wrong.  The non-partisan Kaiser Family Foundation now projects that family healthcare premiums have, instead, increased by about $2500. That’s a spread of $5000 with other estimates suggesting the annual increase in family premiums has averaged about $3065.

Defenders of Obamacare argue that government subsidies will soften the blow of increases in premiums, but that bit of hype also bears closer scrutiny.  According to MIT Economist, Jonathan Gruber, who was one of the architects of Obamacare, nearly 60% of the individual market will end up paying more, net of the government subsidies.  How much more?  Gruber says nearly a third more.

Then there was the equally audacious promise that everyone who liked his or her current plan would be able to keep it.  We refer to it as an audacious promise because there is absolutely nothing in the law that ensures that people happy with their policies now can keep them. The fact is that employers have the right to drop or modify their current coverage and some are certain to do just that. CBO anticipates that some companies will drop coverage affecting several million workers.  As USA Today put it, “Obama’s soothing words for those who are content with their current coverage have been heard before, rendered with different degrees of accuracy. He (Obama) has said nothing in the law requires people to change their plans, true enough. But the law does not guarantee the status quo for anyone, either.”

The President loves a voter-pleasing sound bite and there’s none better than the promise to provide a lot of something “without increasing the deficit by one dime”.  Audacious as such a promise is, it certainly worked with healthcare, and so it was conscripted back into service for his new all-encompassing progressive agenda presented in his recent State-of-the-Union address.  Uncle Sam is going to keep our armed services strong, provide pre-school for all four-year olds, shore up the nation’s infrastructure, develop clean energy, reduce carbon emissions, reform immigration, and institute more effective gun laws, all without increasing the deficit “by a single dime.” All that seems to be missing are free lunches for everyone, but then again, we all know there is no such thing as a free lunch. Or do we?

Legislation to deal with climate change was loudly hyped by the White House during the President’s first term, but the Administration failed to even get it to a vote in the Democratically controlled Senate.

Perhaps the most over-hyped element of President Obama’s four-plus years in the White House has had to do with tax reform, which boiled down to his “tax the wealthy and fair-share” mantra which, of course, provides virtually no meaningful tax reform.  Our corporate tax burden is, stupidly, the highest in the developed world, which simply demonstrates that leveling the global playing field so that American industry can be competitive, thereby improving economic growth, is not a high priority with the Obama Administration.  Obama’s year-end fiscal cliff deal simply didn’t touch, in any meaningful way, the corporate tax code.  To the contrary, the Obama Administration has categorically ignored all of the pro-growth, job-creating tax proposals made by his own Simpson-Bowles Commission.

Then there was our President’s claim that he would reduce spending by eliminating waste in government by going through “the budget line by line” and “shed spending we don’t need.”  That, of course, raises the immediate question: what budget? The US Senate, which his party controls, conveniently, hasn’t passed a budget since he entered the White House (even though the law requires it to). We simply continue to spend without a budget, and add an additional trillion or so each year.

This is serious stuff.  Consumer confidence is deteriorating.  Following the election consumer confidence declined in December, and declined even further in January.

According to Lynn Franco, Director of Economic Indicators at the Conference Board, Consumer Confidence posted another sharp decline in January, erasing all of the gains made through 2012. Consumers are more pessimistic about the economic outlook and, in particular, their financial situation. Consumers’ appraisal of current conditions deteriorated in January. Those claiming business conditions are “good” declined, while those stating business conditions are “bad” increased. Consumers’ assessment of the labor market has also grown more negative. Those saying jobs are “plentiful” declined, while those claiming jobs are “hard to get” increased.  Consumers’ optimism about the short-term outlook continued to deteriorate in January. Those expecting business conditions to improve over the next six months declined.

Elections, it seems, can be won with lofty and ethereal themes, and “hope” (for a better tomorrow) is, indeed, something every leader should inspire and every society should hold dear.  Hype, however, is quite another matter.  When chronically excessive, hype will, sooner or later, destroy hope.