I have always harbored a vague suspicion about economic populism. Any idea that has the capacity to unite the Tea Party and union activists is more than a little unsettling. But populism is, well, popular. The notions that drive the ideology have a general appeal that, like much of today’s politics, come from the general direction of the gut rather than the brain. What makes the idea so especially popular, however, is that today’s media is unable to see through the nonsense and report the truth.
If it sounds like I am raising an alarm on populism, it is because I am. The guiding principles of populism, on their own, pose a real danger to the economy of the United States. Taken together, the guiding principles of populism could bring our economy down. Is it really that bad? Is populism really that dangerous? Yes. Populism is about vanity, simplicity, and the pride of the working class perverted for power. Happily, the philosophy is easily set aside, and is not linked to either the Republicans or the Democrats.
The generated uproar over the health reform efforts has been remarkable in its ability to completely miss the point. We the people were told that “Obamacare” would insert the government between us and our doctors. We the people were told that “Obamacare” was a government takeover of a free market. We the people were told, again, that the market could take of itself with the help of tax cuts. As the implementation of the Affordable Care Act continues, and as the rhetoric of the midterm elections escalates, it is time for a reminder of the facts of the medical marketplace.
Currently, insurance companies come between most patients and their doctors. Insurance companies dictate what treatments and which drugs a patient can receive, and they do it on the basis of financial calculation rather than patient need. The only way to change that paradigm, is to force insurance companies to compete for patients on a low-margin, high-volume basis. Such a competition will encourage improvements in service and cost. The principle structures created by the Act are the insurance exchanges that will come into being in 2014. The broad investment controls of the Act (companies must spend at least 80% of premiums on their customers), along with the bans on preexisting conditions and rescission, are designed to compress the operating margins of these firms. To maintain the same net revenue, insurance companies will have to find and get more customers.
Free trade is a confused orphan of a political issue. Many in the Tea Party movement seem to despise the idea of free trade, especially NAFTA, even as the conservative movement has long embraced the idea. Democrats and independents who have become convinced of the economic utility of unhindered trade, are left to deal with the structural resistance from within the party driven by union opposition to the concept. Standing above all is the idea that America doesn’t build anything anymore, evidenced some say, but the burgeoning trade deficit.
The one critical item missing from most of the media conversations on trade, has been the facts. The media dutifully repeats the positions of the parties on trade, and records the voices of angry Americans regarding trade. What we don’t often here, are conversations on what causes trade deficits or facts supporting the notion that job loss is driven by free trade. This column will seek to define free trade, and will also look at the other important factors in this under-reported story.