Free Markets, Free People
The “Pay Czar” Diversion And How That Works With Health Care
David Brooks has an article today in which he takes on the concept of a “pay czar” and opines that human arrogance is about to play into the law of unintended consequences in a huge and, most likely, unwanted way.
Arnold Kling takes the opportunity of the Brooks column to change the subject slightly and point out that while what Brooks says is true, the “pay czar” nonsense is really a diversion to keep us fr-om looking and focusing on one of the most serious problems in the financial meltdown – the government’s Freddie Mac and Fannie Mae:
The further into this crisis we go, the greater the share of subprime loans and mortgage losses are turning out to be located at Freddie and Fannie. Even one year ago, if you had asked me, I would have told you to expect at least 2/3 of the losses to be at companies like Citi and Bear, with less than 1/3 at Freddie and Fannie. It now looks quite different. Conservatively, 3/4 of taxpayers losses will be at Freddie and Fannie. Perhaps as much as 90 percent of taxpayer losses will be there.
Given the large role of Freddie and Fannie, it makes sense for politicians to create as large a diversion as possible. Hence, the brouhaha over bonuses at bailed-out banks.
Remember what supposedly started this meltdown was subprime loans. As Kling points out, guess where most of them are located? And, given the government role in these institutions (not to mention the “why” for such loans in terms of policy and incentives fr-om government) it isn’t at all surprising that -as it tries to convince us that government is the best choice for running health care- government tries to divert our attention fr-om its huge role in the meltdown to a group that may have only had a limited role but is a very unsympathetic group in the public’s eyes.
I am not sure if I wrote this on my blog, but I did write in a chapter of the forthcoming Fr-om Poverty to Prosperity (with Nick Schulz) that none of the major regulated institutions was involved in subprime.
But they are indeed the focus of the public’s ire thanks to the government’s demonization of them. Meanwhile, Freddie and Fannie escape both scrutiny and blame.
Which, Kling says, is similar to what is going on in the health care debate concerning the pubic option:
Incidentally, the debate over the “public option” in health reform also can be viewed as an exercise in symbolic politics and diversion. The point is to divert attention away from the bankruptcy of Medicare.
Absolutely correct. It is the point I continue to wonder about and see nowhere in any of opinion or fact based pieces concerning this subject. We are talking about turning over the rest of our health care to an institution that has run the piece it has had for decades into 52 trillion dollars of future debt. Yet we’re being told, by them, that they can run it more efficiently and for less money than private insurance. And, even in the face of evidence that it’s not true, a good portion of us have chosen to believe them.
It boggles the mind.