11-23-2009

Will Your Senator Fall on a Hand Grenade? If She/He Does, the Market Won't Like It

For many years, tax increases have been called the “third rail of politics”.  The third rail carries electricity in many train systems.  Thus, this notion denotes that any politician who endorses increased taxes would be “electrocuted while supporting higher taxes”.  The issues that the Senate is currently wrangling with are much more explosive than a third rail.  Therefore, I’ve come up with the notion that any Senator that wholeheartedly endorses them will be falling on a hand grenade of constituent explosion.

The notion of falling on hand grenades became popularized during WWII, when many soldiers in the ultimate demonstration of bravery and devotion to others would cover the blast from a hand grenade with their bodies to prevent the death of their comrades.  This implies the ultimate noble purpose.  Unfortunately, the result of these heroic soldiers’ actions - in all cases - was that they died. 

Many senators are facing votes proposed by Democratic Party leadership that would force the Senators to vote in favor of their party on issues that clearly do not represent the wishes of the vast majority of the American public.  Those up for re-election in next year’s November midterms are being asked to “fall on a hand grenade” so that the current administration can claim victory on furthering its agenda. 

Do Polls Lie?

The Democratic caucus takes great solace in recent polls that have reported that over half of the public wants the choice of a public option.  However, if you dig into the numbers of what the public thinks about the program, a different picture emerges.  In an Associated Press poll, 2% of Americans under 65 say they would sign up for the public option.  A recent Gallup Poll finds 49 percent of people expect their costs to get worse and only 22 percent expect their healthcare costs to get better under ObamaCare.

To say that pollsters pick their target audiences in a way that gives them results they want is an understatement.  Pollsters are exactly as independent as the sources that hire them.  However, one thing is for sure- the recent mammogram recommendations from a government task force couldn’t come at a more instructive moment.

Mammogram Decision Is Instructive

Last week, the U.S. government task force recommended that women should start mammograms at age 50, not at the previously recommended age of 40.  They defended this decision with discussion of false positives and un-needed biopsies.  However, this is little solace for the 40 year old that misses detection. You don’t have to be a rocket scientist to view this as the first step down the slippery slope toward health care rationing.  It’s obvious that any public option insurance plan would be taking their recommendations for reimbursement from task forces just like the one reporting out on mammograms.  This will not be lost on American Women!  Women are smart and they will easily generalize that moving toward the public option will start the healthcare rationing process.  Also, Americans will definitely move against higher costs of healthcare.  We already spend north of 15% of our GDP on healthcare, while China spends 1%. 

So what’s the answer when more mammograms, etc, cost more money?  The answer is becoming clear to all of us and we are really getting annoyed that the Congressmen and Senators are making believe they don’t see it.  The answer is standing up to special interests and ripping cost out of the system. 

•      Sell insurance across state lines.

•      Put meaningful tort reform in place.

•      Use generics whenever and wherever they save costs.

None of this prevents the 25 million American citizens who can’t afford any health insurance from support from the government.  Real savings enable us to provide free coverage to the most needy.  Pandering to special interests obfuscates the real solutions and politicizes the proposed solutions.  This process is building the hand grenades that our elected representatives may choose to fall on.

P.S.  - The market doesn’t like an out of control Congress.  The market will react very poorly to a health care plan that includes a strong public option.  The public option won’t kill the recovery.  The public option won’t bankrupt the country.  However, passage of a public option will signify that special interests and liberal ideology have a strong enough hold on the U.S. Congress to move other agenda items along, too- ones that could end up in a massively devalued dollar and higher inflation faster than anyone expects. 

Hold your breath, and hope for the good guys.  

 

Fred S. Fraenkel
Vice Chairman and
Chairman of Investment Policy
Beacon Trust Company

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