Repeat After Me: The Mandate Mantra

Contrary to Obama’s self-deceptive analysis of his electoral debacle, it is evident that one of the two issues that turned a normal mid-term election loss into a historical pounding was widespread anger over Obamacare.  That, along with fiscal incontinence, is what galvanized the Tea Parties and swung large numbers of independents against Obama.  That is what radicalized many people–including Mrs. SWP.  There is a large constituency, clearly a plurality, and possibly a majority, in favor of repeal.  In the new House, the number of votes for repeal will almost certainly exceed the number of votes that Pelosi was able to muster for passage.

But Senate and Obama will almost certainly block any attempt to do that now.  That means that it is necessary for the Republicans to play a longer game, to lay the groundwork now for a strategy that has a chance for success in 2012.

In their cleverness, Pelosi and Obama and Reid et al actually gave the Republicans an opportunity to do that.  They quite deliberately pushed implementation of all of the major elements of Obamacare to 2013.  (Quite revealing, that; if they really thought it was going to be more popular than sex once people “saw what is in it,” why the delay?)  Which means that everything rides on 2012; Obamacare is not truly a fait accompli until later, and hence can conceivably be undone if Obama is out of the White House, and the Senate is more Republican, after the 2012 election.

Hence,  the strategy for repeal should be focused on influencing the 2012 election.

That strategy should focus intensely on one issue, and one issue only: the individual mandate.  That mandate is the least popular part of Obamacare.  But more than that, it is the essential element of Obamacare.  It is the keystone in the arch.  If it is removed, the entire structure collapses.

That’s because the whole structure is a huge redistributive scheme, and the sheep have to be held still in order to be sheared.  Or, to use another metaphor, just as serfdom required tying the peasants to the land so that surplus could be extracted from them, in order to extract wealth from one group in order to redistribute it to another it is necessary to keep the former from exiting the system and to force them to pay into it.*  That’s what the mandate does.  It forces some people to purchase overpriced insurance in order to subsidize the provision of insurance for others.  If people can choose whether to buy the insurance, many will not buy the overpriced insurance, and the scheme will rapidly become fiscally unsustainable.

There are other mandates in Obamacare that serve a similar function.  In particular, the dictats regarding the coverage that insurance companies must offer is also a stealth tax.  This forces some people to buy coverage that they will never use, and uses the money to subsidize the insurance coverage for others.  (Bundling by monopolists is a well-known strategy for extracting surplus.)

So the mandate is the keystone of Obamacare, and it is unpopular.  Pounding on the mandate, and day after day pointing out its true function as a huge, concealed, tax will only cement its unpopularity.  Focusing on this issue, with specificity, will force Obama and the other advocates of Obamacare to defend it.  That is unlikely to make them popular, and will either force them to make ludicrous denials that it is not a redistributive tax, or admit that it is.  It is a simple, focused, and powerful message, the kind that works best.

In my view, that is the only way to stop Obamacare–stopping Obama in 2012 by focusing on the most crucial, and the least popular, element of the health care monstrosity.  Perhaps being too clever by half, by pushing full-scale implementation past 2012, Obama and his Congressional minions have given the opponents of Obamacare a window of opportunity.  Those opponents need to use this window wisely.  They have to have realistic expectations that it cannot be undone with Obama in office, and craft a strategy that turns Obamacare into a crippling liability for 2012.

In brief: start chanting the mandate mantra at every opportunity.  Be patient.  Don’t expect immediate action.  Live with legislative defeats.  After each one, get up and start all over again.  Build the case–and the momentum–in a way that crescendoes in November, 2012.

This will require tremendous discipline and cohesion, and it is certainly unclear that a coalition of tired old Washington has-beens and never-weres (mostly in the Senate) and political newcomers have that discipline and unity.  But they will never have it unless they understand why it is so necessary.  If 2 November, 2010 is to have any lasting meaning and impact, the message has to be all mandate, all the time.

So, repeat after me . . .

*Which is why places like California and Illinois are, to put it bluntly, screwed.  They can’t force the productive to stay put and pay for bloated budgets.  (I hear Texas is nice!)  They will, no doubt, try to persuade the Federal government to bail them out, but the odds of that just went way down.  (Note to self: see what has happened to CA and IL credit spreads as it became evident that the House was going Republican in a big way.)  So, voters of CA and IL: good luck with Jerry Brown and Pat Quinn!  You’re going to need it.  We’ll leave the light on for you.

About Craig Pirrong 223 Articles

Affiliation: University of Houston

Dr Pirrong is Professor of Finance, and Energy Markets Director for the Global Energy Management Institute at the Bauer College of Business of the University of Houston. He was previously Watson Family Professor of Commodity and Financial Risk Management at Oklahoma State University, and a faculty member at the University of Michigan, the University of Chicago, and Washington University.

Professor Pirrong's research focuses on the organization of financial exchanges, derivatives clearing, competition between exchanges, commodity markets, derivatives market manipulation, the relation between market fundamentals and commodity price dynamics, and the implications of this relation for the pricing of commodity derivatives. He has published 30 articles in professional publications, is the author of three books, and has consulted widely, primarily on commodity and market manipulation-related issues.

He holds a Ph.D. in business economics from the University of Chicago.

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