Monday, November 26, 2012

Private Sector Abuses force creation of "Big" Government Regulations.

Recently my conservative friend whined again about the size of the Affordable Care Act...Obamacare.

I asked him, “Why do you think it’s so long, has so many pages?” When he answered “too many regulations,” I knew he didn't get it.

It’s long because it had to deal with a private sector that had already caused the health care crisis. Government had to reduce, do away with, and guard against private insurers, doctors and hospitals from gaming the system again. Its already forced them to change their comfortable but flawed business model.

But I’m not the only one who blames the private sector. The article below makes my argument, and then some. Government should have a role when it comes to major public concerns, like health care, defense, national security, environment, education, infrastructure and financial regulations. It’s not big government so much as “we the people” preventing interlopers from taking control of our country:
American Prospect-Robert Kuttner: On Saturday, The Wall Street Journal ran one of its trademark editorials making fun of government red tape—the massive regulations required to implement the Affordable Care Act; the 398 different rulemakings necessary to carry out the Dodd-Frank Act, and a great deal more … it makes an unintentional point: Government regulations have become so complex that they can’t do their job.

But were does the complexity come from? It comes from the metastasized abuses of the private sector and the success of the business elite in getting government to pass laws with plenty of room for industry to maneuver.

The Glass-Steagall Act of 1933, by contrast, was simplicity itself. It drew a nice, simple bright line. The trouble crept in when industry lobbying succeeded in blurring the line.

And nations fortunate enough to have single payer, universal health insurance don’t have libraries full of regulations to keep private insurers from fleecing doctors and patients alike—middlemen for the most part don’t exist. Simpler is better.

The Home Owners Loan Corporation of the Roosevelt era, which refinanced one mortgage in five and saved a million homes from foreclosure, did not require the Byzantine rule book of the Obama mortgage relief programs channeled through the private sector. The HOLC used the Treasury’s own borrowing rate and made direct loans to homeowners. No securitization, no Wall Street middlemen, no scandals, no reams of regulations. End of story.

Pop quiz: Which part of America’s pension system is a complete mess, unraveling as large corporations like American Airlines abuse the bankruptcy system to walk away from pension obligations? Which part requires endless regulation that never seems to be sufficient to prevent the latest corporate scam? That would be the private part.

And which part is simple, elegant, scandal-free, and reliable? That would be Social Security.
Where are the gross abuses in student loans? In the private, government-guaranteed part of the system, of course. Where is the system simpler, fairer, and more cost-effective? In the direct loan part.

Does there seem to be a theme here? It’s not just that simpler is better. It’s that public is better, and public is usually simpler and more efficient.

So the next time you read a Wall Street Journal editorial decrying all that government red tape, ask where the complex abuses came from that required all those rules. The answer is pretty simple.

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