by Matt Kibbe
What could possibly go wrong?
If you want to see the corrosive effects of unfettered discretionary power imposed from the top down—unfireable employees in the executive branch with an ability to target or ignore, choose winners or losers based on ideology or personal agendas—you need look no further than Washington, D.C., today.
WITH THE PRESIDENT’S DECISION to illegally rewrite ObamaCare in real time, arbitrarily delaying implementation of the employer mandate until after the 2014 elections,5 it is clear who will really decide future health-care decisions. And it’s not you. The influential interests in the big business community successfully lobbied for a(nother) delay. No such luck for the rest of us. We are expected to comply.
Of course, the government’s blank checkbook comes with a complex web of laws that have grown more convoluted over time, the rules rearranged by various special interests, and then again by the bureaucrats inside the enforcement agencies. This political give-and-take has little to do with your interests. The growth of governmental infrastructure represents a political equilibrium that is anything but economically efficient for the rest of us.
I call it the Complexity Industrial Complex. The more complicated things get, the better off the insiders are. Bureaucrats feed on complexity, a permanent rationale for expanded budgets and higher compensation, and a fat meal ticket back outside the government as a highly compensated guide to corporations looking to navigate the labyrinth of laws and rules. Navigate, or, more likely, exploit to their advantage.
Take the authors of the Patient Protection and Affordable Care Act, for example. Since drafting that legislation, more than thirty of its architects have found lucrative positions lobbying for deep-pocketed corporations such as Delta Air Lines, Coca-Cola, and British Petroleum, charging big bucks to help companies navigate the regulatory mazes they helped create.6
Incumbent corporations—“big business”—often lobby for, and get, new complexity as a strategy to keep underfunded upstart competitors out of the market. In reality, monopoly market power is typically the by-product of this unholy collusion between complexity-mongers in and outside government. Market share can only be protected permanently in partnership with the power monopolists inside government.
Complexity is also the skirt that power abusers hide behind. One of the excuses used by partisan Democrats in defense of Lois Lerner and other IRS employees who targeted activist groups based on ideology was the convolution of campaign finance laws. It’s an interesting argument coming from the congressional architects of campaign finance regulations. They, of course, wrote the First Amendment–gagging laws that give so much latitude to the permanent bureaucracy. Not one of these congressional authors of convoluted campaign finance laws has ever called for scrapping the whole monstrous structure in favor of a simple defense of First Amendment rights to political speech.
In an op-ed in the Washington Post, Elijah Cummings, the ranking Democrat on the House Oversight Committee, wrote: “The sad reality is that while House Republicans have devoted time and taxpayer money to attempting to smear the White House, they have failed to examine part of the underlying problem the IRS faces: inadequate guidance on how to process applications of organizations seeking tax-exempt status.”7
When the IRS can’t understand its own rules or properly follow the law because of “inadequate guidance,” that ought to be a warning sign that the system is broken in Washington.
CODE RED
There is, of course, a method to their madness. Consider the remarkably corrupt federal tax code.
In 2013, the federal tax code was a whopping 73,954 pages long,8 or about four million words.9 To put this in perspective, consider that the Guinness world record holder for the longest novel, Marcel Proust’s seven-volume In Search of Lost Time, is less than a third of this length.10 Anyone attempting to read the tax code had better have plenty of time on their hands. At a rate of fifty pages a day, it would take more than four years to make it through the whole thing.
Obviously, no one can reasonably be expected to know all the rules and regulations buried in this unfathomable tome. And that may be precisely the point. Even people who are paid to enforce these rules don’t understand them. Former IRS commissioner Douglas Shulman freely admitted in an interview on C-SPAN that he does not file his own taxes, explaining that, “I find [hiring a tax preparer] convenient, and I find the tax code complex.”11
When the head of an agency is incapable of understanding the rules he is charged with enforcing, something seems fundamentally wrong. It is estimated that Americans spend 6.1 billion hours a year simply complying with the tax code,12 and the accounting costs of compliance total between $67 billion and $378 billion every year. Imagine all the good that could be accomplished if that time were instead spent on productive activity. The Mercatus Center has estimated that the total loss to the economy resulting from our complex tax code is as much as $609 billion a year, and this does not include the time and money spent by lobbyists to petition for special tax treatment.13
This is a far cry from the way the founding fathers initially envisioned the system of taxation for their new country. For more than a hundred years after its founding, the United States government was funded purely with tariffs, excises, and receipts from the sale of federally owned lands. Direct taxes, such as the now-familiar income tax, were out of the question.
Sadly, this simpler state of affairs was not to last. The Civil War brought an unprecedented level of expenses, and new taxes were an easy way to collect revenue in a hurry. The Revenue Act of 1861 established the Internal Revenue Service and created the first incarnation of what we would recognize as the modern income tax.
This was originally intended to be a “temporary” measure to finance the war, but history has shown that there are few things more difficult than ending a temporary government program. In 1913, Congress ratified the Sixteenth Amendment to the Constitution, making the individual income tax a permanent feature of law. Then, the top tax rate was less than 1 percent, and the tax code totaled twenty-seven pages in length.14
Within minutes of enactment, moneyed insiders began rewriting the income tax code to carve out exceptions that favored their interests.
In a way, tax code complexity is inevitable. Special interests seeking exclusions, deductions, subsidies, and refunds have a strong incentive to lobby the government to advance their cause. If they know someone, if they have juice in the Capitol, a new provision is added and the tax code becomes more of a labyrinth requiring experts, inside and out. I’ve personally heard business lobbyists make their case to congressional staffers. Every dollar in “tax expenditures” will generate a threefold return for the government, they will claim. They always have the “blue-chip” study under their arm to back it up.
When I worked on Capitol Hill in the 1990s, we tried to repeal the federal sugar program. Big Sugar lobbyists descended upon Washington like a swarm of locusts, distributing backslaps, PAC checks, and free coffee cups that claimed that the sugar growers’ subsidy cost the federal government “Zero.” Still got the cup. And Big Sugar still has its special deal. In fiscal year 2013, the program that was not supposed to cost you anything cost taxpayers $280 million dollars. The tab will increase in 2014, according to the Wall Street Journal.15
It’s not so hard to cook up a case for special treatment that sounds persuasive to eager ears. But there’s always a quo in exchange for quid.
A simpler tax code benefits all of us, but the incentives for individuals to act to protect the principle of equal treatment under the law are small by comparison. Concentrated benefits for the insiders, and dispersed costs for the rest of us.
Far more important than all of the wasted time resulting from tax code compliance, these complex and difficult-to-understand rules fuel abusive and discriminatory practices. No one can manage absolute compliance with this Byzantine mountain of tax regulations, meaning that anyone is vulnerable to punishment at the discretion of the IRS. Complexity
plus compulsion means you—“the most honest of men”—are vulnerable to someone else’s agenda.
In the 1960s, the IRS targeted Martin Luther King Jr. because he was deemed a threat to various government interests. Most recently, the IRS targeted moms who want to “make America a better place to live.” What assurances do you have that someday you won’t get sideways with some government agent? Will someone with power you don’t have target you for speaking up against “Common Core,” a top-down set of education standards that take still more say away from parents? Will you even know who that gray-suited bureaucrat is who decides that you are “dangerous”?
This problem does not end with the tax code. All areas of law have become so complex that full compliance is impossible. The potential for selective persecution is obvious. The Environmental Protection Agency, for instance, has itself acknowledged that complete compliance with the Clean Air Act creates an administrative burden that is “absurd” and “impossible.” We are literally drowning in an ocean of dictates and orders, so much so that it has been estimated that the average American breaks three federal laws every day without realizing it.16
The fact that all of us are continually breaking laws we don’t even know exist, combined with legal standards that do not consider ignorance an excuse for noncompliance, means that any of us could be punished at any moment, entirely at the discretion of the enforcers. Obscure, rarely enforced laws can easily turn into tools of oppression when selectively applied for political reasons.
The law is meant to be an instrument of protection for the people, not a tool of arbitrary and discriminatory punishment. When even the enforcers cannot keep up with the sheer scale of our legal code, there is nothing to stop our protectors from turning into oppressors.
FIRST DO NO HARM
Which is one very good reason to oppose a government takeover of our health care.
What was once a simple relationship between patient and doctor has become a tangled morass of regulations and middlemen, equally damaging to Americans’ health and wallets alike.
ObamaCare promised to fix these problems by creating a government-controlled system and a dramatic expansion of government-funded health insurance. Despite the persistent unpopularity of the proposal, President Obama devoted the bulk of his first term in office to pushing the bill through Congress. Defending the law from grassroots critics has dominated his second term’s domestic agenda, as the systematic problems with it create real chaos.
Imagine what will happen when the new middleman between you and your doctor is a career civil servant who likely has an agenda contrary to your own. Perhaps this faceless decider determines whether or not your son or your wife or your mom gets the procedure they need to live. It might be someone else’s “cost-benefit” analysis that deems your needs unaffordable. Maybe a gray-suited bureaucrat at HHS decides to poke through your political activities in the Data Hub first. Maybe there just isn’t enough money in the centralized system to cover all of the demands from all of the sons and daughters and grandmas and grandpas who were dumped into it by their employers. How to choose? Who are the winners and losers? Will you get a say, an appeal if the answer is no?
Of course not. ObamaCare is less about the quality and affordability of your health care, and more about who controls your health-care future. ObamaCare seeks to fix a system caused by too much government, by injecting still more government discretionary control into the system.
In the early part of the twentieth century, there was no third-party payment system for health care. Individuals who got sick would pay their doctors directly, and this personal accountability kept costs low; doctors could not make money if none of their patients could afford to see them.
All of this began to change in the run-up to World War II. In a politically motivated, economically illiterate effort to boost employment and reduce income inequality, President Franklin Delano Roosevelt imposed wage controls on businesses, dictating the amounts they were allowed to pay their workers.17 Good economics always takes a backseat in the ordering of political priorities. As John Maynard Keynes once said: “In the long run, we’re all dead.” He was speaking to the political class, who would eventually hear instead: “In the long run, when the political reckoning for the consequences of shortsighted policies come, I’ll be out of office, maybe lobbying Congress for more complexity that favors my clients.”
So it was with FDR and wage and price controls, and his penchant for throwing bad economic ideas against the wall to see how long they would stick.
Business owners naturally wanted to employ the best talent they could find, but these wage controls hampered their ability to attract the best workers by offering higher salaries than their competitors. In order to get around the law, and to appease one of his most important political constituencies, the labor unions, FDR authorized nonwage perks, one of which was the first incarnation of employer-sponsored health insurance.
Why link health insurance to your employment? It doesn’t make much sense, and it gives someone else more control over your health-care decisions. This government-driven market distortion was the first of many corruptions that put distance between the patient and the doctor. With deep-pocketed businesses picking up the bill for their employees, doctors had much less incentive to keep costs down, forcing insurance premiums to rise and making health care largely unaffordable for anyone outside the system. The tax code further complicates the problem with its unequal and confusing treatment of health-care costs. Inside the politically structured system, health insurance benefits were tax-free.
But outside the system, you pay inflated costs with after-tax dollars. This is what amounts to political “compassion.” It sounds so good when read compellingly from the dais teleprompter, but in practice the little guy gets screwed.
Instead of addressing these issues directly, ObamaCare doubles down on an already corrupted system. Imposing a fiendishly complex new system, against the will of the people, is no way to resolve the fundamental problems with the market for health services. If doctors and insurance companies raised prices when businesses were paying, they will only raise them more when government, with no profit motive or competition to restrain its spending, is picking up the tab. Congress and the administration will, in turn, impose price controls on hospitals and doctors. Because it worked so well when FDR tried it.
Rising costs and rising demand for “free” services can only lead to one outcome. It’s called rationing of health-care services. Or “death panels.” Or some gray-suited soviet, who just learned that you once sent $250 to Ron Paul’s 2012 presidential campaign, choosing winners and losers in a very complicated system that no one really understands.
One of the key features of the law is to require insurance companies to accept patients with pre-existing conditions, a requirement that undermines the entire concept of insurance. Insurance exists as a safeguard against a possible future disaster, something that is unforeseeable but potentially devastating. You cannot insure against something that has already happened. You cannot buy homeowner’s insurance on a house that is already on fire. If you could, it would no longer be insurance but a mere shifting of costs from one person to another.
Since insurance companies can now be certain that every one of their clients will be filing a claim, their rates will have to rise to compensate for the increased costs. Hence, the “individual mandate” targeting, by force, young, healthy people who cannot afford and don’t need the government-defined plans. Much more on the “social injustice” of this later.
The fact that ObamaCare will fail in its aims of reducing costs and increasing coverage seems to have become common knowledge, with huge numbers of businesses lobbying to get out of the employer mandate. And the federal government has been happy to comply.
The Department of Health and Human Services has announced that about 1,200 businesses have been granted exemptions from the ObamaCare employer mandate.18 Labor unions are not happy with the law, either, and have sought w
aivers en masse for their membership. Thus far, labor unions representing 543,812 workers and private companies employing 69,813 workers have been granted waivers.19 If ObamaCare is supposed to be such a good deal for workers, why do so many of them want out of it?
Private companies are scrambling to deal with the increased costs of the law as well. UPS has announced that it will no longer provide health coverage for employee spouses, while Walgreens and IBM are dumping employees from their employer-sponsored plans, asking them to buy private health insurance instead.20 As of this writing, five million Americans have received cancellation notices from their insurance companies,21 and some estimates put future cancellations as high as a hundred million.22 So much for Obama’s original promise that “if you like your health insurance, you can keep it.”
Of course, the political class, fresh off a closed-door lobbying campaign to protect their generous health insurance plans did get to “keep it.” President Obama responded to their demands, personally asking that the Office of Personnel Management allow members of Congress to retain the massive subsidies conferred by the Federal Employees Health Benefits Program, despite the fact that ObamaCare would otherwise require them to purchase the same health insurance programs available to the population at large.23 The OPM, controlled by the president, quickly solved the problem for the insiders. According to the sympathetic Washington Post: