The Pinocchio President – Change We Can Believe In?

President Barack Obama’s main campaign theme was that he would bring change to Washington, “change we could believe in”. However, there is a huge chasm between his soaring rhetoric and his actions. Unfortunately, the statesman that many people hoped for is just another politician, and not a very good one at that. Instead of trying to bring this country together, he has become a divisive force.

When Nancy Pelosi served up the omnibus spending bill that was loaded with earmarks, he signed it. It was President Obama’s first bill signed into law which violated a campaign promise to be more vigilant against wasteful spending. This was an ominous sign of what else was to come.

The President’s health care initiative is an egregious violation of many of the core principals he espoused during his campaign. This became clearly evidenced from the outset when he turned over his health care initiative to Nancy Pelosi to craft legislation in the House. Subsequently, the Senate followed with its own bill. There appeared to be very little Republican input, and the attitude from the Democrats reflected “we have the super majority take it or leave it”.

The Republicans are not blameless, as there is always partisan politics. Republican Senator De Mint of South Carolina said that not passing the health care bill would be tantamount to President Obama’s “Waterloo”. Nevertheless, it appeared that the President made a very disingenuous effort to be nonpartisan. How do you expect to get the opposition party on board when the bills have already been hammered out? Furthermore, we witnessed some of the worst kind of backroom political deals to gain passage in the Senate.

Due to the unpopularity of the President’s health care initiative, there was a major public backlash which was reflected in significant democratic losses in Virginia, New Jersey and Massachusetts. It appeared that in order to gain public support for his heath care proposals, the President finally decided to bring the leadership of both parties together in an open forum televised by C Span. This was political theater that turned out badly for the President since no compromise resulted. Peggy Noonan characterized his behavior during this forum as “boorish”. After this charade the President pushed for the completion of the Senate bill by using reconciliation, and it finally passed. This resulted in the passage of a major bill with a 51 vote majority in the Senate.

Countless times during the Presidential campaign, President Obama stated that he would bring transparency back to politics. One way to accomplish this was to have the public view the crafting of major bills on C Span. Furthermore, he would reach across the isle to illicit the cooperation of the Republicans in order to shape major bills. He also stated that if he were President he would never use the nuclear option for major bills or what is known as reconciliation. He was quoted on film that it is necessary to achieve a significant majority when passing legislation that would have a major impact on this country.

When the President first started to frame the debate on health care, he stated that the primary reason for health care reform was to rein in the costs of this very significant part of our economy. The President’s major thrust on healthcare reform is to contain the growth of healthcare spending or face severe economic consequences in the future. However, it seems oxymoronic to postulate that we will be able to somehow limit the growth of healthcare spending and simultaneously increase the insurance rolls by 32 million. This bill is about access, not cost cutting. It is just another entitlement program at a time we can least afford.

While the Congressional Budget Office concluded that the Senate Bill would pay for itself, its analysis is based on some heroic assumptions. First, the Cadillac health care plans will be taxed in 2018. This was a capitulation to the unions. Why should we believe that somehow things are going to be different in 2018? Second, the bill calls for taking $500 million from the already bankrupt Medicare Insurance program. Furthermore, there is a major accounting gimmick as revenues for this bill will begin several years before the bill goes into effect. All these factors give the appearance that this bill will pay for itself.

The cornerstone of this bill is to create a federal agency to review and regulate health insurance premiums which is supposed to rein in costs. How does holding down premiums solve the problem of cost increases by doctors and hospitals? Moreover, state regulators are concerned about solvency. Rate setting without financial oversight is a prescription for trouble. It is a very complex analysis to determine what a reasonable premium should be in relation to benefits. This is much more suited for a market place where increased competition will help reduce costs.

The President clearly believes the end justifies the means in his zeal to do something historic. While this health care legislation institutes some positive changes, such as prohibiting insurance companies from turning people down with preexisting conditions, it comes at a huge cost. The President missed a great opportunity to incorporate the kind of change to make healthcare better and more affordable. Warren Buffet said in a CNBC interview that we should scrap the Senate Bill because it does not address the problem of costs. (Refer to my blog on healthcare.)

It is very troubling to think that this historic presidency is being squandered. This President generated great expectations based on his oratorical skills. However, his philosophy and approach of redistributing the wealth based on fairness is missing the mark. This country is a meritocracy and was not built on equality of result. Nevertheless, we should try to help those who are truly in need. One way we can accomplish this is to improve the equality of opportunity. It is also important not to enable those people we are trying to help. If we provide welfare, we need to encourage a work ethic to pursue education and/or jobs. In most cases, giving people money without incenting them to provide for themselves is a prescription for disaster.

The Democrats always refer to the widening gap between the rich and the poor. However, they fail to mention that our society has tremendous mobility between these groups according to government statistics. In fact, the Treasury Department in 2007 released the results of its study examining income mobility of individuals over a ten year period (1996 through 2005). The study found that over half of the taxpayers moved to a different income quintile. Approximately half of the participants who were in the bottom income quintile moved up to a higher group. Moreover, for those in the very top group in 1996 only 25% remained in this group at the end of 2005. This study revealed that we do not have a caste system in this county and that there is meaningful opportunity for advancement.

The Government should be focusing less on income redistribution and more on economic growth. Increasing the economic pie will provide better opportunities for wealth creation. When 10% of the population is paying over 70% in taxes, we will not achieve more prosperous economic growth by taxing this subset more. These are the people who invest capital and create jobs. When was the last time you worked for a poor person?

Not only has President Obama healthcare initiative tarnished his credibility, his handling of the latest Gulf oil disaster is now bringing into question his competency. Process, promises, and results all matter. That’s how you build trust, integrity and leadership. This is the kind of change we can believe in.