The Swine Line

The AARP, which claims to represent more than 40 million seniors, yesterday endorsed H.R. 3962, the massive Pelosi healthcare bill.  An analysis of the motivation for the AARP’s favorable position shows that it is based the group’s bottom line, not the best interests of its membership.  There could be no other rational explanation for supporting a bill that takes about $400 billion from Medicare and then turns it over to help insure younger Americans.

First, Dan Eggen of The Washington Post wrote a front-page story on October 27 that AARP could benefit from the changes in health insurance in the bill.  He noted, ”The group and its subsidiaries collected more than $650 million in royalties and other fees last year from the sale of insurance policies, credit cards and other products that carry the AARP name, accounting for the majority of its $1.14 billion in revenue, according to federal tax records. ” Supplementary Medicare policies, or ”Medigap”plans, make up the biggest share of this royalty revenue. 

While AARP sells a lot of Medigap plans, it does not sell as many Medicare Advantage plans.  The latter program provides services such as lower premiums, dental care, eyeglasses, and better prescription drug coverage compared to traditional Medicare.  About 25 percent of seniors participate in the program.

For those not familiar with AARP’s history, the organization’s initial purpose was to sell health insurance to teachers.  That has morphed into selling health insurance and other services to any American of the age of 50. The group’s director of legislative policy told the Post that policy drives its activities, since it is a “consumer advocacy organization, not an insurance firm.”

The president of the Galen Institute, Grace-Marie Arnett, cited similar concerns in an op-ed in The Chicago Tribune.  She noted that the $400 billion in Medicare cuts, especially the $150 billion in Medicare Advantage, will create “an ever greater need for Medigap coverage” for seniors. That will fatten AARP’s bottom line while thinning the ranks of available alternatives to traditional Medicare for seniors.

The Pelosi bill cuts Medicare Advantage by $150 billion to help pay for the Democrats’ ultimate goal – the elimination of private insurance and the establishment of a single-payer system run by bureaucrats in Washington.

When AARP first endorsed the healthcare plan that was making its way through the House, tens of thousands of seniors left AARP, with many cutting up their membership cards to protest the group’s support of healthcare reform.  Unfortunately, tens of thousands of other Americans joined AARP because they want to take advantage of the discounts and other membership benefits.  Hopefully they will all wake up and smell the bad policy emanating from AARP headquarters following its support of the final Pelosi bill.  The greater harm to seniors is not worth the few dollars saved at the movies.

The vote on the bill will occur sometime this weekend, and the Council for Citizens Against Government Waste (CCAGW), along with many other groups, has issued an Action Alert to its email list urging everyone to tell their representative to vote against the bill. Since the healthcare bill first began working its way through Congress earlier this year, CCAGW has generated 100,000 communications to Capitol Hill opposing the legislation.

The AARP endorsement occurred on the same day that CCAGW joined with other taxpayer groups and thousands of outraged Americans to express their opposition to the bill at the U.S. Capitol.  Following cries of “Kill the Bill,” the participants visited congressional offices to tell their own representative to vote “no” on H.R. 3962.

The vote this weekend on “The Worst Bill Ever,” as it was called by The Wall Street Journal on November 1, is critical to the financial health and welfare of every American – seniors, Baby Boomers, Generations X and Y, and most importantly, future generations.

Thousands of protesters gathered on the lawn outside the Capitol this afternoon to protest Nancy Pelosi’s government takeover of healthcare.  CAGW President Tom Schatz and I attended the event, and stood shoulder to shoulder with concerned Americans.  Check out our video footage of the rally.

Fox news reported:

Thousands of protesters arrived by bus for the rally, which the GOP is calling an emergency “House Call.”  The event drew the conservative “tea party” activists but unlike past rallies was officially sanctioned by House Republicans. 

Republicans want those who attend to track down their elected representatives in Congress and put pressure on them to think twice about voting for the more than $1 trillion health care overhaul pushed by House Speaker Nancy Pelosi. 

“They’re going to listen,” said Rep. Michele Bachmann, R-Minn., who originally called for the rally. “The biggest voice in the United States is your voice.” 

Republicans were formally unveiling their version of a health care reform bill Thursday. 

They are looking to reprise the kind of grassroots resistance that boiled up during the August recess at town hall meetings across the country. That resistance seemed to temper Democrats’ ambitions for health care reform and just about dash any hope for passing a government-run insurance plan as part of the package. But just a few months later, both the House and Senate have included so-called public options in their bills. 

Pelosi’s bill will likely be up for vote this Saturday.  The 2,000 plus page monstrosity calls for the creation of 118 new federal bureacracies, new taxes, individual and employer mandates, massive cuts to Medicare benefits, higher insurance costs, and the creation of a government-run healthcare exchange that includes a “public option.” 

Call your congressman and tell him to VOTE NO on Pelosi’s government-run healthcare bill!

CAGW was quoted in Reporter Michael Grabell’s latest story on misspent stimulus cash.  Here are a couple of the story’s highlights:

Breakfast at Fuddruckers: $19.24.

Snow cone and cotton candy machine: $146.89.

Six extra preview performances of “Little House on the Prairie – the Musical”: $50,000.

Benefit to the economy? According to the recipients of this stimulus money: Priceless.

Last week, the federal government released the first comprehensive tally [1] of the nearly $800 billion economic stimulus package. And while the White House has heralded marquee projects [2] like road construction and solar panel factories, the stimulus package is also made up of hundreds of smaller purchases like office supplies, gasoline and lab rats.

Some of the more unusual purchases are bristling stimulus critics.

“This was not what people had in mind when they were talking about job creation,” said Leslie Paige, spokeswoman for Citizens Against Government Waste [3]. “It was a gigantic pork barrel project from the first day out of the box, and it has proven itself to be every bit as swinish as we thought it would be.”

Waste, of course, is in the eye of the beholder.

Among the 150,000 stimulus expenditures released last week are dozens of iPods, toilets and trips to resort hotels. But, according to the reports, those seemingly questionable purchases are being used to enhance technology in the classroom, make bathrooms accessible to the disabled and train special education teachers.

“If you build a bridge to nowhere, that might be a bridge that you’re going to use that I’m not going to use,” said Ed Pound, spokesman for the government board charged with investigating waste and fraud in the stimulus package. “That’s not a call we’re going to make.”

The White House provided some insight on what types of projects don’t meet the administration’s standards when it announced [4] last month that it had stopped and altered 170 proposals so far. On the list were projects to straighten headstones, freeze fish sperm and steam-clean bird droppings from buildings.

But when the stimulus oversight board released its report last week, other stimulus recipients had funded the exact same types of projects to reset headstones, freeze fish sperm and power-wash bird droppings from bridges…

The award for most unusual stimulus project could perhaps go to Malcolm MacIver, a neurobiology and engineering professor at Northwestern University.

MacIver received a $1.25 million grant to use electric fish from the Amazon to study how animals take in sensory information to move quickly in any direction. (See video.) [5] The research could help in the development of underwater robots to find the source of toxic leaks. Further in the future, it could lead to new, far more agile prosthetics.

 Read it all here:

Chicago Tribune does the AP one better and shows how, in Chicago, stimulus money is saving more jobs..more jobs than actually exist!  Here is how that classic scene should read now:

Malone:  You said you wanted to get [the Stimulus Cash]?  Do you really wanna get it?  You see what I’m saying is, what are you prepared to do?

Ness:  Anything within the law…or maybe not.

Malone:  And then what are you prepared to do?  If you open the can on these worms you must be prepared to go all the way.   Because they’re not gonna give up the fight, until one of you is broke.

Ness:  I want to get the Cash!  I don’t know how to do it.

Malone:   You wanna know how to get the stimulus cash?  Other cities in the country say they saved a few jobs, you have to say you saved way more jobs?  They take millions in stim cash, you have to take tens of millions.  That’s  the Chicago way!  And that’s how you get the Cash.  Now do you want to do that?  Are you ready to do that?  I’m offering you a deal.  Do you want this deal?

Ness:  I have sworn to capture that Cash with all legal and possibly not so legal powers at my disposal and I will do so.

Malone:  Well, the Lord hates a goo-goo government guy.

[jabs Ness with his hand, and Ness shakes it]

Malone:  Do you know what a blood oath is, Mr. Ness?

Ness:  Yes.

Malone: Good, ’cause you just took one.

The Wall Street Journal had two good articles this week illustrating the pitfalls of having the government as a major stockholder or outright owner of a private business.  The first story dealt with the byzantine actvities surrounding the financial survival of GMAC, General Motors’  former financing arm, which is into TARP for about $12.5 billion dollars. 

On the one hand, it needs the private sector to provide consumers with abundant credit. But it can ill afford to have financial firms engage in the kind of risky lending that precipitated the crisis.

GMAC CEO Al de Molina said his brand of auto lending “does not represent undue risk” and “in no way led to the credit crisis.” He added, “All we are trying to do is to make loans to small businesses and consumers in support of the auto industry.”

For years, GMAC was owned by General Motors Corp., and its mission was to provide financing to car dealers and buyers. Eighty percent of GM dealers came to rely on GMAC to get cars onto their lots. In recent years, it expanded into other businesses, including real estate, commercial finance and auto insurance.

One interesting aspect of the GMAC bailout is that, in the volatile days of bank and auto bailouts, GMAC was able  to get the Federal Reserve to quickly redesignate it as a holding company, which would allow it t=behave like a bnak.  The new entity, Ally Bank immediately went out into the marketplace and began offering higher interest rates on laons that other private sector competitors.  So what did they do upon gettign their taxpayer-funded lifeline?:  

GMAC is the parent company of Ally Bank, formerly known as GMAC Bank, an online bank that has drawn in more customers with a savvy advertising campaign and high interest rates. The American Bankers Association forced the FDIC to request Ally Bank to lower its rates because other banks couldn’t compete with Ally’s new strength acquired with the help of taxpayers.

The second story was about Fannie Mae, which, granted, was never a truly private enterprise…hence the nomenclature; government-sponsored enterprise.  Taxpayers have pumped $96 billion into Fannie and Freddie since September 2008 and Fannie reportedly bled out another $37.9 billion in the first half of this year.  

Many argue that it was, in fact, Fannie Mae’s and Freddie Mac’s schizophrenic existence straddling the private and public sector, bifurcated regulatory scheme, and conflicting missions that drove them directly into the financial morass they are in now, nearly taking the whole financial system down with them.  Dire warnings and predictions emanated from many quarters and there were allegations that the enterprises were viewed as “too big to fail,” and, as such, more more oversight should have been exercised over their activities.  That did not happen then, as we know.  But now:   

Nearly every major business decision at Fannie Mae and Freddie Mac is vetted or directed by the government. Officials at both firms have complained about their contradictory missions — they are at once private companies and tools of public policy.

The Goldman talks are emblematic of these conflicts: A deal that could help Fannie Mae might also be politically unpalatable.

The Treasury Department has purchased $45.9 billion in preferred stock in Fannie Mae since it took over the company last year to pump money into the firm, giving taxpayers a substantial stake in the firm.

In fact, one wonders whether the GMAC deal is creating another Fannie and Freddie, complete with all the perverse-incentives and political meddling…leading to deja-vu-type negative consequences for taxpayers. 

After all, just one of the adverse side effects of the Fannie and Freddie model was the unfair advantages they had and leveraged in the marketplace.  The conventional comforming loan market was the sole playing field for F & F because they had taxpayer-backed unfair advantages.  So, won’t GMAC be competing unfairly with Ford Motor Company’s financing arm?  Ford didn’t take a dime of government money and may now be facing a competitor that enjoys that full faith and credit of the U.S. Treasury backing it up.

Columnist George Will addressed this issue succinctly here:

Immediately after GMAC became eligible for TARP money, GM reduced to zero the interest rate — for up to 60 months — on certain models. This, of course, penalizes GM competitors, including Toyota, Honda and other “transplants” whose cars are made in America by Americans for Americans, and Ford, which does not have the freedom of maneuver conferred by TARP money because Ford is not taking any.

This redundant evidence that no good deed goes unpunished might be a reason for Ford to take some. Then it could join GM in using taxpayers’ money to produce more troubled assets. The New York Times reports that GMAC has begun making loans to borrowers with credit scores as low as 621, a significant relaxation of the 700 minimum score the company adopted just three months ago as it struggled to survive. America’s median credit score is 723. GMAC’s lowered standards will increase the number of people eligible for its loans by an estimated 50 million.

What should one call loans made to applicants who, three months ago, were thought to be trying to buy more expensive cars than they could afford? How about “subprime loans”? Thus does the economy, which is suffering a fierce hangover after going on a bender of reckless borrowing, try a familiar remedy — the hair of the dog.

 If you think the government would not make the same mistakes again, think again.  Fannie and Freddie Mac both had a portion of its board made up of presdiential appointees.  Look at this:

Then there is GMAC’s board. As part of the plan to make GMAC a bank, the government largely forced out co-owners Cerberus Capital Management and GM. It reconstituted a seven-person board, with the government appointing two members who will look after a large GMAC equity stake that is held in trust.

One of those appointed board members is Robert T. Blakely, a former chief financial officer at Fannie Mae.

In addition to these two articles, I would direct your attention to a newly-released GAO report on the government’s management plans for GM and Chrysler.   President Obama swore that he and his administration had no interest in staying in the auto business.  Here is what the GAO says:

Treasury does not plan to be involved in the day-to-day management of Chrysler and GM, but it plans to monitor the companies’ performance. Treasury developed several principles to guide its role as a shareholder, including the commitment that although Treasury reserves the right to set up-front conditions to protect taxpayers and promote financial stability, Treasury will oversee its financial interests in a hands-off, commercial manner. The conditions that Treasury set for the companies include requiring that a portion of their vehicles be manufactured in the United States and that they report to Treasury on the use of the TARP funding provided. Treasury officials told us that they are also requiring that Chrysler and GM submit financial information on a regular basis and that they plan to meet with the companies’ top management on a regular basis to discuss the companies’ financial condition.

Sorry, but I think the political pressures to meddle in the operations of these companies will be irresistable.

Oh, and just in case you taxpayers were expecting to get any of the money invested back, the GAO says:

Treasury is unlikely to recover the entirety of its investment in Chrysler or GM, given that the companies’ values would have to grow substantially above what they have been in the past.

This Thursday, November 5th, at noon on the steps of the U.S. Capitol, there will be a House Call on Washington, where Americans from all over the nation will demand that Congress defeat the government takeover of healthcare.

CCAGW is a part of the “High Noon 4 Healthcare” Coalition, and is asking you to please tell your friends and family about this vital event to urge members of the House to VOTE NO on this wasteful and dangerous plan.  If you cannot attend Thursday at noon, we encourage you to show up at your U.S. Representative’s district office or call the DC office and voice your opposition to the 1990-page, $1 trillion Pelosi bill.

Reuters reported today that GE’s F136 engine will require modifications that will keep it offline for the rest of the year.  While speculation about the recent testing failure centered on the combuster for the engine, a GE spokesman said it involves a diffuser that directs air into the combuster.

GE and Rolls Royce are in charge of building the “alternate engine” for the F-35 Joint Strike Fighter, a project that is opposed by the Pentagon, the White House, and defense experts such as The Lexington Institute’s Loren Thompson, who said the following about the testing problems in his blog this morning:

“This issue underscores a logical flaw in the case for an alternate engine. Backers argue that having a second engine is insurance against a design flaw in the primary powerplant being built by Pratt & Whitney for the single-engine F-35 fighter. But that reasoning works both ways — add a second engine to the mix, and you’ve doubled the potential for design issues, just like you’ve doubled the cost of developing engines by having to fund two design teams and two development programs. With several billion dollars remaining to be spent before the alternate engine joins the fleet, there is still time to rethink whether a second engine is really needed. The Pentagon says one engine is enough.”

Citizens Against Government Waste has been speaking out against the alternate engine through its national advertising campaign, by providing an online “Citizen’s Demand” to stop funding the engine, and by direct contact with its members.  The combined efforts have produced 13,000 responses in opposition to the alternate engine.

As Congress moves closer to considering the fiscal year 2010 Department of Defense Appropriations Act conference report, CAGW’s lobbying arm, the Council for Citizens Against Government Waste, launched an online action alert asking taxpayers to send an email to their representative and senators urging them to vote against the legislation if it contained funding for the alternate engine.  To date, there have been more than 13,000 emails sent to Capitol Hill.

The debate is at a critical stage, as the President signed the Department of Defense Authorization Act for fiscal year 2010 despite pledging to cut wasteful earmarks and veto the bill if it contained funds for the alternate engine in a way that adversely affected the Joint Strike Fighter program.  The authorizing committee got around that threat by simply adding the $560 million in funds for the alternate engine to the bill without reducing the cost of any other program, including the F-35.  That cannot be done quite so easily in the appropriations bill.

Loren Thompson made another critical observation about the problems with the engine in his blog, noting that the ”normal failure rate in development of a new gas turbine engine would be on the order of one incident every 300 hours, but GE seems to be having problems every 13 hours. As a result, it may be up to a year behind schedule on its testing plan.”

On Friday, October 30, The Washington Post broke the story that seven members of the House Defense Appropriations Subcommittee are under investigation by the House Committee on Standards of Official Conduct, all of it related to earmarks that were requested by the now-defunct PMA Group.  The F136 engine could be as much as a $560 million earmark, making it one of the largest in the defense appropriations bill.  While this particular program is apparently not tied to the ethics investigations uncovered by the Post, between the ongoing testing problems and the corruption associated with the earmarking process, it should be clear to the defense appropriations conferees that now is the time to pull the plug on the alternate engine and ground it forever.

This story on the U.S. military’s strategy to combat improvised explosive devices (IEDs) in Afghanistan aired this morning on NPR. 

It is a fascinating story, but what it brought to mind immediately was the work done several years ago by a friend and fellow waste warrior, Major Eric Egland, an Iraqi war veteran who was involved with an anti-IED program in Iraq. 

Charged with determining why our anti-IED program in Iraq was not adequately protecting or troops, Egland ulitmately discovered that one of the companies charged with anti-IED work in Iraq had had no previous experience in that field, wasn’t even competent enough to do the most basic work on the program, and had been awarded the contract through a top-secret earmark by former California representative, current inmate Randy “Duke” Cunningham.  Egland has since then made a forceful case that earmarks not only costing us billions, they can actually cost lives.  Read more here. 

Let’s hope that we don’t see that sort of criminal corruption again, but the truth is that taxpayers should be very concerned.  The final numbers are not in yet on earmarks for the 2010 fiscal year, but CAGW is already seeing hundreds of anonymous earmarks crammed into the Defense Appropriations bills and news reports are beginning to creep out, strikingly similar to the Duke Cunningham tale.

It is amazing what you will see when you tune into some radio and television talk shows. 

This is rich:  Perennial complainer Ralph Nader hounding Rep. Barney Frank (D-Mass.) about his failure to regulate the derivatives market.  Nader is correct about Frank’s failure, just a different failure; Barney had a big hand in the Fannie Mae, Freddie Mac debacle, which was arguably the real jumping off point for the market last year. 

He repeatedly and systematically shielded theses two rogue government-sponsored enterprises form ANY sort of sensible overisight, something the Bush administration was right about but couldn’t get passed.  Barney Frank cosseted the two GSEs, baby-talked them, practically wrapped them in swaddling clothes and they took the whole financial market down the tubes with them, as predicated by people much smarter than Barney Frank.   

But it is a beautiful thing to watch him defend himself against an attack from his left flank (does Barney even have a left flank?) by claiming he is doing all he can to expand the role of government and it is those mean nasty Republicans who have given government a bad name! 

Watch the clip; frankly, it’s a romp!

The Senate is on the verge of updating the first-time homebuyers tax credit that I blogged about here.  Here is what Dawn Kopecki at Bloomberg has on the latest developments:

U.S. Senate leaders moved closer to an agreement on replacing an expiring $8,000 tax credit for first-time homebuyers with a smaller one that expands access to more borrowers, two people familiar with the matter said.

 The deal would reduce the size of the tax credit to 10 percent of the sale’s price, capped at $7,290, the people said. The credit would be available on home purchases that are under contract by April 30, and borrowers would have 60 days more to close the sale. The existing credit is due to end Nov. 30.

The new agreement, which is still being negotiated and may change, would expand the credit to so-called step-up borrowers who have lived in their current home for at least five years. The income eligibility for first-time homebuyers would remain the same at $75,000 for individuals and $150,000 for couples. The income criteria for step-up buyers would be $125,000 for individuals and $250,000 for couples.

The credit would be limited to homes costing $800,000 or less.

Yesterday afternoon, Senate Majority Leader Harry Reid announced that his healthcare reform proposal will include a public option.  (Surprise!).  The public option that will go into effect in 2013, however, will allow states to “opt out” of the government-run plan by 2014 if they are able to muster enough legislative support.  Reid’s brilliant scam will give moderate Democrats political cover to vote for a quasi public option by allowing them to claim, “if you don’t like it, you don’t have to take it.”

If only it were that simple. 

Reid plans to charge a tax on expensive health insurance plans worth more than $23,000 per year.  Those taxes combined with new ones levied to finance the $6 billion public option would be collected from all states, including those that choose to ‘opt out’.  Damned if you do, damned if you don’t.  There’s not escaping these massive new tax hikes.

An October 27th Wall Street Journal article notes:

“Underscoring the fight ahead, Senate Minority Whip Jon Kyl (R., Ariz.) said the proposal — even if it allows states to opt out — still inserts the government too deeply into the private sector.”  No matter what you call it or how you dress it up, the Democrats’ proposal is government-run insurance,” he said.

Health insurers, which have been among the most vocal opponents of public insurance, said Monday they would continue to fight the idea. “A new government-run plan would underpay doctors and hospitals rather than driving real reforms that bring down costs and improve quality,” said Karen Ignagni, president of America’s Health Insurance Plans, the main industry trade group. “The divisive debate about a government-run plan is a roadblock to reform.”

Moderate Republicans like Senators Olympia Snowe (R-Maine) and Susan Collins (R-Maine) who might have been inclined to support a bill that lacked a public option (like the Baucus healthcare reform proposal), have now been alienated from negotiations. 

Despite all his legislative tricks, Senator Reid will still have a tough time getting to 60 votes.  He will need all 58 Democrats and two independents to overcome a likely Republican filibuster and bring the bill to the floor.

Grace-Marie Turner, President of the Galen Institute, explains that a government-run healthcare option will not reduce overall healthcare costs.  In an October 27^th Wall Street Journal op-ed, Turner points out that Massachusetts’ financially unviable public healthcare system should be a warning to us all:  

“Despite a significant restructuring of the state’s health sector and dominance of nonprofit health plans, Massachusetts still has the highest health-insurance costs in the nation, averaging $13,788 for a family, according to the Kaiser Family Foundation.

One of the reasons so many people supported the reform effort in Massachusetts is that they were told universal coverage would lead to lower costs. With universal coverage, Massachusetts politicians argued, as many in Washington do today, people would no longer have to pay the medical bills of those who don’t have insurance—the “free riders”—and therefore health-insurance premiums would fall, or at least level off.

Ex-Massachusetts Gov. Mitt Romney, who led the reform effort, wrote an opinion piece for The Wall Street Journal (April 11, 2006) at the time the law was adopted, saying: “Every uninsured citizen in Massachusetts will soon have affordable health insurance and the costs of health care will be reduced.”

But such a reduction is proving much more difficult to achieve. Indeed, the state’s major insurers plan to increase premiums by 7% to 12% next year, with small businesses facing the largest increases.”

A public option will significantly raise healthcare costs, impose massive new taxes, drive private insurers into the ground, and ultimately ration care.  Supporters Reid’s state “opt out” plan should think twice about what is really best for the American people.