Iowa Dave's Blog

One of the standard plots in fiction can be named, “Reaching Maturity”. One of my favorite examples of this shows up in the Disney dog movie, “Chihuahua”.

The little, lost doggie protagonist spends the first act meekly needing all kinds of help. In Act Two she falls in with a band of free-range dogs who tell her to grow a backbone, channel her inner bitch, in a word, “Find your Bark!” In Act Three she finally emits a deep, commanding “Rowff!”  that literally brings the walls crashing down on the bad guys.

Similarly, President Obama spent his first year in office rather puppily hoping that Congress would fling him a nice, fuzzy tennis ball of a health care plan along broadly pleasant but dismayingly vague lines. The effort left Congress exhausted and stalemated by the end of 2009. The Senate enacted one bill, the House another. Even the most domesticated Democratic poodles in the media despaired of any resolution. 

As the new year began, the President seemed anxious to change the subject. Saturday Night Live parodied his 2010 State of the Union address in a skit where the Obama character tells Congress, “Health Care? I could go either way on that. Pass something. Or not. Whatever.”

Suddenly, Rowff! Barak Obama became Bark Obama. The health care bill moved ahead of everything on his agenda. He took a risky political decision to enact a bill by a divisive parliamentary maneuver ironically named, “reconciliation.” Even more, he took pains to be seen as the whip hand in the backroom bargaining. He took the bill away from the Congressional leadership, made it his own, and rammed it through.

Again suddenly, Rowffr! the President steps into television’s bully pulpit and double-dog-dares Republicans to just go ahead and try overturning his health bill if they think they have the necessary bite. Put your teeth where your growl is! he taunts them. Then Rowffrrr!! he flies off to Afghanistan over the weekend to wag his nagging finger of shame at the government there. Then he jets back to sign the health bill in Virginia on Tuesday. He’s There! He’s Here! He’s Everywhere!

And he’s found his bark.

I saw an opinion piece today calling health care Mr. Obama’s “Air Traffic Controller Moment”. The writer recalled how Ronald Reagan fired the air traffic controllers for illegally striking during his first year in office. It stunned labor organizations, galvanized pro-business lobbies in Washington, and transformed him from an affable but ineffective father-figure into a decisive, if feared executive. His supporters and opponents alike took Reagan’s political agenda seriously after that.

The writer notes that Republicans did lose Congressional seats in the midterm election that followed a year later, as typical for the party holding the White House. But Reagan’s standing with the public improved afterward to the point that he was re-elected overwhelmingly with almost 60% of the vote.

Is it just me, or does Mr. Obama really seem energized by his recent political triumph? Republicans hoping to sideline him into permanent irrelevance by blocking passage of the health bill should listen to the bark. They need to get over their cognitive dissonance and prepare to campaign on the merits of constructive policies where they have some chance to win.

The Congressional Republicans’ strategy of unified defiance failed them. It will not serve the GOP hereafter to remain monotonously anti-Obama. Their best hope–one with a reasonable chance of success–is to offer the public a demonstrably loyal opposition with a credible agenda and inspiring leaders capable of delivering the goods. Get out ahead of the President’s agenda and push a positive platform of their own. So far, they have proven unable. Further truculence on their part would only grant Mr. Obama a meaningful lead in his own bid for re-election.

Bill Clinton, the former President, reportedly advised Mr. Obama, “I learned a lot about this job during the first year.”  Truth told, that is probably the only way to learn. The lesson in this case was that the leader must sooner or later wield his power and damn the cost. Seems to me that Mr. Obama knows that now.

We should all go back and re-read his campaign speeches. Pay attention. Suppose he really meant what he said. Get ready for a lot more of it to move through Congress. Rowff!

Comes now for debate the health care law proposed by the Democratic Party caucus of the U.S. Senate.

The new thing in this law that strikes me is the idea of imposing fines for not buying health insurance. Troubling, that. Employers would pay penalties of $750 per employee, and families a like amount per person, for exercising the prerogative not to spend money on something they do not want.

We do not pause to ask why people do not want it, or what alternative might actually be something they would want. No, we determine by fiat what is to be desired, then punish people for not desiring it. The advocate for such a law is quick to claim that it leaves people free to do as they like. But his idea amounts to charging a government license fee to exercise that freedom.

I understand the social economic argument here. It is to deal with the problem of free riders, non-payers who purportedly count on getting health care without cost in any event of need. The cost of this care gets shifted into the overhead expense of hospitals and doctors, who pass it through to public and private insurance providers in the form of higher fees.  ”Make them pay!” is the mantra of the day. “When they pay what they ought, the rest of us will save some money.”

But we are talking about a small minority of the population. Any gain in money at their expense for the sake of a generalized good comes at a cost in individual liberty for the large majority of us whose health premium payments cease to be voluntary acts of civil responsibility.

If the idea of  fee-for-freedom takes hold, then it can easily make its way into other desires for modifying the behavior of the populace. This possibility has fascinating implications for a country’s international competitiveness. Far from erecting walls, the U.S. immigration problem a few years from now might become a puzzle in how to attract enough people to come here, or even how to stem a net outfow of capital and know-how to other, freer parts of the world.

Local College of Iowa (LCI), my alma mater, faces a budget crisis. As a state-supported institution, it recently received notice of a ten percent cut in funding for the current fiscal year that began July 1, 2009. With four months already elapsed, the school actually must absorb the full year’s reduction in state appropriations over the remaining eight months.

The plan on the table calls for: tuition surcharges; furloughs (involuntary, unpaid leave) for all employees; layoffs; all the way up to permanent termination of programs. Pain-sharing is the name of the game, although suddenly the notion of “sharing” has gotten a lot less popular around campus.

The prosect of a further reduction of similar or greater magnitude faces the institution again next year, because this year’s state budget makes use of one-time “stimulus money” from the federal government. President Obama has already ruled out a second round of stimulus, leaving Iowa with that much less to spend next year.

It will surely, noticeably change LCI. I just hope that the experience of diminishing state support will awaken a resolve toward greater self-support and self-sufficiency among my former colleagues. (I not only graduated from LCI but later taught Finance courses there.)

They are in the fight of their institutional lives over there. If they dissipate their energy fighting amongst themselves for scraps of dwindling public largesse, it will risk institutional failure. However, if they unite their energy in a campaign to reshape the school to accommodate a permanently reduced level of state support, they will come through OK. This is the lesson that Local College of Iowa needs now to learn.

News this day was the U.S. Government launched an investigation of Toyota Tundra (full-size) pickup trucks for excessive rust. It sounds serious, as you can read in this story from the Detroit News (click here). Let us hope that any real problems with the trucks are found and fixed in a cooperative spirit.

I would be glad if it really were about safety. Unfortunately, events of this year have created a more menacing way to interpret it. The troublesome new reality is that the government–and the United Auto Workers (UAW) labor union–are no longer impartial arbiters. They are players themselves, with acute competitive stakes that may give the appearance of adverse bias toward the target company in this investigation. It is impossible to be both player and referee in a competitive game.

The U.S. Government acquired majority ownership of General Motors (GM) in a forced bankruptcy action earlier in 2009. The government itself now manufactures Chevy pickup trucks. Toyota competes with Chevy. Meanwhile, the UAW acquired majority ownership of Chrysler when that firm went bankrupt a few months earlier. The UAW manufactures and sells Dodge brand pickup trucks for the benefit of a union-run health care fund.

As manufacturers in their own right, the UAW and government stand in a conflict of interest respecting the outcome of any enforcement action against Toyota. How the government conducts this investigation will–and should–come under greater scrutiny.

There is a side story playing out which adds a political spin to this investigation. Toyota recently announced it will close its manufacturing facility in California.  Toyota and GM had operated the plant jointly since the 1980’s, but GM dropped its end of the deal when the government took over this year. Toyota says it must close the plant because the economics just do not work without both companies making cars there and sharing the costs.

Here’s the rub. It was Toyota’s only factory to employ members of the UAW. The union naturally questions Toyota’s motivation, noting that Toyota is closing its only union shop while it continues to operate ten other, non-union facilities in the U.S. The UAW cooperated closely with the government through the GM and Chrysler bankruptcies, and has been a strong political supporter of the current president.

This investigation of Toyota could easily be painted as political payback. But on that level, so what? Unions work hard to gain political advantages and should be expected to use them. However, now that the UAW is also a competing manufacturer it needs to take greater care how it presses this complaint.

In their new roles as owners of car and truck manufacturers, any action against a competing firm by the government or UAW is apt to be viewed with deeper suspicion. The consequences of this change in their status are difficult to imagine precisely, but are not likely to be small.

The most dangerous risk, it seems to me, is that U.S. or union actions against a global competitor could be interpreted elsewhere in the world as a swerve toward protectionism favoring Chrysler and GM. Such a view could provoke countervailing actions by other countries, with escalating retaliation. If that became the trend, it could turn last year’s financial crisis into next year’s trade crisis. The difference: in a financial crisis, the bank could go under. In a trade crisis, the whole economy.