Not Your Grandfather's Conservatives
The entire Federal government has now been under the control of the Republican Right for the past five years. In reality, however, the Republican Right has been driving the legislative agenda in this country for the past eleven years, ever since Newt Gingrich and the "Contract On America" boys came to power in the disastrous Congressional elections of 1994.
The financial consequences of this-year eleven-year period of Republican legislative control have been striking. The United States is now in a state of fiscal chaos unparalleled in the country's history, as deficits constantly zoom to new record levels. To some extent, irresponsible tax cutting has been the cause of these deficits, but it does not tell the entire story. Federal spending is also out of control. And that spending is not limited to Iraq and the military; uncontrolled domestic spending has also reached new heights. How has all of this happened during the watch of the supposedly "conservative" Republicans?
There was a story on NPR the other morning which, I believe, opens a window on understanding the nature of this Republican-led era of fiscal irresponsibility through which we are living. The story concerned the federal crop insurance program (see "Crop Insurance Industry Ripe For Fraud," Nov. 15, 2005, www.npr.org). The story goes something like this:
The Federal Crop Insurance Corporation ("FCIC") was created in 1938 as part of the New Deal farm relief program. (A history of the crop insurance programs can be found at www.rma.usda.gov). Throughout most of its history, the FCIC played a limited and targeted role in the provision of crop insurance to marginal farmers. The program was designed to offer federally-funded insurance in cases of "dust bowl"-type disasters for farmers who were truly unable to insure their crops through the private insurance sector. That was pretty much the way the program remained throughout most of its history, until Gingrich & Co. got a hold of it in the mid-1990s.
In 1996, the Republican Congress enacted new legislation that privatized the federal crop insurance program. Most of the policies continued to be guaranteed by the Federal Treasury, but the job of selling and servicing policies was handed over to private insurance companies, supposedly because private industry could administer the program more efficiently than government agencies could.
That's not what happened. The federal crop insurance program mushroomed in size as a result of privatization. The value of the insured crops grew from $10 billion in the mid-1990s to over $40 billion at present.
That the privatization of the federal crop insurance program would lead to an expansion rather than a contraction of the program should have been entirely foreseeable. After all, private companies exist for the purpose of making a profit, and private insurance companies make bigger profits by writing more and larger policies. The interest of the private insurance companies charged with administering the program was to make the program as large and as expensive to the federal government as possible, thereby boosting the profits of the insurance companies. This conclusion was expressly confirmed in the remarks of the former head of the Risk Management Agency, the agency within the Department of Agriculture that oversees the crop insurance program:
"There would not have been an expansion of the program without industry lobbying for new legislation, more budget authority, more subsidies for the program. The thing that seemed most egregious was the extent to which the industry ran the program. The industry has a lot of influence and is also a major donor to the political process."
In addition to causing a massive increase in the overall size of the federal crop insurance program, privatization has also led to a dramatic increase in incidents of insurance fraud. Apparently, there is an entirely new industry that has "cropped up" (no pun intended), namely, "insurance farming." It has become common for scam artists to establish sham "farms" in order to obtain federal insurance, then either plant substandard seeds or no seeds at all, and then put in insurance claims when the non-existent crops "fail." Because the insurance companies are largely paying out benefits with federal money rather than their own money, they have little incentive to prevent such fraud. (There are no Edward G. Robinsons out there tracking down the Fred MacMurrays and Barbara Stanwycks of the agricultural set). On the contrary, because the private insurance companies have an incentive to write more policies and keep the program growing in size, the insurance company lobbies have actively resisted legislation that would impose new regulations requiring companies to be more cautious about issuing crop insurance to such phony "farmers."
What I found fascinating is what this story says about the ideology of the supposedly "conservative" Republicans who are running today's federal government. In the old days, conservatives would have objected to federal programs such as the crop insurance program from the standpoint of the hard-hearted free marketeer. If a farmer can't afford to buy adequate insurance for his crops, then that's just too bad. Farms that are not sufficiently profitable to protect themselves against the vicissitudes of the agricultural business should just go under and give way to more profitable enterprises. That, an old-style conservative would say, is just a natural and inevitable consequence of the Darwinian operation of the free market.
But that's not how today's "conservative" Republicans see it. They want to keep the federally-funded crop insurance program running along at full throttle. Specifically they want to keep the federal funding for the program but at the same time, hand over the operation of the program to private companies, supposedly because private companies are more "efficient" than government agencies. The result has been a crop insurance program that is a fiscal nightmare.
I am convinced that the crop insurance story is a microcosm of what today's "conservative" Republicans have been doing throughout the federal government. Paul Krugman had an excellent piece in last week's New York Times about the disastrous impact of Republican-enforced privatization upon the Medicare prescription drug program. The real story of post-occupation Iraq has been the story of privatization, as the Pentagon has effectively privatized all aspects of the administration of the occupation other than purely military operations. The result has been exactly the same combination of corruption, fraud, and overspending that we see in the crop insurance program. How much of the Katrina debacle was the by-product of FEMA's agenda under Republican stewardship of out-sourcing disaster relief programs to private companies? And consider Bush's hopefully defunct Social Security "reform" program. Unlike conservatives of the past, Bush did not propose the abolition of Social Security; instead, he proposed handing over the program to private companies -- another crop insurance story waiting to happen.
There is a lesson in all of this for the Democrats. The Democrats can legitimately position themselves as the party of common sense, the party that honestly stands for both fiscal responsibility and a commitment to limited government social programs where they are truly needed. What this fundamentally means is a return to the ideas of the New Deal. After all, contrary to the ravings of the lunatic fringe, the New Deal was not actually about "creeping socialism." The basic idea underlying the New Deal was that in most respects, the free enterprise system works reasonably well, but that in a few areas -- such as providing minimal retirement benefits and health care for the elderly and the needy and providing insurance coverage to marginal farmers against catastrophic crop failures -- the free enterprise system falls down and government programs are required to pick up the slack. When government action is needed to deal with such specific and limited problems, the presumption ought to be that a well-administered and politically accountable government agency can and should do the job. That is the best way of ensuring not only that the job gets done right, as opposed to getting it done Katrina-style, but also ensuring that the job gets done subject to careful budgetary scrutiny.
As the federal crop insurance program so aptly demonstrates, handing over government financed programs to private companies virtually guarantees that the programs will balloon in size and will become breeding grounds for fraud and corruption. And that, in a nutshell, sounds like a pretty good description of what has been going on in Washington for the past few years.
The financial consequences of this-year eleven-year period of Republican legislative control have been striking. The United States is now in a state of fiscal chaos unparalleled in the country's history, as deficits constantly zoom to new record levels. To some extent, irresponsible tax cutting has been the cause of these deficits, but it does not tell the entire story. Federal spending is also out of control. And that spending is not limited to Iraq and the military; uncontrolled domestic spending has also reached new heights. How has all of this happened during the watch of the supposedly "conservative" Republicans?
There was a story on NPR the other morning which, I believe, opens a window on understanding the nature of this Republican-led era of fiscal irresponsibility through which we are living. The story concerned the federal crop insurance program (see "Crop Insurance Industry Ripe For Fraud," Nov. 15, 2005, www.npr.org). The story goes something like this:
The Federal Crop Insurance Corporation ("FCIC") was created in 1938 as part of the New Deal farm relief program. (A history of the crop insurance programs can be found at www.rma.usda.gov). Throughout most of its history, the FCIC played a limited and targeted role in the provision of crop insurance to marginal farmers. The program was designed to offer federally-funded insurance in cases of "dust bowl"-type disasters for farmers who were truly unable to insure their crops through the private insurance sector. That was pretty much the way the program remained throughout most of its history, until Gingrich & Co. got a hold of it in the mid-1990s.
In 1996, the Republican Congress enacted new legislation that privatized the federal crop insurance program. Most of the policies continued to be guaranteed by the Federal Treasury, but the job of selling and servicing policies was handed over to private insurance companies, supposedly because private industry could administer the program more efficiently than government agencies could.
That's not what happened. The federal crop insurance program mushroomed in size as a result of privatization. The value of the insured crops grew from $10 billion in the mid-1990s to over $40 billion at present.
That the privatization of the federal crop insurance program would lead to an expansion rather than a contraction of the program should have been entirely foreseeable. After all, private companies exist for the purpose of making a profit, and private insurance companies make bigger profits by writing more and larger policies. The interest of the private insurance companies charged with administering the program was to make the program as large and as expensive to the federal government as possible, thereby boosting the profits of the insurance companies. This conclusion was expressly confirmed in the remarks of the former head of the Risk Management Agency, the agency within the Department of Agriculture that oversees the crop insurance program:
"There would not have been an expansion of the program without industry lobbying for new legislation, more budget authority, more subsidies for the program. The thing that seemed most egregious was the extent to which the industry ran the program. The industry has a lot of influence and is also a major donor to the political process."
In addition to causing a massive increase in the overall size of the federal crop insurance program, privatization has also led to a dramatic increase in incidents of insurance fraud. Apparently, there is an entirely new industry that has "cropped up" (no pun intended), namely, "insurance farming." It has become common for scam artists to establish sham "farms" in order to obtain federal insurance, then either plant substandard seeds or no seeds at all, and then put in insurance claims when the non-existent crops "fail." Because the insurance companies are largely paying out benefits with federal money rather than their own money, they have little incentive to prevent such fraud. (There are no Edward G. Robinsons out there tracking down the Fred MacMurrays and Barbara Stanwycks of the agricultural set). On the contrary, because the private insurance companies have an incentive to write more policies and keep the program growing in size, the insurance company lobbies have actively resisted legislation that would impose new regulations requiring companies to be more cautious about issuing crop insurance to such phony "farmers."
What I found fascinating is what this story says about the ideology of the supposedly "conservative" Republicans who are running today's federal government. In the old days, conservatives would have objected to federal programs such as the crop insurance program from the standpoint of the hard-hearted free marketeer. If a farmer can't afford to buy adequate insurance for his crops, then that's just too bad. Farms that are not sufficiently profitable to protect themselves against the vicissitudes of the agricultural business should just go under and give way to more profitable enterprises. That, an old-style conservative would say, is just a natural and inevitable consequence of the Darwinian operation of the free market.
But that's not how today's "conservative" Republicans see it. They want to keep the federally-funded crop insurance program running along at full throttle. Specifically they want to keep the federal funding for the program but at the same time, hand over the operation of the program to private companies, supposedly because private companies are more "efficient" than government agencies. The result has been a crop insurance program that is a fiscal nightmare.
I am convinced that the crop insurance story is a microcosm of what today's "conservative" Republicans have been doing throughout the federal government. Paul Krugman had an excellent piece in last week's New York Times about the disastrous impact of Republican-enforced privatization upon the Medicare prescription drug program. The real story of post-occupation Iraq has been the story of privatization, as the Pentagon has effectively privatized all aspects of the administration of the occupation other than purely military operations. The result has been exactly the same combination of corruption, fraud, and overspending that we see in the crop insurance program. How much of the Katrina debacle was the by-product of FEMA's agenda under Republican stewardship of out-sourcing disaster relief programs to private companies? And consider Bush's hopefully defunct Social Security "reform" program. Unlike conservatives of the past, Bush did not propose the abolition of Social Security; instead, he proposed handing over the program to private companies -- another crop insurance story waiting to happen.
There is a lesson in all of this for the Democrats. The Democrats can legitimately position themselves as the party of common sense, the party that honestly stands for both fiscal responsibility and a commitment to limited government social programs where they are truly needed. What this fundamentally means is a return to the ideas of the New Deal. After all, contrary to the ravings of the lunatic fringe, the New Deal was not actually about "creeping socialism." The basic idea underlying the New Deal was that in most respects, the free enterprise system works reasonably well, but that in a few areas -- such as providing minimal retirement benefits and health care for the elderly and the needy and providing insurance coverage to marginal farmers against catastrophic crop failures -- the free enterprise system falls down and government programs are required to pick up the slack. When government action is needed to deal with such specific and limited problems, the presumption ought to be that a well-administered and politically accountable government agency can and should do the job. That is the best way of ensuring not only that the job gets done right, as opposed to getting it done Katrina-style, but also ensuring that the job gets done subject to careful budgetary scrutiny.
As the federal crop insurance program so aptly demonstrates, handing over government financed programs to private companies virtually guarantees that the programs will balloon in size and will become breeding grounds for fraud and corruption. And that, in a nutshell, sounds like a pretty good description of what has been going on in Washington for the past few years.
posted by democratic core at 6:57 AM
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