For newly minted employees of Goldman Sachs, one of the first things they’re instructed on during training is the ephemeral nature of investment banks. Using deal ‘tombstones’ from decades past, established employees ask them to look closely at the list of now-defunct underwriters of long ago deals.
The purpose of such an exercise is to remind them once again that when it comes to financial institutions, their existence is far from a forever thing. Second, it’s to sear in their minds the basic truth that one false move from an errant employee can bring the whole company down.
Lessons from Goldman Sachs loom large in light of the rollout of President Obama’s signature healthcare legislation, otherwise known as Obamacare. Though it was Obama’s goal to make access to healthcare universal, he left the ACA’s creation largely to Congress and bureaucrats whose creation of Healthcare.gov threatens to wreck any presumed legacy of success for the Obama administration. Had Obama been lucky enough to experience Goldman Sachs training, it’s fair to presume that he wouldn’t have been so lax about letting others write and then create the very legislation that would carry his name.
It’s popular now to suggest that the staggering incompetence that gave us Obamacare is limited to a flawed website. If only that were true. In truth, Obamacare’s problems merely begin with the website, and will grow much worse assuming Heathcare.gov is ever fixed.
That is so because contrary to its billing as a market-based exchange, it’s nothing of the sort. Healthcare.gov at its core is a wealth redistribution scheme that promises to fail for it ignoring basic economics.
Indeed, basic economics dictates that there’s no such thing as a ‘free good.’ That’s a major problem because Obamacare not only promised healthcare for all, but it promised gold-plated access to healthcare at costs lower than had previously prevailed in the actual marketplace. To put it very plainly, any legislation that promises more of a market good at a below market price is by definition a very expensive lie.
Since it is, stories about people like Dianne Barrette suddenly losing health insurance plans that cost $54/month in return for plans that cost $591/month were inevitable. There’s once again no such thing as a free good, and unless federally mandated insurance plans offering everything – including maternity benefits for men – were going to be given away by insurance companies hurtling toward bankruptcy, it was inevitable that what Obama promised was going to be accompanied by a much larger price tag for individuals.
Beyond that, it can’t be stressed enough that what was being promised had nothing to do with insurance. Here Republicans are just as much at fault for mandating that insurance companies offer ‘insurance’ without regard to pre-existing conditions. Drivers of fancy cars would love such a luxury, but if this applied to car insurance, the cost of it would skyrocket for the safest drivers eschewing insurance until the day of the unforeseen accident.
There’s no affordable car insurance sans safe drivers paying into the pool, and healthcare is logically no different. Rather than pay for health insurance that will be there by government mandate no matter the condition, basic economic incentives tell us that the healthiest would eagerly embrace paying the fine for not buying health insurance until such a day when it’s truly needed.
The other lesson taught to new Goldman employees early on is the one about managing expectations. The way it’s put at Goldman, and this is constantly drilled into the heads of employees, is that they must ‘underpromise and overdeliver.’ The idea is to set expectations low so that when amazing service is delivered, customers of the bank are bowled over by all the good things that come their way.
In Obama’s case he promised satisfied Americans that they could keep their health plans if they preferred them, only to have basic economics come back to haunt him yet again. Many Americans, particularly the healthier ones, logically only want to insure for the truly unexpected and catastrophic, all the while paying out of pocket for routine doctor visits. The latter is the proper definition of health insurance, but going back to mandates that essentially promised the world, their insurance plans no longer pass muster in the mind of a president and Congress who almost never consider economics when they legislate. The obvious result is that many insured Americans will not be able to keep their plans, and will only be insured in the future if they’re willing to break the bank to do so. Lots of luck there; instead they’ll pay the fine for not buying insurance on the way to soaring costs, and then they’ll buy it when they need it.
The perhaps logical response is that since true insurance is once again for the unexpected and catastrophic, and as such is inexpensive, President Obama and Congress should go back to the drawing board and craft a way to subsidize its purchase for the truly needy. That sounds nice, but should be avoided. Indeed, as the Barrette example makes plain, health insurance when left to the markets is cheap. In that case, and as evidenced by the fact that cellphones are ubiquitous in the poorest locales of the United States, Americans should learn to prioritize, including buying insurance over former luxury items like cellphones.
Back to President Obama, his disdain for the private sector has come back to haunt him, and could possibly destroy his presidency. Had he worked for Goldman Sachs or another company like it he would have understood what horrors can be wrought by underlings lacking proper supervision. He’d have also understood that successful people in the private sector always manage expectations rather than make promises that are defied by basic economics.