Megan McArdle is Always Wrong…Health Insurance Reform/Great Depression edition
I’m trying (and failing – ed.) to learn how to go all Daniel Goldin on my blogging stylz these days (you know, “faster, better, cheaper” and all that), so let’s see if I can keep this latest bit of outrage at Megan McArdle’s willed incompetence short and to the point.
In this post she considers a broad claim…
I’ve been pretty skeptical of the Amity Shlaes argument that regulatory uncertainty was the major culprit in prolonging the Great Depression…
And then rejects her doubts…
Over time, however, in talking to banks and business people, I’ve become more convinced that it’s at least a minor problem…
In support of a conclusion that should make you go hmmm.
About that, more in a moment. To slice and dice — of McArdle’s first statement, she shoulda stood in bed.
The historical record is pretty clear (a) that Shlaes is a dishonest and incorrigible hack and the (b) the signal policy that slowed recovery from the great depression in this country (leave aside the global nature of the beast), was the decision to switch from stimulus measures to premature attempts to balance the budget in 1937. (Something you can see graphically here, with a nice additional slam at Schlaes.)
On her second claim: this is the kind of reporting that has given Ms. McArdle so much of her notoriety to this point…in that, of course, whatever this post represents, it ain’t journalism.
There are certainly actual attempts to study regulation, and that subset of the field, the issue of uncertainty in regulatory regimes. If you’re interested in the subject, it takes very little time to find dozens of interesting threads to pull — I’ve just been reading this one on the paradox of prudential regulation [pdf] (i.e., because the cost of regulation is obvious and individual perceived but the benefits from successful regulatory systems are broadly dispersed and individual, it becomes hard to sustain support for such systems).*
But that’s not what McArdle has done here. There isn’t even a shred of an attempt to suggest that she actually has mustered some real data here. Instead, she’s talked to some folks she knows and they have told her they don’t like regulation. They especially don’t like it if they sense that they might not be effectively in charge of the regulatory agencies that purport to govern their industries — which is how I translate “uncertainty” in this instance.
So, to this point, here’s the state of play:
McArdle invokes an often debunked partisan writer to suggest that one of her routinely disproved claims might actually be true. She says this seems to be so because we should trust her when she tells us that her unidentified sources in an industry that has just disastrously failed have told her so.
But never mind, because all this is preliminary to this stirring confirmation that regulatory uncertainty right now is causing businesses to shutter. Her evidence? This:
And this seems like a pretty clear cut case of death by regulation: startup health insurer forced to shut down because of uncertainty surrounding health care reform. According to the insurer, at least, they neither have the capital to handle the new requirements, nor have any prospect of raising it from the markets, where they’ve already tried and failed to get more investment.
She’s not even trying.
It’s almost not worth the effort to sneer at this. McArdle’s link is to an article in a local Virginia business journal that, as McArdle indicates quotes the insurer to account for why that insurer is leaving business. This isn’t journalism, this is stenography.
The whole story boils down to a complaint that an unspecified insurance model established two years ago (hence, in the last administration) may not in the future meet requirements specified by the new health insurance law, and that this is the reason this small insurer has been unable to raise capital.
There are two things to note here, beyond the simple sloth and meaninglessness of taking a failed businessman’s account of why the enterprise went bottom up at face value.
One is that McArdle is playing a very slippery game here. Remember: she began by specifically calling out regulatory uncertainty, all the bad stuff that happens when a new administration starts changing things. But this company is complaining not simply about lack of knowledge, but of the substance of the change itself:
“…the uncertainties in the regulatory climate coupled with new demands imposed by national healthcare reforms have made it challenging to sustain the level of sales required to remain viable over the long run.” (from James Slabaugh , executive vice president of nHealth.)
New demands, eh? I’ll leave the reader to judge whether it is the fact that the new health care rules include provisions like prohibiting revocations of policies (rescission), or the like, or whether it is unspecified “uncertainty” that weighs more heavily here.
And while McArdle is careful to fudge just a bit — she refers to “new requirements” after all — she is really trying to have it both or maybe three ways. Regulatory uncertainty is bad; regulation is bad; and the health care reform is bad…and because she knows these truths to be self evident, she needs do no actual reporting or research to prove her case or identify the specific root causes of the one actual business failure she tries to adduce as proof for these articles of faith.
This isn’t even a parody of journalism. As I said above: she’s not even trying with this stuff.
And one last thing, my second point: it remains amazing to me how gutless and pathetic the glibertarian crowd becomes in the face of actual capitalism.
This insurance company had an approach (unspecified in the linked article) to providing insurance. It’s approach did not survive a change of administrations, a change in the landscape of health care delivery and payment, the competition within the insurance market itself, and/or the problems that are face undercapitalized companies at any moment — and especially in a period of disruption in the financial markets.
The company and its owners/managers made bets on certain expectations about the future. Those bets didn’t pay off. They go out of business. I’ve run my own small business and I don’t wish that outcome on anyone…but it is a fact of life in the marketplace: some folks don’t grab the gold ring.
I’m a screaming liberal, social-safety-net, environmentalist, birkenstock-wearing**, Berkeley, California born and raised, Kremlin-on-the-Charles educated, Massachusetts-pointy-headed-university type, yellow-dog Democrat, and I got no problem with that. What’s McArdle’s excuse?
* It’s relevant here because it suggests just how McArdle’s sources may have in fact connived in the regulatory relaxation that permitted the reckless behaviors that lay behind the recent near-collapse of the financial system.
**Actually, I’ve never owned or even tried on a pair of Birkenstocks. They look ugly and uncomfortable to me … but you got to ride with the stereotype that brung ya.
Image: Wilhelm Maria Hubertus Leibl, “The Newspaper Reader,” 1881.