Red, white, and blue lies

National Journal columnist Ron Fournier coined a new phrase, at least for me, when he concluded his scathing November 12, 2014, “Obamacare’s Foundation of Lies” editorial with the line:

“And so even I have to admit, as a supporter, that Obamacare was built and sold on a foundation of lies.  No way around it, unless you’re willing to accept a political system that colors its lies—the reds, the whites, and the blues.” (My emphasis.)

Jonathan GruberOther than being a clever way to tie the color of lies to the American flag, Fournier’s point was to describe the way lies are excused in Washington and America at large.  White lies are those that a politician may tell his constituents to get re-elected.  These lies, like the harmless lies men tell their girlfriends about how they look in a dress, usually result in no harm being done to any of the parties involved.  If these politicians are caught in white lies, their opponents may take the opportunity to call that politician a liar, but the general public usually doesn’t get so worked up about it that there are any lasting consequences to it. That politician can also get out of whatever minimal consequences they face, by issuing a non-apology apology that begins with a well-coached, parsed introductory phrase similar to, “If anyone was offended by the words I used …   

Although there’s no greater severity attached to the red and blue lies Fournier describes, there is an implicit statement that no matter what the severity of those lies, red and blue people in the media, in politics, and in the country in general, are more ready to accept them, and excuse them, when they come from their color of choice.  It’s an obvious statement, to some degree, but it cleverly illustrates Fournier’s frustration at what we’re willing to accept when … certain lies are regarded as a necessary evil to further our cause, and the result of those lies are justified by the end game.

The Cadillac tax: The blue lie

The gist of the blue lie that M.I.T. health economist, and chief architect of Obamacare, Jonathon Gruber confessed in a year-old video that surface from a University of Pennsylvania panel stated that the passage of the 2010 Health reform law, the Affordable Care Act, or Obamacare, relied on the “lack of transparency” and the “stupidity of the American Voter”.

In an interview with Frontline Gruber stated that he was involved in a 2009 summer meeting with President Barack Obama and several experts.  The theme of this meeting was cost control for what would later be called Obamacare:

(The meeting) was very exciting, once again, because the economists in the room all said the number one thing you need to do is you need to take on the tax subsidy to employer-sponsored insurance. We need one minute of background on this. The way employer-sponsored insurance works is, if you get paid in wages, you get taxed. If you get paid in health insurance, you do not. …”

So, the “political nightmare” that arose for the experts in that summer 2009 meeting was to find a politically expedient way of getting the American public to pay the taxes for their employer-sponsored insurance without facing a political backlash that might culminate in constituents saying:

No, you can’t tax my benefits.” 

Gruber stated that President Barack Obama knew this, and he said, in that meeting:

Look, I can’t just do this.  It is just not going to happen politically.  The bill will not pass.  How do we manage to get there through phases and other things?”  

Gruber then added:

And we talked about it. And (Obama) was just very interested in that topic.”

The discussion in this meeting ultimately led to “the genesis of what is called the Cadillac tax in the health care bill.”  This answer they arrived at would exploit the “lack of economic understanding of the American voter,” by passing an excise tax on insurance companies.  The latter was a suggestion by then-Senator –and “Hero” to Gruber for this particular suggestion— John Kerry to push through an excise tax on insurance companies.

The reason that Kerry’s “Cadillac tax” suggestion was characterized as heroic by Gruber was that not only had Kerry found a way to end the “political nightmare” that those in the room feared, but it provided them real cost controls.  The dirty little secret that’s only come forth recently, with the discovery of these Gruber videos, is that Kerry’s suggestion relied on the economic stupidity of the American public.  It relied on the fact that the greater masses would not only not rebel against the end of their tax subsidy to employer-sponsored insurance –thus forcing the worker to pay taxes on their benefits— but that they would cheer on the politicians that announced that they would be punishing insurance companies with an excise tax.

Most people will probably laugh at the idea that other Americans are stupid, and if you doubt me, try watching one of Jay Leno’s “Man on the Street” interviews.  Whenever such a charge is leveled, we always laugh at the other guys that are stupid, and that the import of the message is, he’s not talking about me.  To those Americans that may think that Gruber was talking about you, you can go ahead and take some solace in the fact that Gruber is relieved that it worked:

So after years and years of us wanting to get rid of this (tax subsidy to employer-sponsored insurance) or (forcing workers to pay a tax on their health care benefits), to finally go after it was just such a huge victory for health policy.  And I’m just incredibly proud that (Obama) and the others who supported this law were willing to do it. …”

He’s incredibly proud that the politicians, and experts in the room, were willing to dupe the economically ignorant (“call it the stupidity of the American voter or whatever”) people out of more of more of their money.  The dupe is something they call the Cadillac tax, similar to what economists call the tax incidence.  The tax incidence basically allows politicians to pass a corporate tax on a corporation, a Walgreen’s, for example, without political consequences for the politician.  Not only do the politicians avoid political consequences, but they are cheered by those that have a fundamental misunderstanding of economics, for their courageous act of sticking it to the corporations.  The import of the cheering is that these corporations are finally paying their fair share in taxes, coupled with the belief that they are not paying as much in taxes as a result.  The fundamental misunderstanding reaches it’s culmination at the Walgreen’s checkout counter, when that cheering Walgreen’s customer pays a tiny bit more for a Snickers bar today than they did yesterday.  They are thus paying the corporate taxes that Walgreen’s is passing onto them, and that they cheered, and that they didn’t notice at the check out stand.  It’s a win win for all parties involved, except for the consumer that is paying more today than they did yesterday.

To cover for this fundamental lack of understanding, in economics, I suspect that if this customer were made aware of the ruse of the “rube tax” or the tax incidence, they would say, “Eh, what’s a couple of pennies here and there?”  Fair enough, I would reply, but does it bother you that politicians execute this tax in a manner that is intended to actively deceive you?  The answer would presumably be that it’s a white lie, and that they wouldn’t get too worked up about it.  Another answer might be that if it’s a blue lie, that they’re traditionally blue, and that it’s okay as long as the end justify the means.  Fair enough, I would reply, but what happens when all of those tax incidence maneuvers prove so successful, and provide such political coverage, that they use its logistics to map out another, more punishing tax, a Cadillac tax, as yet another ruse for the rubes that don’t understand how all this complicated economics stuff works?

In the midst of his touchdown dance, Gruber called this deception, this Cadillac tax:

One of the most important and bravest parts of the health care law and doesn’t get nearly enough credit. I mean, this is the first time after years and years of urging — and the entire health policy, there was not one single health expert in America who is setting up a system from scratch, would have this employer subsidy in place. Not one.”

He says that the methods used to change Obamacare “in a tortured way” made it appear more feasible to the Congressional Budget Office (CBO) and appeal to the “stupidity of the American voter” in a manner that was “really, really critical to getting the thing to pass” one has to wonder if more Americans are finally starting to “find out what’s in it” now that Obamacare has passed, and it’s the law of the land.

As Charles Krauthammer writes:

It’s not unconstitutional to lie. Nor are laws enacted by means of deliberate deception thereby rendered invalid. But it is helpful for citizens to know the cynicism with which the massive federalization of their health care was crafted.

In other words, Obamacare cannot be overturned on the basis that a bunch of people, politicians, and economist eggheads lied to us.  If that were the case, I’m sure all of the blue people would ask, how many hundreds of thousands of laws and regulations would be subject to being overturned?  That’s fine, I would reply, but if this worked on such a massive scale, and there were no political consequences for its passage, why wouldn’t they just do it again?

If it’s true, as Abraham Lincoln once said, “You can fool all the people some of the time, and some of the people all the time, but you cannot fool all the people all the time,” what does it say that almost of the people were fooled all of the time by this one, contemptuous deception?  Does it mean that Lincoln was wrong, or that he didn’t know what he was talking about, or does it say that all of these experts, and politicians, were able to use all of their resources to defy Lincoln’s age old logic on this one, historic occasion?  If that’s the case, and they were able to fool almost all of the people in the media, and all of the politicians that voted for it, and all of the people that vocalized their support of it, all of the time, it may explain some of what Vice-President Joe Biden meant when he said, “This is a big (expletive) deal!”


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