The Gruberization of Policy: Unintended Consequences 

Vaughn Cordle, CFA / November 19, 2014

To quote Thatcher:

“It is always important in matters of high politics to know what you do not know. Those who think that they know, but are mistaken, and act upon their mistakes, are the most dangerous people to have in charge.”

Even more dangerous is the politician who will say or promise anything to win an election or spin reality for “stupid” voters because it’s the only way to ram through policies that the majority would never accept if they knew the truth. The objective of the corrupt politician is to leave out important information that is required to understand the issues. This is the reason why voters and Democrats became stupid enough to allow the Affordable Care Act (ACA) to become the law of the land. They were, in short, Gruberized by a cynical administration that is more than willing to deceive and mislead to achieve its goals.

Where was the press when it became know that Jon Gruber was on the Administration's payroll when his "objective analysis" was used as proof that ObamaCare helped businesses and lowered premiums for families? This type of misrepresentation and conflict of interest would be considered fraud in the private sector.  Prior to the Senate vote on the bill, the White House touted another Gruber study that "confirms" that the new healthcare bill reduces costs and improves coverage. The exact opposite has occurred. Gruber was THE go-to-guy for the press and the only source used to [falsely] validate the benefits of ObamaCare. What has become painfully clear is that much of the media has done a lousy job of covering this scandal and have been biased in its coverage.

Obama acts on his mistakes and does not know what he doesn’t know, especially when it comes to the unintended consequences that ultimately cause significantly more damage than any benefits from poorly thought-out policies that were not properly vetted in cost and benefit terms. The political damage from the mid-term elections should be a wake-up call for Obama and his liberal base, but likely will not help them with the competence problem, which gets to the heart of why they are unfit to govern or manage the public purse and balance sheet. 

The incompetence of the administration is that it did not, and still does not, understand the unintended consequences of passing the new healthcare law. The consequences include a shellacking of Democrats that voted for ACA and the resultant Republican control of Congress. Another big [unintended consequences] shoe to drop is the 40% excise tax on “Cadillac” healthcare plans, which kicks in in 2018, after Obama is out of office. Under ObamaCare, private sector unions and employees get hit hard with higher taxes, higher out-of-pocket healthcare and lower quality healthcare; public sector unions benefit. 

Most big union plans, including public sector unions, will be hit hard with this new tax. Companies are already cutting benefits and shifting costs to employees to get ahead of this new tax. It’s a tax that was sold (i.e., Gruberized) as shifting costs to greedy insurance companies. These companies will receive a $175 billion windfall from the government (i.e., taxpayers) that allows them to profit from ObamaCare. This is the worst type of corporate cronyism and the payments are made without the consent and approval of Congress via a presidential executive order.  

Union employees, according to Gruberomics, are like voters: they are too stupid to understand the economics. Of course, the insurance companies simply shift the costs to the employer that provides the benefit, which, in turn, shift the costs to the employee. Stupid employees will, of course, blame the insurance companies and their employer. Abracadabra! The administration’s real goal, wealth redistribution, has been achieved, and blame for higher healthcare costs is shifted to greedy corporations and insurance companies. The government, and its public-sector union constituents, will simply pass along the higher cost of the Cadillac plans to the middle class via higher taxes.

Most employees and voters are not stupid. Given the right information, most will make the right decisions. The Gruber videos provide valuable insight about how this administration fraudulently sold Obamacare and the contempt it has for the average working American. The contempt is reflected in its attempt at central planning where liberal elites like Gruber devise the master plan.

It should be noted that every promise made (much of which was based on Jon Gruber’s model) to sell Obamacare has been proven to be false … by a wide margin. Example, Obama and Senate Democrats promised the new healthcare law would lower average premiums by $2,500 and deficits would be reduced.  Average premiums have increased by $4,000 and deductibles are higher by 46%, and federal deficits increase materially.  Hence, the proof of the deception and incompetence in [healthcare] central planning enacted into law by Obama and his far-left base that controlled both chambers in Congress when it was passed. This is what makes liberals dangerous when they are in charge of fiscal policy. Thatcher and Reagan understood this danger; most liberals do not because they do not know what they don’t know, and they act on their mistakes. This is why their preferred policies—tax, spend, and redistribute wealth—are, in the final analysis, stupid. Their policies are stupid because it results in lower economic growth, higher unemployment, and falling standards of living for the middle class. Hence, they are unfit to be in charge of policy-making, and the American voters were smart enough to put the Republicans back in charge.

The Jon Gruber Scandal in Under 3 minutes