Sunday, July 05, 2015

Malloy’s New Economy

Progressive Governor Dannel Malloy is in the midst of building “a new economy in Connecticut.” So Mr. Malloy claimed in an address during the Democratic Party’s annual Jefferson, Jackson, Bailey fund raising dinner, soon to be renamed.

Democrats only recently discovered that Mr. Jefferson and Mr. Jackson were slavers. A proposal to rename the annual event was made following progressive firebrand U.S. Senator Elizabeth Warren’s key note address before assembled Democrats. The names of Mr. Jackson, a notorious Indian killer, and Mr. Jefferson are to be scrubbed from the marque event, Democrats announced four days before the Fourth of July, also known as Independence Day, so named after Mr. Jefferson’s Declaration of Independence.

The notion that Mr. Malloy and the Democratic dominated General Assembly can re-invent Connecticut’s economy is, of course, a quixotic absurdity. The intricate, multifarious business network in Connecticut – comparable in complexity to the state’s interdependent ecology – has seen governors and General Assemblies come and go for more than two centuries. The last colonial Governor of Connecticut was Jonathan Trumbull, who became the first Connecticut Governor under the nation’s new Constitutional Republic. Mr. Trumbull, contenting himself with governing the state rather than developing a new economy -- which is on a par with developing a new primary color – was, it would appear, far more modest than the ambitious Mr. Malloy.

While  Mr. Malloy and the progressive leaders of the General Assembly – President Pro Tem of the Senate Martin Looney and Speaker of the House Brendan Sharkey – were tinkering with the old economy, attempting to improve it by increasing taxes and regulations, that creaky old economy was changing in response to progressive efforts to improve it. In an economy under stress, businesses change more rapidly.

Before Mr. Malloy could say “Hesto presto, conjure me a new economy,” the old adaptive economy rapidly adapted to changes imposed on it by progressives. An insurance lobbyist interviewed by Hartford Courant reporter Mara Lee tells us why major insurance companies in Connecticut have suddenly become cannibalistic. Two of the nation’s largest insurers, Aetna and Humana, have merged, and the conjoining has opened the possibility that a second large Connecticut insurer, Cigna, may soon be swallowed up by Anthem, the nation’s second largest health insurer. No one knows how many jobs will be lost when all the cannibalistic gobbling is done.

Insurance lobbyist Keith Stover thinks the gobbling was trip-wired by Obamacare. “The medical-loss ratio requirement in Obamacare,” according to Ms. Lee’s report, “puts a squeeze on profits, because it mandates how much of premiums must be dedicated to medical spending. To counteract that force, efficiencies through consolidation are the logical choice,” Mr. Stover said.

Ah, Logic! A true disturber of the peace.

See: If the national or state regulatory apparatus diminishes earnings, companies will seek to recover lost earnings by acquiring other companies, which allows a new combined entity to pool resources and cut jobs. We can never remind ourselves too often that the modern progressive creed is, at bottom, an idealistic venture; which is to say, it is a pointless exercise in which, at least in the imagination, fantasy trumps reality. 

U.S. Senator Dick Blumenthal, who as Attorney General may have swept more jobs out of Connecticut than any other Attorney General in state history, thinks acquisitions caused by Obamacare dislocations – essentially a regulatory scheme that involves 17.3 Percent of the nation’s Gross Domestic Product (GDP) – can be ameliorated through more regulation. The economic heresy that more of a bad thing will lead to a good thing lies at the center of the progressive credo. Noting that “government health spending is growing much faster (8.7 percent) than spending by private payers (3 percent), a CBS report in 2010 rang the alarm bell: “Unless healthcare spending is controlled, it will bankrupt the whole government.” CBS, it should be said, is not a conservative network run by Roger Ailes.

Never mind how many jobs may be lost as a result of progressive tinkering – U.S. Senator Dick Blumenthal is on the job. Mr. Blumenthal wants to prevent potential monopolistic acquisitions caused by Mr. Obama’s tinkering in the U.S. healthcare market.

Big is not always better, because acquisitions may reduce competition, and competition is a public good in and of itself. Market competition leads to more jobs and lower prices, but only in markets not distorted by preferential governmental tinkering, which– Senator Elizabeth Warren, the Democrat’s progressive-populist, may want to take note of this – is the very definition of crony capitalism. The crony capitalist can only succeed in a market in which government provides chits to crony capitalists. And the solution to crony capitalism cannot be more crony capitalism.  Here in Connecticut, Mr. Malloy’s “First Five” program, since changed to accommodate as many businesses Mr. Malloy wishes to accommodate, is a crony capitalist venture in which Mr. Malloy parcels out  chits – tax credits, interest free loans, cost free property – to companies he favors, one of which is Aetna, soon to merge with Humana.

Not to worry though: Mr. Blumenthal, the Courant tells us, “who recently convinced the Department of Justice antitrust division that it should open a case against airlines, said, ‘Antitrust enforcers should take a very strong, hard look at these mergers before they approve them.’”

Someday, anti-trust regulators may want to take a very strong, hard look at crony capitalist governors and U.S. Congresspersons. 
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