Category Archives: free hand of the market

Why Market Solutions To Policy Problems Usually Don’t Work

Interesting piece from Governing magazine, which quotes the University of Michigan’s Barry Rabe, who looked at two market-based solutions to policy issues: the Affordable Care Act and cap-and-trade.

These, of course, were both solidly Republican ideas which Democrats signed on to. Once they did, however, these market-based solutions suddenly caught liberal cooties, and Republicans ran away from them screaming “socialism!” at the top of their lungs.

Rabe notes that by 2008, 23 states had signed on to cap-and-trade:

It seemed a perfect solution. New markets developed, and regional consortia planned to reduce greenhouse gases by 10 percent or more within a few years.

But that perfect solution didn’t last long. Rabe found that, within five years, more than half the states had walked away from their cap-and-trade commitment. The market-based alternative to command-and-control regulations evaporated as a state-based policy tool.

What happened between 2008 and 2013? Well, there was an economic meltdown. There was also a Republican meltdown. Any policy progress while a Democrat was in the White House ground to a halt. The Tea Party took over, state legislatures turned Red. Hyper-partisanship became the rule of the day.

Then there’s the Affordable Care Act, which was designed to dodge complaints of “big government” and encourage the states to create exchanges that would provide insurance policies to their uninsured.

State implementation proved wildly uneven. Federal policymakers found themselves without the results they sought. And everyone came away more convinced than ever that government couldn’t solve problems like this, even though many of the problems were rooted in private market failures.

By the end of 2015, 38 states had declined to set up health-care exchanges, leaving the federal government to step in and create them. Three states — Hawaii, Nevada and Oregon — tried the exchange approach and backed out when enrollment was lower and costs were higher than expected. Some states, like Maryland and Washington, enthusiastically embraced the exchanges but fumbled the launch. Pressed by angry Republicans, who criticized the states’ lack of accountability for federal funds, the Obama administration took back $200 million in grants it had made to states that had struggled to launch their exchanges.

Note: this wasn’t a failure of the policy. It was a failure of politics. Republicans love to talk about the need to “run government like a business,” but when a Democrat does it, they call it Socialism, Fascism, Big Government, etc. Hyper-partisanship has basically ruined our country’s ability to solve big problems, in my opinion. We’re seeing the predictable result of 30 years of “government isn’t the solution, it’s the problem” messaging.

The author notes:

The fundamental flaw lies in two assumptions: that markets always work better than governments and that markets will run themselves if government gets out of the way. The first assumption is the stuff of fierce ideological debate, but the second is really a settled question. Markets just don’t run themselves in delivering public goods, because most of the time they are being asked to do things they aren’t used to doing. And because policymakers tend to assume that the markets will take care of themselves, they often don’t build governmental capacity to steer the process. The reformers then end up running after problems as they develop down the line.

Indeed. Government exists for a reason. Government exists to do the things that the private sector can’t or won’t do.

I’m not going to agree that market-based solutions NEVER work. They can work — when accompanied by a strong government regulatory presence. What never works is all one or the other. You need both.

Truly no ideology has more consistently failed than the Libertarian one, or even worse, the Libertarian-lite “run government like a business,” “government needs to get out of the way,” “release the free hand of the market” one, which dominates today’s Republican Party. I really don’t understand why anyone who believes government is the problem would want to be in government. And I don’t understand why anyone votes for someone who believes government is the problem. It’s like going to a butcher shop run by PETA. You’re just asking for failure.

One thing Democrats have consistently failed at is defending their own positions. A Republican yells “BIG GOVERNMENT” and we wet our pants. Democrats need to learn how to defend their principles, instead of trying massage their positions into something Republicans will find palatable. As the past eight years show, Republicans will never find anything a Democrat does palatable. They will even turn on their own market-based policy solutions if a Democrat is the one selling it.

These are lessons we’ve learned during the Obama years. We’ve also seen markets fail the economy and the American people time and time again. We’ve seen bad actors like Turing Pharmaceuticals and Theranos, hell even Enron is still synonymous with “crooks.” The financial crisis of 2007-2008 ain’t exactly ancient history, not with movies like “The Big Short” reminding everyone about how the market failed the global economy.

We’ve seen deregulation in Texas end in an entire town exploding. And hello, Flint, Michigan, where Republican Gov. Snyder tried to “save money” because “government should be run like a business.” Meanwhile, an actual business — General Motors — refused to use Flint River water at its engine plant because chloride levels were too high.

As this article notes, “government requires governing.” Republicans don’t seem to know how to do it. Democrats don’t seem to know how to be advocates for it. And I believe we will never have effective policies until we fix our politics.

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Filed under free hand of the market, Housekeeping

Kansas Schools Flunk Gun Policy 101

Nobody could have predicted, etc. etc.:

Insurer Refuses To Cover Gun-Carrying Kansas Schools

An insurance company based in Iowa has refused to renew coverage for Kansas schools that permit teachers and staff to carry concealed firearms on campus, the Des Moines Register reported on Sunday.

EMC Insurance Cos. made the decision after Kansas enacted a new law to allow the concealed guns on campus. The company told the newspaper the decision was based on financial policy, not politics. The company reportedly covers 85 to 90 percent of Kansas school districts.

“We’ve been writing school business for almost 40 years, and one of the underwriting guidelines we follow for schools is that any on-site armed security should be provided by uniformed, qualified law enforcement officers,” Mick Lovell, EMC’s vice president for business development, told the Des Moines Register. “Our guidelines have not recently changed.”

The Kansas law passed in the wake of the Newtown, Conn. school shooting went into effect July 1, allowing Kansas schools to permit teachers and staff to carry weapons to protect children. No school districts in the state had adopted a concealed-carry policy as of Saturday, according to the Register.

A couple of quick things:

a) The free market has spoken. If it keeps you from getting insurance coverage, your solution to gun violence sucks.

b) I realize the policy has only been in place a week and school isn’t in session right now, but if nobody wants to take you up on your solution when school starts back up in August or whenever it is? Your solution to gun violence sucks.

This is what happens when you listen to the gun loonz at the NRA. You get policy solutions that work for gun manufacturers, not the school districts and children you’re supposedly trying to protect.

Fail, fail, fail.

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Filed under free hand of the market, gun control, gun violence

Remind Me Why Private Contracting Is So Much Better Again?

Seven Florida lifeguards employed by a private “aquatic saftey contractor” have been fired after one, Tomas Lopez, left his station to save a man who was drowning outside the company’s contracted area. The other six were fired for supporting Lopez and saying they’d have done the same thing.

Perhaps the douchey private aquatic safety company could explain why demanding trained lifeguards ditch their moral code and watch people drown is a job requirement? Jeff Ellis and Associates, take it away:

A spokesman for Jeff Ellis and Associates, the aquatic safety contractor that fired Lopez, said in a statement that “We have liability issues and can’t go out of the protected area.”

Freedom! Yes, just watch the man die. Serves him right for swimming in an area not protected by Jeff Ellis and Associates! Personal responsibility, yada yada. The free hand of the market will solve this problem, amiright?

Somewhere, probably right here on this blog, a Teanut winger is nodding his head and saying, “Yes. This makes perfect sense to me.”

Happy Fourth of July, everyone. Enjoy your freedom to be fired for saving someone’s life because your asshole boss is more worried about their made-up liability issues.

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Filed under fail, free hand of the market

Free Speech Or Free Hand?

I don’t know why conservatives are always confusing the two. Yet they do. Here’s Ben Stein, suing Kyocera for not signing him as a pitchman because they didn’t want to be represented by an idiot:

According to the complaint, filed in Los Angeles Superior Court, Kyocera approached Stein in December 2010 to inquire as to his availability to appear in TV advertisements for Kyocera printers. Stein agreed and they began negotiating a contract. Three months later, before the contract was executed, Kyocera learned that Ben Stein is an idiot who denies the reality of global climate change. So they changed their mind and withdrew the offer, because they didn’t want to be represented by an idiot. That’s how capitalism works, right? Companies make decisions based on their interests, and contracts are the law of the land.

No! Capitalism works by suing people when you don’t get your way. To hear Stein tell it, even though they didn’t sign a contract, they still had a contract since Stein really, really, wanted the $300,000 Kyocera had offered contingent on signing the contract, which never happened.

Also, according to Stein, he has a right to the $300,000 under the Constitution, which guarantees him freedom of religion. See, Stein believes that global warming isn’t real because “God, and not man, control[s] the weather.” When Kyocera declined to pay Stein $300,000 to represent the corporation in part because it doesn’t want to be associated with that belief, it violated Stein’s constitutional right to $300,000. He also accuses Kyocera of violating his “freedom of speech” and “political freedom.” Stein has no political freedom, because Kyocera robbed him of the freedom when it refused to pay him $300,000.

No, you do not have a constitutional right to be a Kyocera pitchman.

News flash: Kyocera Corp. is one of the world’s largest manufacturers of solar panels and other PV systems. While Stein would not have been hawking its solar products, I can see how having a vocal climate change denier pitching any of the company’s product lines would be a little awkward, to put it mildly. So a big boo to whatever genius suggested Ben Stein for this gig in the first place: advertising agency Seiter & Miller, I’m going to assume. That was just a dumbass move all around.

And I’m sorry, but Ben Stein? Hello? Try reading your own damn columns and books about the free hand of the market. Also, I haven’t had a chance to dig into the memory hole, but I wouldn’t be surprised if we didn’t find something in there from him decrying the burden of frivolous lawsuits and advocating tort reform and all that.

Pfft.

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Filed under advertising, Ben Stein, free hand of the market, free speech

Free Hand Of The Market Bitchslaps Islamophobes

Sorry, Tennessee Islamophobes: you’re going to have to take your little Muslim hate-fest somewhere else! Nashville’s Hutton Hotel has told the anti-Sharia Preserving Freedom Conference to take a hike, rather than be associated with a bunch of nutballs and bigots. Ouch.

Predictably, chief hater Lou Ann Zelenik has started whining about censorship, because the conservative mind is too narrow to grasp the difference between free speech and the free market:

Zelenik said her group is being censored for opposing radical Islam, and the hotel’s action shows Shariah law is a threat to free speech.

No, honey. You don’t have a “right” to hold your merry little hate-fest wherever the fuck you please. It’s called the FREE MARKET. Something your side always yammers on about when it suits you.

You know what people do have a right to do? Practice whatever religion they want, in whatever church/house of worship they want. And that includes Islam, in a mosque in Murfreesboro that you’ve been trying so desperately to stop.

Get lost.

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Filed under free hand of the market, free speech, Islam, Nashville, religion

It’s Not Class War

Warren Buffett has an op-ed in today’s New York Times where he tells the GOP to “stop coddling the super-rich”:

Last year my federal tax bill — the income tax I paid, as well as payroll taxes paid by me and on my behalf — was $6,938,744. That sounds like a lot of money. But what I paid was only 17.4 percent of my taxable income — and that’s actually a lower percentage than was paid by any of the other 20 people in our office. Their tax burdens ranged from 33 percent to 41 percent and averaged 36 percent.

[…]

Back in the 1980s and 1990s, tax rates for the rich were far higher, and my percentage rate was in the middle of the pack. According to a theory I sometimes hear, I should have thrown a fit and refused to invest because of the elevated tax rates on capital gains and dividends.

I didn’t refuse, nor did others. I have worked with investors for 60 years and I have yet to see anyone — not even when capital gains rates were 39.9 percent in 1976-77 — shy away from a sensible investment because of the tax rate on the potential gain. People invest to make money, and potential taxes have never scared them off. And to those who argue that higher rates hurt job creation, I would note that a net of nearly 40 million jobs were added between 1980 and 2000. You know what’s happened since then: lower tax rates and far lower job creation.

It’s the death of yet another right-wing meme. Apparently the “fighter pilots of capitalism” — some of them at least — really do want the government to raise taxes on the wealthy. Imagine that!

I’m sorry I don’t have more time today to delve into this, because it’s the final nail in the conservative coffin. We know trickle-down doesn’t work, we know higher taxes don’t cause rich people to “go Galt” and head off to … I dunno, Somalia or some place. We know forcing middle class Americans to shoulder the national tax burden has ruined the economy. We know cutting government spending at a time when lower demand has caused the private sector to curtail hiring has led to higher unemployment. We know that sometimes you have to spend money to make money, and in the case of a catastrophic economic downturn, if the private sector won’t hire, the government must and that means temporary, short-term deficits.

Instead we have these free market fairy tales bringing the country to the brink of economic collapse.

Now, I don’t hang out with a lot of really rich folks, we don’t belong to a country club, we don’t have a yacht, we don’t move in those circles. But I’ve talked to a couple of people in that world, people I work with, music people, Wall Street people. Not a lot of these folks, just a handful. But I haven’t spoken to one millionaire who said they didn’t want their taxes raised. Maybe the few I know are just hippies or something, I dunno. But in the throes of the debt ceiling debate one Wall Street type told me he would rather have his taxes raised than deal with a market crash. “I could pay more,” he said. “I would rather pay more than lose what I do have in a market collapse.”

I just have to wonder who the super rich the Tea Party is supposedly coddling are. If billionaires like Warren Buffett want the country to return to a sane tax policy where “shared sacrifice” really means something, then who’s fighting it? The Koch brothers? Do the Kochs really think if the country spirals into an economic collapse people are going to line up to buy their StainMaster carpets and Lycra yoga pants and Supplex jogging gear and hunting trips to the Matador Ranch and Koch-refined gasoline for the SUV?

This isn’t a class war, it’s an ideological one. We’re fighting a group of people who, all evidence to the contrary, still believe that “freeing the market” to run roughshod over people is the way to go. That might have been true a few decades ago but we all live and work in a global marketplace now, and absence of any moderately protectionist policies just lowers American standards, it doesn’t raise those of the rest of the world. That’s what we’re dealing with here.

Even after the collapse of 2007, even after 30 years of wage stagnation, we still have people stubbornly attached to their crazy ideas which they are convinced will work this time. It didn’t work under Bush but by golly, he just did it wrong! It will work this time, honest! This is so crazy I have to think there’s something else going on. Something psychological, like maybe if they admit they were wrong and their economic model has a flaw, that means they were wrong about everything else, too.

You know why China is such an economic powerhouse? Besides billions of people, of course. How about some policies that have labeled it the “most protectionist country ever”:

“China has intervened massively in the foreign exchange markets for at least five years, buying at least $1 billion every day to keep the dollar strong and its own renminbi weak,” Fred Bergsten, president of the Peterson Institute for International Economics, said in the text of a speech.

“This is by far the largest protectionist measure adopted by any country since the Second World War — and probably in all of history,” Bergsten said.

Bergsten estimated the China’s renminbi, also known as the yuan, is currently undervalued by at least 20 percent against the U.S. dollar as a result of China’s currency intervention.

That “is the equivalent of a subsidy of 20 percent on all China’s exports and an additional tariff of 20 percent on all China’s imports,” Bergsten said.

I know, just because China does something doesn’t mean we have to do something. But we really could have some modestly protectionist policies in place, you know, “for the duration.” One thing that annoys the hell out of me is hearing Democrats decry Washington gridlock by saying “there are some things we all agree on. Free trade agreements, for example. Let’s do those.”

No we most certainly do not all agree on free trade agreements! Free trade agreements are why American manufacturing has shipped overseas and the only jobs left for Americans are WalMart greeter and Wall Street trader. Come on, quit acting like there isn’t disagreement on this issue, because there is.

Back in 2009 I linked to a Harper’s piece by Alan Tonelson of the U.S. Business and Industry Council, in which he made a series of recommendations for President Obama. They were good recommendations, and I urge you to read them. Because the White House’s current approach is basically useless.

I don’t have time to go into any more depth on this, hopefully I’ll get back to you later in the week. But seriously: we’ve got some complicated problems right now, and they won’t be solved by bumper-sticker bromides, conservative fairy tales, or Democrats too afraid that Fox News will say mean things about them.

We need government policy that raises taxes on the wealthy and encourages job creation at home not abroad. When people have jobs they have income, and when they have income they buy shit. This ain’t hard, people.

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Filed under economic stimulus, economy, free hand of the market, taxes

>And They Said It Couldn’t Be Done

>Yet another round of corporate whining, moaning and fear mongering over a very simple consumer protection proves unfounded:

Only three commercial flights among the thousands that operated nationwide in June sat on the ground loaded with passengers for three hours or longer, the Obama administration said Tuesday, touting the impact of a new consumer-protection rule that threatens stiff fines against airlines for excessive tarmac delays.

[…]

Nationally, the three United flights stranded on June 18 marked a sharp drop in long tarmac delays from the same month last year, according to the U.S. Department of Transportation. In June 2009, 268 flights nationwide were delayed at airports for at least three hours, according to the department’s Air Travel Consumer Report.

The report also found there was no increase in the rate of canceled flights in June compared with the same month last year. Airlines canceled 1.5 percent of their scheduled domestic flights.

Some aviation experts have predicted that, faced with the possibility of multimillion-dollar fines for every seriously delayed plane, airlines would implement wholesale cancellations in poor weather well before the three-hour tarmac limit, inconveniencing the flying public more deeply than by waiting out long flight delays and eventually taking off.

Ah, yes. “Some aviation experts.” Remember them? Like this one?

But wait! If a flight is canceled, then the fine is void. Too bad no one can see the future to know what will happen next. Just kidding. We know exactly what will happen next.

So let’s just go ahead and make this an official announcement: Starting in April, every flight that is delayed more than three hours in the United States of America is canceled. The flight that was delayed for the rainstorm that shows signs of clearing at 2 hours and 55 minutes? Canceled. The flight delayed for a repair that will take 3 hours and 4 minutes? Canceled.

Hmm, amazingly none of that happened! Shocking, I know. Here’s another “expert”:

The potential price for violating the rule means that in the short term, many domestic airlines will likely act “with an abundance of caution,” says Jami Counter, senior director of TripAdvisor Flights, and that planes sitting on the tarmac getting too “close to the three-hour bubble will [return to the gate] and be cancelled,” he says.

But my favorite is the “Out of Control Policy Blog” which always tells us free market fairies will sail in to solve every problem, right after they tell us there really isn’t a problem of course, just some whiny hippies who want to be pampered with glasses of chardonnay and plates of truffle oil-coated tofu. After repeating the same tripe about airlines cancelling each and every flight that even hinted at being three hours on the tarmac, he suggested the same tired “solutions” of “competition” and pointed out how the airlines which treat their passengers like crap suffer “big reputational penalties.” Oh noes, that’s gotta hurt!

This last part was priceless:

In short, the feds should butt out, and let competition, pricing, and airport-airline cooperation continue developing workable solutions.

What these folks don’t seem to understand is that “competition” is meaningless in an era of unrestrained monopolies and corporate consolidation (and no free-marketeer has ever come out in favor of government regulation of monopolies). In the last two years alone we’ve seen Delta and Northwest merge, and Continental and United merge. This has prompted industry observers to speculate that American Airlines, no longer the big player, will have to merge with another carrier (US Airways, which merged with America West in 2005, is often named as a likely partner. I think I need a scorecard!).

All of which means to say, when I fly somewhere, which is a few times a year, 90% of the time I have very little choice over which carrier I use. My decision is largely made for me by my destination because airlines have signed agreements with airports. Beyond that, my decision is made by my schedule and price. Never do I think, “Gee, now which carrier got negative press this year?”

But beyond that, I love these people who keep trying to tell us that free market fairies will protect consumers, even though the entire reason we are having a debate about something is because there is a problem, which means the free market fairies have not protected consumers. You know what protects consumers? The government telling them if they don’t do the right thing they will get slapped with a big, fat fine. Problem solved.

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Filed under air travel, corporations, free hand of the market

>Dick Corporate Moves

>Nothing illustrates the failure of the “free hand of the market” more than the growing list of dickish corporate practices designed to trip up consumers and fleece them for money. I’m talking about the booby traps and potholes consumers are now expected to navigate as we simply try to live our lives in this world and make use of modern conveniences.

It’s created an “us vs them” climate in the marketplace; no longer are there goods and services presented and consumers select what they want. Now stuff is slipped in your pocket, unbeknownst to you, and then you’re stuck with the bill at the end of the month.

For example, <a href="http://cbs2chicago.com/investigations/phone.bill.mystery.2.1009287.html
“>unknown fees on your phone bill:

His March phone bill included a company’s charge for an enhanced long distance set up fee of nearly $19.

“The only thing I know they’re enhancing was my bill,” Bradley said.

The bill also had a $12.95 voicemail charge from another company. What Bradley didn’t know, until CBS 2 inquired about the case, was he’d paid that amount for 11 months, a total of $142.

And if you’ve got a cell phone, you’ve got an even worse problem:

About a year ago, I was offered a chance to try VCast for 1 month free. I did not care to continue this service after the month was up and yet somehow the $15 per month fee was never removed from my bill even though I assumed the VCast had been disabled. By my own stupid neglect, I failed to notice that I was being overcharged since November 2007 and assumed the extra fees were because of picture messaging or the few accidental times my phone connected itself to some bullshit internet service. I know that many cell phone companies probably make hundreds of extra dollars by taking advantage of their customers in this way. Verizon, next time you offer a customer a “one month free” subscription please make sure the customer understands that they need to cancel this extra nonsense themselves and not rely on the network.

Yes, we should all be on top of these things but hey, life is complicated and busy enough. Things fall through the cracks. The idea that a company would set up a “free service” with the idea of tricking you into shelling out a few bucks every month and hoping you won’t notice is the definition of a Dick Corporate Move.

And yes, Verizon is the king of Dick Corporate Moves. They’ve actually designed their phones to fleece you:

At about the same time, I got a note from a reader who says he actually works at Verizon, and he’s annoyed enough about the practice to blow the whistle:

“The phone is designed in such a way that you can almost never avoid getting $1.99 charge on the bill. Around the OK button on a typical flip phone are the up, down, left, right arrows. If you open the flip and accidentally press the up arrow key, you see that the phone starts to connect to the web. So you hit END right away. Well, too late. You will be charged $1.99 for that 0.02 kilobytes of data. NOT COOL. I’ve had phones for years, and I sometimes do that mistake to this day, as I’m sure you have. Legal, yes; ethical, NO.

“Every month, the 87 million customers will accidentally hit that key a few times a month! That’s over $300 million per month in data revenue off a simple mistake!

“Our marketing, billing, and technical departments are all aware of this. But they have failed to do anything about it—and why? Because if you get 87 million customers to pay $1.99, why stop this revenue? Customer Service might credit you if you call and complain, but this practice is just not right.”

No, it’s not right. And it’s not even the worst Dick Corporate Move I’ve heard, either. That honor goes to our illustrious banks, who have figured out if they disguise your bill as junk mail, maybe you won’t pay it and they can fleece you with fees.

Digby alerted us to this scam last month:

The same thing happened to me. The plain brown envelope looked like it was one of those car dealership “checks” that were all the rage before the credit crisis hit. And because I didn’t realize the first month that I hadn’t gotten my bill, it created a black mark on my credit for a late payment which resulted in a cascade of raised rates on several cards.

After I read that I started to panic every time one of my bills was late. Did I accidentally throw it away? The last thing I need right now is a cascade of escalating fees because I was “late” making a payment. As Digby wrote at the time:

And that’s what people are dealing with all the time as consumers, with their health insurance, their credit cards, their mortgages, their pensions—overwhelming complexity designed to trip them up and cost them money or deny them benefits to which they believed in good faith they were entitled. And its all perfectly legal — or at least there’s no visible accountability for it.

This is exactly right. And it’s pissing me off. It’s not dealing with customers honestly or fairly. It’s “how can sneak one past my customers today and scam them for a few bucks.” Well, screw you.

DirectTV has been so egregrious that the Washington State AG’s office is suing:

California-based DIRECTV is accused of wooing new viewers with ads for low prices while hiding a multitude of fees, planned rate changes, and terms that call for automatic renewals in the fine print.

DIRECTV’s contracts “are so one-sided as to grossly favor defendants. The contracts limit the customer’s rights and remedies and impose numerous, sometimes undisclosed fees, while at the same time maintaining defendants’ flexibility to alter any terms and conditions,” the state’s complaint states.

This all reminds me of that new “Harry and Louise” ad the health insurance companies threw out last summer, the one that got the media’s attention because it was supposedly in favor of healthcare reform whereas the one from the Clinton era was not. Of course, our media missed the real story in the message of the ad: that AHIP supports Congress’ effort to make the words “pre-existing condition” a thing of the past. Hey, AHIP … you guys could just, you know, stop the practice all on your own. You don’t actually need an act of Congress to outlaw your own dick policies.

You ever think about that? Of course not.

And that goes for Verizon and DirectTV and the banks and all of the other assholes out there trying to trip up us consumers with their hidden land mines. Congress shouldn’t have to tell y’all to behave like good “corporate citizens” (and I’m not entirely sure what that even means anymore). Instead, we have a series of Dick Corporate Moves that these companies invent. As soon as consumer complaints are heard and one Dick Corporate Move is banned, they dream up a new one.

Since when has the marketplace become a battlefield? Does anyone really think this is a good way to do business?

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Filed under corporations, free hand of the market

>Invisible Hand

>And they wonder why we’re so cynical about the Great And Glorious Power of the Free Market:

More Profit and Less Nursing at Many Homes

Habana Health Care Center, a 150-bed nursing home in Tampa, Fla., was struggling when a group of large private investment firms purchased it and 48 other nursing homes in 2002.

The facility’s managers quickly cut costs. Within months, the number of clinical registered nurses at the home was half what it had been a year earlier, records collected by the Centers for Medicare and Medicaid Services indicate. Budgets for nursing supplies, resident activities and other services also fell, according to Florida’s Agency for Health Care Administration.

The investors and operators were soon earning millions of dollars a year from their 49 homes.

Residents fared less well. Over three years, 15 at Habana died from what their families contend was negligent care in lawsuits filed in state court. Regulators repeatedly warned the home that staff levels were below mandatory minimums. When regulators visited, they found malfunctioning fire doors, unhygienic kitchens and a resident using a leg brace that was broken.

But hey, if your loved one receives poor care, is injured or even dies, you can always turn to the courts, right? After all, the courts are where we traditionally have gone for restitution, and more importantly, to deliver a punitive smack at corporations. You know, a $3 million judgment certainly eats into the profits, right?

Heh, well, funny thing about Bush’s America:

In the past, residents’ families often responded to such declines in care by suing, and regulators levied heavy fines against nursing home chains where understaffing led to lapses in care.

But private investment companies have made it very difficult for plaintiffs to succeed in court and for regulators to levy chainwide fines by creating complex corporate structures that obscure who controls their nursing homes.

By contrast, publicly owned nursing home chains are essentially required to disclose who controls their facilities in securities filings and other regulatory documents.

The Byzantine structures established at homes owned by private investment firms also make it harder for regulators to know if one company is responsible for multiple centers. And the structures help managers bypass rules that require them to report when they, in effect, pay themselves from programs like Medicare and Medicaid.

Someone remind me, how is the free market supposed to work here? For the Carlyle Group, their chain of nursing homes is just a profit center alongside businesses like Dunkin’ Donuts. When all you care about is profits, how is this supposed to be good for people?

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Filed under free hand of the market, nursing home care