An email on healthcare reform for the Supreme Court and public

If the GOP conservatives were distraught over the last few days because Mitt Romney selected Michael Leavitt (a supporter of parts of Obamacare) to head his transition team should he win in November, then they will be in full buyer’s remorse after reading today’s story in the Wall Street Journal.

Calling for the full repeal of national healthcare reform has been developed into a reflexive mantra of the Republican Party base.  Mr. Romney is still having difficulty securing the love of conservatives because of his past support in Massachusetts of much of what is in Obamacare including the individual mandate. 

So even while the GOP Presidential nominee calls for total repeal of Obamacare from the stage, Mr. Leavitt’s appointment caused quite a push-back from conservatives and raised their suspicion of Mr. Romney even higher.

But today’s Wall Street Journal story is more than just more fuel for the ABR primary voters (Anybody but Romney); it is an educational opportunity for the public and even the Supreme Court.

In spite of the Romney gubernatorial staff efforts to erase every trace of emails during his term of office in Massachusetts (they had every email on the governor’s office server computer removed and bought 17 hard drives from personal computers owned by the state—so much for transparency), the Wall Street Journal found a Romney cabinet member who obviously couldn’t find the delete button.

The emails obtained by the paper show Governor Romney and his aides as big supporters of the individual mandate within their healthcare reform plan.  Mr. Romney was intimately involved in creating every detail of the plan and pushed the mandate onto reluctant state Democrats.

In one uncovered email a top healthcare aide to Governor Romney wrote, “We must have an individual mandate for any plan to work.”  Mr. Romney himself drafted an opinion editorial to run the day before he signed his healthcare reform legislation.  In that piece Mr. Romney says, “Either the individual pays or the taxpayers pay.  A free ride on government is not libertarian.”

After Governor Romney signed his healthcare reform—individual mandate and all—into law, he sent the same top healthcare aide an email saying (according to the Wall Street Journal story), “Quite a day! … You have made a huge difference, for me and for hundreds of thousands of people who will have healthier and happier lives… Best, Mitt”

That is the message the country and the Supreme Court needs to hear. 

We need customers

The Census Bureau reported yesterday that the United States now has 46.2 million people living below the poverty line—up 2.6 million people since last year.  Median household incomes fell below 1997 levels. 

No wonder the biggest threat to small business is the lack of customers, not taxes or regulations. 

Last week I told you about a McClatchy Newspaper survey that indicated that taxes and regulations were not holding back small businesses.

Kathleen Madigan, blogger for the Wall Street Journal (champion of the concept that regulations and taxes are the root of all evil) is on board with the lack of demand being the number one issue for small business.  She acknowledges that President Obama’s American Jobs Act seeks to increase consumers for business. 

Now we just need Congressional Republicans to get on board too.

Read Ms. Madigan’s blog below.

Small Business Hangs ‘Demand Wanted’ Sign

By Kathleen Madigan
Wall Street Journal
September 13, 2011

"Nobody knows the trouble I’ve seen.” That’s the song small-business owners around the U.S. are singing. But it isn’t regulation, tax policy or credit constraints causing the woes. It’s the lack of customers.

The widely watched survey of small businesses done by the National Federation of Independent Business shows optimism in August was the lowest since July 2010 when the recovery last hit a soft patch. The drop to 88.1 was the sixth consecutive decline — a record string of declines in the index.

The NFIB bleak view isn’t one dark cloud in a blue sky. Half of respondents to an August survey done by Newtek Business Services are pessimistic about the outlook, and 69% don’t plan on hiring over the next 6-12 months.

Small business-owners are worried because sales are falling and there’s no pickup in sight. The NFIB index covering sales expectations for the next three months is at its lowest since the recession.

Falling sales expectations are bad news for the jobs outlook because companies are not going to add workers if they do not think demand will increase as well.

Jonathan Basile, director of economics at Credit Suisse, points out the NFIB’s sales-expectations index is 10 points below its current hiring index. A negative spread between sales and current employment is rare, he says, and the gap has not been this large since the last recession.

What happened back then when demand kept falling? Small businesses cut jobs with a vengeance, as indicated by the NFIB survey as well as the tally of small-firm employment done by payroll processor ADP.

For now, hiring plans are still slightly positive. But if small businesses do not see more customers coming through the doors or ordering on-line, don’t expect the hiring index — currently at 5 — to stay above 0 for long.

President Barack Obama‘s jobs plan tries to answer the demand challenge by putting more money into workers’ pockets (by expanding the Social Security withholding cut) and by initiating construction projects.

Republicans, however, are voicing opposition to any new spending programs, so that aspect of the bill looks dead.

It seems more likely that the tax cut will go through. Yet it isn’t a sure thing that workers — scared about getting laid off — will spend the money. Higher savings, while a long-run economic positive, mean less demand now when the recovery needs it.

Small businesses have hung out the “Demand Wanted” sign. Until that need is satisfied, however, they won’t be posting a “Help Wanted” sign in the window.

SBA under attack

When the federal government was bailing out big banks, Wall Street’s corporate America, Fannie and Freddie; one important federal financial program stayed solvent—the Small Business Administration. 

The SBA’s primary job is simply to encourage private financial institutions to make small business loans that they might otherwise not do.  The SBA accomplishes this by guaranteeing up to 85% of the loan, which reduces the risk to the private lenders.   If the loans are repaid, the taxpayers aren’t out any money. 

So it is amazing that during the recent great recession that tanked the economy, you didn’t hear cries from the SBA that it was going under.  You would think that a program this successful in helping promote small business growth would earn it some respect and even the pledge from Congress to beef up the program.  But just the opposite is happening.

There appears to be a well-coordinated effort to strip the SBA of all funding.  Two days after the conservative-leaning Rasmussen Report released a most probably-skewed public opinion poll claiming that 58% of the public wants to end the SBA, an opinion editorial calling for the same appeared in free-daily conservative rag The Washington Examiner.  The next day the Wall Street Journal reported on both.   (This is how the conservative media pushes an issue into the main stream.)

In the op.ed Tad DeHaven, a budget analyst with the libertarian Cato Institute, says that encouraging private financial institutions to make small business loans isn’t necessary. 

Obviously Mr. DeHaven has no experience as a small business owner.  His idealistic “think tank” views are great for a salaried employee who doesn’t have to worry about his or his employees’ next paychecks.

Capital markets have developed effective private solutions such as credit scoring to overcome the asymmetry of information between lenders and borrowers.  Besides, small businesses with sound business plans and solid prospects should be able to raise debt and equity capital through private means.

Yet, there will be plenty of similarly “principled” members of Congress who buy into this dangerous “eyes wide shut” business philosophy and will encourage the budget deficit Supercommittee to axe the SBA.

But as Bob Coleman, editor of the Coleman Report, pointed out last month in a speech at the 2011 Mid America Lender's Conference in Fort Worth the SBA did not need a bailout and the program resulted in almost $10 billion in loans to Main Street in the 4^th quarter of 2010.  That is a tale of success, not a reason to terminate.