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Agency theory explains why the country is in a funk

Even before the polls opened on Tuesday, pundits and spinners were managing election-night expectations. The pros of politics and journalism can read the polls as well as the rest of us. Better, in fact. They knew Republican candidates in Virginia and in New Jersey had better-than-even chances to win their races.

One African-American talk-show host, and an unabashed supporter of the president, emphatically warned victories by Robert McDonnnell in Virginia and Chris Christie in New Jersey should not be interpreted as referendums on Barack Obama. Virginia, he pointed out, historically elects a governor from the party not occupying the White House. Then why bother, one wonders, to hold gubernatorial elections in Virginia?

Exit polls seemed to support the belief that Obama’s job performance was not on the minds of voters. In Virginia, for instance, 56 percent of the voters said Obama was not a factor in their choices.

That’s what they said, but other exit-poll data suggest thoughts of the president were present in the backs of their minds. In CNN’s exit poll, 50 percent of Virginia’s voters said they did not approve of the way President Obama is doing his job, and 94 percent of those voters picked the Republican candidate for governor. Forty-nine percent said they approved of Obama’s job performance, yet 20 percent of them voted for McDonnell. That means about 47 percent of Virginia’s voters who were split down the middle regarding the way the Democratic president leads the nation chose the Republican to lead their state. That’s a big number political advisers from both parties will dig into deeper as they prepare for next November’s important mid-term elections.

But, the spin is already in on that one, too, a full year in advance. We’re already reminded that the party in the White House always loses seats in Congress in the mid-terms. Once again, they’re managing our expectations instead of addressing our concerns.

The post-election analyses from both parties and from political observers fail to address the fact that our country is in a funk, pure and simple. American’s feel leaderless and confused. We cast a wary eye toward elected officials and institutions. Every day, we see lawmakers bickering instead of legislating; journalists inciting instead of reporting; preachers politicking instead of pastoring; and a president campaigning instead of leading.

And now, even after what could be described as a voting-booth warning shot, and in spite of overwhelming evidence that the economy is the runaway concern of our fellow citizens, Congressional leaders act like spoiled and petulant children in their drive to present to the president a healthcare overhaul bill just in time for Christmas. There’s a reason for this inane behavior from those we look to for leadership and guidance. Economists know it as agency theory; political scientists call it the principal-agent problem.

In its basic form, agency theory suggests that a corporation is a set of contracts between resource holders. An agency relationship occurs when principals hire agents to act on their behalf to perform certain services. In other words, stockholders hire managers to run the company. In a republic such as ours, voters elect individuals to represent them in government.

This theory, for our purposes here, shows that managers do not always act in the best interests of stockholders, and elected officials do not always act in the best interests of their constituents. This is why corporate executives have golden parachutes and other perks not available to lower-level employees and stockholders. And, it explains why lawmakers often take positions that place their political careers head of the wishes of the people who elected them.

In the end, though, the finger of blame points back to the people with the ultimate responsibility: you and me, whether in our roles as stockholders or voters. We have only ourselves to blame if we re-elect a president who we believe is not leading, and if we re-elect a Congress (with a 29-percent approval rating) that we like less than George W. Bush (with a 41-percent favorability rating) who’s been out of office for nearly a year.
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Seduction of fear, reduction of reason

You know it is time to take a closer look at a deal when the smarmy pitchman warns you to act now before it is too late. Unless a safe is falling on your head, it is usually a good idea to step back, take a deep breath, and review what is on the table.
We frequently use fear as a motivator, sometimes with good intentions. The fear of blindness temporarily stayed many a boy from personal exploration. On the other hand, some people play into deep-seated fears of social exclusion, racism, or terrorism to gain some level of control over individuals, whole classes of people, or nations.

One can make an argument that the United States government overreacted in some of its anti-terrorism laws and measures following the Sept. 11 attacks. We and our leaders responded in good faith to the fear that additional terrorists were poised to kill more Americans using airplanes and other weapons. The seduction of fear led to National Guardsmen patrolling airport terminals, armed with weapons that had no bullets. We continue debating the necessity of the past administration’s efforts to protect our nation, which included water boarding, wire tapping, and the Department of Homeland Security.

Homeland Security Secretary Janet Napolitano this week said she disagrees with Bush Administration measures that fed into fears and did not include the participation of the American people in improving the country’s resilience against attacks. “The consequences of living in a state of fear, rather than a state of preparedness, are enormous,” she said.

Frank Furedi, a professor of sociology at the University of Kent, contends the seduction of fear feeds into the Precautionary Principle, which is designed to eliminate the risk of harm. Furedi says people no longer believe in acts of God or naturally occurring events. For example, accidents are preventable injuries, and we need to fix the causes. If a teenager dies in a car wreck, the family blames missing guardrails or poor road maintenance, and demands laws that keep teenagers from driving at night.

He also believes society no longer expects individuals to rise above adversity. Society, instead, treats people as victims scarred for life. Enter the poverty pimps and community organizers who convince people that racists, bigots, and the wealthy will never let them succeed because of their race, their gender, or their economic status. Only they, the poverty pimps and community organizers, can affect justice for the oppressed.

Individual responsibility does not exist in a precautionary culture, according to Furedi. Thoughtless people, greedy corporations, and incompetent government watchdogs cause a plethora of societal woes. So, we divide the citizenry into vulnerable or at-risk groups that need government protection from a government we do not trust, and we roll over to the seduction of fear by allowing that government to throw money and regulations at circumstances within our control.

If we believe the national news media and Washington fear mongers, each one of us is in danger of losing our home to foreclosure or seeing our home’s value plummet unless Uncle Sam steps in with mountains of cash. People across the country bought into that fear, causing the value of homes in unaffected areas to fall. The government, meantime, pumped billions of dollars into the system to save troubled mortgages given to individuals who could not and cannot afford them.

Buried in a wire-service story this week was a statement from the chief economist of the Federal Deposit Insurance Corporation who estimates the number of home foreclosures could reach 5 million by 2011. That’s a big number, especially if you are one of the 5 million, but it represents just over 6 percent of all homes in the country. In other words, 94 percent of home mortgages are safe and have been.

Another example is the current healthcare debate. Eighty-nine percent of respondents to the latest Time magazine poll said they have some form of healthcare coverage, and 86 percent of that group said they are very satisfied or somewhat satisfied with their plans. A Gallup poll last November found that 83 percent of Americans said the quality of their health care is excellent or good.

Proponents of sweeping changes in healthcare coverage and healthcare delivery use the seduction of fear to make their case rather than rely on reasonable examinations of the underlying causes and effective cures.

The seduction of fear only leads to the reduction of reason, which comes with a price tag no one can afford.

Mundus vult decipi
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Healthcare debate must include costs for treating illegals

The civil case against a Florida hospital draws to a close this week. A relative of an illegal alien sued Martin Memorial Medical Center when it repatriated the man after treating him for nearly three years at an un-reimbursed cost of $1.5 million. The relative/legal guardian wants an unspecified six-figure judgment for alleged false imprisonment and nearly $1 million in economic damages for the medical care he has not received since 2003. That’s when Martin Memorial paid $30,000 to charter a jet to take Luis Jimenez to a medical facility in Guatemala. Jimenez now lives with his mother.

Carol Plato, the director of corporate business services for Martin Memorial in Stuart, says Jimenez is an example of what happens when hospitals treat illegal immigrants. Martin Memorial also is treating an illegal Mexican immigrant for severe brain damage. The man has no family in this country. He’s cost Martin Memorial about $1.5 million over the past two years. Plato says Martin Memorial has contacted the Mexican consulate and the U.S. government about returning the man to Mexico, but no one’s helping.

In addition to this patient, Plato says six illegal immigrants use Martin Memorial three days a week for dialysis with no reimbursement because of their status.

Listen closely, but you’ll be hard-pressed to hear anyone in Washington, from the White House to Capitol Hill, placing medical coverage for illegal immigrants as a priority in the healthcare debate. They don’t want to address it seriously, because then they’d have to find a solution to the overall problem of illegal immigration.

Uncompensated costs to hospitals and other healthcare providers run into the billions of dollars annually. The Florida Hospital Association estimates that in 2007, treatment for illegal immigrant patients cost $100 million. A 2004 study by the Federation for American Immigration Reform put California’s annual cost at $1.4 billion.

States bordering Mexico take the biggest hits. A study by the United States/Mexico Border Counties Coalition found that hospitals serving the 24 U.S. counties along the border ate $190 million in the year 2000.

The Emergency Medical Treatment and Active Labor Act requires all emergency departments to treat all persons coming in seeking medical care, regardless of residency status or ability to pay. Hospitals cannot legally ask residency status of patients, which thwarts attempts to determine accurately the scope of the situation.

A few years ago, the U.S. Government Accountability Office looked for available federal funding to help hospitals offset the costs of treating illegal immigrants. GAO surveyed 503 hospitals and interviewed Medicaid and Medicare officials in ten states, only to determine that an accurate assessment of these uncompensated costs “remains elusive.”

Conservative estimates place the number of illegal immigrants in the U.S. as high as 10 million. Nearly 60 percent of the illegals do not have health insurance, according to the Pew Hispanic Center. That means 40 percent have health insurance, mostly provided by their employers. If that’s the case, then around 4 million illegal immigrants receive health coverage because they’ve supplied their employers with false or stolen Social Security numbers.

Here in Texas, the state and local hospital districts spent about $677 million on uncompensated health care for illegals in FY 05, according to the Texas Health and Human Services Commission. The Harris County Hospital District provided $203.5 million in uncompensated care, according to the study, which hospital district administrators say is twice what they really lost. The study, however, did not include figures from the University of Texas Medical Branch in Galveston, which lost $140 million a year, according to published reports.

“Last year, 6,540 visits from undocumented immigrants cost Parkland Hospital System in Dallas $7 million, and Memorial Hermann in Houston incurred over $4 million in cost for their care,” says Kay Bailey Hutchison (R-Texas). “Hospitals in Connecticut, Delaware, Florida, Louisiana, Nevada, and other states have drawn 100 percent of the available federal aid to help defray the costs associated with providing care for illegal immigrants.”

Unless Congress comes up with a way to fix the illegal immigration problem, the continued strain on the healthcare system by undocumented individuals will cut into any cost savings of a universal healthcare plan.
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