The left-wing war on high-tech companies escalates even further

I have posted multiple times (for example, here) about the war that Progressives, Liberals, and others on the Left are waging against high-tech companies.

So far this war has consisted of mere accusations: high-tech companies do not create enough jobs in America; high-tech companies engage in racist and sexist hiring practices (because they hire too many Indian and Chinese men and not enough blacks, Hispanics, and women); high-tech companies do not pay enough in taxes; high-tech workers are driving up rents. But now, this war has escalated into physical threats and actual violence against employees of high-tech companies. As reported on sfgate.com:

For the second time in two weeks, protesters angry with tech-boom gentrification in the Bay Area surrounded and temporarily blocked corporate shuttle buses full of tech workers — both in San Francisco and Oakland. This go-round, however, some activists apparently became destructive.

A window was shattered and tires were slashed on a bus that was picking up Google employees at 7th and Adeline streets near the West Oakland BART Station, according to the Bay Area Council, which represents businesses that run shuttles. The damage was corroborated by photos on Twitter.

I cheer the protestors. Let them rage. There is no surer way to transform naively liberal high-tech workers into law-and-order conservatives than to have a mob of left-wing thugs attack their bus with bricks. Once awakened, these techies will begin to see that their interests are most certainly not aligned with those of the community organizer Obama and the Democratic Party, but rather with the Tea Party. The Left's attacks against "income inequality" and "racist hiring policies in Silicon Valley" directly threaten high-tech entrepreneurialism and are responsible for fomenting the class warfare and violence being directed against well-paid high-tech employees today.

Recall for a moment Mr Obama's famous statement: "If you’ve got a business — you didn’t build that. Somebody else made that happen." The ideology underlying this statement is directly antithetical to the principles on which Silicon Valley has been founded. Here in the Valley, entrepreneurs do risk everything every day to build businesses on their own. It is statements like Mr Obama's that undermine these principles, that infect the populace at large with an entitlement mentality, that directly encourage mobs on the Left to think that society owes them something, and that incite them to violence to defend what they have been persuaded they are owed.

My word of the year

Glitches.

Does this tin-pot dictator understand anything about how a real business works?

As Yuval Levin writes about the Caudillo's latest Obamacare pronunciamentos:

[The Administration] is asking insurers to pay claims for consumers who haven’t paid their premiums, to treat out-of-network doctors and hospitals as though they were in-network, and to pay for prescription drugs not actually covered by the plans they offer. ... To “strongly encourage” insurers to take these kinds of steps (to use the Orwellian phrase of the HHS announcement), and to do it just a couple of weeks before the new system is supposed to start, suggests that the administration’s health experts mapped out how January is shaping up and had a collective heart attack.

Once again, Obama reveals that he has absolutely no understanding about how a business works. Like some tin-pot dictator, he attempts, on incredibly short notice in the midst of the Christmas season, to strong arm insurance companies into doing things that they never never agreed to do and that make no sense to the insurance companies economically. As Allan Einboden, CEO of Scott & White Health Plan, said, in what has to be the understatement of 2013:

In terms of covering things when they haven't paid premiums, that we would be concerned about doing.

Said Karen Ignagni, head of America's Health Insurance Plans:

[W]ith only weeks to go before coverage begins, continued changes to the rules and guidance could exacerbate the challenges associated with helping consumers through the enrollment process.

As WSJ comments:

Officials even encouraged insurers to do something that normally would be anathema: offer coverage to consumers who sign up and pay a few days into the new year, but backdate the policies to Jan. 1. It wasn't clear how many carriers would take up the idea.

First, Obama and the Democrats pass legislation that causes millions of policies -- labeled by the Administration as "junk policies" -- to be canceled. Then, mere weeks before these policies are scheduled to be terminated, the Administration announces that insurance companies may extend these "junk policies." And now, the Administration announces that insurance companies are "strongly encouraged" to provide coverage for which premiums have not been paid.

Where has the rule of law gone? Are there any adults whatsoever at the helm in the White House?

de jure versus de facto: the mirage of Obamacare

Under the terms of the Affordable Care Act, insurers cannot refuse us coverage for a precondition, cannot kick us off a health plan, and cannot impose lifetime limits on coverage. This is the situation de jure.

But the de facto situation is something quite different: premiums are higher, doctor networks are limited, deductibles are unaffordable, and (now we are being told) important classes of drugs are not fully covered.

So, it turns out in the real world that the wonderful health insurance plans peddled to us by Obama and the rest of the Dems aren't so wonderful and unlimited after all. The American people are finding out, as Nancy Pelosi said they would, what is in the law.

If, de facto, an individual finds premiums and deductibles too high or cannot see his doctor or cannot afford the drugs the doctor prescribes for him, it hardly matters if, de jure, he has a right to "health insurance."

The insurance companies have a million different knobs and levers that they can operate to dial down their costs and subvert all the lofty promises of Obamacare. Obama has been duped. This should come as no surprise, given the fact that the insurance companies underwrite insurance policies and process claims every day, whereas people like Obama, Harry Reid, and Nancy Pelosi are rank amateurs in the insurance business (as they are in the website development business) and really have no idea what they are doing.

What it's beginning to look like is that the status quo ante Obamacare has not changed at all. The promise of Obamacare is a mirage. Even if millions of people sign up on healthcare.gov, the insurance policies being sold there will turn out to be no better (in their own way) than the policies that were available in the individual market before Obamacare, and which the Democrats so roundly criticized as "junk policies" over the last couple of months. And again, this should come as no surprise, since the terms of the policies in the individual marketplace before Obamacare were dictated by economic reality, and President Obama, as much as he may think he can do things like stop the rise of the oceans, cannot suspend economic reality. There simply ain't no free lunch. People, like Obama, who think otherwise are just idiots.

Years from now there will still be millions of people who, de facto, will not be insured (or adequately insured), regardless of the situation de jure.

If you like your doctor (and you're willing to pay higher premiums than you did before), you can keep your doctor. Period.

In a previous blog post I pointed out that Ezra Klein was recommending that Democrats run in the 2014 mid-term elections on the argument that "the cancellations, reduced networks, higher premiums, and increased deductibles that you are experiencing in your health insurance are how Obamacare, brought to you exclusively by Democrats, is supposed to work."

This morning in an exchange with Chris Wallace on Fox News Sunday, Ezekiel Emanuel, one of the architects of Obamacare, adduced another argument that Democrats will be able to use in the 2014 mid-term elections, namely, "if you like your doctor, and you're willing to pay higher premiums than you did before, you can keep him:"

EMANUEL: [I]f you want to pay more for an insurance company that covers your doctor, you can do that. This is a matter of choice. We know in all sorts of places you pay more for certain -- for a wider range of choices or wider range of benefits. The issue isn't the selective networks. People keep saying, 'Oh, the problem is you're going to have a selective network.'

WALLACE: Well, if you lose your doctor or lose your hospital --

EMANUEL: Let me just say something. People are going to have a choice as to whether they want to pay a certain amount for a selective network or pay more for a broader network.

WALLACE: Which means your premiums will probably go up.

EMANUEL: They get that choice. That's a choice you've always made.

WALLACE: Which means your premium may go up over what you were paying so that, in other words --

EMANUEL: No one guaranteed you that your premium wouldn't increase. Premiums have been going up.

WALLACE: The president guaranteed me I could keep my doctor.

EMANUEL: And if you want to, you can pay for it.

Also, Mr Emanuel's claim that "No one guaranteed you that your premium wouldn't increase." is a direct contradiction of Mr Obama's assurance that Obamacare would lower the premiums of the typical family by $2500 a year:

In an Obama administration, we’ll lower premiums by up to $2,500 for a typical family per year. And we’ll do it by investing in disease prevention, not just disease management; by investing in a paperless health care system to reduce administrative costs; and by covering every single American and making sure that they can take their health care with them if they lose their job. … And we won’t do all this twenty years from now, or ten years from now. We’ll do it by the end of my first term as president of the United States.

As I said in the previous blog post: watching the Dems run in the 2014 elections on arguments like these is going to be fun.

An idiot's argument in favor of raising the minimum wage

On the CNNMoney site, Stephen Gandel tries to make the argument that WalMart can "easily pay more without tanking the stock." Mr Gandel bases his argument on an elaborate "scientific" analysis that he himself developed and that he claims was "peer-reviewed" by the economists Sendhil Mullainathan of MIT and Charles Lee of Stanford.

I won't bother to reproduce the argument here since it is so idiotic (as I will demonstrate below) and you can read it for yourself. I only want to quote Mr Gandel's conclusions:

Wal-Mart paid its top executives and board members $66.7 million last year. The rest of the money has to be split among Wal-Mart's remaining roughly 2.2 million employees. Of those, about 1.4 million work in the U.S. Assume that Wal-Mart spends about 2/3 of that on the salaries of its U.S. employees, because salaries are generally higher here. That leaves $66.6 billion for the U.S. workers, or $47,593 [sic]. The Bureau of Labor Statistics estimates that 30% of the average U.S. workers' total compensation is spent on benefits.

That means the average Wal-Mart employee's take home pay should be $33,315. Wal-Mart doesn't say what its actual average salary is. But Payscale estimated it to be just over $22,000 at the end of last year.

The conventional wisdom, of course, is that if Wal-Mart were to hand out raises, its stock would tank. That may not be true. When Google (GOOG) announced a 10% raise for its employees three years ago, the stock dropped a bit but mostly recovered within a year. And Google's stock is 60% higher now than it was before the raise.

So, Mr Gandel concludes that "the average Wal-Mart employee's take home pay should be $33,315," whereas it now stands at a mere $22,000. According to this argument, then, Wal-Mart should increase the pay of each American Wal-Mart employee by $11,315 per year. Now, as Mr Gandel himself notes, Wal-Mart has 1.4 million American employees. To give an $11,315 a year raise to 1.4 million employees would cost Wal-Mart an additional $15.841 billion per year. According to Yahoo!, Wal-Mart has 3.26 billion shares outstanding. So, the additional wage expense would amount to about $4.86 per share. Wal-Mart's current earnings per share -- again, according to Yahoo! -- are $5.20. So, we are being asked to believe that Wal-Mart could essentially wipe out its entire earnings per share and this would have no impact whatsoever on its share price. This is what passes for economic argument in our society today.

But wait, there's more! Mr Gandel notes that Google's share price even went up after they gave a 10% raise to their employees. First of all, let it be noted that there is an enormous difference between a 10% raise and the 50% raise (from $22,000 to 33,315) that Mr Gandel is recommending for Wal-Mart employees. More to the point, Google's decision to give its employees a raise was presumably dictated by the highly competitive market for knowledge-workers (in particular, software engineers) in Silicon Valley. Google made the determination that it could more easily hire and retain workers (and keep them from going to competitors) if it paid them more. To compare highly skilled and highly sought after software engineers in Silicon Valley to unskilled shelf stockers at Wal-Mart is ludicrous.

Moreover, if there is any lesson to be learned from Google's actions, it is that a competitive, meritocratic marketplace ensures that salaries are adjusted to the correct level: if a company's pay is too low, employees will go elsewhere; if a company can find abundant labor, it does not need to pay exorbitant salaries. If we apply this calculus to workers at Wal-Mart, we can conclude that management might actually be paying its employees too much since management is not having any problem hiring and retaining employees at the current wage being paid. Comparing Google and Wal-Mart employees reveals only that the minimum wage is a completely artificial construct that has nothing to do with market forces, but has been instituted by politicians seeking to curry favor with low income voters. The minimum wage is not really a wage for work done at all, but rather merely another form of enervating, humiliating social welfare.

And, yes, if all this sounds like Social Darwinism, I proudly plead guilty.

Poll numbers in favor of an increase in minimum wage are misleading

Over the last several days, much ado has been made about polls that show overwhelming support for an increase in the minimum wage. For example, Jennifer Kirby in the New Republic writes:

Fast-food workers across the U.S. are striking Thursday to demand higher wages, and it turns out they're not alone in believing the federal minimum wage of $7.25 an hour is much too low. A majority of Americans—71 percent—support hiking the minimum to $10, according to the 2013 American Values Survey by the Public Religion Research Institute. Democrats overwhelmingly support an increase, and even a majority of Republicans do. The minimum wage “is that rare issue where there is bipartisan and cross-religious support,” says Dan Cox, PRRI's research director. Except for the Tea Party, that is.

Those dastardly tea baggers!

But, the results of these polls are misleading. If instead of asking "Do you support raising the minimum wage? pollsters had asked "Do you support raising prices at McDonald's and Walmart?" (which is what the result of raising the minimum wage would be), presumably the results would be quite different, especially among the poor, who are among the most frequent customers of McDonald's and WalMart.

Follow the money: SEIU just wants to harvest more union dues from increased minimum wage

What's behind the sudden push to increase the minimum wage for jobs in fast food restaurants like McDonald's and retailers like WalMart? Supporters argue that a “living wage” is needed by those who work in these jobs over the long term and for whom these jobs are the sole means of support.

The problem with this argument is that most workers who hold these positions do not remain in these jobs for long nor is this job usually the worker's sole means of support. In other words, a minimum wage job is usually not a career choice, but rather a temporary, part-time position, often filled by students on the way to higher paying jobs. Furthermore, the students who work part-time in these jobs are often merely supplementing other family income.

In reality, the effort to increase the minimum wage is only part of a larger effort to unionize the various workplaces where that wage is paid. Big labor unions, like the Service Employees Union International (SEIU), are behind this effort. And the SEIU’s motive is not to benefit workers, but rather to increase the number of dues paying members and the amount of dues they pay, so that the SEIU will have the money to run its political operations in support of bought-and-paid-for politicians like Obama.

The SEIU is not concerned with the long-term welfare of people working at McDonald's or WalMart. Rather, the SEIU's game plan can be described as follows:

1. increase the minimum wage, so that when the workplace is unionized, higher dues can be collected;
2. unionize the workplace (the prime targets are those employers with enormous labor pools, such as McDonald's and WalMart);
3. coerce the collection of the higher dues from whatever warm bodies happen to be passing through the minimum wage jobs at any given time;
4. use those harvested dues to advance their leftist political agenda.

Which is to say: the effort to raise the minimum wage is just a fundraising effort by which the Democratic Party and its allies seek to skim funds from the general public to run their political machine.

The SEIU and Obama salivate at the thought of hundreds of thousands of employees of WalMart and McDonald's funneling dues to the Democratic Party. The effort to increase the minimum wage is not a spontaneous, grass roots uprising of downtrodden workers seeking to better their condition. Rather it is an "astroturf" effort, carefully organized and orchestrated by the community organizer Obama and Big Labor with the collusion of their media lackeys like Paul Krugman.

To understand the true nature of this movement, all you have to do is follow the money. It is the SEIU and the Democratic Party who will benefit over the long run from an increase in the minimum wage and the unionization of the workplaces in which that wage is paid, not the part-time student worker passing through the minimum wage job.

Raising minimum wage will only hurt the poor

President Obama called on Congress today to increase the minimum wage. Earlier this week Paul Krugman also called for an increase. Tomorrow there will be demonstrations across America organized by the Service Employees International Union (SEIU) and the union-backed advocacy group Fast Food Forward in support of raising the minimum wage for workers in fast food restaurants. Gee, I wonder if there is some coordination of message going on between Obama, Krugman, and the union thugs.

We are assured by Mr Krugman that absolutely no economic harm will result from raising the minimum wage:

[T]here are strong reasons to believe that the kind of minimum wage increase the president is proposing would have overwhelmingly positive effects. ... [T]he great preponderance of the evidence ... points to little if any negative effect of minimum wage increases on employment.

This is yet another case where you should believe your common sense rather than the Nobel laureate.

Just ask yourself: Who eats at fast food restaurants? One of the largest groups of customers is, of course, people who don't have much money, that is, the poor. If the minimum wage for workers in fast food restaurants is raised, the restaurants will simply pass this increase in wage expense along to their customers. So, the end result of raising the minimum wage for workers in these restaurants will be to make eating there more expensive for the poor.

Exactly the same analysis applies to raising the minimum wage in WalMart. Who shops at WalMart? Many poor people do. WalMart will pass along the cost of an increased minimum wage to its customers, namely, the poor. So, raising the minimum wage for WalMart employees will simply increase the cost of goods for the poor.

At best, an increase in minimum wage will result in a wash, since those who receive an increase in the minimum wage will likely also be patrons of the establishments where the wage was raised.

The economic bromides being peddled by Obama and company would be laughable if they weren't so tragic. Mr Obama's time in office has been characterized by stagnant economic growth brought about by the misguided Keynesian economic policies of his administration and the Fed. This economic malaise has been particularly damaging to the poor, who have fallen farther and farther behind while the 1% have grown richer and richer on the back of Keynesian stimulus. And yet, Mr Obama continues to try to sell the American people on economic policies that just hurt the poor and have no impact on the rich. After all, it is not the rich who eat Big Macs and shop at WalMart.

This is going to be fun

Ezra Klein writes:

There are the insurance cancellations, of course, but there also [are] going to be people who happily buy new insurance only to find their doctor isn't covered, and there will be people who end up paying higher premiums in the new market, and there will be employers who raise deductibles to keep from paying the 2018 tax on high-value insurance plans, and so on.

Unlike HealthCare.gov's technical problems, most of these issues will be part of the law working as it's supposed to work rather than the law failing to work as it's supposed to work. ... Obamacare is now moving from unexpected problems that threaten the law to predictable disruptions that are, in many cases, intended by the law. And the Obama administration will have three full years to create millions, and perhaps tens of millions, of winners who are getting insurance or protection through the law.

Seriously, Ezra?

I am going to love watching Democrats run on the argument "the cancellations, reduced networks, higher premiums, and increased deductibles that you are experiencing in your health insurance are how Obamacare, brought to you exclusively by Democrats, is supposed to work."

As for the tens of millions of winners from Obamacare, most of them already voted for Obama and the Democrats the last time around. The problem is going to be the tens of millions of losers from Obamacare, the predominantly young, middle-class or affluent, healthy, and well-educated voters, many of them independents, who cast their ballots for Obama and the Democrats before, but will abandon ship once they realize that they are footing the bill for all the winners.

Yes, watching Democrats run on Obamacare is going to be fun.

Healthcare.gov working (except for that pesky back end)

In an opinion piece in USA Today, HHS Secretary Kathleen Sebelius writes:

So we've been working 24/7 to make improvements, and more consumers are successfully shopping online and enrolling in a health plan each week. As a result, today's user experience on HealthCare.gov is a dramatic improvement over where it was on Oct. 1. The site is running faster, it's responding quicker and it can handle larger amounts of traffic.

Yet, according to the Washington Post, Henry Chao, deputy CIO and deputy director of the Centers for Medicare and Medicaid Services' Office of Information Services, testified during a hearing before the Oversight and Investigations Subcommittee of the House Energy and Commerce Committee on Tuesday:

[H]is team has yet to complete 30 to 40 percent of the overall project. ... Chao said the Centers for Medicare and Medicaid Services is [sic] still working on a number of “back office” aspects of the project, including a system to send payments to insurance companies.

And WSJ reports:

Insurers and some states are continuing to look for ways to bypass the balky technology underpinning the health-care law despite the Obama administration's claim Sunday that it had made "dramatic progress" in fixing the federal insurance website. Federal officials said they had largely succeeded in repairing parts of the site that had most snarled users in the two months since its troubled launch, but acknowledged they only had begun to make headway on the biggest underlying problems: the system's ability to verify users' identities and accurately transmit enrollment data to insurers. ... Our favorite line in the report is the HHS boast that "the team is operating with private sector velocity and effectiveness." That sure is a remarkable two-month turnaround for the same team that took three and half years to botch the initial launch at a cost of more than $1 billion, according to an analysis by Bloomberg Government.

A while back, I wrote:

When customers fill in data, click on buttons, and so on, in the Obamacare portal, backend business processes will be set in motion. It is one thing for software to capture data in a form, send that data over a wire, and store that data as a transaction in a database. It is quite another thing for the backend business processes to make sense of and reconcile all this data, to take appropriate actions based on the data, and, to operate in such a way that all the transactions taken together aggregate and add up to a net benefit to users. In short, once a user has enrolled in a policy, the entire lifetime of that policy, including premium billing over the long term, must be administered in a consistent, auditable way.

A system is hardly complete if the back office functionality required to verify identities, forward applications to the insurance companies, and make payments is not working. Who does Kathleen Sebelius think she's fooling? A system that is "running faster" and "responds quicker," but doesn't know who you are, sends your data down the bit bucket, or doesn't make payments to the insurance companies, is, by Silicon Valley "private sector" standards, not yet working.

More to the point: even when the software engineers get the back office functionality up and running (after maybe another year and another several billion dollars more in consulting fees), the perverted incentives created by Obamacare (cover the sick and poor at the expense of the young, affluent, and healthy) will still doom Obamacare and the Democratic Party.

My company's health care premiums are going up due to Obamacare

I recently received the following email from the HR manager of the software company I work for:

[Our company] strives to offer a competitive benefits package in the context of continuous healthcare cost inflation. This year, due to a significant increase in claims and new fees associated with the Affordable Care Act, we are facing substantial rate increases. ... We therefore encourage you to consider switching over to the Anthem Health Savings Account (HSA) plan ... High deductible plans are the best way to control costs while offering competitive benefits at the same time. [emphasis added]

Higher premiums? My company urging me to go on a plan with a high deductible? Thank you, Obamacare.

Another momentous change made by Democrats with no bipartisan support

Today, Senate Democrats made another momentous change to American political life with no bipartisan support. By a 52-48 vote, with all Republicans voting nay, the Senate changed its filibuster rules to allow Senate confirmations to proceed with just 51 votes. Since 1975, 60 votes had been required to invoke cloture (end of debate), and before that 66. This rules change will, of course, make it easier for Democrats to ram through various nominations along party lines. As WSJ reports:

[Republican Senate Minority Leader Mitch McConnell] said the drive to change Senate rules represented a raw use of power akin to the tactic used to pass the Affordable Care Act. "They muscled through Obamacare on a party-line vote and didn't care about the views of the minority, and that's just about what they are going to do here," said Mr. McConnell.

The change is a clear sign of the increasing panic and desperation of Democratic politicians as their poll numbers plummet due to the Obamacare disaster. It is quite clear now that the Democrats will not take back the House in 2014 and are very much in danger of losing their majority in the Senate. So, their plan in the meantime is to ram through as many confirmations as they possibly can. The immediate goal of Democrats is to pack the DC Circuit Court with three additional Democratic nominees.

RealClearPolitics has to change scale of Obama approval chart

Today RealClearPolitics had to change the scale of the President Obama Job Approval chart because the President's approval rating was about to plunge right off the bottom of the chart.

I guess that's what happens when you pass the most massive redistributionist legislation in 50 years and steal an election all by lying.

Mr. President, maybe now it's time for you to go pound sand

Mr President,

Over the last couple of years, Republicans have offered numerous proposals for how to reform the health care marketplace in America. In every single case, you, Senator Reid, and Congresswoman Pelosi have told the Republicans, in effect, to go pound sand.

"The presidential election was a referendum on Obamacare and you lost!" Republicans were admonished. "Obamacare is the law of the land, was upheld by the Supreme Court, and cannot be delayed, changed, or repealed!" your Democratic talking heads shouted.

But now, with the healthcare.gov website in shambles, with the number of canceled insurance policies far greater than the number of new enrollees in Obamacare, and with Democratic approval ratings cratering and the threat of a disaster in the 2014 midterm elections hanging over your heads, you and other members of your party are proposing at the eleventh hour that radical administrative and/or legislative changes be made to the Obamacare legislation that you insisted could never be altered.

These changes are so extensive that it is questionable whether they are even consistent with the principles the law was founded on. Furthermore, these changes have been conceived in such a rush and so obviously as a result of Democratic political imperatives rather than through any kind of rational deliberation that they threaten to take an already chaotic situation and make it even more confused and uncertain.

Millions of Americans have had their insurance policies canceled or their premiums raised. They are being told that if they don't have health insurance by early next year they will be fined. And yet, they cannot even use the crippled website you assured them would be available to them so they could "comparison shop" for new coverage. All this has been brought upon us by you and the Democratic Party alone. Remember: not a single Republican lawmaker voted in favor of Obamacare. And now that you have brought the American health care system to the brink of disaster, you arrogantly insist that we all jump to our feet and support you as you blunder like a drunken sailor down your newest policy path. Once again you will be demanding, I am sure, that we need to pass your new proposals so we can find out what's in them.

Obamacare has been plagued from the outset by a lack of bipartisan support and serious consideration of the best ideas from all sides. I am confident that if you will be willing to sit down with Republican congressional leaders and discuss in a rational manner their entire range of objections to Obamacare, they will be quite willing to cooperate with you. In the meantime, since the mess you have created threatens so many people as deadlines approach, it is obvious that all of Obamacare needs to be scrapped and we need to start over, together.

If, however, you are unwilling to sit down with Republicans and are unwilling to listen to their ideas and incorporate some of their suggestions into new healthcare legislation well, then, Mr President, it's time for you to go pound sand.

Never mind

Bill Clinton now says:

I personally believe, even if it takes a change in the law, the President should honor the commitment the Federal government made to those people, and let them keep what they got."

So, after 3 years of preparation for the implementation of the most disruptive and politically divisive social policy America has seen in the last 50 years, the Democratic Party is doing a 180 and saying: Never mind, you can keep the health plan you had before.

But, if everyone keeps what they had before, then, what is the change that Obamacare brings about? What are the implications for the rest of the program? Have you ever seen such a cluster fuck?

It will take months

In a blog post entitled The Obamacare Rollout: The Administration Needs a Plan B––Now!, health policy expert Bob Laszewski reports:

It is now becoming clear that the Obama administration will not have Healthcare.gov fixed by December 1 so hundreds of thousands, or perhaps millions, of people will be able to smoothly enroll by January 1.
...
It's time for the Obama administration to get real. It takes months to properly test a complex data system like this. Two things are obvious:
1. When they launched on October 1, very little of the testing had been completed.
2. They are now in the midst of that many months long testing and fixing period. It is clear they don't have a few weeks of work left; they have months of work left.

What does Hillary think of Obamacare

What I want to know is: What does Hillary think about Obamacare now? Does she continue to give it her unqualified support?

What does she think about the healthcare.gov website? Does she think that Kathleen Sebelius is doing a good job or that she should be fired? Does she think that it's fair to require people to have health insurance when the website through which they are supposed to sign up is riddled with bugs?

Does she think it's acceptable for millions of people to have received cancellations of their health care insurance as a result of the provisions of the Obamacare legislation? Does she think that insurance policies that have higher deductibles, more limited doctor networks, and coverage that individuals don't need are "better" for them? Does she think that it's "fair" for the young and healthy to be forced through higher premiums to pay for the costs of the old and sick?

Again and again, the mainstream media must force the next Democratic candidate for President to go on record about what she thinks of this enormous mess, foisted on us by the Democratic Party.

The pathetic attempt to pin the blame for Obamacare on Republicans

Larry Summers published a truly pathetic piece in WaPo today, taking Republicans to task for trying to “subvert” Obamacare:

[F]airness requires recognizing the equally important, and in some ways more fundamental, factor behind the problems implementing Obamacare: the systematic effort of the president’s opponents to delegitimize and undermine the project. … There is a line that must be respected between political opposition and conscious subversion. Everyone understands that when the country is at war, even a war a person may oppose, vigorous oversight is essential, but, in the end, there is an obligation to support American troops. In the same way, history will not judge kindly those who, having lost political debates over policy, go beyond vigorous oversight and seek to subvert enacted programs.

Sanctimonious Harvard president bloviation! You can always tell when a Democrat is about to try to pull the wool over your eyes or pick your pocket, because he begins his peroration with "Fairness requires ..."

Healthcare.gov is an ongoing disaster. The President's repeated assurances that Americans would be able to keep their insurance plans and doctors if they liked them have been exposed as premeditated fraud. It is inconvenient facts like these, Mr Summers, that have delegitimized and undermined Obamacare, not the opposition of a few Republicans.

More to the point: Why should anyone be surprised by the continued attempts of Republicans to derail the implementation of Obamacare? Not a single Republican Congressman or Senator voted for Obamacare. Why does Mr Summers think that their opposition should stop with the passage of the law? Of course Republicans will do everything in their power to subvert Obamacare. They should unashamedly shout their ongoing opposition to Obamacare from the rooftops!

The Democrats have no one to blame but themselves. Deep-rooted opposition is the inevitable result of the fact that Obama, Pelosi, and Reid rode roughshod over Republicans and rammed the legislation through without bipartisan support. It is the height of hypocrisy for Mr Summers to bemoan the lack of bipartisan support now when there was no mention of the need for bipartisanship in 2010.

And, as for all of his talk about supporting American troops in time of war, Mr Summers conveniently forgets that Democrats in the Senate, including Hillary Clinton, threatened in 2007 to withhold funding for the war in Iraq if President Bush did not agree to a timetable for withdrawal. As WaPo reported at that time:

Within hours, Senate Majority Leader Harry M. Reid (D-Nev.) declared that Bush will not get more money to pay for the wars in Iraq and Afghanistan this year unless he accepts a plan to complete troop withdrawals by the end of next year.

Finally, as for the question of whether Republicans will be judged kindly for their continued efforts to subvert Obamacare, the midterm elections in 2014 will go a long way towards answering that question. And right now things are looking increasingly rosy for the Republicans and increasingly bleak for the Democrats (with the spread between those disapproving and approving of President Obama's performance having ballooned to over 10%).

Mr Summers: Democrats, not Republicans, passed Obamacare. You own it. Your attempt to pin the blame for Obamacare's failures on Republicans is truly pathetic.

Obamacare = a gun held to the head of the American people

On November 3 I predicted that there was no way the healthcare.gov website would be running smoothly by December 1, as the Administration assured us it would. Here's an update as reported in WSJ today:

In updates for reporters on Thursday and Friday, the Affordable Care Act's lead repairman Jeff Zients more or less conceded that the website three years in the making won't work until sometime after the end of this month. He explained that every problem that is resolved and taken off the "punch list"—already several hundred items long—reveals new problems that the tech people didn't know about. "Where we are is not where we want to be," he said.

Anybody who is surprised that things are playing out this way knows nothing about the software development process. You just don't roll out a major release of a complex enterprise software system and then a couple of months later roll out another major release. All you need to do is ask yourself how frequently Microsoft rolls out major releases of the Windows operating system to understand the rhythm which with such releases typically happen. The simple fact that the Administration claimed the website would be working by December is just another sign that they are utterly incompetent. Either that, or once again they are telling bald-faced lies to the American public.

But, even if these technical problems with the website eventually get ironed out, what is not fixable in Obamacare and what will cause its eventual failure is the incentives it creates and the coercion it exercises: it incentivizes the sick, old, poor, and uninsured to sign up for Obamacare; it coerces the healthy, young, and affluent to pay higher premiums to cover the additional costs.

During the government shutdown, the President said that he would not negotiate with the Republicans with "a gun held to the head of the American people." Well, what is the individual mandate if not a gun held to the head of the American people? Enroll in Obamacare or pay a fine. Take your new plan that the government in its infinite wisdom has decided is "better" for you (with its higher deductibles, more limited doctor networks, and coverage you don't want), or leave it and pay a fine. Coercion plain and simple. Bang!

Obamacare's back end

In a previous blog post, I wrote about what I fear are the most significant problems facing the Obamacare system, namely, potential weaknesses in its business model and back-end business processes.

When customers fill in data, click on buttons, and so on, in the Obamacare portal, backend business processes will be set in motion. It is one thing for software to capture data in a form, send that data over a wire, and store that data as a transaction in a database. It is quite another thing for the backend business processes to make sense of and reconcile all this data, to take appropriate actions based on the data, and, to operate in such a way that all the transactions taken together aggregate and add up to a net benefit to users. In short, once a user has enrolled in a policy, the entire lifetime of that policy, including premium billing over the long term, must be administered in a consistent, auditable way.

Now, Jon Kingsdale, who oversaw the Massachusetts health insurance exchange from 2006 to 2010, reports on some of the challenges in these back-office processes:

The first [challenge] is to get enrollment, billing and premium collections working smoothly. In 2006, when we launched the Massachusetts Health Connector, which became the prototype for insurance exchanges under the ACA, my team encountered start-up problems. Tracking billing and collections was a much bigger challenge than getting our Web site to work.

Here’s why: Enrollees are not covered until their first month’s premium is received. In the individual insurance market, premium billing and collection is difficult to track. Folks frequently pay late or in weekly installments, or send too little or even too much. And when they stop paying, they often do not notify the insurer; the company must determine whether it is an intentional termination, an oversight, or a lost or late payment. Unlike most of today’s 15 million direct enrollees, who pay premiums on their own, an estimated 27 percent of those who will be eligible for tax credits under the ACA do not have checking accounts. So they must use cash, money orders or prepaid debit cards to pay their share of monthly premiums.

Under the health-care law, premium billing and tracking will be even tougher. There are hundreds of prices across each of the thousands of plans in the federal marketplace. Having enrollees pay partial premiums, and the IRS issue tax credits for the rest, means twice as much billing. Calculating subsidies based on personal income tax filings also creates security issues: In addition to the problems with verifying consumers’ identities online, which have created delays on HealthCare.gov, tens of thousands of unlicensed “navigators” are fanning out across the country to help folks enroll. Many of these people don’t have to submit to thorough background checks, although they will gain access to personal financial information. And consumer protections for low-income enrollees who miss payments require complex notifications over 90 days before an insurer can end coverage. ...

In Massachusetts, we received about 100 visits to the site for every one enrollment. If the tens of millions of hits for the federal exchange in October eventually translate into millions of customers, the accuracy of the enrollment data — and insurers’ ability to correctly split premium billing between millions of enrollees and the IRS; track premium remittances; and chase, reconcile and report on accounts receivable — will be tested under the pressure of high volume. If insurers cannot track and collect premium dollars each month, the extra work of doubling back with customers and insurers will frustrate consumers and delay coverage. And a mounting backlog could eventually compromise the fiscal integrity of the exchange. [emphasis added]

To think that all of these back-end business processes are going to be working by December 1 is sheer fantasy. And, if they are not working, then, as Mr Kingsdale mentions and I have also pointed out in other blog posts (for example, here and here): "a mounting backlog could eventually compromise the fiscal integrity of the exchange." That is, a poorly functioning exchange will create more and more data that must be revisited and manually corrected until the amount of reworks will simply overwhelm the system.

Paper applications will only add to the problems

And then there is the Administration's specious claim that filling out a paper application with the assistance of a "navigator" is an adequate alternative to enrolling in Obamacare on the healthcare.gov website.

In order to understand how the use of paper applications will only increase problems, imagine for a moment the system architecture of healthcare.gov. We can think of it as consisting of two main components:

1. a website that serves up pages that allow users to enter information and make selections;
2. a back-end server that communicates with a variety of external systems; imagine a giant wheel with healthcare.gov's server sitting at the hub, various external systems sitting at the end of the spokes, and digital (not paper) information passing back and forth between the central hub and the external processes through the spokes.

The external systems perform a variety of functions:

1. If the external system is an insurance company, then a.) it sends to the central hub information about the policies and premium rates that the insurance company offers and b.) it receives from the hub completed, validated user applications for its insurance policies.
2. If the external system is another government agency, then it receives from the central hub queries to verify user information (entered through the website) and sends back answers; for example, the external system might be the IRS and the central hub may ask it whether the SS# 123-45-5678 is a valid SS# for John Doe and whether last year John Doe's salary was $100K; the IRS will send back a digital reply answering yes or no.

Now, ask yourself: How is all this processing going to take place with paper applications? In particular:

1. How will users get the information about the policies and premium rates of various insurance companies? Will the navigator have access to all the latest information?
2. How will information the users provide be verified? Will the navigator call up all the various governmental agencies to verify the user's information?
3. How (and how securely) will completed user applications be forwarded to insurance companies?

Also, remember that eventually user information will need to be read off these paper applications and entered into computer systems by data processing personnel. After all, we live in a digital world. The information on the forms will often be incomplete, unverified, and even illegible and the data processing person will likely not have the applicant sitting next to them to supplement/correct the information on the application.

In fact, filling out paper applications will just add to the enrollment process steps that have the potential to introduce additional error and even fraud into the system. The whole reason for having a centalized healthcare.gov website was so that we could avoid all the inefficiencies and errors and invalid data that result from paper applications. And now people are being told that paper applications are an adequate alternative. On the contrary, paper applications will simply create more problems for Obamacare to deal with.

Processing errors create even more problems

Alexis Simendinger on RealClearPolitics reports:

[HHS Secretary Sebelius] also noted that early applications launched on the wobbly site got stuck, were incomplete or in error, and the government is trying to sort out what to do with thousands of such attempts. That problem is unlikely to be resolved by next week.

I predicted this phenomenon in an earlier blog post:

And, oh yeah. If the exchanges try to go on line in spite of poorly functioning systems, the complexity of the problem will only grow, since not only will the buggy systems still need to be fixed, but also the processing errors made by the buggy systems will subsequently have to be corrected, too.

Another Obamacare prediction

Not only will the Obamacare website healthcare.gov not be ready by December 1, but the experts that have been brought in during the "tech surge" to help work out the problems with the site and its back-end systems will announce at that time that the project is so fundamentally flawed that it will have to be junked in its entirety and that the government will, in effect, have to start over from scratch.

Presumptive eligibility = liar loans

In my last blog post, I mentioned an organization named Enroll America, which is supporting the Obamacare enrollment push. I happened to visit their website and found there a "best practices" document encouraging the use of "presumptive eligibility" for Medicaid. The document describes presumptive eligibility as follows:

With presumptive eligibility, an individual or family can be temporarily enrolled in Medicaid (or CHIP, if applicable) immediately if it appears they are eligible. They simply need to provide a few pieces of information—name, household size, and estimated monthly income—and a presumptive eligibility determination can be made. ... [Presumptive eligibility] can be used even when IT systems are down, or when an individual can’t get a real-time determination using the new single, streamlined application for coverage.

I like that part about "even when IT systems are down." Obviously, presumptive eligibility was designed with healthcare.gov in mind.

The document has a handy FAQ section:

Do individuals need to verify their income for presumptive eligibility?
No. The determination is made based on the individual’s attestation of their family circumstances.

How do providers get paid for services delivered during the temporary eligibility period?
Providers get paid the regular Medicaid rates for any services provided during the temporary eligibility period, even if the person is eventually found ineligible for Medicaid.

Who can determine someone presumptively eligible?
States that use presumptive eligibility get to choose which entities are allowed to make presumptive eligibility determinations.

So, I can walk into a hospital, fill out a form on which I "attest" to my monthly income, some "entity" can approve it, and I can get Medicaid coverage? And if turns out that I lied and am not eligible, the government will still pay?

Isn't the practice of accepting an attestation of income on an application -- in their case, a loan application -- precisely what banks are being fined billions of dollars for by various government agencies? And yet, here we have a group encouraging the acceptance of unverified information on Medicaid applications as a "best practice."

The big banks are now often condemned for allegedly entrapping unknowing victims into entering unverified, false information on their loan applications. But, just as now advocacy groups encourage the entry of unverified information on Medicaid applications so that poor and minority communities can receive medical benefits, so in the years before 2008 enormous pressure was applied by various advocacy groups like ACORN on banks to accept unverified information on so-called "liar's loan" applications so that those same poor and minority communities could receive bank financing.

For example, Wikipedia describes the Community Reinvestment Act (CRA) as follows:

The Community Reinvestment Act ... is a United States federal law designed to encourage commercial banks and savings associations to help meet the needs of borrowers in all segments of their communities, including low- and moderate-income neighborhoods. Congress passed the Act in 1977 to reduce discriminatory credit practices against low-income neighborhoods, a practice known as redlining.

As Edward Pinto reports in the WSJ:

[The housing] bubble was the result of government policies that lowered mortgage-lending standards to increase home ownership. One of the key players was the controversial liberal advocacy group, Acorn (Association of Community Organizations for Reform Now). The watershed moment was the 1992 Federal Housing Enterprises Financial Safety and Soundness Act, also known as the GSE Act. To comply with that law's "affordable housing" requirements, Fannie Mae and Freddie Mac would acquire more than $6 trillion of single-family loans over the next 16 years. Congress's goal was to force these two government-sponsored enterprises (GSEs) to purchase loans that had been originated by banks—loans that were made under the pressure of another federal law, the 1977 Community Reinvestment Act (CRA), to increase lending in low- and moderate-income communities. ... Acorn and the other advocacy groups succeeded at getting Congress to mandate "innovative and flexible" lending practices such as higher debt ratios and creative definitions of income. [emphasis added]

In sum, we have exactly the same pattern repeating itself: a liberal community organizing group leverages the provisions of liberal legislation to encourage various entities to accept unverified income information on applications that will result in the granting of benefits (Medicaid coverage or bank financing). And, this practice is made risk-free for the entities themselves by the guarantee that if it turns out that the information provided is false, the government will make good any losses suffered (by making the Medicaid payments on the one hand or by making good on loan guarantees provided through Fannie Mae and Freddie Mac on the other).

And now we are witnessing the ultimate hypocrisy: after having incentivized the banks for years to engage in this destructive behavior of accepting unverified information, then, when the banks actually behaved that way, the government now drags them into court for having done so. We can be sure that hospitals and other medical providers, after being incentivized to implement presumptive eligibility, will be vilified and accused of fraud in the future for having done so. And groups like Enroll America and ACORN will move on unpunished to the next liberal scam.

The technology-entitlement-surveillance complex

The Los Angeles Times reports:

Enroll America, a nonprofit organization formed in 2010 to support the [Obamacare] enrollment push, is supplementing its field program with a $5-million digital campaign targeting minority women. It will use data analytics, similar to those the Obama reelection campaign used to spectacular effect in 2012, to find women online who are likely to be uninsured and capture their attention through ads on websites they visit.

"Based on the information that we have on users and that we collect as they are searching and going about their day online, we can meet them where they are with our message," said Anne Filipic, a 2008 Obama campaign alum who later worked in the White House as deputy director at the office of public engagement. "And when they come to our website [at Enroll America], we can actually tailor our website so it shares specific content, or even specific pictures, based on the demographic."

This is exactly the dynamic I described in my blog post The blueprint for the ideal enterprise software company in the age of entitlements. More and more the function of Silicon Valley is to streamline and facilitate access to the welfare state. Either that, or to provide government agencies like the NSA with tools to snoop into our lives and analyze our social networks. For, as WSJ reported last June:

Key advances in computing and software in recent years opened the door for the National Security Agency to analyze far larger volumes of phone, Internet and financial data to search for terrorist attacks, paving the way for the programs now generating controversy. ... The NSA's advances have come in the form of programs developed on the West Coast—a central one was known by the quirky name Hadoop—that enable intelligence agencies to cheaply amplify computing power, U.S. and industry officials said. The new capabilities allowed officials to shift from being overwhelmed by data to being able to make sense of large chunks of it to predict events, the officials said.

In a speech delivered in January 1961, outgoing President Dwight Eisenhower warned about the dangers of the military-industrial complex. In our age, the danger arises instead from the technology-entitlement-surveillance complex. Increasingly, the individual stands helpless in the face of an ever more powerful and all-embracing (totalitarian, that is) government enabled by high technology.

President Obama bemoans the inequality gap that is opening ever wider between the haves and the have-nots in our society. And yet, it is Obama's promotion of an ever-expanding government, gushing lucrative contracts, that creates enormous and irresistible opportunities for entrepreneurs to start up software companies. The Silicon Valley billionaires of the future will make their fortunes by enabling all the various activities of Big Brother.

I just didn't realize I would be the one who was going to pay for Obamacare personally

The Democrats say that the reason why individual policies offered under Obamacare are more expensive is because they provide better coverage. This assertion is a bold-faced lie.

Before Obamacare, an individual paid a certain premium for a policy that covered, say, only items 1, 2, and 3. The reason the individual purchased precisely that policy was because it was his considered judgment that he only needed coverage for items 1, 2, 3. And, who could be a better judge of what coverage he needed and how much he was able to pay for it than the individual himself?

After Obamacare, the individual is forced to purchase a policy that covers not only items 1, 2, and 3, but also items 4, 5, and 6 as well, and this for a substantially greater premium than he was paying before Obamacare. Well, harumph the Democrats, the individual should be grateful: he is receiving better coverage, even if he is paying a “little bit more.”

Actuarially speaking, however, the individual is not likely to use the coverage for items 4, 5, and 6. After all, he did not need that coverage before Obamacare, so why should he suddenly need it after Obamacare? That is, within a large pool of policyholders, a significant number of them simply won't use coverage that they did not judge themselves to need and weren't willing to pay for before Obamacare. It's just a fact. But, if they don't use the extra coverage, where do the extra dollars they are paying in premiums go?

In reality, the extra amount the individual is paying in premiums after Obamacare does not go to purchase coverage for items 4, 5, and 6 for himself, but rather to help defray the costs of coverage for items 1-6 for somebody else.

As the now famous Cindy Vinson of San Jose, whose premiums for an individual policy have gone up $1800 a year under Obamacare and who doesn't qualify for premium support, said:

Of course, I want people to have health care. I just didn't realize I would be the one who was going to pay for it personally.

The war between the SIP's and the YAF's is beginning to intensify.

Obama, VC wannabe, has a desk waiting for him at KPCB.

Until recently I thought it was a slam dunk that President Obama would join the venture capital firm Kleiner, Perkins, Caufield, and Byers after he left office.

After all, his Democratic buddy Al Gore is already there. Mr Obama is obviously a VC wannabe. He's always talking about "investment." And there can be no doubt that he is adept at spending enormous sums of money to promote "technology" and "innovation."

As soon as he was elected in 2008, the website of the Office of the President-Elect published Mr Obama's "technology agenda" (apparently, a contractor other than CGI developed this website because you can actually access it). The agenda proclaims Mr Obama's grandiose vision:

Barack Obama and Joe Biden understand the immense transformative power of technology and innovation and how they can improve the lives of Americans. They will ... employ technology to solve our nation's most pressing problems -- including improving clean energy, healthcare costs, and public safety.

But, it's not exactly clear now where KPCB will put Mr Obama.

Obviously, Al Gore is keeping a seat warm for the President on the Greentech Team, but rumor has it that other members of the team are having second thoughts about the President joining them given the spectacular failure of his bets on companies like Solyndra and A123.

The Digital Team also seemed like a good fit for the President, but the monumental catastrophe of the rollout of the healthcare.gov website has made it apparent that the President has little talent for putting together a first rate software venture.

But I jest. A while back I wrote a post that dealt with the question of what the blueprint for the ideal software company in the age of entitlements might be:

As an entrepreneurially inclined software engineer (over the last two decades I have worked for 3 Silicon Valley enterpise software startups that have gone on to successful IPO’s), I have been asking myself lately the following question: What is the blueprint for the ideal enterprise software company in the age of entitlements? In attempting to answer that question, I have assumed that government spending on entitlement programs will only continue to expand (that is, more and more programs will make more and more transfer payments to an ever-increasing army of Julias). So, the problem becomes one of imagining a company that can best profit from the expansion of these entitlement programs.

Is it possible to imagine anyone with more experience in the area of entitlement programs or with a better grasp of how venture capitalists might create companies that can harvest the monies that flow through these programs than Mr Obama?

Yes, there is a corner office awaiting Ex-President Obama on Sand Hill Road. But, his presence at KPCB will just be one more sign that the old, rebellious, counter-culture-based Silicon Valley is dead, and has been reborn as the handmaiden of big government.

Obamacare vaporware will get worse still. Or: How VC-wannabe Obama will learn about the mythical man-month.

Twenty years ago, Frederick Brooks wrote the classic book The Mythical Man-Month to discuss the challenges facing engineers when they develop large software systems. This book is required reading in CS programs around the world and its findings have been confirmed by every software engineer (including myself) who has ever worked on large software projects.

The book addresses the following question: When a large and complex software project is behind schedule, what should you do to speed up its completion? The naive answer is that you should add more software engineers to the project. The basic reasoning behind this answer goes like this: If one software engineer will take one year (twelve man-months) to complete a task, then it should take 12 software engineers one month (again, twelve man-months) to complete the same task. Brooks demonstrates that this reasoning is fallacious. Instead, he posits a thesis that has become known as Brooks Law:

Adding manpower to a late software project only makes it later.

Brooks Law is true for two basic reasons, as summarized by Wikipedia:

1. It takes some time for the people added to a project to become productive. Brooks calls this the "ramp up" time. Software projects are complex engineering endeavors, and new workers on the project must first become educated about the work that has preceded them; this education requires diverting resources already working on the project, temporarily diminishing their productivity while the new workers are not yet contributing meaningfully. Each new worker also needs to integrate with a team composed of multiple engineers who must educate the new worker in their area of expertise in the code base, day by day. In addition to reducing the contribution of experienced workers (because of the need to train), new workers may even have negative contributions – for example, if they introduce bugs that move the project further from completion.
2. Communication overheads increase as the number of people increases. The number of different communication channels increases rapidly with the number of people. Everyone working on the same task needs to keep in sync, so as more people are added they spend more time trying to find out what everyone else is doing.

The Obamacare website and all the back-office enterprise software components that support it obviously qualify as an example of the kind of system that Brooks had in mind. The project is obviously very much behind schedule and very buggy. So, what is President Obama doing? Precisely, what Brooks said he should not do: he is adding manpower to the project. Reports the President:

We've had some of the best IT talent in the entire country join the team. And we're well into a tech surge to fix the problem.

I can just imagine this new "best IT talent surging" onto the project and declaring "We are in charge now." There is no surer way to get the engineers already on the project to say "fuck this" and simply give up. When people already on the project are alienated, they will become uncooperative and stop supplying information about the architecture and implementation of the system.

In addition, Democrats are growing increasingly annoyed with their dysfunctional software system. Mr Obama fumed:

Nobody’s madder than me about the fact that the website isn’t working as well as it should, which means it’s going to get fixed.

Bitched Nancy Pelosi:

I think somebody should fix it. Coming from where I do in California, I have great confidence in technology and its ability to bring fresh eyes to the subject and fix it so that we can go forward. Just fix it, just fix it.”

In spite of the fact that she comes from California, Nancy obviously does not understand very much about the challenges of large software systems. "Just fix it" is the cry of someone who simply doesn't know what to do or even how to get started.

So, where do we stand? We have a software system that is terribly late and horribly buggy, the President is adding manpower to the project, and all the Democrats, increasingly dismayed that the system is not working, are applying enormous pressure to the engineers to "just fix it." Given the way things are working out, the Obamacare fiasco probably calls for a revision of Brooks' Law. It should now read:

Adding manpower to a late software project only makes it later. And having politicians watch over engineers' shoulders and scream at them while they are trying to fix problems, only makes the project even later and more buggy still.

In an earlier blog post in July, I made the following prediction:

The idea that all the computer systems required to implement Obamacare will be up and running smoothly by October is sheer fantasy. The recent announcements of delays in the implementation of Obamacare are just the beginning. Expect a steady drumbeat of additional postponements from the Obama administration as the implementation of Obamacare falls farther and farther behind schedule.

That prediction has come true in spades. Expect the problems with the system not to decrease, but actually to increase. It is a certainty now that the personal mandate will be delayed, just as the Tea Party Republicans insisted it should earlier this month.

Once again, Obama takes the low road

The crisis had passed. It was a moment for the President to reach out, to heal wounds, to build bridges. A confident and magnanimous leader, one with abundant experience as a chief executive officer, would use the moment to try to create an atmosphere of reconciliation and cooperation.

But, not Obama. Once again he could not restrain himself from attacking his opponents. Assuming his most haughty demeanor and punctuating his speech with lengthy pauses intended to convey his utter contempt for those he was speaking about, the President said:

The folks who pushed for the shutdown and threatened default, claimed their actions were needed to get American back on the right track, to make sure we're strong. But, probably nothing has done more damage [hyperbole?] to America's credibility in the world, our standing with other countries, than the spectacle we have seen these past several weeks. It's encouraged our enemies, it's emboldened our competitors, and it's depressed our friends who look to us for steady leadership.

Mr President, what is damaging American credibility in the world and our standing with other countries, what is encouraging our enemies and emboldening our competitors is the fact that Federal spending is completely out of control. Soon America will be buried under a mountain of debt that we will have no hope of repaying and that will cripple our country. And when Tea Party Republicans take a principled stand to oppose this reckless behavior, they are greeted by you with nothing but intransigence and attack. This is hardly the right way to kick off the next round of negotiations.

I have already written (here and here) about how President Obama never seems to be able to deliver a speech without taking the low road and attacking Republicans in the most petty, divisive, and mean-spirited way. Today's press conference was just the latest example.

Kennedy was killed not by communist Oswald, but by climate of hate created by Dallas' sick, right-wing bigots

Now even the Wall Street Journal is repeating the outrageous slander that the city of Dallas was somehow responsible for President Kennedy's assassination. An article, written by Ann Zimmerman and appearing in today's WSJ, states:

After John F. Kennedy was assassinated here on Nov. 22, 1963, it took years for this metropolis to shake its stigma as the "City of Hate," with many people blaming its virulent anti-Kennedy sentiment as the cause. ... Dallas's image had taken a hit even before the killing, according to historians. An ultraconservative strain in the city, led by Edwin Walker, a former Army major general with anticommunist and segregationist views, had criticized the Democrat Kennedy as soft on Communism.

Of course, Ms Zimmerman is forced to acknowledge the inconvenient fact that Lee Harvey Oswald, the person who actually killed Kennedy, was a "left-wing extremist" (actually, a communist; see below):

In the end, the Warren Commission concluded that Kennedy met his fate at the hands of a left-wing extremist, Lee Harvey Oswald. Nonetheless, many blamed Dallas for the combustible climate that led to the assassination.

George Will has already pointed out the sheer stupidity of this departure from fact:

The transformation of a murder by a marginal man into a killing by a sick culture began instantly — before Kennedy was buried. The afternoon of the assassination, Chief Justice Earl Warren ascribed Kennedy’s “martyrdom” to “the hatred and bitterness that has been injected into the life of our nation by bigots.” The next day, James Reston, the New York Times luminary, wrote in a front-page story that Kennedy was a victim of a “streak of violence in the American character,” noting especially “the violence of the extremists on the right.” Never mind that adjacent to Reston’s article was a Times report on Oswald’s Communist convictions and associations.

Wikipedia's biography of Oswald details his well-known communist sympathies and his attempt to renounce his US citizenship and defect to the Soviet Union.

In October 1959, just before turning 20, Oswald traveled to the Soviet Union. ... Almost immediately after arriving, Oswald told his Intourist guide of his desire to become a Soviet citizen. When asked why by the various Soviet officials he encountered—all of whom, by Oswald's account, found his wish incomprehensible—he said that he was a communist. ... According to Oswald, he met with four more Soviet officials ..., who asked if he wanted to return to the United States; he insisted to them that he wanted to live in the Soviet Union as a Soviet national. ... On October 31, Oswald appeared at the United States embassy in Moscow, declaring a desire to renounce his U.S. citizenship. "I have made up my mind," he said; "I'm through." ... The Associated Press story of the defection of a U.S. Marine to the Soviet Union was reported on the front pages of some newspapers in 1959.

The Warren Commission concluded that on April 10, 1963 [after returning from the Soviet Union], Oswald attempted to kill retired U.S. Major General Edwin Walker, firing his rifle at Walker through a window, from less than 100 feet (30 m) away, as Walker sat at a desk in his home; the bullet struck the window-frame and Walker's only injury was bullet fragments to the forearm. General Walker was an outspoken anti-communist, segregationist, and member of the John Birch Society. ...Marina Oswald testified that her husband told her that he traveled by bus to General Walker's house and shot at Walker with his rifle. She said that Oswald considered Walker to be the leader of a "fascist organization."

Yes, this is the same Edwin Walker that Ms Zimmerman suggests was responsible for stirring up the "ultraconservative strain" in Dallas that led to Kennedy's assassination.

So, let's examine Ms Zimmerman's twisted logic. Lee Oswald was a communist attempting to kill anti-communists. John Kennedy can certainly be described in some respects as ardently anti-communist (remember the Cuban missile crisis). These right-wing, anti-communists were responsible for stirring up the climate of hate that led to the assassination of Kennedy. So, President Kennedy, an ardent anti-communist, was responsible for stirring up the climate of hate that resulted in his own assassination. Absurd!

Ms Zimmerman's article is simply the latest example of how the liberal left and the mainstream media always attempt to pin the blame for all acts of violence on the supposedly sick souls of right-wing extremists, clinging to their guns and religion. Up until now, the best example of this genre was Paul Krugman's insane column blaming the shooting of Arizona Congresswoman Gabby Giffords not on the actions of a demented lunatic, but on the climate of political hatred fomented by right-wing extremists. But now, I fear that Ms Zimmerman has surpassed even Mr Krugman's ravings.

Defining profligacy down. Whatever!

The Continuing Appropriations Act, 2014 (CAA) is a defeat not for Tea Party Republicans, but for all Americans, particularly young ones.

The CAA does not raise the debt ceiling by some fixed amount, but simply suspends enforcement of that ceiling altogether until February 8, 2014, at which point the limit will be reinstated at the level of debt that has been incurred by then. This is the budgeting equivalent of throwing up one's hands and sighing "Whatever!" This same procedure of "suspension" was adopted in the No Budget, No Pay Act passed when we ran up against the debt ceiling earlier this year.

(Here's an analogy. Imagine that you have a credit card with a credit limit of $5000 and you have maxed it out. Instead of lifting the credit limit by some fixed amount (say, by $1000 to $6000), your bank waives the credit limit altogether until next February and says that your credit limit at that time will be reinstated at whatever amount you have spent up until then. Gee, do you think that might be an incentive to spend as much as possible between now and next February? I can guarantee you that all over Washington meetings are being held to figure out how to accelerate as much spending as possible into the period before the February deadline.)

These two pieces of legislation taken together represent the abject failure of our government even to try to rein in our profligate deficit spending (as I pointed out in a previous blog post, the federal deficit in FY2013 will be about $1T; that is, our federal government is spending about 1/3 more than it is taking in).

Such utter irresponsibility is given the name of "moderation" and "willingness to compromise" and the Tea Party Republicans who opposed it are labeled "extremists" and terrorists," even by members of their own party. Although we continue to head down the road to a Greece-like catastrophe, the news media celebrate the fact that the "crazies" have been defeated and the government once more can open the spigots of spending for a few more months.

This is how far we have defined profligacy down. How young people are not outraged by this fiscal debauchery (which they will have to pay for) is beyond my ability to understand.

Felix Salmon: The default has already begun

In a piece entitled The Default Has Already Begun, Felix Salmon makes the following comments:

The best way to look at this, I think, is that there's a spectrum of default severities. At one end, you have the outright repudiation of sovereign debt, a la Ecuador in 2008; at the other end, you have the sequester, which involves telling a large number of government employees that the resources which were promised to them will not, in fact, arrive. Both of them involve the government going back on its promises, but some promises are far more binding, and far more important, than others.

Right now, with the shutdown, we've already reached the point at which the government is breaking very important promises indeed: we promised to pay hundreds of thousands of government employees a certain amount on certain dates, in return for their honest work. We have broken that promise. Indeed, by Treasury's own definition, it's reasonable to say that we have already defaulted: surely, by any sensible conception, the salaries of government employees constitute "legal obligations of the US."

I guess I should conclude from Salmon's comments that every time a company lays off some of its employees (and federal employees are experiencing not layoffs, but rather furloughs), then that company is "in default."

The bubble that government employees live in is truly amazing. Awww, the poor federal workers, waaaaah!!! Do they not understand the basic concept of layoffs? Out here in Silicon Valley where I work, layoffs are a fact of life: when your company's expenses are greater than its revenues, it may decide to lay people off. When I was working for Nielsen, I came in one Friday in the darkest days of 2008 and discovered that 2 out of every 3 people in my office had been laid off. My friend Sebastien, a highly qualified senior software engineer, was one of them. Sebastien didn't whine about "resources promised to him not arriving." Instead, he packed up and left. The next week he was out pounding the pavement looking for a new job. Within a couple of weeks, he had found a job that was better than the one he'd had at Nielsen. This is the flexibility, agility, and the resiliency of workers in the high tech sector. Compare this to the ossified, sclerotic, inflexible world of the government worker.

Last week I quoted Treasury Secretary Jack Lew's astonishing statement that "[the payment system of the US government] was not designed to be turned off selectively." Now, Felix Salmon makes the astounding claim that it is "a default" for the government even to furlough workers. The government cannot stop spending or furlough workers when it is spending more money than it is taking in?!? What world do these people live in?

Krugman: Covered California is working fine

Paul Krugman said today:

They messed up the software for the federal version of it. But we have the exchanges working just fine in many states, which means it's fixable, and it will be fixed. California has a perfectly well-functioning exchange, which it's running itself. If you can do it for 30 million people, you can do it for 300 million. So, Obamacare will be working fine.

I just visited Covered California. This is the message I got:

We're sorry for the inconvenience. We are performing a scheduled maintenance of the Covered California website from Saturday night, October 12th, at 8:00 pm until Monday morning at 3:00 am.

Politico reports: Tech experts wary of more Obamacare "glitches"

See here. Among the quotes:

The glitch-plagued Obamacare rollout might be just the beginning: A series of potential technology problems could thwart the Obama administration’s goal of getting 7 million people enrolled in the new exchanges by the end of March. ... Washington and Lee University School of Law professor Tim Jost, a staunch Obamacare backer and a consumer advocate at the National Association of Insurance Commissioners, said the rollout has been “very disappointing.”

But, as I wrote in an earlier post, the "glitches" are the least of Obamacare's worries. If the government can't even get the software for the website running bug-free, then how well can they have designed the overall business logic of the system?

The Obama Administration is quickly going to be forced to acknowledge that the problems with the system are more than mere "glitches." VC Wannabe Barack Obama will be revealed to know as much about software systems as he does about renewable energy (remember Solyndra).

BTW: Within a couple of weeks, as the system quickly grinds to a halt, the proposal to delay/defund Obamacare will make more and more sense and people like Ted Cruz will be seen to have made a prescient and savvy bet against Obamacare.

The war between the SIP's and the YAF's

At the heart of Obamacare is the basic misconception that you can give a significant part of the population a raw deal and they will not do anything about it.

The people with the greatest incentives to enroll in Obamacare are, naturally, those who are sickest and those who are poorest -- let's call them the SIP's. The sick will have an incentive to enroll because they have pre-existing conditions. The poor will have an incentive to enroll because they will receive premium support.

Hence, the mandate. That is, the only way Obamacare can work is if the young and affluent -- let's call them the YAF's -- also are forced to enroll. Since the YAF's by definition have no pre-existing conditions and will not receive premium support, the premiums paid by them under Obamacare will be far in excess of the premiums they would have paid without Obamacare. And the excess paid in by the YAF's, so the argument goes, will cover the costs of the SIP's.

But, how is this a good deal for the YAF's? After all, they are healthy, so their only need is for insurance against catastrophic illness or injury. Well, they are being told, their reward will come decades later in life when they are no longer YAF's, but have themselves become SIP's. The problem is that this reward is being promised to them at a date decades in the future by a government that cannot even meet the liabilities it already has on its books for other social programs, such as Social Security and Medicare. So, how can these YAF's believe that the government will deliver on this additional promise?

When the YAF's realize what a raw deal they are getting, they will put an end to Obamacare.

"Glitches" are least of Obamacare's worries

Ezra Klein has posted to his "Wonkbook" a piece entitled Obamacare's Website is really bad. Klein writes:

[A] few screens after that, the site crashed on me entirely. ... [And yet, t]he fact that the site is buckling under the traffic is not a reason to defund or delay the law. Indeed, it's perverse to use the overwhelming demand as a reason to take the law away from the people who so clearly need it. And even if it takes a few more days or even weeks until the site is working as well as it should be, the open enrollment period still has another five months and 27 days (or so) to run. These are fixable, not fatal, problems.

The fact that Klein thinks the technical problems with the Obamacare web site can be remedied in "a few more days or weeks" (heck, just spin up a few more servers to handle the excess traffic) is an indication that he has no understanding whatsoever of enterprise software development. (BTW, Ezra, just exactly how do you define the SLA "working as well as it should be?")

Even worse, my intuition tells me that the "glitches" (new favorite Democrat buzzword) encountered so far in the website will be the least of Obamacare's worries. What I really worry about is the "business model" the system is based on. How well has this business model been defined? Is it really a model for producing a net benefit for the American people? We are being asked to believe not only that the meaning of the 2000-plus pages of the Affordable Care Act is perspicuous and void of any ambiguity, but also that all these pages have been translated without misinterpretation into specific software business rules that will improve the health care and reduce the health costs of all Americans.

Klein seems to fail to understand the basic fact that, when customers click on buttons in the Obamacare portal, backend business processes will be set in motion. It is one thing for software to capture data in a form, send that data over a wire, and store that data as a transaction in a database. It is quite another thing for the backend business processes to operate in such a way that all the transactions taken together aggregate and add up to a net benefit.

Contrast Obamacare with Amazon, for example. Every quarter, Amazon files financial statements with the SEC. All the various transactions initiated through Amazon's website are rolled up into an income statement, and Amazon's financial status is summarized in a balance sheet. These financial statements are created in accordance with strict accounting rules defined by FASB and under the supervision of an independent accounting firm. Thus, at the end of every quarter, we have a reasonably good idea of whether Amazon made a profit in the preceding quarter and whether its financial health is good. In other words, we know whether Amazon's business processes for that quarter have resulted in a net benefit for Amazon's stockholders.

How will the net benefit (if any) from Obamacare be measured? What accounting methodology is going to be applied to all the transactions under Obamacare to determine if the benefits of the system outweigh the costs and if the system is having a positive impact on America's balance sheet? Will government accounting (contradiction in terms) be employed? Will we encounter the same kind of accounting shenanigans and obfuscations that we grew so accustomed to at Fannie Mae and Freddie Mac? Will the benefits be simply what Mr Obama and other Democratic politicians assert they are (just as Barney Frank asserted to the bitter end that Fannie Mae was solvent)? Or will there be any hard and impartial measurement, any metrics? Furthermore, if there are metrics and these metrics show that the system is operating "at a loss," will the Democrats have the political courage and integrity to acknowledge the system's shortcomings and fix them? Or will a malfunctioning health care system become simply another example of a government program run amok, rolling up huge costs, further inflating American debt, but preserved for the benefit of various politicians and special interest groups?

Given the "glitches" we have seen in the rollout of the various exchanges, I am not confident that the underlying business processes have been given anywhere near the amount of thought that they should have been given. My experience as a software engineer tells me that it's fairly easy to create a UI for a web app that gives the illusion that something beneficial is happening in the backend. Yes, the system can display a message that says: "Congratulations! You have successfully enrolled in Obamacare!" But, what should really concern us is whether all the various clicks and user actions, once the exceptions and error messages begin to die down, will prove to add up to a real, objectively measurable net benefit for the American people.

Lew: Government spending cannot be turned off

As reported by McClatchy:

Testifying before the Senate Finance Committee during an unusual 8 a.m. hearing, Treasury Secretary Jacob Lew all but ruled out the chances that the Obama administration would try to prioritize who gets paid in the event that next week's debt ceiling deadline passes. ... Asked about prioritizing payments due so that bondholders get paid, and so do Social Security recipients, military families and so on, Lew suggested it couldn't be done. "This system was not designed to be turned off selectively," he said.

This system is not designed to be turned off selectively??? What the hell does that mean? Can we never stop the outflow of money from the federal government if we choose to?

Once again it needs to be pointed out that families and businesses "selectively" stop spending money if they don't have it. The assertion that the federal government cannot stop spending is simply preposterous on its face. If the federal government's payment systems are so inflexible, then they have been designed about as effectively as the Obamacare exchanges.

McClatchy goes on:

Lew repeatedly warned that it's not just a matter of paying interest to bondholders to prevent a default on U.S. government bonds, but rather the hundreds of millions of dollars of bonds that roll over in coming weeks. These bonds are used as collateral in all sorts of financial transactions and if financial markets decide they won't trade then until the government is funded it could cause financial markets to seize up.

This is "Chicken Little" fear mongering of the worst kind. The idea that the market in U.S. government bonds, the deepest, most liquid market in the world, will freeze up is also completely preposterous.

Facts about the debt limit

Contrary to all the lies coming out of the White House and the liberal mainstream media, a refusal by House Republicans to raise the debt limit is not the same thing as forcing the United States to default on its debt. As reported in the Washington Post, Moody's Investors Service has published a memo stating:

We believe the government would continue to pay interest and principal on its debt even in the event that the debt limit is not raised, leaving its creditworthiness intact. The debt limit restricts government expenditures to the amount of its incoming revenues; it does not prohibit the government from servicing its debt. There is no direct connection between the debt limit (actually the exhaustion of the Treasury’s extraordinary measures to raise funds) and a default. [emphasis added]

The federal government reports the national budget figures as follows (see here and here):

1. In FY2013, the federal government will receive revenues of approximately $2.7T.
2. In FY2013, the federal government will have expenditures of approximately $3.7T.
3. IN FY2013, the federal government will have interest expense of approximately $416M.

Thus, although items 1 and 2 taken together reveal that the federal government will run a deficit of approximately $1T in FY2013, nevertheless, items 1 and 3 taken together demonstrate clearly that the government has approximately 9x the revenue coming in as is required to pay interest on our debt. So, there is, as Moody's correctly points out, absolutely no need to default. The only thing that can possibly cause a default is if President Obama makes a deliberate and premeditated decision not to service the debt, but opts instead to continue spending incoming revenues on bloated government programs.

It is all so simple. There is no need for the government to stop making payments on its debt (which, yes, would have catastrophic consequences for global financial markets). Rather, the government simply needs to figure out how to stop spending the extra $1T a year more than it is taking in so that it does not need to borrow any more. Families and businesses in the private sector face this challenge every day. If more money is going out than is coming in, then it's time to prioritize, tighten the belt, and figure out how to trim the spending.

Furthermore, Barack Obama himself, when he was a senator, opposed raising the debt limit. Said Senator Obama:

The fact that we are here today to debate raising America’s debt limit is a sign of leadership failure. It is a sign that the US Government cannot pay its own bills. It is a sign that we now depend on ongoing financial assistance from foreign countries to finance our Government’s reckless fiscal policies. ...Increasing America’s debt weakens us domestically and internationally. Leadership means that 'the buck stops here'. Instead, Washington is shifting the burden of bad choices today onto the backs of our children and grandchildren. America has a debt problem and a failure of leadership. Americans deserve better.

At the time, Senator Obama was urging Congress not to tolerate an increase that would bring the debt ceiling to $9 trillion. The current debt ceiling, which President Obama wants raised, now stands at $16.7 trillion, or 85% higher than it was when Senator Obama said that raising it would represent a failure of leadership.

So, the facts may be summarized as follows:

1. not raising the debt ceiling does not entail a default on our debt,
2. we are running a deficit of $1T a year,
3. Obama himself opposed raising the debt ceiling 7 years ago,
4. the debt ceiling is now 85% higher than when Senator Obama opposed it.

Given these facts, it would be unconscionable for the House Republicans to do anything else than to stick to their guns and demand that the President avoid a debt crisis by cutting back on bloated Federal spending.