In Part 1 of this series, I wrote about the role of the banking industry in our government and how, via the lobbying industry, they were able to influence our government to create or remove laws regarding the banking industry. You might call it a buyout of our government. One of the rather unique features of the banking business is that it doesn’t create a tangible product, like washing machines or automobiles. It just loans money to you and then its meter starts running, and you have to pay back the money plus an additional amount – and that additional amount can be enormous. For example, if you take out a $100,000 mortgage on a house at 5% interest for 30 years, by the time you have paid back the bank you will have paid $193,255, almost twice the purchase price of the house. If you have the misfortune of having an adjustable rate mortgage you might find your total repayment to be a lot more. Which is one of the reasons we are now in a worldwide recession.
There is another financial industry that is a close cousin to the banking industry. It also produces no tangible product, but unlike the banking industry, where if all goes well you eventually wind up owning your own house, in this other financial industry, if all goes well you wind up with no return on your investment at all, i.e. you get nothing. I am, of course, talking about the insurance industry. Little more than legalized gambling on the probability of personal disasters, the insurance industry is one of the big money-making businesses in our country, and if we care to recall the activities of AIG and credit default swaps, it is also one of the leading causes of the worldwide recession too.
Like the banks, the insurance industry is in the business of taking more money in than it gives out. Today we have insurance for life, health, accidents, fire, hurricanes, you name it. You can get insurance for just about anything. If you are an average American you will never collect as much money in claims as you pay in premiums. It has to be that way, otherwise the insurance companies would lose money – and that isn’t going to happen. Like the state lottery, your chances of winning when you buy insurance are small – and the insurance companies want to make your chances ever smaller.
Which brings us to the topic of health insurance. Until Barack Obama became president the insurance companies were pretty content with their system of health insurance, i.e. don’t insure high risk people and set the cost of insurance high enough so that even when the expected number of people have legitimate claims there will still be enough money left over for a fat profit.
Enter President Obama. Without waiting to hear the details of his plans for health care reform the insurance companies began their anti-reform campaign. Why? Were they worried that the American consumer would be hurt by reform? Were they concerned that it wouldn’t be fair to some citizens? Were they worried that some people might be left out? Were they worried that our medical system would be inundated with millions of new patients when everyone had insurance and therefore the quality of healthcare would deteriorate? No. They were worried about losing money, that’s all. They had a good thing going by only selling insurance to people who would probably never use it. That last thing they want to do is to sell insurance to someone who is going to run up a big medical bill. So, they had to take action.
The health insurance, and entire health care industry, began a massive spending campaign on lobbying Congress – much larger than their usual massive campaigns. In the first quarter of 2009 this group of businesses spent over $35, 000,000 lobbying members of Congress. Ummm, let’s see now… there are 100 Senators and 435 Representatives…so 35 million divided by 535 is, uh, $65,420.56 per person. Not bad. Of course that’s just in the first quarter too. Who knows what the total amount will be by the time the voting is done. And, naturally, the money is not spread around evenly. You can bet there is strategy involved. There are certain key Senators and Congressmen whose votes might make the difference. It’s a great system we have. If you own a business, you send your money in to Congress and then you tell them how to vote so that your business makes a fat profit. The fact that by so voting a Congressman might actually harm rather than help his/her constituents is just not part of the equation for many members of Congress.
The direct link from wealthy owners of major companies to our government representatives via lobbyists is well known. The remarkable thing is that the American people do not seem to be very upset about our system. Of course, when things don’t turn out good in the end the people always vote out the bad Congressmen and even Presidents, but these people are just replaced by a new and eager crop of recruits, eager to participate in the same process – i.e. pocketing money from lobbyists. We have the best government that money can buy.
That of course is the problem. It is the wealthy who have the money to spend in this way, and it is the wealthy who hire the lobbyists, and it is the wealthy who then tell our elected representatives how to vote. In Part 1 of this series I showed how this invisible hand of the wealthy directly led to the failure of our banking system and the worldwide economic meltdown. Now we have the same process occurring in one part of our insurance industry – namely the health insurance industry – and the result could well be as catastrophic, because if health insurance reform doesn’t happen the cost of insurance will continue to escalate while the insurance companies continue to find reasons to disqualify treatment for certain diseases, even for people who have paid their premiums. This is what the insurance companies want – maximum profits and minimum losses. Our government should be protecting us from these vultures, but how can that happen when the elected members of our government are receiving millions and millions of dollars from them?
The invisible hand of the wealthy isn’t really all that invisible, but it is very powerful because it pervades the entire economy and budget of the country. We have already seen how the banking and the insurance industry exerts its control over our government. However, the wealthy are involved in other industries too. We’ll look at that in Part 3 of this series.
Hi Rich! 20 years ago I made that same comment at a family discussion that the goverment was the best money could buy. In college we were learning about political theory and I was hearing on the news about lobbying and political favors. My first thought was “Are we talking about the same government?”. Learning about Keynes, Jefferson and all those learned men just seemed like something distant after hearing current events.