I was born for the storm, and a calm does not suit me ~ President Andrew Jackson
Politics. Andrew Jackson made it into Keith McCullough’s Early Look last week, a proper and fitting reference for the moment(s) in time in which we find ourselves.
Despite efforts to cancel him in recent years – Jackson owned several hundred slaves who worked his farm on the northeast side of what is today Nashville – Old Hickory’s reputation survives as one of the few American populist leaders.
(If you are ever in Nashville, it is well worth your time to visit The Hermitage.)
Aside from the forcible removal of native Americans from their ancestral lands, a policy unpopular in the east but embraced by Americans in the south and west, Jackson was best known for his tireless war against central bankers.
The object of his ire was the Second Bank of the United States, chartered by James Madison and, by 1829 run by Nicholas Biddle of Philadelphia. Jackson’s concern was the bank's favoritism toward merchants and financiers over those who earned a living through their own efforts, such as farmers and laborers.
Let me know if this all sounds familiar.
The Second Bank of the United States was, what we would call today, a Public-Private Partnership. Private entities could hold an interest in the bank which held public money and serviced the national debt.
The unique arrangement, unconstitutional in Jackson’s mind, was rife with possibilities for monied interests of the east coast to favor certain economic policies over others. Ultimately that central bank’s charter was terminated and for his efforts, Jackson was blamed for the Panic of 1837.
Jackson’s struggle to keep the power of money dispersed was eventually lost in 1913. However, the Federal Reserve Act did not end the natural and uniquely American tension between the monied interests of the coasts and everyone else.
As long as Congress was distracted with high minded concerns of government, like international affairs and interstate commerce, the influence of the bankers Jackson hated so had its limits. When Congress decided – around World War II – that instead it should be in the business of business, Jackson’s animus was vindicated.
Policy. Congress has loved no business more than health care, its ardor made possible by a low-interest rate fueled budget deficit. The well-intentioned Affordable Care Act has produced nearly universal insurance coverage, mostly through the expansion of Medicaid to able-bodied childless adults.
The law, however, was intended to “bend the cost curve” and make health care more affordable. It has done exactly the opposite.
As if you need to be told but see this week’s release from the Congressional Budget Office on the budgetary effects of the Centers for Medicare and Medicaid Innovation.
CMMI was intended as a laboratory to develop ways to make health care delivery better and cheaper. Thus, the story told in 2008, was that it would save the taxpayers’ money and serve to offset the cost of the Medicaid expansion and exchange plan subsidies.
Instead of saving the Medicare Trust Fund $77B, as originally projected in 2010, the program will cost taxpayers about $1.3B. Would a more accurate score from the CBO have mattered? Probably not.
Free money makes for a somnolent world; the calm, as Andrew Jackson would say, that does not suit him.
Power. There are few things to wake up a people quite like the cost of capital. It appears in every form, from higher rents, to groceries to fuel, and it tends to unleash the storm Andrew Jackson so loved.
The interest rate increases of 2004-06 no doubt stimulated the forces that eventually were manifest in the Occupy Wall Street and Tea Party Movements. The 1960s, our last overtly revolutionary period, included successive rate hikes and regrettably premature cuts that eventually culminated in the Volkerism of the 1980s and fiscal reforms of the 1980s.
A higher cost of capital is an environment when choices must be made, some of them deleterious like President Richard Nixon’s price controls; some of them revolutionary, like President Ronald Reagan’s deregulation agenda; and nothing like President Barack Obama’s.
Interestingly, and as Keith points out in his comparison of Elon Musk to Andrew Jackson, challenges like those before the world tend to attract people who love them. After all, what is so noble and deserving of Congress’s attention as regulating UTI detection in nursing homes? Absolutely nothing which explains a lot about who serves in Congress today.
Have a great rest of your weekend.
Need to talk? Visit my Calendly Page: https://calendly.com/eevans_hp
Emily Evans
Managing Director – Health Policy
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