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Chronicle of the Conspiracy
Join us as we discover, document, expose and challenge the bad people, the bad institutions and the bad ideas that stand in the way of wealth creation -- and show you how to fight back!

Friday, August 21, 2009

WHOLE FOODS-STYLE HEALTH CARE   Let the hate-mail begin. Here's my column today for SmartMoney.com:
I've written several columns over the last couple months about the attempts by Obama administration and the Democratic-controlled Congress to impose nationalized health-care insurance -- so-called "Obamacare." I've said1 it's bad for corporate profits, bad for the stock market, bad for the economy -- and even bad for people seeking quality health care.

I've never had such a huge volume of reader response to anything I've written here, and never so polarized. To half of you, I'm a messiah. To the other half, I'm a pariah. So I was glad to find support in this perilous position from one of my favorite CEOs, John Mackey, who runs one of my favorite companies: Whole Foods Market.

Before I get into how Mackey and Whole Foods play into the Obamacare debate, let me just say a few words about this wonderful company. Back in 1980, when Whole Foods started, if anyone had asked the question, "Does the world really need another chain of supermarkets?" the answer would certainly have been "no." But from a single store in Austin, Texas, Whole Foods now has more than 280 stores in the United States, Canada and the United Kingdom.

They've done it by catching the new wave of the way people want to eat and shop now. They want all the amenities of a supermarket -- variety, low prices, large inventories. But they want higher-quality food -- healthier, lighter, organic, in an environment that doesn't blare commercialism and dehumanization.

Whole Foods' stock has pretty much risen and fallen with the market over the last several years. In the recession, the company has had to pare back growth plans, and the widespread belief that consumers are going to have to scrimp and save for a while has led investors to question whether a "high-end" grocery store can thrive.

I think the stock is cheap. The recession is over, and Whole Foods will surely start expanding again. And it's a mistake to think of it as a "high-end" retailer. One of the things I love about it is that its prices are so competitive -- especially adjusted for the higher-quality level, on average. As confidence in the economy and the U.S. consumer comes back, I think Whole Foods could have a nice run.

But back to the matter of Obamacare. Another reason Whole Foods became a success is the way CEO Mackey runs the business. Here, too, Whole Foods caught a new wave. Whole Foods has always had a philosophy of treating its employees as intelligent human beings, empowering them to made decisions not normally delegated to people who might otherwise be seen as unskilled labor, and giving them significant incentives to improve their performance and productivity. Part of his formula for treating employees well has been the company's approach to health-care benefits.

He talked about it in a commentary in the Wall Street Journal last week. Here's the essence of it:

Whole Foods Market pays 100% of the premiums for all our team members …for our high-deductible health-insurance plan. We also provide up to $1,800 per year in additional health-care dollars through deposits into employees' Personal Wellness Accounts to spend as they choose on their own health and wellness.
And then later on:
Our team members therefore spend their own health-care dollars until the annual deductible is covered (about $2,500) and the insurance plan kicks in. This creates incentives to spend the first $2,500 more carefully.
Do you see the essence of what he has done? First, by offering high-deductible insurance, he has returned the whole concept of health insurance back to what it should have been all along -- a safety net against the really bad health catastrophes. Second, by giving employees the funding to pay for their own care when they just get the sniffles, he returns health care to the discipline that all other markets for any other kind of service have to face -- consumers making careful decisions about how to spend their own money.

Mackey went on in his commentary to criticize Obamacare as the very opposite of his own plan's aspirations. It emphasizes low-deductible insurance, and positions health care as a "right," like the right to free speech, rather than as something that people have to earn and make careful decisions about. Government would end up making the decisions -- and that's just a polite way to say "rationing."

If Whole Foods had to switch over to an Obamacare-style approach, its costs of doing business would rise. And his employees would not be pleased, either, because under his enlightened approach to management he's already crafted his company's health benefits to reflect his employees' stated wishes. As he puts it, "Our plan's costs are much lower than typical health insurance, while providing a very high degree of worker satisfaction."

Labor is the largest cost for most companies. Benefits are the fastest-growing component of labor costs. And health-care insurance is the fastest-growing component of benefits. If Obamacare is enacted, labor costs are only going to go higher -- which means that corporate profits will have to go lower, unless companies pass the costs on to consumers.

Any company CEO -- and all the more so, people who run small businesses where labor costs are high and profit margins are already slim -- needs to be concerned about this. But Mackey is coming from another place, as well.

He's pointing out the very good news that corporate profits and providing generous health benefits don't need to be at odds. He's already found the way -- he just needs to keep government from messing it up for him and his workers.

And yet Mackey has been demonized for expressing these views in print. Left-leaning bloggers have tried to organize a boycott of Whole Foods to punish Mackey. One prominent blogger even made the absurd statement that "very few businesses go as far as Whole Foods in marketing their products specifically as part of a quasi-politicized left-wing lifestyle and few CEOs go as far as Mackey in public advocacy of political views that are only tangentially related to his business."

Oh, come on. There's nothing left-wing about eating healthy. And health-care costs and employee satisfaction are certainly not tangential concerns for a corporate CEO. But do you see now why I keep saying that today's political environment is such a threat to business? If a CEO can't reasonably disagree with President Obama and propose his own worthy alternatives, his political opponents retaliate by trying to destroy his company. How come they think that health insurance is a right, but free speech is not?

And I think this has a lot to do with why stocks have rallied 50% from the March lows -- because that threat hasn't materialized as strongly as was initially feared. Think about it. We have a popular president. A Congress strongly dominated by Democrats. And in health care, a popular issue. And yet it seems they can't get it done.

If guys like John Mackey can keep taking the heat, and keep fighting the good fight, maybe this economy and this stock market have a chance after all.

Posted by Donald L. Luskin at 12:35 PM | link  

ARE WE RUNNING OUT OF RICH PEOPLE TO ROB?   From my DC-insider friend "Mick Danger":
Say you had a business plan to sell hyper expensive watches and other frivolous jewelry items such as those advertised in the Sunday New York Times Magazine.

Or, alternatively, say you are the Times Magazine and you need the advertising revenue derived from sellers of hyper expensive watches to continue, as far as time exists.

Or, last, say you are President and you’re banking on taxing that top 1% to pay for all those promises you sprinkled to the people on your stroll into the oval office.

Then, in any of these three imaginations, you’d be rattled by this Times story:

...economists say — and data is beginning to show — that a significant change may in fact be under way. The rich, as a group, are no longer getting richer. Over the last two years, they have become poorer. And many may not return to their old levels of wealth and income anytime soon.

For every investment banker whose pay has recovered to its prerecession levels, there are several who have lost their jobs — as well as many wealthy investors who have lost millions. As a result, economists and other analysts say, a 30-year period in which the super-rich became both wealthier and more numerous may now be ending.

Note, especially, the very last chart on the number of people with “investible assets over one million,” based on data through 2007 so it does “not reflect the current downturn.”

Golly, Barack, you seem to be running out (& running off) the very people you most want to tax. Maybe you can hit some up while on vacation. Better yet, go downscale, and buy yourself a beer and a hat.


Posted by Donald L. Luskin at 8:16 AM | link  


Thursday, August 20, 2009

DELONG: THE PROBLEM WITH TPC IS IT'S NOT CORRUPT ENOUGH   The liberal-leaning Tax Policy Center tells Brad DeLong to keep his fat hands off their agenda. TPC's Howard Gleckman writes,
Brad knows his economics very well. Public policy, not so much.

This is how he describes what TPC does:

TPC views its mission as (a) figuring out what the good policies are, (b) building a coalition for those policies from the center--starting with one Democrat and one Republican each of whom wants to be in the position of winning applause for putting policy substance above partisanship--and then building out from there, and (c) arguing that supporting bipartisan initiatives is a good way for legislators to raise their chances of reelection. To say "yes, right now the Democrats are being a lot more sensible than the Republicans" spoils the first step of that, and so is not something that TPC can say and remain true to its mission.
The trouble is, Brad fundamentally misunderstands what we do. ...we don’t do (b) and we don’t do (c). TPC doesn’t build coalitions of any kind—from the center or from anywhere else. We don’t play Noah, bringing pols two-by-two onto our policy ark. We, in fact, have no policy ark.

We gather and analyze data, present it in useful ways and without partisan spin, and tell politicians and the public about the likely consequences of tax policy...

No wonder DeLong doesn't approve of what they do... they tell the truth. Gleckman goes on...
I think Brad’s biggest error is his belief that we are bipartisan. We are not. We are proudly non-partisan. This is not the same thing.

Our reputation for nonpartisanship is critical to what we do. It is why people across the political spectrum acknowledge our estimates are credible even as they sometimes grumble about what the results imply for their own policy views. If we lose that credibility by turning ourselves into DeLongian partisans, the data lose much of their value. Our non-partisanship is what makes TPC so different from an outfit like the Center for American Progress, or the Heritage Foundation. For eight years, CAP was largely a Democratic government in exile—a place where mid-level Democrats could hang out, make connections, play with ideas, and work their way back into power. Not so different from the Heritage Foundation that does the same thing for Republicans. While all of us at TPC have our own personal views about who gets elected (some of which may surprise Brad), we have no institutional view. Really, we don’t.


Posted by Donald L. Luskin at 11:05 PM | link  


Wednesday, August 19, 2009

ROBERT NOVAK, RIP   From the Wall Street Journal:
[Robert Novak] was attracted to LBJ, but over time he became increasingly skeptical of the political class and its habit of accruing power to itself. He was a staunch anti-Communist and became an advocate for supply-side economics. His column probably reached the apex of its influence during the Reagan years, as he chronicled the battles between the Gipper's true believers and the GOP establishment that sought to defeat them. He preferred the believers.

All of this earned Novak the moniker of "conservative" in Washington's taxonomy, but above all he brought to his work a reporter's skepticism about the powerful. This is in contrast to most modern Washington journalists, who have become apologists for the federal government's dominance in American life. Novak was as hard on Republicans who failed to live up to their small-government principles as he was on Democrats who sought to expand the welfare state.


Posted by Donald L. Luskin at 10:09 AM | link  

CONSERVATIVES AND THEIR FILTHY EATING HABITS   Last week we highlighted Whole Foods CEO John Mackey's Journal op-ed explaining his company's approach to health insurance, and opposing the government takeover in Obamacare. Now the Obamabots are boycotting Whole Foods -- God forbid you shop in a store whose CEO you disagree with. Here's my favorite rationale, from one especially brain-dead Leftist blogger:
...very few businesses go as far as Whole Foods in marketing their products specifically as part of a quasi-politicized left-wing lifestyle and few CEOs go as far as Mackey in public advocacy of political views that are only tangentially related to his business.
Huh? Since when is it a "left-wing lifestyle" to eat healthy? Does Matthew Yglasias, the author of this passage, really wish to demonize conservatives to the extent of suggesting that they are bad eaters, and that only liberals can want fresh, organic food? It's one thing to disagree with one's political opponents -- and another to claim that they are somehow incapable of living a good life. And since when is a company's health insurance program -- the subject of Mackey's article -- "only tangentially related to...business"? Isn't it Lefties like Yglasias who are always telling us how critical it is for employers to provide good health benefits?

Posted by Donald L. Luskin at 7:55 AM | link  


Sunday, August 16, 2009

OBAMARAHMA!   As Obamacare goes down the drain (see at left... the online futures markets now put the chance of getting it done this year at about 20%), my DC-insider friend "Mick Danger" has some observations. Maybe this explains why a popular president with a popular initiative and strong control of both houses of Congress can't get a darn thing done.
Pity the witless readers of the New York Times who trust the grayed lady's writers and editors to inform.

Consider this front-pager from Sunday:

The caricature of Mr. [Rahm] Emanuel as a profanity-spewing operative has given way to a more nuanced view: as a profanity-spewing operative with a keen understanding of how to employ power on behalf of a new president with relatively little experience in Washington.
In the opening 'graph of today's episode, the NYT notes that it was Rahm who told Hillary she couldn't have Blumenthal because, well, one asshole per Administration is evidently enough. Who said the print edition of the soap opera was dead?

Now consider that Obama-Rahm-a is about to enter phase two, post-Labor Day, where we will all see exactly how "keen" Rahm's understanding is; not very, I predict. Sometime in late September, Mr. President, you will experience, keenly, that a having a Chief of Staff with a Phucking PhD in Temper Tantrum isn't enough.

Screaming vulgarities at immovable objects (such as Chuck Grassley) doesn't move them, especially not when your only leverage is bent by falling poll numbers.

See, if Max Baucus gets Chuck Grassley to agree, your health care deform bill gets to 60 votes in the Senate. If you agree to that deal, however, your base goes to battle-force Pelosi!

Have fun stormin' the castle!


Posted by Donald L. Luskin at 11:22 PM | link