You regular ole Americans just aren’t cynical enough. Let’s tune into this week’s episode, “Harry & the States.”

We all know now that when Harry met Mary, Louisiana picked up a hot $300 million. (What would a real operator -- President Clinton -- do with just $300? Three trailer parks.)

Do the other States come out OK? In the short run, yes. But not so far down the road, the road...well, it’s not a road anymore, it’s a cliff.

The House-passed health care bill grants the states an extension of additional extra federal assistance (begun in the Stimulus bill) until June of 2011. The amount is a sizeable $23.5 billion.

It’s like a Countrywide Teaser Rate! According to the top federal lobbyist for the National Council of State Legislators (conservative state legislators), it’s a “bribe.” Whatever you call it, the states are lusting for it now. Once it expires, though, the States get “the cliff.”

Remember Lou Cannon? No, not the fat guy TV detective. The fat guy reporter of Reagan’s presidency. Here’s his report:

"This bill...makes Medicaid the foundation of our health care system, and they're under-funding the foundation," said Joy Johnson Wilson, NCSL Washington lobbyist, in a conference call with state lawmakers. Viewed in this light, the gift of $23.5 billion seems more like a bribe to win support from state legislators for the House bill. It's a tactic that might work, for the current plight of the states is so desperate that legislators may be willing to endure long-term costs that will occur when many of them are no longer in office in order to obtain short-term relief."

And later in the piece:

Without the extension voted by the House, this formula would revert to the old one next year, undoubtedly triggering another round of fiscal crises and budget cuts. Section 1749 would extend the added federal share of Medicaid until June 2011. While this is welcome, a better solution would be to phase out the added federal assistance. As Raymond Scheppach, executive director of the National Governors Association and an economist, told The Washington Post, the federal aid ends too abruptly. "It's sort of like a cliff," he said. "...The cliff is just moved back."

In the Senate, Harry sees Nancy’s 18-month extension of additional federal support to the states and raises it to 100% federal funding for the first 3 years:

Now, in the bill unveiled this week, Reid is offering 100-percent funding for Medicaid expansion in all states for the first three years of the program.

So what do we could call this Act? A Teaser Rate, a Bribe or a Cliff?

We could call it a “Terrorist” Act.

After all, it is a man-caused disaster. We want to be inclusive. We ought to be in tune with the words of the Obama Administration.

It is indeed a man-caused disaster to set up the state governments to bear a cost they cannot bear without breaking their economies. Harry Reid famously flipped off George W. Bush as “incompetent” and as “a loser.”

So what do we call Harry, the author of a plan to hurl the federal budget and all 50 states up against the edge of a financial cliff three years down the road?

Yeah, it’s not hard to figure out that Harry thinks he can bribe his monstrous healthcare bill into law late this year or, more likely, early next year. Devious, but not incompetent. With his own campaign flush with $25 million cash-on-hand (and union support) he believes he can muscle through his own reelection in November of 2010. Yeah, he might be a loser after all.

Let’s go back in time, once again to Louisiana. Harry said:

“Let’s be clear about what Katrina was: a failure of leadership. The day before the Hurricane made landfall, President Bush received a briefing on the enormity of the storm. But when flood waters poured into America’s Gulf Coast, America’s government sat on its hands.”

OK, let’s stay with the Katrina metaphor. A federal judge recently put the blame on the Army Corps of Engineers for decades of "monumental negligence" in canal design and maintenance.

What the media misses is that the Congress explicitly directs the Corps of Engineers. They can’t and don’t do anything except comply with very specific legislation Congress enacts to control their every person and penny. The Corps is what the jaded in Washington call a “bitch agency.” Special interests of all sorts and the Louisiana delegation (sorry for the redundancy) had total control over these canals. Who had zero control? Whomever happened to be sitting in the Oval Office decades later when a Cat 5 storm hit.

Earth to Harry: George W. Bush didn’t design the faulty canals in and around New Orleans. Congress did.

Paying attention, here, Harry? You are the Congress, the bill is the Corps and the situation you are creating will be a Katrina-size Cat 5 storm sure to hit our nation’s financial stability.

You say Bush received a briefing on Katrina a day before the storm but ignored it? (The day before?)

You’ve received many briefings over the last six months by the CBO, not on how best to control healthcare costs, but on how to to design the canals so they’d fail.

I mean, design the bill so it sneaks past the auditors.

You designed the bill to commence its collection of taxes and fees four years prior to its first expenditure to manipulate the CBO’s ten-year budget assessment window. That’s fraud, dude.

No, Harry, you aren’t incompetent.

You’re a friggin’ terrorist.

If you simply paid people not to work, shrinking the labor usage by that much might cost about $3 trillion.

It can be a $3 trillion task because people who would not work anyway may take you up on your offer not to work. If you could target your bribes, you would want to target them to the weakest employment relationships -- those for which supply is closest to demand. With very well chosen targets, you could make a recession like this for a mere $100 billion.

But do not expect that you could target so well in practice, because it's difficult to know which employment relationships are the weakest, and once you started paying people for what appeared to you to be weak employment relationships, others might put on the appearance. But at least you could try to target the types of people who are generally expected to be working soon, such as persons searching for jobs (interestingly, that's what unemployment insurance does).

All together, you would be hard pressed to make a recession like this for less than $1 trillion...If you took the combination of mortgage modification, UI [unemployment insurance], big parts of the "stimulus" law, and other anti-employment policies, we probably are looking at over $1 trillion worth of spending that encourages people to have lower labor incomes.

Before deciding a firm is engaged in risky activity, [the] Kanjorski [Amendment] would require regulators to consider factors such as a firm's leverage, its ties with other companies, its role as a lender to households, businesses and governments, and the size and nature of a firm's liabilities.

"The idea of being too big, of posing systemic risk, that is defined somehow by some bureaucrat," said Don Luskin, chief investment officer of Trend Macrolytics, and a libertarian. "It will become inherently capricious like antitrust law. No one knows when they will run afoul of the law."

The amendment states that in reviewing regulators’ “imposition of a mitigatory action, the court shall rescind or dismiss only those mitigatory actions it finds to be imposed in an arbitrary and capricious manner.”

“There is supposed to be due process, but there is no process at all except that you are screwed,” said Don Luskin, chief investment officer of Trend Macrolytics and a libertarian. “Arbitrary and capricious — that means the regulator needs only to prove that he was duly diligent, that he followed an internal decision-making process, or model. The results of the process can’t be questioned, so long as there was a process and it was followed diligently.”

Posted by Donald L. Luskin at 8:51 AM | link  

My DC-insider friend "Mick Danger" explores this cross-cultural phenomenon.

Why are liberals like vampires?

Because they need daily transfusions of someone else’s blood?

Nah, because the whole concept of vampires only makes sense as a work of fiction.

Here’s today’s blood-sucking edition courtesy of the New York Times:

You see, we borrowed a T from China to fund the Stimulus, to be repaid by your kids so that the unionized employees of the states and local governments could have their jobs “saved.” Plus, we needed to pay for a whole bunch of other crap dreamed up by Nancy & Co. We were expecting the actual economy would turn around on its own — because those whip-smart economists told us so — and we figured we could use the crisis to feed our special interests groups and still take credit for the turnaround. Damn. Now, even Joe Biden knows it ain’t working to get people working.

Quick, call the Times and have them dream up a new spin! Hence those cool charts with made-up numbers.

Here are real numbers. In the real world, we have real test cases. Take Michigan, a state completely lobotomized by liberals over the past 25 years. A once glorious place to do business, Michigan now suffers with a U-6 of 20.9%. U-6 measures the “real” unemployment rate which includes the given up, the un- and the under-employed.

Update... Reader William Heasley notes,

Mick Danger has uncovered a cultural phenomena. There is no doubt. But it might be more insidious than even Mick has uncovered. Attached is rare photo of Barney and Nancy negotiating legislation.

Posted by Donald L. Luskin at 8:43 AM | link  

Posted by Donald L. Luskin at 8:36 AM | link  

Posted by Donald L. Luskin at 8:32 AM | link  

Posted by Donald L. Luskin at 2:30 AM | link