Connect The Dots

John McCain may be confused about the need to keep companies like AIG solvent. But as DevilsTower laid out in his spectacular post, Three Times is Enemy Action, there is no doubt it was the intentional actions of people like John McCain and his economic advisor Phil Gramm over the years that created and nurtured the intricate web of shortsighted stupidity that directly enabled this enormous mess:

This is a bullet deliberately fired into the economy by men willing to exercise their ideology regardless of the cost to taxpayers. John McCain may not have had his finger directly on the trigger, but he was there. He assisted. He not only cheered them on, but claimed until last month that he was also "primarily a deregulator." These were his personal friends and philosophical comrades.

We can’t say exactly what went through McCain's mind and led him to a 180 degree flip flop on the AIG bailout in 24 hours flat. His grasp of the economy is obviously pathetic on a good day, and what little we know of his dominionist sidekick is downright terrifying. But just to illustrate the scope of Republican economic ignorance, if we connect a single faint line of dots, without a bailout, we could start from archconservative economic fundamentalism and end up at a place conservatives certainly never intended. Shall we?

Everyday, workers are injured in on the job accidents covered by worker’s compensation insurance policies. Most of these injuries, while by no means minor, are the kind of injuries the claimant will make a full recovery from with the help of proper medical treatment. We’re talking here about sprains, torn muscles or ligaments, broken bones, repetitive motion injury, that kind of thing. Others might leave the worker slightly disabled or scarred for life, but otherwise able to function at a high enough level to continue working in the same or similar capacity.

But some of those injuries are life changing events. Blindness, loss of limbs, extensive neuromuscular damage, spinal cord injury, severe burns, or serious head injury. Those patients will face a lifetime of hardship and disability requiring highly specialized medical care, in some cases long periods of hospitalization, round the clock home nursing care, occupational therapy, and durable medical equipment like wheelchairs, specially equipped vehicles and homes for the handicapped, and on and on. If the insurance company that issued the policy covering those patients goes down the tubes, who pays the bill?

The claims of insolvent insurance companies generally fall to the respective State Insurance Guarantee Association or SIGA. All states, or at least all the states I checked, have their own version. Each state’s guarantee association is governed by state law and overseen by the state’s insurance commissioner, but most are funded the same way: a portion of every insurance premium collected by the insurer operating in that state is paid into the fund.

It’s not hard to imagine what might happen if too many insurers, or a handful of giants, go belly up. Thousands of new claimants suddenly fall to the SIGA, expenses go through the roof, and revenues into the fund plummet because those insurance companies are no longer collecting premiums.  If the SIGA faces collapse, the shortfall has to be made up, and there’s only a few traditional ways the state can do it. The state can raise the percentage of premium paid, raise taxes, slash spending, or borrow.

If the state doesn’t do enough of one or some combination of the above, and the SIGA itself becomes insolvent, the next stop for those patients might be Medicaid. What conservatives refer to disdainfully as socialized healthcare, most of which have long been under funded thanks to Republicans. The nation as a whole would then have the same miserable options as individual states. And if lawmakers don’t bail out the states, do what ever is needed to take care of those claimants? Well, unless those severely injured people or their families can afford to pay the endless, lifetime medical expenses out of pocket, and provide food and rent, they’ll waste away unattended, quietly, out of sight. Or be thrown into the streets to suffer and starve before our eyes.

Conservative ideology exacerbates this problem from every direction. For starters, they’re loathe to properly over see and enforce existing workplace safety rules, much less create new ones. OSHA is a swear word in the GOP. Under Republican rule, safety boards are staffed by incompetent cronies and industry lobbyists. George Bush appointed the aptly named Richard "Dick" Stickler to over see the Mine Safety and Health Administration, despite the fact that mines overseen by Stickler up to that time experienced three times the national average in preventable accidents. More injuries means either higher premiums or more insolvent insurance companies and thus higher costs for either businesses or SIGAs.

Of course, conservative ideologues just can’t seem to keep their greedy mitts out of existing funds to cover up budget shortfalls produced by the now legendary conservative mismanagement. No oversight, political corruption, and state deregulation invites crooks and clowns. We may find out to our horror that some SIGAs are chock full of IOUs or cooked books, leaving states ill prepared to handle a sudden influx of new claimants. That they've been raided in the same irresponsible manner conservatives have ripped through the social security trust fund, or used as financial landfills for the same kind of toxic investment garbage that nuked member insurance companies in the first place.

Then there is the complete breakdown of the oversight and regulations enacted in the wake of the Great Depression, engineered by Republicans like Phil Gramm and John McCain, allowing insurance companies to get overextended to the tune of trillions of dollars in subprime loans and credit default swaps. What’s noteworthy here is that even if AIG ran a profitable worker’s comp divisions, and they do, it doesn’t matter. The divisions made possible by deregulation, the ones that would never have existed if not for conservative aversion to wise governance and effective oversight, blow up everything else. In the specific case of worker's comp, those claimants end up on relying on the state, or the fed. Or us.

This worker's comp example is just one single fine thread that could unravel in the delicate, frayed economy conservatives made up out of whole cloth. There are lots more, lots bigger, and you can bet that a bunch won't be known or suspected until they detonate. It’s the prospect of all those threads we can see unraveling, along with the fear of those we can't, that left taxpayers with little choice than to keep AIG and the other firms afloat. We had to choose on the spot: commit a knowable, monumental sum of taxpayer money now, or face an unknowable and potentially crippling crisis in the near future that could make the 1930s look like the good old days. That's how bad it was and still remains: given the stakes, we can only hope we made the better choice, but there's no guarantee.

Decades of ideological certitude and contempt for reality has left the GOP irrevocably locked in an unbreakable, destructive spiral. The day to day behavior of John McCain and his advisors is beginning to resemble, for lack of a better comparison, something like a desperate, degenerate gambler who's convinced, despite mounting losses, he has a system that will beat the house sooner or later if only he can keep playing. They're still utterly convinced it will eventually work -- that it has to work -- completely unable to accept the empirical fact that conservative economic philosophy has already failed.

A few years ago Bush tried to hand over social security to the same captains of high finance who managed to fly the nation's economy into the side of a mountain last week. Had he succeeded, we might have spent the last few days debating how to bail out Social Security. Just a few days ago John McCain wanted to do the same with your healthcare:

Opening up the health insurance market to more vigorous nationwide competition, as we have done over the last decade in banking, would provide more choices of innovative products less burdened by the worst excesses of state-based regulation.

You think that's sick, this is how the 700 billion dollar bailot reads right now, and it damn well better not mean what it looks like it means:

Decisions by the Secretary pursuant to the authority of this Act are non-reviewable and committed to agency discretion, and may not be reviewed by any court of law or any administrative agency.

What might happen if they get another crack at it? Based on the past behavior of the company John McCain keeps, they might keep rolling the dice until they're broke, until we're broke, until social security is gone, until Medicare is history, until even the cash stashed in a mattress has the value of unrecycled newspaper. And then we won't have to decide anything, because we'll be out of choices altogether.