Ratcheted Up

Joseph Ashby
In an August posting on NRO’s The Corner titled “Give Me Liberty or Give Me Death Panels," Mark Steyn argued that moderate opposition to the health care bill might lead to the kind of compromise “that will get Democrats far enough…that the Big Government ratchet effect will do the rest.”

For those unfamiliar with the ratchet effect, allow me to explain.

The Big Government ratchet is on full display on Wall Street. First was the establishment of Fannie Mae and Freddy Mac (Est. in 1938 and 1970 respectively). Their purpose was “to provide liquidity, stability and affordability to the U.S. housing and mortgage markets.” These “government sponsored entities” dwelt in the background of American thought for decades, with few people paying them notice.

Unsatisfied with the level of home ownership achieved through Freddy and Fannie alone, the government adopted a bevy of programs, regulations and statistical quotas that, for simplicity’s sake, we’ll call affordable housing mandates. Over several decades these mandates became increasingly strict and lead to progressively more risky behavior.

Then, after the “affordable housing” bubble burst, came the implosion of the financial industry. Government bailed out several banks and insurance firms to avoid “systemic risk” to the financial sector.

Once the bailout money was available, the Treasury Department changed the method of bailout from buying toxic assets to taking an ownership stake in struggling companies. The bailout was then extended beyond the financial sector to GM and Chrysler.

Once the loans were divvied out, the White House began to shame corporations out of making scheduled purchases of company jets and using jets already owned. Banks were forbidden to pay back government loans and car company bond holders were forced to give up their contractually guaranteed position during bankruptcy proceedings.

An executive Pay Czar, whose power is not allowed even by legislative mandate, let alone the Constitution, was appointed. That Pay Czar’s edict has come down:
The U.S. pay czar will cut in half the average compensation for 175 employees at firms receiving large sums of government aid, with the vast majority of salaries coming in under $500,000, according to people familiar with the government's plans.

As expected, the biggest cut will be to salaries, which will drop by 90% on average. Kenneth Feinberg, the Treasury Department's special master for compensation, also intends to demand a host of corporate governance changes at those firms.

And that’s how it works. A small, almost unnoticeable power is assumed by government. That authority leads to more authority. Government control causes what would be small, manageable problems to grow into massive, system threatening crises. Because those crises are dealt with using tax dollars, government claims the right to control everything those dollars touch.


Thus a small, semi-governmental business like Fannie Mae can lead to the outright, unconstitutional control we see Obama exercising today.

Now back to health care. Anyone who does not believe health care will follow a similar path will be gravely disappointed. Health care is not different. Two plus two will still equal four. The only difference being that health care (unlike narrow authority over the executive pay of seven bailed out companies) has the potential to reach into almost every corner of every citizen’s life.

In other words, health care is the biggest of Big Government ratchets.

In an August posting on NRO’s The Corner titled “Give Me Liberty or Give Me Death Panels," Mark Steyn argued that moderate opposition to the health care bill might lead to the kind of compromise “that will get Democrats far enough…that the Big Government ratchet effect will do the rest.”

For those unfamiliar with the ratchet effect, allow me to explain.

The Big Government ratchet is on full display on Wall Street. First was the establishment of Fannie Mae and Freddy Mac (Est. in 1938 and 1970 respectively). Their purpose was “to provide liquidity, stability and affordability to the U.S. housing and mortgage markets.” These “government sponsored entities” dwelt in the background of American thought for decades, with few people paying them notice.

Unsatisfied with the level of home ownership achieved through Freddy and Fannie alone, the government adopted a bevy of programs, regulations and statistical quotas that, for simplicity’s sake, we’ll call affordable housing mandates. Over several decades these mandates became increasingly strict and lead to progressively more risky behavior.

Then, after the “affordable housing” bubble burst, came the implosion of the financial industry. Government bailed out several banks and insurance firms to avoid “systemic risk” to the financial sector.

Once the bailout money was available, the Treasury Department changed the method of bailout from buying toxic assets to taking an ownership stake in struggling companies. The bailout was then extended beyond the financial sector to GM and Chrysler.

Once the loans were divvied out, the White House began to shame corporations out of making scheduled purchases of company jets and using jets already owned. Banks were forbidden to pay back government loans and car company bond holders were forced to give up their contractually guaranteed position during bankruptcy proceedings.

An executive Pay Czar, whose power is not allowed even by legislative mandate, let alone the Constitution, was appointed. That Pay Czar’s edict has come down:
The U.S. pay czar will cut in half the average compensation for 175 employees at firms receiving large sums of government aid, with the vast majority of salaries coming in under $500,000, according to people familiar with the government's plans.

As expected, the biggest cut will be to salaries, which will drop by 90% on average. Kenneth Feinberg, the Treasury Department's special master for compensation, also intends to demand a host of corporate governance changes at those firms.

And that’s how it works. A small, almost unnoticeable power is assumed by government. That authority leads to more authority. Government control causes what would be small, manageable problems to grow into massive, system threatening crises. Because those crises are dealt with using tax dollars, government claims the right to control everything those dollars touch.


Thus a small, semi-governmental business like Fannie Mae can lead to the outright, unconstitutional control we see Obama exercising today.

Now back to health care. Anyone who does not believe health care will follow a similar path will be gravely disappointed. Health care is not different. Two plus two will still equal four. The only difference being that health care (unlike narrow authority over the executive pay of seven bailed out companies) has the potential to reach into almost every corner of every citizen’s life.

In other words, health care is the biggest of Big Government ratchets.