800 Days Late and a Dollar Short on Obamacare

I am about 800 days late and as many dollars short on this topic, but what the hell, let me talk about Obamacare.   This is not only the signature piece of legislation of Obama’s term, it illustrates everything that is wrong with his domestic policies and with him as a President.

Take Your Medicine

First, Obamacare never enjoyed popular support, and against the direct wishes of the people, was jammed down our throats.  As a series of polls showed consist lack of support, Obama, in an arrogance about his abilities of persuasion that is wholly without evidence, made repeated speeches to explain to us exactly why we do not know what is good for us and why we should simply take our medicine and shut up.  Repeated such speeches did nothing to change anyone’s mind.  Obama’s style is to lecture the people as if he is addressing a group of kindergartners – you don’t know what’s good for you, just trust me.

The Con

Second, the sales pitch was the pure con.  You want to know the most effective way to rip people off – you convince them that someone else is ripping them off, and that you are going to save them from such thievery.   This leads to the creation of two incompatible straw men, both of which were characterized as ripping us all off.  First, we were told directly by Obama that doctors are constantly ordering unnecessary procedures to pad their income.  Second, we were told directly by Obama that insurance companies were constantly denying people life-saving procedures.  So apparently the insurance companies were fine green lighting the unnecessary procedures ordered up by the unethical medical profession, but when it came to covering necessary procedures they fought tooth and nail.  How approving unnecessary amputations at its own expense led to more profits for the insurance companies remains unclear, but they were clearly recouping it by denying necessary procedures all of the time.  Obama put the cherry on top with his repeated lie about his mother being refused coverage by her insurer for necessary medical procedures.  (Don’t believe me?  Go to NPR: http://www.npr.org/blogs/itsallpolitics/2012/09/07/160726548/retell-politics-story-about-obamas-mother-gets-another-look). 

Add to these lies the cynical insistence during the political fight that the fines that would be levied against those who didn’t purchase insurance were not a tax, followed immediately thereafter with the argument in favor of the constitutionality of the legislation that it is a tax.  Keep in mind that the stock price of health insurance companies all increased the day Obamacare passed – what does that tell you about how they were ripping you off before, but now they will purportedly be set straight?

The Unintended Consequences of Excessive Regulation

There was a recent article about the restaurant chain parent company Darden scaling employees back from full-time to part-time employment in order to reduce the cost burden placed upon it by Obamacare.  Under Obamacare, companies of a certain size must provide affordable health insurance to employees working an average of at least 30 hours per week.  If they do not, the companies can face fines of up to $3,000 for each employee.  By scaling people back to part-time status, the company avoids the costs imposed upon it by Obamacare.  This is the “unintended” consequence which, while perhaps unintended, is completely predictable.  This is a classic example of the difference between the statutory incidence of a tax – who nominally is designated to pay a tax – and the economic incidence, which is who feels the pain of the tax.  The letter of the law makes it look like the employer either pays for the employee’s insurance as part of his overall compensation, or pays the fine, which can go to subsidizing the insurance purchase for those who cannot afford it. 

No cost to the employees, right?  Not exactly.  Obamacare is a tax on the decision to employ a full-time worker.  Suppose prior to Obamacare, the company employed full-time workers for $10 per hour. Now, under Obamacare, it is mandated to provide insurance, equivalent in value to $2 per hour.  One option, not taken by this company, is to cut the wage to $8 per hour, so overall comp stays the same. Why didn't they do this? It is likely that the value of the insurance to yoing employees far exceeds its cost, so they don't view it as $10 in total comp - they might view as $9 in total comp. So they leave to work elsewhere. Rather than do that, the company can avoid the tax by splitting jobs in two. They also know that this will lead to turnover, but perhaps they expect it will be less turnover than that which would come from cutting wages. Of course it is expected to be bad for business, because they obviously were not choosing that option in the first place, but it is in their opinion the best response to the effective tax. Now consider the worker - prior to Obamacare he had no insurance, but he had a full-time job. Now his hours have been cut back, and because no employer is obligated to provide him insurance, he is mandated by law to buy it himself. Again, because he is probably young and relatively healthy, he doesn't want to buy "community - rated" insurance with a premium that treats him like he is a 50 year old guy with gout, he opts out and pays a fine to the government (or is that a tax? it depends on whether you are trying to shove a program down people's throats or argue in front of the Supreme Court). End result - the worker makes less money, pays a fine he never had to pay before, and still doesn't have insurance. At least he has more liesure time – he can sit around drinking Chartreuse and watching bowling.  The economic incidence of the tax falls partially on the company, but more fully on the employees, who are the intended beneficiaries of the policy.

You Can Have Anything on the Menu, as Long as it is SPAM

Economic freedom means very little to the Obama administration, and Obamacare reflects this directly.  I have a high deductible health plan in combination with a healthcare spending account. I researched all of my options when I went out on my own, and this was clearly the one that made the most sense. There is also evidence from the Rand Health Care Experiment that such plans reduce health care costs, not through people ignoring real healthcare that they need, but by limiting expenditures on low cost healthcare items. Obamacare puts these plans in jeopardy, when what we really need is more people on plans like these.  that such plans reduce health care costs, not from people ignoring real care that they need, but by limiting expenditures on low cost healthcare items. Obamacare puts these plans in jeopardy, when what we really need is more people on plans like these. I have a Ph.D. in economics, and am fully f*&^ing qualified to make rationa

1.      that such plans reduce health care costs, not from people ignoring real care that they need, but by limiting expenditures on low cost healthcare items. Obamacare puts these plans in jeopardy, when what we really need is more people on plans like these. I have a Ph.D. in economics, and am fully f*&^ing qualified to make rational

I am fully f7*^ing qualified to make rational decisions regarding the best way to insure myself and my family, but my freedom to contract for the insurance coverage I desire is thrown away.   Under Obamacare, the medical loss ratio requirement (“MLR”) of Obamacare requires that insurance companies spend 80 percent of revenue from premiums on medical claims or anything that improves the quality of health care. (The additional 20 percent is for administrative and other non-medically related expenses.) If the minimum of 80 percent is not met, the insurer must issue a rebate to the consumer. The structure of my insurance plan makes it incompatible with the new MLR rules.  And I’m not alone – there are 11.4 million people with similar coverage.  (see: http://blog.heritage.org/2012/02/24/side-effects-if-you-like-your-hsa-get-ready-to-lose-it/) This is one of the many ways in which Obama’s repeated promise - “If you like your health care plan, you’ll be able to keep your health care plan, period” – is a falsehood. 

When we decide that a private good or service – like health insurance – is to be guaranteed to us through the Big Government Restaurant, never forget that the nature of the Big Government Restaurant is to have a very short menu – there is really only one entrée ever available.  The fact that Obamacare leads to the elimination of a transaction between me and my insurance provider that is mutually beneficial to each of us is one of those unfortunate “bumps in the road.”  As the old line from Monty Python goes, you can have anything on the menu as long as it’s SPAM.

Subsidizing Choices Rather than Insuring Risk

We insure against uncertain low probability events that can be costly.  Those are the 2 elements that create the demand for, and subsequent supply of, insurance contracts.  If treating cancer cost $10, there would be no need to insure against it.  If getting cancer were a certainty, there would be no one offering you an insurance contract.  Because it is a costly but low probability event, we willingly pay an annual premium equal to the expected costs of treatment in the event we get sick, multiplied by the very low probability we will actually get that sick.  There is also one major thing to consider – sometimes we influence the probability of our getting sick.  If we smoke, or drink a lot of Chartreuse, or eat pork rinds while watching professional bowling, we increase the odds of getting sick.  This is called moral hazard.

All of this explains why there is no insurance for milk.  Milk is a low cost item, and your need to purchase it is completely determined by your choice – there is not some low probability unexpected event that is going to lead to the necessity of your buying milk.  Similarly with birth control – you don’t unexpectedly need it, it is not a high cost item, and your need to have it is completely a matter of personal choice.  And yet, here we are, with Obamacare requiring that employers, even religious employers that are vehemently opposed on moral grounds – are being forced to offer such “insurance” to their employees.  Nice little subsidy to the abortion and birth control industries – remember my characterization of Obama’s primary policy question: who can I give shit away to?  This one is twofor – at the same time he gives sh*& away to a favored constituent group, he sticks it in the eye of religious conservatives all in the name of “insurance.”  And this, by the way, is going to control costs. 

All Pigs are Equal, But Some Are More Equal Than Others

I remember back in the days when Clinton was turning the White House into a brothel for chubby Jewish interns, there was a big effort to raise the federal minimum wage law.  One of the lobbying organizations that was instrumental in the effort, which was eventually successful, was ACORN.  The ink wasn’t even dry on the new wage law when ACORN was asking for an exemption from it in its dealings with its own employees.  Rules are for the people we don’t like, and whenever possible, should be selectively applied accordingly.  And so it is with the Cadillac tax on high-cost insurance coverage, which applies to everyone with such a plan.  Except for members of unions.  Some Pigs are more equal than others.  That tax started as an effort to hit the fat cat 1 percenters, and the Obama administration didn’t realize that a lot of unions have these same fat cat deals.  So a policy that stemmed from the question: “Who can I take sh*% away from?” ran into a slight hitch.  No problem – just exempt those you favor, and move along.  

Overeating at the Big Government Restaurant

We’ve all been in this situation before – we are at a restaurant with a group sufficient in size to make separate checks untenable.  We may be fooled the first time we try to economize, ordering pasta (no sauce) and water, only to be stuck with a proportionate share of a bill that includes your dining companions’ martinis and filet mignons.  But we’re not fooled the second time, and in a savvy crowd, no one at the table is fooled – and as a result we all end up sucking down martinis and filling our arteries with coagulated cow fat to the tune of sharing a bill for an order that is triple what we would have chosen in isolation.  Economists call this a Lindahl equilibrium – with 10 people at the table, you only face 1/10^th of the incremental cost of your personal order, and yet you get to eat the whole damn thing.  Everyone else has the same calculation running through their heads, and the feeding frenzy ensues, followed by the ever-increasing credit card balance.

This is one of the standard models used to explain pork-barrel spending in Congress.  When a congressperson brings some boondoggle project into his district, his constituents face only a fraction of its costs, and yet receive all the benefits of the federal funds flowing in.  The voter fails to see that this was part of an equal trade among the 400+ members of Congress, so in the end he is paying the same small fraction for 400+ projects that do not benefit the district, and in effect he is on the hook for the entire cost of the boondoggle.  Or, if the voter is savvy, he still sees that if his congressman doesn’t play this game while all of the others do, he now pays his proportionate share for all of these projects, and none of the pork comes home.  He therefore comes to the conclusion that although this game sucks, he wants his congressman to play it.  But just as in the case of the restaurant, you get things you never wanted in the first place, and you are worse off as a result.

This is one big argument against Big Government – the dynamics are such that we are all stuck at Ruth’s Chris steakhouse scanning the menu for the most expensive item, rather than the one we would actually choose given our own budget.  But I was reading an interesting blog post that highlighted a paper by Ed Prescott, which points out an even more pernicious way in which Big Government leads to a perverse Lindahl equilibrium. 

Prescott was trying to understand why Americans work much harder than Europeans.  In standard labor economics, an increased tax rate would have an ambiguous effect on the amount of labor you would ideally provide in the market.  By lowering the amount of take-home pay for working an hour, there is a substitution effect – because you are not taxed for sitting on the couch and watching professional bowling, you may lower the number of hours you work and take-in more exciting 7-10 splits.  However, there is a countervailing income effect – with a higher tax rate, you have to work harder to achieve any specific goal you may have, such as retiring by a certain age.  Maybe you work more (income effect dominates), or maybe you work less (substitution effect dominates).  Liberals who press for bigger government are always and everywhere counting on the income effect at least holding its own.  If you cut back your hours as they raise the tax rate, the revenue may not increase and may even go down – i.e. they are killing the golden goose.

Prescott’s insight was to look at what the government does with the tax revenues raised.  If it simply finances parties at the Kennedy estate, there is no benefit that flows back to the guy making the labor decision.  Raising his taxes yields the substitution effect and the income effect, and it’s close to a wash.   If, however, the new tax revenues go to providing things to that worker that he otherwise would have had to pay for himself out of his post-tax pay, there is very little income effect from the increased tax.  So if the government decides it’s going to give out TV’s, and this guy just happens to have been saving for a TV, wala – no income effect – he can cut back his work without giving up the TV.  The substitution effect dominates, and hours go down.  Now, the total tax revenues from this guy may increase or decrease depending upon how many hours are cut back versus the extent of the incremental tax increase.  But even if they increase slightly, they’ve done so in a context where the government has just committed to giving out TVs to 300 million people, so it is likely that the revenues fall short of the promised incremental goodies.

Now think back to the feeding frenzy at the restaurant.  The government promises you something you would otherwise have to pay for on your own, and that promise doesn’t require that you pay a certain amount in taxes.  You can work harder, or keep your hours the same, and therefore increase your tax revenues, or you can cut back your hours, but the effect of your labor decision doesn’t matter as much for what you get to spend as it did prior to the tax increase.  Everyone is making the same calculation we did at the restaurant – compared to the situation prior to the tax rate increase, working harder doesn’t add as much to what we get in the end, and working less doesn’t subtract as much from what we get in the end. 

Think of the extreme – suppose the government committed to providing you all of your needs – food, shelter, clothing, entertainment, etc.  No matter what anyone else does, if you stop working, you reduce the amount you get from the government by your 1 share of 300 million in tax revenues to buy crap to give away – your decision to stop working has only an incremental effect on what you get from the government, but you just reduced your tax payment to zero.  You get the full benefit of not paying any part of the bill, and yet this individual decision has basically zero effect on what the government doles out to you.  Just like at the restaurant, only now we are talking 300 million people at the table rather than 10, everyone is savvy enough to make the same individually rational decision that is collectively disastrous – stop working.  No work, no tax revenues, and no goodies.

That’s the basic explanation offered by Prescott – because the European welfare states provide so many things people would otherwise have to pay for themselves, they reduce their individual price for such goodies by cutting back their labor supply.  The substitution effect dominates. 

So suppose the government says – you shouldn’t have to worry about paying for a lawn gnome, we will provide one to everyone.  Prior to making that promise, and try to hold your laughter, let’s suppose the current tax revenues are sufficient to handle all current commitments, so that to provide lawn gnomes to the entire population the government has to increase tax revenues, and does so by increasing the rates.  The substitution effect kicks in undiluted by the income effect.  Because everyone is working less, there is less stuff.  Even if the government still manages to balance its budget, there is less stuff!  Big Government’s decision to provide the lawn gnome in the end only makes you watch more professional bowling instead of buying your own lawn gnome, as well as a pink flamingo lawn ornament.  But this is not a better situation – prior to the tax increase, you explicitly decided that owning the pink flamingo lawn ornament was better than watching bowling.  Everyone loses, with the possible exception of the bowlers!

One lesson, which has always been the standard conservative message, is this – if government spending is a big waste (and of course we argue much of it is), it makes us all poorer just because we are flushing money down the toilet – but it may have no effect on how much work we do and how much we produce.  It’s just that the government somehow manages to take all that money and piss it away on stupid stuff we would never spend it on ourselves.  So it is like we’ve made all of these lawn gnomes, and the government just collects them and trades them with another country for something incredibly tacky that we would never ourselves choose.  But the better lesson from Prescott is this – if government spending is actually on things we want, like the lawn gnomes, it still makes us poorer!  Whether the government is throwing money away or it is successful in providing to us the things we want – the government is making us poorer!

When you decrease the benefits from working longer and harder, and increase the benefits from not working at all, you have the makings of an unsustainable long-term fiscal policy.  You’ve promised things, and by virtue of that promise alone you have decreased the size of the pie to the point where you will be unable to honor that promise.  Each incremental extension of the welfare state brings us closer to that breaking point.  (And by welfare state I do not mean programs for the poor exclusively – it is the pernicious genius of liberals to have created programs that encompass everyone, like Social Security and Medicare.)

The “substitution effect” of big government is not restricted to labor decisions.  Prior to the emergence of the welfare state, the economies were much more agrarian, and the physical toll of the work was such that families had to rely upon their grown children to maintain the output of the farm.  Kids, and the mutual obligations of family, were the “social security” of the prior era.  Now, instead, we finance those retirement years through taxing the current generation of workers.  The economies of Europe went from a situation in which they intuitively understood they had to rear the next generation in order not to starve to death in their old age to one in which the government has now promised citizens that you could never work more than 40 hours a week and still retire at 55, regardless of whether you had any kids.  Based on that, Europe stopped having kids, and now there is no working generation that can be taxed to deliver on the promise.

Many of the European economies – Greece, France, Spain, and Italy - are seeing this dynamic play out in real time.  The promises made government have depressed both work effort and birthrates.  As Mark Steyn puts it, the problem is not that socialism has run out of other people’s money to spend, it’s that it’s run out of people period.  The fallout will not be pretty.  As a country, I think we are unfortunately headed in the same direction.  Our government has been making promises it cannot possibly maintain, people have organized their lives to some extent around such hollow promises, and everyone will be embittered when the promises are broken.  To deflect the blame for such broken promises, Democratic politicians will continue to perpetuate the fiction that you are being screwed by someone other than them – be it the rich, big Oil, big Pharma, outsourcing, etc.  You are not being screwed by anyone other than Big government. 

 

Who Can I Give Sh8^ Away To?

For those of you who are new to the list receiving the post updates, I suppose it will come as some shock that I have been a closet blogger, and perhaps the worst kind of all - a rightwing blogger.  Although you will no doubt find coded messages of racism in my posts, so cryptic in their coding that I am even unaware that I am sending them, I mix these in with occasional stories of fuzzy bunnies so as to appear relatively innocuous.  If you are one of "them" - i.e. a liberal - there have long been liberal subscribers who have enjoyed the blog, making favorable comments like "go to hell," "you have the brain of a marsupial", and "you are a tool of the Zionist plot."  Anyway, welcome! 

This week the Nobel prize in economics was awarded, which makes it timely for me to talk about a book about decision making authored by a psychologist who was a prior recipient of the Nobel in economics - Daniel Kahneman.  The book is called "Thinking Fast, Thinking Slow" - it is endlessly fascinating, and it has some connections to my prior post about intelligence that have some relevance to the matter at hand - i.e. the current election.

One of the themes of the book is that using reason and deliberative thought requires effort, and our minds our inherently lazy, so we more often than not rely on some form of intuition.  When asked a difficult question, for example, rather than consider and answer that question, we substitute a different question that we can answer without thinking.  For example, if we are asked which of the two presidential candidates has a better grasp on the nuances of foreign policy, answering that is hard.  First, we need to have some knowledge of the subject itself, and secondly, we need to form an opinion about how each guy approaches the subject.  Hard work.  So rather than wave our hands and say we don't really know, we ask the easier question: Which guy is taller? or Who has better hair?  Unfortunately for us, in 2008, people did not ask "Which guy has ears less remiscint of Dumbo?"

Anyone who has been conducting an interview, asking pointed questions, probably believes that they are objectively assessing the likely job performance skills of the various candidates, but in truth that is an extremely difficult thing to do in a 30 minute interview - most people substitute the likability question, which is much easier to answer.  This is why polling questions on likability matter. 

The inherent laziness of the mind, regardless of intelligence, is why ideology and party identification matter so much in assessing a presidential candidate.  I honestly do not believe that Obama is intelligent enought to understand the complexity of the economy.  (Back prior to the 2008 election, when the financial meltdown occurred, he was quoted as basically asking economic advisors - tell me the right policy, and I'll sell it to the American people.  He was a salesman, not a guy who knew what policy to sell.)  However, even if he were that intelligent, the demands of the job are such that there is no way to stay on top of arcane economic arguments in favor of this policy or that.  So Obama substitutes an easier question that he can answer without thought: "Can I give shit away to people who will vote for me?"  Cash for clunkers, overhauling student loans, the extension of unemployment benefits, all the subsidies to pie in the sky wind or solar power companies that haven't a clue or a prayer, Obamacare, mortgage relief, the distribution of stimulus funds for shovel-ready donors projects , cell phones, the forced subsidization of birth control for women in law schools who like to pretend someone wants to have sex with them, etc. 

The flip side is: "Can I take shit away from the people who won't vote for me?"  Drilling moraturiums in the gulf, excessive regulation in the energy industry in general, cuts to the military, and the argument now that it is the patriotic duty for the top 1 percent to increase their share of the total income tax burden from its current level (hovering between 35 and 40 percent).

Even his much hyped "saving" of GM was a giveaway to a bloated union at the expense of its bondholders; you might think the bondholders are the Wall Street evil guys, but many of them were simple pensioners.  The world is filled with companies that survived bankruptcy - in most cases, bankruptcy does not lead to the liquidation of assets and the discontinuation of business operations, and in the case of GM there is no reason why that would have occured.  In most cases, what happens is the obligations of the company to its creditors are converted to equity claims, and things go on.  Even if liquidated, someone free from the bloated union contracts could have purchased the assets and made a profitable go of the business.  The unintended consequence: Screwing over normal bankruptcy proceedings at the expense of the lenders makes lenders reluctant in the future, making it more difficult to finance new investments.  Fool me once ...

Now of course, some clever commentator is going to point out that Romney's substitute questions would be the same, and only the answers would differ.  But here is where the essential difference in ideology matters.  To Obama, the government should circumvent the market wherever possible to achieve a desired outcome, in his case the answers to the above questions.  People don't carry on as usual in the face of such policies - they try to avoid activities (like investing and working) that make them subjec to increased taxation, and try to seek some handout to their own group or industry, diverting their labor and capital from productive enterprise.  (I for one have diverted from productive work to writing a damn blog due to his policies). 

To Romney, the market should take precedence wherever possible (I hope that is what he thinks anyway); in that case, while such policies (or lack thereof) may in effect reward "his" people, they do so only via the free choices of people in the marketplace.  The difference for our current economic situation is that no one with money trusts Obama.  And without that trust, there is a deep reluctance to make risky investments when the payoff for such investments may end up just getting funnelled to a favored victim group.  Put Romney in, and those with the money sitting on the sidelines breathe a collective sigh of relief, and get back to business.

I happen to believe, and I think the evidence supports this belief, that more free market policies reward not only the investors, but workers and consumers as well.  Moreover, the investors get the smallest share of the benefits of such investments.  That is, while nominally you might view pro-investment policies as benefitting the rich, in truth they benefit all of us with most of the benefit coming to us.  In contrast, more intrusive government generally leads to the flight of capital and talent, sclerotic growth, reduced job opportunities, and increased government dependence - trickle up poverty.  We are lurching closer to the policies of European countries, and the comparative record of historical growth rates makes it clear this is not a trade that benefits us in any way.  But the real reason I am voting for Romney is clearly the fact that he has better hair.

Crazy, Bigoted, or Both?

In light of the less than inspiring debate performance of Obama, and the possibility being floated that he isn't all that bright, Joe Klein recently said that anyone who thinks Obama isn't extremely intelligent is either crazy or bigoted.  He was probably being nice, and thinks that both apply.
Of course I have my own opinion on Obama's intelligence, which you can probably guess, but I will detail them anyway; you might dismiss them as partisan, but I think many of these observations are generally useful.  The punchline - we have little evidence to say he is all that intelligent, and what evidence is offered on his behalf is problematic in the general assessment of intelligence.

I've always said that if you want to convince someone you are really smart, let them do at least 80 percent of the talking, with your 20 percent contribution being obsequious agreement.  This is one of the basic rules of how to win friends and influence people - let them talk about themselves and what interests them.  But among the smartest people, there is generally far more diversity of opinion and disagreement over ideas, which was a point I first heard made by Hayek.  So the uniformity of opinion that is often judged as a sign of intelligence could be the exact opposite - agreement on too many levels is probably more indicative of tribal loyalty than intelligence.  It is for this reason that the accusation that Obama might not be all that bright is indeed fighting words to many on the left - where intelligence is often equated with virtue, and intelligence is judged merely by adherence to liberal ideas.  Obama agrees with liberals, and this is the primary reason why they hail his intelligence.  People all over the IQ spectrum agree with liberals, so it is hardly restricted to the top 1 percent.

People in power, or who have the potential to be in power, always have a circle of people who benefit from them acquiring and maintaining power.  It is in the interest of such people to aggrandize the attributes of their de facto meal ticket.  George Stephanapolous would have gladly told you in 1991 that Bill Clinton was a faithful and loving husband, and probably would say so today, and the reason is pure self-interest.  If Bill Clinton doesn't get elected, George Stephanapolous is just another hirsute little person.  Because of the assumption that a smart person will surround himself with the smartest of the smart, testaments to your meal ticket's intelligence are even more self-serving.  Never believe the mythology that the inner circle will purposefully cultivate.  By the same logic, when it gets out that someone in the inner circle thinks the power broker is an empty suit, you should really give such an opinion a lot of weight, subject to the caveat that it could just be sour grapes over being demoted. 

Public speaking is a very poor indicator of general intelligence.  In my first year of graduate school, I was taught macroeconomics by Ed Prescott, who went on to win the Nobel Prize, but as a teacher he was absolutely incoherent. In my grad school experience, he wasn't alone - there were many of the same caliber who could never anchor the evening news.  If anything, a talent for public speaking is a skill that provides cover for a lack of intelligence in other areas.  The same holds true for a talent for writing.  Both require some degree of intelligence, but both can hide severe deficiencies.  Most of us have experienced the limitations of the press in areas where we know a lot about a topic, and yet seeing how they more often than not bungle the story, we trust that somehow in other areas they are getting it right. 

Giving a speech is one form of public speaking, but in modern day presidential politics, we know that the speech, while it may benefit from the input of the president, is not written by the president.  I don't happen to believe Obama is all that good of a speech giver, which may be an opinion that is influenced by my disagreement with the views expressed in such speeches (which again are probably not written by him), and moreover, "let there be no mistake," his rhetorical repetitiveness is highly annoying.  Perhaps my view on this is tainted by partisanship, but either way the general point remains that if you think Obama is smart because he is a good speaker, your making such judgments with the wrong evidence.  Have Barack Obama read the Gettysburg address, and then have Ed Prescott, and then make your judgment on the comparative intelligence of the two, and I can tell you flat out that your assessment would be off by 100 IQ points.  Giving a speech is a form of acting.  Again, to be a good actor takes a certain type of intelligence, but it can mask severe deficiencies in intelligence in other areas. 

By the same logic, a good or bad performance in a debate is not necessarily a good indicator of general intelligence; although I think it is a better indicator than a speech.  But it can be an important indicator for one skill that you would generally want your president to have - ability to think on your feet and be persuasive.  This is especially true in situations of diplomacy and negotiations with foreign governments, where policy plays itself out in private conversations that are not scripted in advance, and which have the same debate dynamic - i.e. you may only have one shot at making your case, and failure to do so can have adverse consequences for your policy objective.

So what about education?  Surely an undergraduate degree from Columbia, and a law degree from Harvard, can be trusted as an indication of high intelligence.  This same logic somehow never applied to an undergraduate degree from Yale, and a Harvard MBA.  Perhaps this was because, in the days when George W. Bush was attending school, the old boys network was enough to get you through the rigors of an Ivy league education.  Maybe that is so.  But the new boys network - affirmitive action - was very much in play during the years Obama was being educated.  I've seen affirmitive action firsthand in academia - frankly, there was and is enormous pressure to apply different standards for admissions and grading. 

But don't take my word for it, use some elementary logic.  If Obama's grades supported the mythology of his vaunted intelligence, Obama would surely have them tattood to his forehead by now, which means his unwillingness to release his grades is probably indicative of very poor grades.  And yet such grades did not stop the upgrade from Occidental College to Columbia, nor did it preclude admission to Harvard law school. For yet more evidence, look at Obama's own career as a constitutional law professor at the University of Chicago, one of the top law schools in the country.  Obama never published one scholarly article on constitutional law - you try doing that and getting a job as an adjunct professor at the University of Chicago.  Your only hope is to claim that despite your alabaster complexion, you are part Cherokee - than you can teach at Harvard! 

As a partial digression, I am especially suspicious of people emerging from a legal education as being prone to grossly over-estimate their own intelligence.  The primacy of the legal profession as the training ground for politicians, and thus their prominence in the history of the governance of our country, leads to an inlated sense of their own self-importance.  (Henry Ford, as an example, probably did more for this country than all but 2 or 3 presidents, but businessmen will never be accorded the same respect as our government leaders.)   It also leads to an inflated sense of intelligence.  This is compounded by the fact that the finest schools in America all have a law school - despite the fact that the field is not technically very difficult, and rests on a fairly rudimentary knowledge of logic, it gets the imprimatur of our most elite institutions.  Having had a much more mathematical education than your typical lawyer, I am suspicious of anyone who hasn't at some point in time stared for 2 hours straight at one page in a text trying to understand how the author got from line 9 of the proof to line 10.  Such an experience provides a necessary dose of humility and self-knowledge about the limits of your own intelligence, and I don't get the sense that many lawyers have had that experience. 

Finally, and this will come across as a brag, I have spent my career studying and working with many people who would generally test in the top 1 percent of the population for IQ.  The fact that 99 percent of the population generally lags this top 1 percent is a truly depressing fact.  We are clearly the smartest species, but that is a very low hurdle to clear.  Generally people think they are a lot smarter than they are, which is true across all levels, but the danger comes in the fact that the bottom 99 percent severely over-estimates the intelligence of the top 1 percent, who are only too happy to be thought of in such glowing terms.  This is especially dangerous in government, where we are prone to place too much trust in government under the theory that it is run by the best and the brightest.  The best and the brightest are still pretty dim, but in contrast to the lesser mortals who by necessity learn from their mistakes in their private actions, the best and the brightest are inclined to stay blind to their own shortcomings.  As a result, bad government policies have a persistence that is best measured in geological time.  Politics is not a math problem - it is generally a fight over power and money - it is definitively not a fight between smart and stupid policies.