What can the classic 1944 film Double Indemnity teach us about public policy? Plenty, according to Barron’s guest columnist Daniel C. Munson.
Munson focuses less on the film’s main plot and more on the tension between insurance company claims manager Edward G. Robinson and his company’s fast-talking salesmen.
“It’s the company. The way they do things. The way they don’t do things. The way they’ll write anything just to get it down on the sales sheet. And I’m the guy that has to sit here up to my neck in phony claims so they won’t throw more money out of the window than they take in at the door…I get darn sick of picking up after a gang of fast-talking salesmen.”
There’s a constant battle within an insurance company among the actuaries who set the policy terms, the salesmen who hunt for acceptable clients, and the tough guys who investigate and settle the claims. The healthy tension between people with different skills and temperaments keeps the firm solvent.
Robinson’s insurance company, like any company, must try to control its fast-talking salesmen. All salespeople know that the merchandise would move a little faster and their lives would be much easier if the home office would give them a little more flexibility — lower prices, looser qualifications for customers, and a little more generosity in paying claims and refunds. The flexibility they seek, alas, invariably eats up the company’s profit margins and threatens its long-run survival.
What does this have to do with government?
GOVERNMENT-RUN SOCIAL-INSURANCE PROGRAMS are dysfunctional because the sales force — the elected officials — have the flexibility that successful private companies would never give them. They get themselves elected with what Robinson, the claims manager, calls “a smooth line of monkey talk,” promising voters low premiums and big benefits. There is no home office to stop them.
In the U.S., the Constitution grants taxing and spending powers to the Congress, but the Founding Fathers never dreamed that Congress would turn the federal government into an insurance company, with the representatives and senators acting as the sales force.
Our elected officials have written and sold policies that will “throw more money out of the window than they take in at the door,” as the movie claims manager says.
The salesmen in Congress hear testimony concerning the solvency of Social Security and Medicare from nonelected, powerless trustees and actuaries, and they are told point-blank that these programs are fiscal disasters. They hear that average Medicare recipients will receive over $100,000 more in benefits than they ever paid for. But the lawmakers don’t have to heed the warnings. They don’t have to change the policy terms to promote solvency. Recently, they awarded cost-of-living adjustments to recipients when none were required and lowered the payroll-tax premiums to promote economic growth. Congress runs the actuarial department as well as the sales department.
And with no need to turn a profit, no one should expect Congress to adopt Robinson’s zealous pursuit of waste, fraud, and abuse in the system.
P.S. You don’t have to look back to the 1940s for an example of a movie that can enlighten today’s public policy debates. John Hood has devoted his attention to other valuable lessons from the cinema.
