The assault on free markets and the middle class continues. The economy is collapsing - but for some reason - healthcare is now a top priority for our leaders in Washington. This bill will do nothing but continue to drive small businesses owners - out of business. This type of government intervention is yet another example straight out of ‘Atlas Shrugged’ – tax the ‘wealthy’ and distribute the money into a bloated, bureaucratic government enterprise.
From the article below:
“House Speaker Nancy Pelosi unveiled the measure on Tuesday, praising it as a historic step toward insuring all Americans that has eluded lawmakers for decades. "This bill is a starting point and a path to success to lower costs to consumers and businesses," the California Democrat said.”
If we lived in a fantasy world where the impossible was somehow made possible, then I might believe Ms. Pelosi’s comments. Since I live in the real world that requires a way in which to pay for spending – I tend to believe that our Nation is on the road to bankruptcy – and instead of every American having health insurance – none of us will.
We are on a path that will take us from the wealthiest nation on earth – to one of the poorest. It is leadership like we’re witnessing here that is making it happen.
jg – July 15, 2009
___________________________
JULY 15, 2009
Small Business Faces Big Bite
House Health Bill Penalizes All but Tiniest Employers for Not Providing Insurance
Wall St. Journal
By JANET ADAMY and LAURA MECKLER
WASHINGTON -- House Democrats on Tuesday unveiled sweeping health-care legislation that would hit all but the smallest businesses with a penalty equal to 8% of payroll if they fail to provide health insurance to workers.
The House bill, which also would impose new taxes on the wealthy estimated to bring in more than $544 billion over a decade, came as lawmakers in the Senate raced against a self-imposed deadline of this week to introduce a bill in time for action this summer.
Senators face a tougher battle because they are striving for a bipartisan bill. Key senators are weighing a combination of several more-modest fund-raising provisions, including some new fees on health-care industries.
Under the House measure, employers with payrolls exceeding $400,000 a year would have to provide health insurance or pay the 8% penalty. Employers with payrolls between $250,000 and $400,000 a year would pay a smaller penalty, and those less than $250,000 would be exempt. Certain small firms would get tax credits to help buy coverage.
The relatively low thresholds for penalties triggered the sharpest criticism yet from employer groups, who said the burden on small business is too high and doesn't do enough to help them expand insurance coverage.
"This bill costs too much, it covers too few and it has way too much government involvement," said Michelle Dimarob, a lobbyist with the National Federation of Independent Business, the main trade group for small firms. "Small business doesn't want any of those things."
According to 2006 data from the federation, businesses with between five and nine workers, representing about one million employers, had an average payroll of around $375,000 a year. A report from the Kaiser Family Foundation found that only about half of firms with three to nine workers offered health benefits in 2008.
House Speaker Nancy Pelosi unveiled the measure on Tuesday, praising it as a historic step toward insuring all Americans that has eluded lawmakers for decades. "This bill is a starting point and a path to success to lower costs to consumers and businesses," the California Democrat said.
The Congressional Budget Office on Tuesday calculated the cost of the House's plan to expand insurance coverage at $1.04 trillion over 10 years, and predicted the measure would eventually lead 97% of legal American residents to have insurance. That's in line with President Barack Obama's desired budget for a health overhaul and lawmakers' pledges for expanding coverage.
The estimate doesn't factor in the plan to pay for the bill, including the new tax on wealthy Americans, or certain changes to Medicare and Medicaid, all of which could affect the final price tag.
The House bill would place new taxes on the wealthiest people to help expand insurance coverage to the nation's 46 million uninsured people. The legislation calls for a 5.4% surtax on those with annual gross incomes exceeding $1 million.
Households with annual income between $500,000 a year and $1 million would be hit with a 1.5% surtax, and those earning between $350,000 and $500,000 would face a 1% surtax. Those rates could eventually increase to 3% and 2%, respectively, if the government doesn't achieve certain health-cost savings.
The 1,018-page initiative contains several components pushed by liberal Democrats that were long expected to be part of House legislation, but which face considerable opposition in the Senate. Most notably, the House bill creates a new public health-insurance plan aimed at individuals and small businesses that otherwise can't get affordable coverage.
The House measure would bar insurance companies from denying coverage to individuals who are sick, while also requiring most Americans to carry health insurance or pay a penalty equal to about 2.5% of their gross income. It would provide families earning up to $88,000 a year with subsidies to help them buy coverage. And it would expand health-insurance coverage through the Medicaid federal-state insurance program for the poor.
The Senate legislation is also expected to include mandates on insurers to provide coverage and individuals to carry it, although the details may differ. The bigger differences will come on the financing side, where many senators are cautious about introducing major new taxes on the wealthy to pay for health care.
The White House is pushing for action before the August recess in both houses of Congress to give lawmakers time to reconcile their two versions, pass that compromise through the House and the Senate and send Mr. Obama a final bill by autumn. The Senate Health, Education, Labor and Pensions Committee could approve its health overhaul bill as soon as Wednesday.
That will get merged with a bill in the Senate Finance Committee, where lawmakers are trying to craft a bipartisan measure. Chairman Max Baucus on Tuesday was pitching his colleagues on a plan to finance the bill through a combination of more-modest tax increases. He is trying to fill a hole of about $320 billion over 10 years, after Democrats objected to a provision to tax upper-end employee health benefits.
The fresh package included a new fee on pharmaceuticals and other health-care industries, and stiffer corporate-reporting measures aimed at collecting a greater share of corporate taxes owed each year, two Senate aides said.
Under the first proposal, health industries including drug makers and insurers would be charged an assessment, with individual companies' fees based on their market share. It's not clear how large the total assessment would be.
The proposal also seeks to raise $75 billion to $100 billion over 10 years by giving states an incentive to issue bonds that would help offset the expanded federal share of Medicaid.
"The goal here is a bunch of smaller, less controversial items that can add up," one official said.
The package may still include a modified version of the plan to tax high-end employer-provided health insurance, though on a smaller scale, aides said.
Mr. Baucus spent much of the day meeting one-on-one with members of his committee, and he put on an optimistic face. "We're going to pass very significant health reform this year," the Montana Democrat said.
But the pre-recess deadline appeared in danger as Republicans expressed concern that the process is moving too quickly.
Sen. Olympia Snowe, a key Republican whom Mr. Baucus is trying to win over, said Tuesday that the legislation is far too complex to rush and that she saw little chance of moving a bill through the Senate before the August break.
"I frankly couldn't imagine at this point bringing it to the floor and completing our deliberations...before the August recess," the Maine senator said. She said "arbitrary, artificial time frames really are not realistic given the magnitude of the task we are assigned to do."
In addition to health care, the White House also hopes for action on energy and financial-sector regulation, both of which would consume time this fall.
At a White House meeting with top Democratic leaders on Monday, Mr. Obama pushed Mr. Baucus to produce legislation by Thursday.
Senators are now talking openly of keeping the chamber in session an extra week, though some say that is simply a tactic to discourage delay by senators who have plans for vacations, congressional trips and hometown activities.
A further complication is that if it looks as if the Senate can't or won't act this summer, many House Democrats are likely to hesitate about voting on a contentious issue -- including raising taxes -- for something that might never become law.
Write to Janet Adamy at janet.adamy@wsj.com and Laura Meckler at laura.meckler@wsj.com
Showing posts with label Pelosi. Show all posts
Showing posts with label Pelosi. Show all posts
Saturday, September 16, 2006
Friday, September 15, 2006
The Dangers of a Value-Added Tax
Keep your eye on this one. It is impossible for our current leaders to contemplate reducing government spending – so there’s only one other alternative to try to reduce our deficits. Expect all kinds of stealth tax proposals to boost federal revenue.
As many of our states have already discovered – raising taxes to reduce bloated budget deficits only pounds another nail in our economic coffin.
Higher taxes = less corporate/individual disposable income = reduced spending = lower economic activity.
I’ll say it again - our government is leading us to economic ruin.
jg – October 15, 2009
__________________________________________
OCTOBER 15, 2009
The Dangers of a Value-Added Tax
By ERNEST S. CHRISTIAN
AND GARY A. ROBBINS
Wall St. Journal
On its way out of the recession, the economy may encounter a VAT blocking its way.
Last week on PBS's "Charlie Rose Show," House Speaker Nancy Pelosi said she thinks "it's fair to look at a value-added tax." And the Congressional Research Service just published a lengthy new paper on the value-added tax that tends to obscure the fact that the middle class will bear the majority of its burden.
Even Alan Greenspan is on board, albeit reluctantly, he says. Paul Volcker, chairman of Mr. Obama's tax reform panel, may not be far behind.
With the deficits at a historic high, these former heads of the Federal Reserve may prefer to pay for President Obama's spending spree with taxes instead of borrowed money. But tax and spend is no better than borrow and spend. Why not just stop spending so much?
For Mr. Obama, a VAT, which appears on the surface to simply tax goods and services at the cash register, is the ideal tax. At a 17% tax rate, for example, he can quickly increase taxes by $1.5 trillion a year in a partially hidden way. A VAT is by its nature hidden, because no one files a tax return.
The VAT is so slippery that academics here and abroad do not agree on who pays this seemingly magical tax. Some economists still deceive themselves with the old notion that a VAT is simply a tax on consumers. This misperception comes from the European VAT, which uses a system of credits to create the illusion of pushing the tax forward from one business to another and finally to consumers.
Modern economists in the U.S. take the view that consumers bear only about 50% of the VAT, basically through higher prices and fewer product choices. Because of market forces, the rest of the tax ends up back on the owners and the employees of the companies that produce and sell the goods and services subject to the VAT.
Our own simple general equilibrium model suggests that about 33% of the VAT tax is borne by people in proportion to their relative wage levels, about 17% in proportion to their capital, and about 50% in proportion to their consumption. Federal, state and municipal employees escape the implicit wage tax, but otherwise, the VAT is predominantly a tax on middle-class and upper-income earners and consumers.
The VAT also taxes imports, but excludes exports from taxation. But here again there is confusion. For instance, who really pays the import tax?
The old idea was that U.S. consumers would in all cases pony up the import tax in addition to the price of the imported product. In the case of most manufactured goods, however, the modern view is that market competition pushes all or part of the import tax back onto foreign sellers. There is no definitive answer as yet.
Amidst all this uncertainty, just imagine what a master political spin doctor like Mr. Obama could do with vast amounts of additional tax revenues drawn heavily from the wages and savings of the middle class, though widely misperceived to be paid disproportionately by lower-income consumers.
Proceeding from that misperception, he could create a vast new subsidy program that would offset by many multiples the VAT tax actually borne by these newly created welfare recipients. He could also increase the income tax on "the rich," saying that they and the middle class get a nearly free ride under the VAT compared to less affluent people who must spend everything on purchasing "taxable" essentials. Not so, but the VAT lends itself to spin.
Mr. Obama and Mrs. Pelosi might also use the VAT to fund "free" government-run medical care and hospitals for everyone, as well as "free" college education and "free" home mortgages.
How about a temporary VAT, solely to pay down the federal debt? When was the last time a tax ever went away? Or how about a smaller VAT of only 5%? Obviously, it could quickly grow. Any tax increase big enough to repay much of the huge federal debt would devastate the economy for years to come.
The one certainty about a VAT is its enormous revenue-producing potential. At a rate of 17% to 18%—about average for Europe—it could increase total federal taxes to 30% of GDP or more from 15% now, according to the Congressional Budget Office. In combination with higher federal spending, this could forever alter the balance between the public and private sectors.
America and its economy would be radically changed—and not for the better. The first priority in Washington should be to cut spending, not to add a powerful new weapon to the tax arsenal.
—Mr. Christian, a lawyer, is co-author of "The Value Added Tax: Orthodoxy and New Thinking" (Kluwer, 1989). Mr. Robbins is the chief economist at the Center for Strategic Tax Reform in Washington, D.C.
As many of our states have already discovered – raising taxes to reduce bloated budget deficits only pounds another nail in our economic coffin.
Higher taxes = less corporate/individual disposable income = reduced spending = lower economic activity.
I’ll say it again - our government is leading us to economic ruin.
jg – October 15, 2009
__________________________________________
OCTOBER 15, 2009
The Dangers of a Value-Added Tax
By ERNEST S. CHRISTIAN
AND GARY A. ROBBINS
Wall St. Journal
On its way out of the recession, the economy may encounter a VAT blocking its way.
Last week on PBS's "Charlie Rose Show," House Speaker Nancy Pelosi said she thinks "it's fair to look at a value-added tax." And the Congressional Research Service just published a lengthy new paper on the value-added tax that tends to obscure the fact that the middle class will bear the majority of its burden.
Even Alan Greenspan is on board, albeit reluctantly, he says. Paul Volcker, chairman of Mr. Obama's tax reform panel, may not be far behind.
With the deficits at a historic high, these former heads of the Federal Reserve may prefer to pay for President Obama's spending spree with taxes instead of borrowed money. But tax and spend is no better than borrow and spend. Why not just stop spending so much?
For Mr. Obama, a VAT, which appears on the surface to simply tax goods and services at the cash register, is the ideal tax. At a 17% tax rate, for example, he can quickly increase taxes by $1.5 trillion a year in a partially hidden way. A VAT is by its nature hidden, because no one files a tax return.
The VAT is so slippery that academics here and abroad do not agree on who pays this seemingly magical tax. Some economists still deceive themselves with the old notion that a VAT is simply a tax on consumers. This misperception comes from the European VAT, which uses a system of credits to create the illusion of pushing the tax forward from one business to another and finally to consumers.
Modern economists in the U.S. take the view that consumers bear only about 50% of the VAT, basically through higher prices and fewer product choices. Because of market forces, the rest of the tax ends up back on the owners and the employees of the companies that produce and sell the goods and services subject to the VAT.
Our own simple general equilibrium model suggests that about 33% of the VAT tax is borne by people in proportion to their relative wage levels, about 17% in proportion to their capital, and about 50% in proportion to their consumption. Federal, state and municipal employees escape the implicit wage tax, but otherwise, the VAT is predominantly a tax on middle-class and upper-income earners and consumers.
The VAT also taxes imports, but excludes exports from taxation. But here again there is confusion. For instance, who really pays the import tax?
The old idea was that U.S. consumers would in all cases pony up the import tax in addition to the price of the imported product. In the case of most manufactured goods, however, the modern view is that market competition pushes all or part of the import tax back onto foreign sellers. There is no definitive answer as yet.
Amidst all this uncertainty, just imagine what a master political spin doctor like Mr. Obama could do with vast amounts of additional tax revenues drawn heavily from the wages and savings of the middle class, though widely misperceived to be paid disproportionately by lower-income consumers.
Proceeding from that misperception, he could create a vast new subsidy program that would offset by many multiples the VAT tax actually borne by these newly created welfare recipients. He could also increase the income tax on "the rich," saying that they and the middle class get a nearly free ride under the VAT compared to less affluent people who must spend everything on purchasing "taxable" essentials. Not so, but the VAT lends itself to spin.
Mr. Obama and Mrs. Pelosi might also use the VAT to fund "free" government-run medical care and hospitals for everyone, as well as "free" college education and "free" home mortgages.
How about a temporary VAT, solely to pay down the federal debt? When was the last time a tax ever went away? Or how about a smaller VAT of only 5%? Obviously, it could quickly grow. Any tax increase big enough to repay much of the huge federal debt would devastate the economy for years to come.
The one certainty about a VAT is its enormous revenue-producing potential. At a rate of 17% to 18%—about average for Europe—it could increase total federal taxes to 30% of GDP or more from 15% now, according to the Congressional Budget Office. In combination with higher federal spending, this could forever alter the balance between the public and private sectors.
America and its economy would be radically changed—and not for the better. The first priority in Washington should be to cut spending, not to add a powerful new weapon to the tax arsenal.
—Mr. Christian, a lawyer, is co-author of "The Value Added Tax: Orthodoxy and New Thinking" (Kluwer, 1989). Mr. Robbins is the chief economist at the Center for Strategic Tax Reform in Washington, D.C.
The Worst Bill Ever (ObamaCare)
This is an opinion piece in the Wall St. Journal this morning. If we only look at the financial impact of this bill (and ignore the obvious problems associated with our Government running healthcare or anything else) - this is a nightmare.
I continue to be amazed at how our leaders in Washington D.C. (Republicans & Democrats alike) act as though they can spend whatever they want - with no repercussions.
We currently have over $55 Trillion Dollars in debt/unfunded liabilities that we will never be able to re-pay - so why not add a few more trillion on top for additional healthcare entitlements?
As I've said before - this does not end well for us. The path we're on is unsustainable.
jg - November 2, 2009
_______________
NOVEMBER 1, 2009, 11:23 P.M. ET
The Worst Bill Ever
Epic new spending and taxes, pricier insurance, rationed care, dishonest accounting: The Pelosi health bill has it all.
Opinion
Wall St. Journal
Speaker Nancy Pelosi has reportedly told fellow Democrats that she's prepared to lose seats in 2010 if that's what it takes to pass ObamaCare, and little wonder. The health bill she unwrapped last Thursday, which President Obama hailed as a "critical milestone," may well be the worst piece of post-New Deal legislation ever introduced.
In a rational political world, this 1,990-page runaway train would have been derailed months ago. With spending and debt already at record peacetime levels, the bill creates a new and probably unrepealable middle-class entitlement that is designed to expand over time. Taxes will need to rise precipitously, even as ObamaCare so dramatically expands government control of health care that eventually all medicine will be rationed via politics.
Yet at this point, Democrats have dumped any pretense of genuine bipartisan "reform" and moved into the realm of pure power politics as they race against the unpopularity of their own agenda. The goal is to ram through whatever income-redistribution scheme they can claim to be "universal coverage." The result will be destructive on every level—for the health-care system, for the country's fiscal condition, and ultimately for American freedom and prosperity.
•The spending surge. The Congressional Budget Office figures the House program will cost $1.055 trillion over a decade, which while far above the $829 billion net cost that Mrs. Pelosi fed to credulous reporters is still a low-ball estimate. Most of the money goes into government-run "exchanges" where people earning between 150% and 400% of the poverty level—that is, up to about $96,000 for a family of four in 2016—could buy coverage at heavily subsidized rates, tied to income. The government would pay for 93% of insurance costs for a family making $42,000, 72% for another making $78,000, and so forth.
At least at first, these benefits would be offered only to those whose employers don't provide insurance or work for small businesses with 100 or fewer workers. The taxpayer costs would be far higher if not for this "firewall"—which is sure to cave in when people see the deal their neighbors are getting on "free" health care. Mrs. Pelosi knows this, like everyone else in Washington.
Even so, the House disguises hundreds of billions of dollars in additional costs with budget gimmicks. It "pays for" about six years of program with a decade of revenue, with the heaviest costs concentrated in the second five years. The House also pretends Medicare payments to doctors will be cut by 21.5% next year and deeper after that, "saving" about $250 billion. ObamaCare will be lucky to cost under $2 trillion over 10 years; it will grow more after that.
• Expanding Medicaid, gutting private Medicare. All this is particularly reckless given the unfunded liabilities of Medicare—now north of $37 trillion over 75 years. Mrs. Pelosi wants to steal $426 billion from future Medicare spending to "pay for" universal coverage. While Medicare's price controls on doctors and hospitals are certain to be tightened, the only cut that is a sure thing in practice is gutting Medicare Advantage to the tune of $170 billion. Democrats loathe this program because it gives one of out five seniors private insurance options.
As for Medicaid, the House will expand eligibility to everyone below 150% of the poverty level, meaning that some 15 million new people will be added to the rolls as private insurance gets crowded out at a cost of $425 billion. A decade from now more than a quarter of the population will be on a program originally intended for poor women, children and the disabled.
Even though the House will assume 91% of the "matching rate" for this joint state-federal program—up from today's 57%—governors would still be forced to take on $34 billion in new burdens when budgets from Albany to Sacramento are in fiscal collapse. Washington's budget will collapse too, if anything like the House bill passes.
• European levels of taxation. All told, the House favors $572 billion in new taxes, mostly by imposing a 5.4-percentage-point "surcharge" on joint filers earning over $1 million, $500,000 for singles. This tax will raise the top marginal rate to 45% in 2011 from 39.6% when the Bush tax cuts expire—not counting state income taxes and the phase-out of certain deductions and exemptions. The burden will mostly fall on the small businesses that have organized as Subchapter S or limited liability corporations, since the truly wealthy won't have any difficulty sheltering their incomes.
This surtax could hit ever more earners because, like the alternative minimum tax, it isn't indexed for inflation. Yet it still won't be nearly enough. Even if Congress had confiscated 100% of the taxable income of people earning over $500,000 in the boom year of 2006, it would have only raised $1.3 trillion. When Democrats end up soaking the middle class, perhaps via the European-style value-added tax that Mrs. Pelosi has endorsed, they'll claim the deficits that they created made them do it.
Under another new tax, businesses would have to surrender 8% of their payroll to government if they don't offer insurance or pay at least 72.5% of their workers' premiums, which eat into wages. Such "play or pay" taxes always become "pay or pay" and will rise over time, with severe consequences for hiring, job creation and ultimately growth. While the U.S. already has one of the highest corporate income tax rates in the world, Democrats are on the way to creating a high structural unemployment rate, much as Europe has done by expanding its welfare states.
Meanwhile, a tax equal to 2.5% of adjusted gross income will also be imposed on some 18 million people who CBO expects still won't buy insurance in 2019. Democrats could make this penalty even higher, but that is politically unacceptable, or they could make the subsidies even higher, but that would expose the (already ludicrous) illusion that ObamaCare will reduce the deficit.
• The insurance takeover. A new "health choices commissioner" will decide what counts as "essential benefits," which all insurers will have to offer as first-dollar coverage. Private insurers will also be told how much they are allowed to charge even as they will have to offer coverage at virtually the same price to anyone who applies, regardless of health status or medical history.
The cost of insurance, naturally, will skyrocket. The insurer WellPoint estimates based on its own market data that some premiums in the individual market will triple under these new burdens. The same is likely to prove true for the employer-sponsored plans that provide private coverage to about 177 million people today. Over time, the new mandates will apply to all contracts, including for the large businesses currently given a safe harbor from bureaucratic tampering under a 1974 law called Erisa.
The political incentive will always be for government to expand benefits and reduce cost-sharing, trampling any chance of giving individuals financial incentives to economize on care. Essentially, all insurers will become government contractors, in the business of fulfilling political demands: There will be no such thing as "private" health insurance.
***
All of this is intentional, even if it isn't explicitly acknowledged. The overriding liberal ambition is to finish the work began decades ago as the Great Society of converting health care into a government responsibility. Mr. Obama's own Medicare actuaries estimate that the federal share of U.S. health dollars will quickly climb beyond 60% from 46% today. One reason Mrs. Pelosi has fought so ferociously against her own Blue Dog colleagues to include at least a scaled-back "public option" entitlement program is so that the architecture is in place for future Congresses to expand this share even further.
As Congress's balance sheet drowns in trillions of dollars in new obligations, the political system will have no choice but to start making cost-minded decisions about which treatments patients are allowed to receive. Democrats can't regulate their way out of the reality that we live in a world of finite resources and infinite wants. Once health care is nationalized, or mostly nationalized, medical rationing is inevitable—especially for the innovative high-cost technologies and drugs that are the future of medicine.
Mr. Obama rode into office on a wave of "change," but we doubt most voters realized that the change Democrats had in mind was making health care even more expensive and rigid than the status quo. Critics will say we are exaggerating, but we believe it is no stretch to say that Mrs. Pelosi's handiwork ranks with the Smoot-Hawley tariff and FDR's National Industrial Recovery Act as among the worst bills Congress has ever seriously contemplated.
I continue to be amazed at how our leaders in Washington D.C. (Republicans & Democrats alike) act as though they can spend whatever they want - with no repercussions.
We currently have over $55 Trillion Dollars in debt/unfunded liabilities that we will never be able to re-pay - so why not add a few more trillion on top for additional healthcare entitlements?
As I've said before - this does not end well for us. The path we're on is unsustainable.
jg - November 2, 2009
_______________
NOVEMBER 1, 2009, 11:23 P.M. ET
The Worst Bill Ever
Epic new spending and taxes, pricier insurance, rationed care, dishonest accounting: The Pelosi health bill has it all.
Opinion
Wall St. Journal
Speaker Nancy Pelosi has reportedly told fellow Democrats that she's prepared to lose seats in 2010 if that's what it takes to pass ObamaCare, and little wonder. The health bill she unwrapped last Thursday, which President Obama hailed as a "critical milestone," may well be the worst piece of post-New Deal legislation ever introduced.
In a rational political world, this 1,990-page runaway train would have been derailed months ago. With spending and debt already at record peacetime levels, the bill creates a new and probably unrepealable middle-class entitlement that is designed to expand over time. Taxes will need to rise precipitously, even as ObamaCare so dramatically expands government control of health care that eventually all medicine will be rationed via politics.
Yet at this point, Democrats have dumped any pretense of genuine bipartisan "reform" and moved into the realm of pure power politics as they race against the unpopularity of their own agenda. The goal is to ram through whatever income-redistribution scheme they can claim to be "universal coverage." The result will be destructive on every level—for the health-care system, for the country's fiscal condition, and ultimately for American freedom and prosperity.
•The spending surge. The Congressional Budget Office figures the House program will cost $1.055 trillion over a decade, which while far above the $829 billion net cost that Mrs. Pelosi fed to credulous reporters is still a low-ball estimate. Most of the money goes into government-run "exchanges" where people earning between 150% and 400% of the poverty level—that is, up to about $96,000 for a family of four in 2016—could buy coverage at heavily subsidized rates, tied to income. The government would pay for 93% of insurance costs for a family making $42,000, 72% for another making $78,000, and so forth.
At least at first, these benefits would be offered only to those whose employers don't provide insurance or work for small businesses with 100 or fewer workers. The taxpayer costs would be far higher if not for this "firewall"—which is sure to cave in when people see the deal their neighbors are getting on "free" health care. Mrs. Pelosi knows this, like everyone else in Washington.
Even so, the House disguises hundreds of billions of dollars in additional costs with budget gimmicks. It "pays for" about six years of program with a decade of revenue, with the heaviest costs concentrated in the second five years. The House also pretends Medicare payments to doctors will be cut by 21.5% next year and deeper after that, "saving" about $250 billion. ObamaCare will be lucky to cost under $2 trillion over 10 years; it will grow more after that.
• Expanding Medicaid, gutting private Medicare. All this is particularly reckless given the unfunded liabilities of Medicare—now north of $37 trillion over 75 years. Mrs. Pelosi wants to steal $426 billion from future Medicare spending to "pay for" universal coverage. While Medicare's price controls on doctors and hospitals are certain to be tightened, the only cut that is a sure thing in practice is gutting Medicare Advantage to the tune of $170 billion. Democrats loathe this program because it gives one of out five seniors private insurance options.
As for Medicaid, the House will expand eligibility to everyone below 150% of the poverty level, meaning that some 15 million new people will be added to the rolls as private insurance gets crowded out at a cost of $425 billion. A decade from now more than a quarter of the population will be on a program originally intended for poor women, children and the disabled.
Even though the House will assume 91% of the "matching rate" for this joint state-federal program—up from today's 57%—governors would still be forced to take on $34 billion in new burdens when budgets from Albany to Sacramento are in fiscal collapse. Washington's budget will collapse too, if anything like the House bill passes.
• European levels of taxation. All told, the House favors $572 billion in new taxes, mostly by imposing a 5.4-percentage-point "surcharge" on joint filers earning over $1 million, $500,000 for singles. This tax will raise the top marginal rate to 45% in 2011 from 39.6% when the Bush tax cuts expire—not counting state income taxes and the phase-out of certain deductions and exemptions. The burden will mostly fall on the small businesses that have organized as Subchapter S or limited liability corporations, since the truly wealthy won't have any difficulty sheltering their incomes.
This surtax could hit ever more earners because, like the alternative minimum tax, it isn't indexed for inflation. Yet it still won't be nearly enough. Even if Congress had confiscated 100% of the taxable income of people earning over $500,000 in the boom year of 2006, it would have only raised $1.3 trillion. When Democrats end up soaking the middle class, perhaps via the European-style value-added tax that Mrs. Pelosi has endorsed, they'll claim the deficits that they created made them do it.
Under another new tax, businesses would have to surrender 8% of their payroll to government if they don't offer insurance or pay at least 72.5% of their workers' premiums, which eat into wages. Such "play or pay" taxes always become "pay or pay" and will rise over time, with severe consequences for hiring, job creation and ultimately growth. While the U.S. already has one of the highest corporate income tax rates in the world, Democrats are on the way to creating a high structural unemployment rate, much as Europe has done by expanding its welfare states.
Meanwhile, a tax equal to 2.5% of adjusted gross income will also be imposed on some 18 million people who CBO expects still won't buy insurance in 2019. Democrats could make this penalty even higher, but that is politically unacceptable, or they could make the subsidies even higher, but that would expose the (already ludicrous) illusion that ObamaCare will reduce the deficit.
• The insurance takeover. A new "health choices commissioner" will decide what counts as "essential benefits," which all insurers will have to offer as first-dollar coverage. Private insurers will also be told how much they are allowed to charge even as they will have to offer coverage at virtually the same price to anyone who applies, regardless of health status or medical history.
The cost of insurance, naturally, will skyrocket. The insurer WellPoint estimates based on its own market data that some premiums in the individual market will triple under these new burdens. The same is likely to prove true for the employer-sponsored plans that provide private coverage to about 177 million people today. Over time, the new mandates will apply to all contracts, including for the large businesses currently given a safe harbor from bureaucratic tampering under a 1974 law called Erisa.
The political incentive will always be for government to expand benefits and reduce cost-sharing, trampling any chance of giving individuals financial incentives to economize on care. Essentially, all insurers will become government contractors, in the business of fulfilling political demands: There will be no such thing as "private" health insurance.
***
All of this is intentional, even if it isn't explicitly acknowledged. The overriding liberal ambition is to finish the work began decades ago as the Great Society of converting health care into a government responsibility. Mr. Obama's own Medicare actuaries estimate that the federal share of U.S. health dollars will quickly climb beyond 60% from 46% today. One reason Mrs. Pelosi has fought so ferociously against her own Blue Dog colleagues to include at least a scaled-back "public option" entitlement program is so that the architecture is in place for future Congresses to expand this share even further.
As Congress's balance sheet drowns in trillions of dollars in new obligations, the political system will have no choice but to start making cost-minded decisions about which treatments patients are allowed to receive. Democrats can't regulate their way out of the reality that we live in a world of finite resources and infinite wants. Once health care is nationalized, or mostly nationalized, medical rationing is inevitable—especially for the innovative high-cost technologies and drugs that are the future of medicine.
Mr. Obama rode into office on a wave of "change," but we doubt most voters realized that the change Democrats had in mind was making health care even more expensive and rigid than the status quo. Critics will say we are exaggerating, but we believe it is no stretch to say that Mrs. Pelosi's handiwork ranks with the Smoot-Hawley tariff and FDR's National Industrial Recovery Act as among the worst bills Congress has ever seriously contemplated.
Health 'Debate' Deserves a Failing Grade
Instead of listening to politicians speak about what’s best for us – let’s learn a few things from someone who understands our healthcare system and the finances involved.
jg – November 18, 2009
_______________________________
NOVEMBER 18, 2009
Health 'Debate' Deserves a Failing Grade
Wall St. Journal
Opinion
By JEFFREY S. FLIER
As the dean of Harvard Medical School I am frequently asked to comment on the health-reform debate. I'd give it a failing grade.
Instead of forthrightly dealing with the fundamental problems, discussion is dominated by rival factions struggling to enact or defeat President Barack Obama's agenda. The rhetoric on both sides is exaggerated and often deceptive. Those of us for whom the central issue is health—not politics—have been left in the lurch. And as controversy heads toward a conclusion in Washington, it appears that the people who favor the legislation are engaged in collective denial.
Our health-care system suffers from problems of cost, access and quality, and needs major reform. Tax policy drives employment-based insurance; this begets overinsurance and drives costs upward while creating inequities for the unemployed and self-employed. A regulatory morass limits innovation. And deep flaws in Medicare and Medicaid drive spending without optimizing care.
Speeches and news reports can lead you to believe that proposed congressional legislation would tackle the problems of cost, access and quality. But that's not true. The various bills do deal with access by expanding Medicaid and mandating subsidized insurance at substantial cost—and thus addresses an important social goal. However, there are no provisions to substantively control the growth of costs or raise the quality of care. So the overall effort will fail to qualify as reform.
In discussions with dozens of health-care leaders and economists, I find near unanimity of opinion that, whatever its shape, the final legislation that will emerge from Congress will markedly accelerate national health-care spending rather than restrain it. Likewise, nearly all agree that the legislation would do little or nothing to improve quality or change health-care's dysfunctional delivery system. The system we have now promotes fragmented care and makes it more difficult than it should be to assess outcomes and patient satisfaction. The true costs of health care are disguised, competition based on price and quality are almost impossible, and patients lose their ability to be the ultimate judges of value.
Worse, currently proposed federal legislation would undermine any potential for real innovation in insurance and the provision of care. It would do so by overregulating the health-care system in the service of special interests such as insurance companies, hospitals, professional organizations and pharmaceutical companies, rather than the patients who should be our primary concern.
In effect, while the legislation would enhance access to insurance, the trade-off would be an accelerated crisis of health-care costs and perpetuation of the current dysfunctional system—now with many more participants. This will make an eventual solution even more difficult. Ultimately, our capacity to innovate and develop new therapies would suffer most of all.
There are important lessons to be learned from recent experience with reform in Massachusetts. Here, insurance mandates similar to those proposed in the federal legislation succeeded in expanding coverage but—despite initial predictions—increased total spending.
A "Special Commission on the Health Care Payment System" recently declared that the Massachusetts health-care payment system must be changed over the next five years, most likely to one involving "capitated" payments instead of the traditional fee-for-service system. Capitation means that newly created organizations of physicians and other health-care providers will be given limited dollars per patient for all of their care, allowing for shared savings if spending is below the targets. Unfortunately, the details of this massive change—necessitated by skyrocketing costs and a desire to improve quality—are completely unspecified by the commission, although a new Massachusetts state bureaucracy clearly will be required.
Yet it's entirely unclear how such unspecified changes would impact physician practices and compensation, hospital organizations and their capacity to invest, and the ability of patients to receive the kind and quality of care they desire. Similar challenges would eventually confront the entire country on a more explosive scale if the current legislation becomes law.
Selling an uncertain and potentially unwelcome outcome such as this to the public would be a challenging task. It is easier to assert, confidently but disingenuously, that decreased costs and enhanced quality would result from the current legislation.
So the majority of our representatives may congratulate themselves on reducing the number of uninsured, while quietly understanding this can only be the first step of a multiyear process to more drastically change the organization and funding of health care in America. I have met many people for whom this strategy is conscious and explicit.
We should not be making public policy in such a crucial area by keeping the electorate ignorant of the actual road ahead.
—Dr. Flier is dean of the Harvard Medical School.
jg – November 18, 2009
_______________________________
NOVEMBER 18, 2009
Health 'Debate' Deserves a Failing Grade
Wall St. Journal
Opinion
By JEFFREY S. FLIER
As the dean of Harvard Medical School I am frequently asked to comment on the health-reform debate. I'd give it a failing grade.
Instead of forthrightly dealing with the fundamental problems, discussion is dominated by rival factions struggling to enact or defeat President Barack Obama's agenda. The rhetoric on both sides is exaggerated and often deceptive. Those of us for whom the central issue is health—not politics—have been left in the lurch. And as controversy heads toward a conclusion in Washington, it appears that the people who favor the legislation are engaged in collective denial.
Our health-care system suffers from problems of cost, access and quality, and needs major reform. Tax policy drives employment-based insurance; this begets overinsurance and drives costs upward while creating inequities for the unemployed and self-employed. A regulatory morass limits innovation. And deep flaws in Medicare and Medicaid drive spending without optimizing care.
Speeches and news reports can lead you to believe that proposed congressional legislation would tackle the problems of cost, access and quality. But that's not true. The various bills do deal with access by expanding Medicaid and mandating subsidized insurance at substantial cost—and thus addresses an important social goal. However, there are no provisions to substantively control the growth of costs or raise the quality of care. So the overall effort will fail to qualify as reform.
In discussions with dozens of health-care leaders and economists, I find near unanimity of opinion that, whatever its shape, the final legislation that will emerge from Congress will markedly accelerate national health-care spending rather than restrain it. Likewise, nearly all agree that the legislation would do little or nothing to improve quality or change health-care's dysfunctional delivery system. The system we have now promotes fragmented care and makes it more difficult than it should be to assess outcomes and patient satisfaction. The true costs of health care are disguised, competition based on price and quality are almost impossible, and patients lose their ability to be the ultimate judges of value.
Worse, currently proposed federal legislation would undermine any potential for real innovation in insurance and the provision of care. It would do so by overregulating the health-care system in the service of special interests such as insurance companies, hospitals, professional organizations and pharmaceutical companies, rather than the patients who should be our primary concern.
In effect, while the legislation would enhance access to insurance, the trade-off would be an accelerated crisis of health-care costs and perpetuation of the current dysfunctional system—now with many more participants. This will make an eventual solution even more difficult. Ultimately, our capacity to innovate and develop new therapies would suffer most of all.
There are important lessons to be learned from recent experience with reform in Massachusetts. Here, insurance mandates similar to those proposed in the federal legislation succeeded in expanding coverage but—despite initial predictions—increased total spending.
A "Special Commission on the Health Care Payment System" recently declared that the Massachusetts health-care payment system must be changed over the next five years, most likely to one involving "capitated" payments instead of the traditional fee-for-service system. Capitation means that newly created organizations of physicians and other health-care providers will be given limited dollars per patient for all of their care, allowing for shared savings if spending is below the targets. Unfortunately, the details of this massive change—necessitated by skyrocketing costs and a desire to improve quality—are completely unspecified by the commission, although a new Massachusetts state bureaucracy clearly will be required.
Yet it's entirely unclear how such unspecified changes would impact physician practices and compensation, hospital organizations and their capacity to invest, and the ability of patients to receive the kind and quality of care they desire. Similar challenges would eventually confront the entire country on a more explosive scale if the current legislation becomes law.
Selling an uncertain and potentially unwelcome outcome such as this to the public would be a challenging task. It is easier to assert, confidently but disingenuously, that decreased costs and enhanced quality would result from the current legislation.
So the majority of our representatives may congratulate themselves on reducing the number of uninsured, while quietly understanding this can only be the first step of a multiyear process to more drastically change the organization and funding of health care in America. I have met many people for whom this strategy is conscious and explicit.
We should not be making public policy in such a crucial area by keeping the electorate ignorant of the actual road ahead.
—Dr. Flier is dean of the Harvard Medical School.
Fed Gets More Power & Responsibility - July 15 2010
Our wonderful leaders (actors) put on a grand show that would lead us to believe they would fight for the American people – and in the end – we see the truth.
Once again – we hear lots of rhetoric that the Federal Reserve’s power will be reduced (talk).
Once again, the Federal Reserve gains more power over us (actions).
We need leaders that are concerned about the future of the United States of America – not how good they look on camera.
jg – July 15, 2010
_________________________
JULY 15, 2010
Fed Gets More Power, Responsibility
By LUCA DI LEO
After fending off most challenges to its independence and winning new powers to oversee big financial firms, the Federal Reserve has emerged from a bruising debate on the overhaul of U.S. financial rules as perhaps the pre-eminent regulator in the sector. But that could only bring it added blame if things go wrong again.
Just a few months ago, amid populist anger at the Fed for failing to prevent the financial crisis of 2008 and bailing out Wall Street, Congress was talking of stripping the central bank of its supervisory oversight of banks or forcing it to submit to congressional audit of its interest-rate decisions.
Instead, the new law gives the Fed more power and a better tool box to help prevent financial crises. It will become the primary regulator for large, complex financial firms of all kinds, such as American International Group, the insurer which built a massive derivatives portfolio that regulators didn't see until it was too late.
Congress approved a sweeping rewrite of rules that touch every corner of finance in the biggest expansion of government power over banking and markets since the Great Depression. David Wessel, David Reilly and Al Lewis discuss the likely impact of Dodd-Frank.
This isn't the first time Congress has expanded the Fed's role. After the Great Depression, it passed the Employment Act in 1946, charging the Fed with averting the huge unemployment seen in the 1930s. After the double-digit inflation of the 1970s, the Fed was formally given a dual mandate of promoting both price stability and maximum sustainable employment. In the wake of the latest financial crisis, the Fed is effectively being told to add the maintenance of financial stability to its responsibilities.
The risks, however, are that the Fed still won't be able to prevent another crisis, and that it will be an even clearer target for blame if that occurs. "The bill has good intentions, but I'm worried about its implementation. If I were the Fed, I'd be seriously worried about being left holding the bag," said Anil Kashyap, a professor at the University of Chicago's Booth School of Business.
The Fed, of course, still shares responsibility for overseeing the financial system with the Federal Deposit Insurance Corp., the Securities and Exchange Commission and other agencies with which it sits on the new Financial Stability Council. And in a change, the new law requires the Fed to get the Treasury's go-ahead before using its extraordinary authority to lend to almost anyone, and limits loans to sectors of the economy rather than individual firms, such as Bear Stearns or AIG.
But the Fed's role is in most respects expanded by the legislation. The central bank will decide whether the council should vote on breaking up big companies if they threaten the stability of the entire financial system. It also will be able to force big financial companies—not just firms legally organized as banks—to boost their capital and liquidity. It will have the power to scrutinize the largest hedge funds.
All this could suck the Fed into political controversies. A decision to break up a big bank because of its size likely would subject the Fed to conflicting pressures from lobbyists and politicians. "It could give a lot of people reason to interfere," says Thomas Cooley, professor at the New York University Stern School of Business.
The Fed's role in the rescue of AIG and Bear Stearns, and its acquiescence in letting Lehman Brothers fail, led the public to question the Fed's powers and prompted Congress to consider curtailing its powers. One threat came from legislation sponsored by long-time Fed critic Ron Paul (R., Texas), author of the best-selling book "End the Fed," who sought to expand the authority of the congressional Government Accountability Office to audit the Fed. The new law expands the GAO's auditing authority but avoids nearly all provisions that alarmed the Fed.
In the end, the Fed's emergency lending during the 2008 crisis will face a one-time audit to be published by Dec. 2010 and it will be required—with a two-year lag—to reveal which banks borrow from its discount window. With lobbying from several presidents of the 12 regional Federal Reserve Banks, the Fed also fought off proposals to remove it from supervision of the large number of smaller banks.
"Basically, they ended up winning almost on everything that counts," says Laurence Meyer, a former Fed board governor now with economic consulting firm Macroeconomic Advisers LLC.
The Fed will surrender its responsibilities for consumer-finance regulation —never central to its mission or to its chairmen—which will be shifted to a new independent agency. It will be housed and financed by the Fed, but the central bank won't have any authority over it.
In a sign of the greater importance assigned to financial stability, the Federal Reserve Board will get a second vice chair position, this one responsible for supervision, to be chosen by the White House. One likely contender is Daniel K. Tarullo, a Georgetown University law professor who was President Barack Obama's first appointee to the Fed board and is the point person on bank regulation. He already has been pulling control of bank supervision to Washington from the New York and other regional Fed banks, which oversees the big Wall Street firms.
Congress also gave the Fed responsibility for setting the fees merchants must pay banks when customers use their debit cards, another political hot potato. The Fed will have nine months to collect data and decide on a ceiling for such fees that must be "reasonable and proportional to the cost of processing those transactions." During this time, there's certain to be a lobbying war pitting retailers and banks. The Fed faces criticism from consumer groups if it sets the fee threshold too high or anger from banks if the level is set too.
Once again – we hear lots of rhetoric that the Federal Reserve’s power will be reduced (talk).
Once again, the Federal Reserve gains more power over us (actions).
We need leaders that are concerned about the future of the United States of America – not how good they look on camera.
jg – July 15, 2010
_________________________
JULY 15, 2010
Fed Gets More Power, Responsibility
By LUCA DI LEO
After fending off most challenges to its independence and winning new powers to oversee big financial firms, the Federal Reserve has emerged from a bruising debate on the overhaul of U.S. financial rules as perhaps the pre-eminent regulator in the sector. But that could only bring it added blame if things go wrong again.
Just a few months ago, amid populist anger at the Fed for failing to prevent the financial crisis of 2008 and bailing out Wall Street, Congress was talking of stripping the central bank of its supervisory oversight of banks or forcing it to submit to congressional audit of its interest-rate decisions.
Instead, the new law gives the Fed more power and a better tool box to help prevent financial crises. It will become the primary regulator for large, complex financial firms of all kinds, such as American International Group, the insurer which built a massive derivatives portfolio that regulators didn't see until it was too late.
Congress approved a sweeping rewrite of rules that touch every corner of finance in the biggest expansion of government power over banking and markets since the Great Depression. David Wessel, David Reilly and Al Lewis discuss the likely impact of Dodd-Frank.
This isn't the first time Congress has expanded the Fed's role. After the Great Depression, it passed the Employment Act in 1946, charging the Fed with averting the huge unemployment seen in the 1930s. After the double-digit inflation of the 1970s, the Fed was formally given a dual mandate of promoting both price stability and maximum sustainable employment. In the wake of the latest financial crisis, the Fed is effectively being told to add the maintenance of financial stability to its responsibilities.
The risks, however, are that the Fed still won't be able to prevent another crisis, and that it will be an even clearer target for blame if that occurs. "The bill has good intentions, but I'm worried about its implementation. If I were the Fed, I'd be seriously worried about being left holding the bag," said Anil Kashyap, a professor at the University of Chicago's Booth School of Business.
The Fed, of course, still shares responsibility for overseeing the financial system with the Federal Deposit Insurance Corp., the Securities and Exchange Commission and other agencies with which it sits on the new Financial Stability Council. And in a change, the new law requires the Fed to get the Treasury's go-ahead before using its extraordinary authority to lend to almost anyone, and limits loans to sectors of the economy rather than individual firms, such as Bear Stearns or AIG.
But the Fed's role is in most respects expanded by the legislation. The central bank will decide whether the council should vote on breaking up big companies if they threaten the stability of the entire financial system. It also will be able to force big financial companies—not just firms legally organized as banks—to boost their capital and liquidity. It will have the power to scrutinize the largest hedge funds.
All this could suck the Fed into political controversies. A decision to break up a big bank because of its size likely would subject the Fed to conflicting pressures from lobbyists and politicians. "It could give a lot of people reason to interfere," says Thomas Cooley, professor at the New York University Stern School of Business.
The Fed's role in the rescue of AIG and Bear Stearns, and its acquiescence in letting Lehman Brothers fail, led the public to question the Fed's powers and prompted Congress to consider curtailing its powers. One threat came from legislation sponsored by long-time Fed critic Ron Paul (R., Texas), author of the best-selling book "End the Fed," who sought to expand the authority of the congressional Government Accountability Office to audit the Fed. The new law expands the GAO's auditing authority but avoids nearly all provisions that alarmed the Fed.
In the end, the Fed's emergency lending during the 2008 crisis will face a one-time audit to be published by Dec. 2010 and it will be required—with a two-year lag—to reveal which banks borrow from its discount window. With lobbying from several presidents of the 12 regional Federal Reserve Banks, the Fed also fought off proposals to remove it from supervision of the large number of smaller banks.
"Basically, they ended up winning almost on everything that counts," says Laurence Meyer, a former Fed board governor now with economic consulting firm Macroeconomic Advisers LLC.
The Fed will surrender its responsibilities for consumer-finance regulation —never central to its mission or to its chairmen—which will be shifted to a new independent agency. It will be housed and financed by the Fed, but the central bank won't have any authority over it.
In a sign of the greater importance assigned to financial stability, the Federal Reserve Board will get a second vice chair position, this one responsible for supervision, to be chosen by the White House. One likely contender is Daniel K. Tarullo, a Georgetown University law professor who was President Barack Obama's first appointee to the Fed board and is the point person on bank regulation. He already has been pulling control of bank supervision to Washington from the New York and other regional Fed banks, which oversees the big Wall Street firms.
Congress also gave the Fed responsibility for setting the fees merchants must pay banks when customers use their debit cards, another political hot potato. The Fed will have nine months to collect data and decide on a ceiling for such fees that must be "reasonable and proportional to the cost of processing those transactions." During this time, there's certain to be a lobbying war pitting retailers and banks. The Fed faces criticism from consumer groups if it sets the fee threshold too high or anger from banks if the level is set too.
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