Member Of Obama’s Economic Recovery Advisory Board Attacks ObamaCare

Harvard University professor Martin Feldstein, adviser to both Republican and Democrat administrations, and currently serving as a member of Obama’s President’s Economic Recovery Advisory Board, has come out strongly against ObamaCare.

Unfortunately, Feldstein failed to see the folly of Obama’s stimulus porkulus.  Perhaps because of his “fool me once, shame on you; fool me twice, shame on me” realization, he is now dead set against Obama’s healthcare porkulus.

Feldstein once served as an adviser to Ronald Reagan.  Perhaps he finally thought about what Ronald Reagan said about the liberals attempt to seize health care and socialism.

From a speech Reagan gave:

One of the traditional methods of imposing statism or socialism on a people has been by way of medicine. It’s very easy to disguise a medical program as a humanitarian project. Most people are a little reluctant to oppose anything that suggests medical care for people who possibly can’t afford it.

Now, the American people, if you put it to them about socialized medicine and gave them a chance to choose, would unhesitatingly vote against it. We had an example of this. Under the Truman administration it was proposed that we have a compulsory health insurance program for all people in the United States, and, of course, the American people unhesitatingly rejected this.

And sure enough, and as Reagan predicted so many years ago, the American people – measured by every single poll across the board – have firmly rejected ObamaCare.

Kevin Price has written an article detailing Feldstein’s objections:

In a recent article in the Wall Street Journal (aptly titled “ObamaCare’s Crippling Deficits”), Feldstein states that “the higher taxes, debt payments and interest rates needed to pay for health reform mean lower living standards.”Feldstein has been an advisor to both Republicans and Democrats, but is known as a proponent of huge “stimulus packages” during economic decline. In spite of this, Obama probably did not make a particularly smart choice in picking the fiercely independent Feldstein. The one time advisor to Ronald Reagan publicly warned that president of the negative implications of the deficits in the 1980s. Those deficits were nothing compared to those provided in Obama’s budget. His deficits would last years after the recession is over and in spite of the massive tax increases that promise to accompany them. The Democrats correctly criticized Bush’s deficits. Feldstein notes that Obama’s deficits, because of its expensive health care agenda will reach $9.3 trillion — more than twice the amount of the previous administration.

In an earlier article in the Washington Post, Feldstein noted that “For the 85 percent of Americans who already have health insurance, the Obama health plan is bad news. It means higher taxes, less health care and no protection if they lose their current insurance because of unemployment or early retirement.” Feldstein also notes that the price of the program is enormous and would cost more than $1 trillion and would raise the current maximum tax rate from 35 to 45 percent.

Barack Obama has fundamentally been dishonest when it comes to the health care debate. Consistently he has been arguing that his agenda would lower cost and expand coverage. The reality is, his agenda would dramatically reduce the quality of coverage for those who currently enjoy the best health care system in the world and would be accompanied by the excessive costs so common in bureaucratically driven programs.

I thought it would be a good thing to acquaint people as to what a member of Obama’s President’s Economic Recovery Advisory Board – who initially supported Obama’s ideas – has to say about Obama’s approach to health care.

I find this particularly interesting in light of Obama’s vile demagoguery against those who protest his plan.  If you oppose his takeover, you are an ideological slave to the GOP, or a minion of the private health insurance companies.  And yet here is a man whom Obama personally selected to be an adviser, presumably for his wisdom, saying that ObamaCare will be an unmitigated disaster.

From The Wall Street Journal:

ObamaCare’s Crippling Deficits
The higher taxes, debt payments and interest rates needed to pay for health reform mean lower living standards.

By MARTIN FELDSTEIN

While the deficits caused by the fiscal stimulus package will end in 2011 and will help to sustain a fragile recovery in 2010, the deficits projected for the longer term are a threat to our economic future. The starting point for controlling those future deficits is for Congress to abandon the administration’s health-care plan—a plan that will cost more than $1 trillion.

The deficits projected for the next decade and beyond are unprecedented. According to an assessment released in March by the Congressional Budget Office (CBO), the president’s budget implies that deficits will average 5.2% of GDP over the next decade and will be 5.5% of GDP in 2019. Without the president’s proposals, the budget office forecasts a 2019 deficit of only 2% of GDP.

The CBO’s deficit projections are based on the optimistic assumptions that the economy will grow at a healthy 3% pace with no recessions during the next decade; that there will be no new spending programs after this year’s budget; and that the rising national debt will increase the rate of interest on government bonds by less than 1%. More realistic assumptions would imply a 2019 deficit of more than 8% of GDP and a government debt of more than 100% of GDP.

Such enormous deficits would crowd out productivity-enhancing investments in new equipment and software as the government borrows funds otherwise available to private investors. The result would be slower economic growth and a lower standard of living.

In the nearer term, the projected deficits could cause interest rates on bonds and mortgages to rise sharply if bond investors fear that the government will not prevent inflation. This is a greater risk now that more than half of the U.S. government debt is held by the Chinese and other foreign investors. Such an interest rate rise could kill a recovery in 2010 or 2011 and depress growth in the years that follow.

Dropping the Obama health plan would significantly reduce fiscal deficits over the next decade and help restore public confidence in the ability of Congress to control spending. The CBO estimates that the House committee versions of the Obama health plan would add more than $1 trillion to federal deficits over the next decade. But the actual costs would be much higher.

For starters, $1 trillion of extra debt-financed spending would cause the government to pay about $300 billion of extra interest in the next decade. Moreover, the CBO’s method of estimating the cost of such a program doesn’t recognize the incentives it creates for households and firms to change their behavior.

The House health-care bill gives a large subsidy to millions of families with incomes up to three times the poverty level (i.e., up to $66,000 now for a family of four) if they buy their insurance through one of the newly created “insurance exchanges,” but not if they get their insurance from their employer. The CBO’s cost estimate understates the number who would receive the subsidy because it ignores the incentive for many firms to drop employer-provided coverage. It also ignores the strong incentive that individuals would have to reduce reportable cash incomes to qualify for higher subsidy rates. The total cost of ObamaCare over the next decade likely would be closer to $2 trillion than to $1 trillion.

The administration’s claim that the health-care plan would be “self-financing” is both false and irrelevant. It is false because it would only be self-financing if one counts a variety of President Obama’s proposed tax increases—and even those would produce much less revenue than is assumed in the budget calculations. The claim is irrelevant because those tax increases have nothing to do with health care and could be used instead to reduce other projected deficits.

For example, the administration and the congressional designers of ObamaCare say they would finance a substantial part of health reform with the revenue from new taxes on corporate foreign profits and on high-income individuals. The likely revenue from these tax changes would be much less than the official estimates because of the induced changes in taxpayer behavior that the estimators ignore.

Previous experience with changes in the marginal tax rates of high-income individuals implies that the current proposal to raise the marginal tax rate to about 50% from today’s 40% would produce only about half of the official revenue estimates. No one knows how much of the estimated extra tax revenue on foreign profits would be lost as the resulting fall in international competitiveness reduces profits, and as businesses sell their overseas subsidiaries or shift their profits in other ways.

While abandoning health reform would be an important step, it would not be enough to limit the exploding level of future deficits and debt. That requires substantial reductions in existing spending programs, if large tax increases are to be avoided. Since Medicare is the largest contributor to the explosive growth in government spending, a good way to start shrinking government outlays would be by restructuring Medicare to shift more of its costs to supplementary private insurance, perhaps on an income-related basis.

Given the perceived need for significant additional tax revenue to shrink future fiscal deficits, there is now talk in Washington of introducing a value-added tax (VAT), the kind of national sales tax that European governments use to finance their welfare states. That would be a triply bad idea. Although it is a tax on spending, a VAT effectively raises marginal tax rates. Like the income tax, it reduces the reward for work and entrepreneurship by adding a tax to the prices of all goods and services. A VAT would also be grossly unfair to those whose lifetime savings would now be subject to a new tax when they start to spend those savings.

A VAT would open the door to an explosion of new spending programs. That’s because, no matter how low the initial rate, the tax rate would be drawn inevitably to European rates of more than 15%—on top of existing income and payroll taxes.

The key to raising revenue without raising marginal tax rates or creating a new tax is to reduce or eliminate some of the “tax expenditures” that now lower tax revenue by special deductions and exclusions. Ending the current exclusion from taxable income of employer payments for health insurance would increase income tax revenue by more than $1 trillion over the next five years and nearly $3 trillion over the next decade. Eliminating this subsidy would also lead to a restructuring of private health insurance that would give patients the incentive to seek more cost-effective care and thereby bring down the overall cost of health care.

Restructuring Medicare and reforming tax rules would be politically difficult. But a failure by Congress to address the exploding path of fiscal deficits would be morally irresponsible.

Mr. Feldstein, chairman of the Council of Economic Advisers under President Ronald Reagan, is a professor at Harvard and a member of The Wall Street Journal’s board of contributors.

From the Washington Post:

Obama’s Plan Isn’t the Answer
By Martin Feldstein

For the 85 percent of Americans who already have health insurance, the Obama health plan is bad news. It means higher taxes, less health care and no protection if they lose their current insurance because of unemployment or early retirement.

President Obama’s primary goal is to extend formal health insurance to those low-income individuals who are currently uninsured despite the nearly $300-billion-a-year Medicaid program. Doing so the Obama way would cost more than $1 trillion over the next 10 years. There surely must be better and less costly ways to improve the health and health care of that low-income group.

Although the president claims he can finance the enormous increase in costs by raising taxes only on high-income individuals, tax experts know that this won’t work. Experience shows that raising the top income-tax rate from 35 percent today to more than 45 percent — the effect of adding the proposed health surcharge to the increase resulting from letting the Bush tax cuts expire for high-income taxpayers — would change the behavior of high-income individuals in ways that would shrink their taxable incomes and therefore produce less revenue. The result would be larger deficits and higher taxes on the middle class. Because of the unprecedented deficits forecast for the next decade, this is definitely not a time to start a major new spending program.

A second key goal of the Obama health plan is to slow the growth of health-care spending. The president’s budget calls explicitly for cutting Medicare to help pay for the expanded benefits for low-income individuals. But the administration’s goal is bigger than that. It is to cut dramatically the amount of health care that we all consume.

A recent report by the White House Council of Economic Advisers claims that the government can cut the projected level of health spending by 15 percent over the next decade and by 30 percent over the next 20 years. Although the reduced spending would result from fewer services rather than lower payments to providers, we are told that this can be done without lowering the quality of care or diminishing our health. I don’t believe it.

To support their claim that costs can be radically reduced without adverse effects, the health planners point to the fact that about half of all hospital costs are for patients in the last year of life. I don’t find that persuasive. Do doctors really know which of their very ill patients will benefit from expensive care and which will die regardless of the care they receive? In a world of uncertainty, many of us will want to hope that care will help.

We are also often told that patients in Minnesota receive many fewer dollars of care per capita than patients in New York and California without adverse health effects. When I hear that, I wonder whether we should cut back on care, as these experts advocate, move to Minnesota, or wish we had the genetic stock of Minnesotans.

The administration’s health planners believe that the new “cost effectiveness research” will allow officials to eliminate wasteful spending by defining the “appropriate” care that will be paid for by the government and by private insurance. Such a constrained, one-size-fits-all form of medicine may be necessary in some European health programs in which the government pays all the bills. But Americans have shown that we prefer to retain a diversity of options and the ability to choose among doctors, hospitals and standards of care.

At a time when medical science offers the hope of major improvements in the treatment of a wide range of dread diseases, should Washington be limiting the available care and, in the process, discouraging medical researchers from developing new procedures and products? Although health care is much more expensive than it was 30 years ago, who today would settle for the health care of the 1970s?

Obama has said that he would favor a British-style “single payer” system in which the government owns the hospitals and the doctors are salaried but that he recognizes that such a shift would be too disruptive to the health-care industry. The Obama plan to have a government insurance provider that can undercut the premiums charged by private insurers would undoubtedly speed the arrival of such a single-payer plan. It is hard to think of any other reason for the administration to want a government insurer when there is already a very competitive private insurance market that could be made more so by removing government restrictions on interstate competition.

There is much that can be done to improve our health-care system, but the Obama plan is not the way to do it. One helpful change that could be made right away is fixing the COBRA system so that middle-income households that lose their insurance because of early retirement or a permanent layoff are not deterred by the cost of continuing their previous coverage.

Now that congressional leaders have made it clear that Obama will not see health legislation until at least the end of the year, the president should look beyond health policy and turn his attention to the problems that are impeding our economic recovery.

Martin Feldstein, a professor of economics at Harvard University and president emeritus of the nonprofit National Bureau of Economic Research, was chairman of the Council of Economic Advisers from 1982 to 1984.

George Will pointed out something interesting on ABC’s This Week yesterday:

WILL: When this campaign started a year ago, 87 percent of the American people had some form of health insurance. If this is signed into law, 94 percent will. So a 7 percent increase is what this war is about. And we read this morning in the paper that, in 2018, there will still be 23 million uninsured people.

So this massive takeover is all being done under the guise of providing coverage to a mere 7% of Americans.  We’re literally going to drive the entire health care system right off a cliff to “improve” health care for a tiny minority of people.

Reagan was right, even speaking to us from the grave, that Americans would reject medical socialism.  And Martin Feldstein – who wrongly joined Obama in supporting the stimulus (possibly because he failed to realize just how incompetent and corrupt and unforgivably partisan the Democrats would be with the stimulus) – is right about the unacceptable costs ObamaCare will ultimately impose on an already debt-ridden government.

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One Response to “Member Of Obama’s Economic Recovery Advisory Board Attacks ObamaCare”

  1. Effie Berry Says:

    Hi, great post there! I like it very much.

    This is my fav part:
    George Will pointed out something interesting on ABC’s This Week yesterday:

    WILL: When this campaign started a year ago, 87 percent of the American people had some form of health insurance. If this is signed into law, 94 percent will. So a 7 percent increase is what this war is about. And we read this morning in the paper that, in 2018, there will still be 23 million uninsured people.

    Thanks for posting it!

    Cheers!
    Effie

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