Posts Tagged ‘government option’

Democrat’s Government Health Care Will Increase, NOT Decrease, Costs

July 19, 2009

We don’t have any idea how expensive Obama care will truly be.  You can bet your britches – and you may end up actually being forced to BET your britches – that it will cost a whopping load more than advertised.

First, some figures to show the invariable tendency of the government to dramatically underestimate the cost of its own programs:

– 2009 (January) CBO estimated that the bailout TARP plan would cost taxpayers $189 billion; instead, several weeks later the estimated cost was raised to $356 billion, and will eventually be much more by end of 2009.

– 1965 CBO estimated that Medicare Pt. A cost would be $9 billion by 1990; instead the cost was $66 billion in 1990.  They were wrong by a mere 633%.  Today the costs have exploded so incredibly that no one’s even bothering to go back now and try to figure out just how terribly wrong the forecasters truly were.

1965 CBO estimated that all (Part A plus Part B) Medicare cost would be $12 billion by 1990; instead the cost was $107 billion in 1990, and today it has a stratospheric total unfunded liability of $61.6 trillion.  Oops.

1987 CBO estimated that subsidy for Medicaid special hospitals would be $100 million by 1992; instead the cost was $11 billion in 1992There’s a nice 10,900% cost markup for you.  Better luck next time.

1988 CBO estimated that Medicaid homecare cost would be $4 billion by 1983; instead the cost was $10 billion in 1983.  But don’t worry; it’s only money.  And being off by a mere 150% is actually quite excellent by the “close enough for government work” mindset.

2003 White House estimate of Iraq War cost would be $60 billion; instead the cost so far has exceeded $600 billion.  Oh, well, if at first you don’t succeed, there’s always Afghanistan to screw up too.

Maybe you’d better sit down for this shocker: The U.S. government controls its costs the way Monty Python’s famous Mr. Creosote controlled his weight:

And like Mr. Creosote, it will be that extra tiny little bit of spending that finally causes the U.S. treasury to explode in a gory death.  Instead of the mint that blows up Mr. Creosote, it will be a dollar bill that blows up the U.S. government.

So when you hear the arguments over how much Obama’s health care “reform” will cost, realize that it isn’t a matter of whether it will cost $1 trillion, or $1.5 trillion, or $3.5 trillion; it’s a matter of whether it will cost one of those numbers times a factor of at least 10 or more.

The $1.5 trillion figure, which is currently being thrown around, is enough of a sticker shocker even without the realization that it will actually end up costing far, far more that even Democrats – fearing losing their seats – are beginning to bail out of it.

Still, the worse the plan looks, the faster Barack Obama wants it passed, before people know what a lemon they bought.  Obama has been claiming that we must immediately pass health care “reform” in order to save money in future years.  He has pounded away with that message again and again.

But that message is a complete lie.

Allow me to introduce Doug Elmendorf, the director of the Congressional Budget Office.  And allow me to cite an article by Rick Moran from Pajama’s Media to describe the truly dire situation we face, and which we are ignoring to our literal peril:

ObamaCare Gets a Red Light from Congressional Budget Office

The Democrats’ plan not only won’t save a dime, it will cost us billions over the next decade. (Also see PJTV: Nationwide Protests Target ObamaCare)

Doug Elmendorf, director of the nonpartisan Congressional Budget Office, was testifying before the Senate Budget Committee yesterday when he dropped a bombshell on the gathering that put a whole new spin on the effort by the Obama administration to reform the health care system.

The exchange with Democrat Kent Conrad was a shocker:

Conrad: Dr. Elmendorf, I am going to really put you on the spot because we are in the middle of this health care debate, but it is critically important that we get this right. Everyone has said, virtually everyone, that bending the cost curve over time is critically important and one of the key goals of this entire effort. From what you have seen from the products of the committees that have reported, do you see a successful effort being mounted to bend the long-term cost curve?

Elmendorf: No, Mr. Chairman. In the legislation that has been reported we do not see the sort of fundamental changes that would be necessary to reduce the trajectory of federal health spending by a significant amount. And on the contrary, the legislation significantly expands the federal responsibility for health care costs.

Conrad: So the cost curve in your judgment is being bent, but it is being bent the wrong way. Is that correct?

Elmendorf: The way I would put it is that the curve is being raised, so there is a justifiable focus on growth rates because of course it is the compounding of growth rates faster than the economy that leads to these unsustainable paths. But it is very hard to look out over a very long term and say very accurate things about growth rates. So most health experts that we talk with focus particularly on what is happening over the next 10 or 20 years, still a pretty long time period for projections, but focus on the next 10 or 20 years and look at whether efforts are being made that are bringing costs down or pushing costs up over that period.

As we wrote in our letter to you and Senator Gregg, the creation of a new subsidy for health insurance, which is a critical part of expanding health insurance coverage in our judgment, would by itself increase the federal responsibility for health care that raises federal spending on health care. It raises the amount of activity that is growing at this unsustainable rate and to offset that there has to be very substantial reductions in other parts of the federal commitment to health care, either on the tax revenue side through changes in the tax exclusion or on the spending side through reforms in Medicare and Medicaid.

Elmendorf made additional news yesterday by scaring the hell out of everyone when he released the latest CBO report on the long-term budget outlook that, in technical terms, says that we are in very big trouble:

Under current law, the federal budget is on an unsustainable path, because federal debt will continue to grow much faster than the economy over the long run. Although great uncertainty surrounds long-term fiscal projections, rising costs for health care and the aging of the population will cause federal spending to increase rapidly under any plausible scenario for current law. Unless revenues increase just as rapidly, the rise in spending will produce growing budget deficits. Large budget deficits would reduce national saving, leading to more borrowing from abroad and less domestic investment, which in turn would depress economic growth in the United States. Over time, accumulating debt would cause substantial harm to the economy. …

Measured relative to GDP, almost all of the projected growth in federal spending other than interest payments on the debt stems from the three largest entitlement programs — Medicare, Medicaid, and Social Security. For decades, spending on Medicare and Medicaid has been growing faster than the economy. CBO projects that if current laws do not change, federal spending on Medicare and Medicaid combined will grow from roughly 5 percent of GDP today to almost 10 percent by 2035. By 2080, the government would be spending almost as much, as a share of the economy, on just its two major health care programs as it has spent on all of its programs and services in recent years.

This double dose of doom has made absolutely no impact on Capitol Hill. Three House committees seem ready to report out a $1.5 trillion health care reform measure while the Senate Finance Committee appears close to a bipartisan deal on how to fund it — this, despite the fact that the CBO chief has told them there is no way to pay for it.

It is like being in a bad dream where there’s a fire in a room where a dinner party is being held and you’re the only one who notices. Everyone else is still playing cards, eating, or sitting around having witty conversations, all the while the fire laps closer and closer.

But it’s not a nightmare and lawmakers really are ignoring the fire. Elmendorf doesn’t come up with these projections to amuse himself and the wonks at CBO. He has outlined a recipe for catastrophe that will eventually make the United States a second rate economic power, not to mention impoverish the population.

The president and Democrats have been pitching this plan as a cost-saving measure. The president especially has been warning that we have to pass this reform bill quickly in order to get control of the spiraling deficits grimly outlined in Elmendorf’s long-term budget outlook.

But Elmendorf is saying that we can’t get there from here, that the numbers being used by Democrats to close the gap between what the bill will cost and how they plan to pay for it are simply not adding up.

There is another aspect to this reform measure that few are talking about: history. Every single entitlement program ever created by the federal government has cost the taxpayer more than advertised — in some cases, astronomically more.

Medicare is a perfect example. When the program was created in 1965, it cost taxpayers around $3 billion. At that time, the House Ways and Means Committee estimated that Medicare would cost $12 billion by 1990 — and that number was adjusted for a predicted rate of inflation. The actual cost of the program in 1990 was $107 billion. And today, Medicare costs the U.S. taxpayer $440 billion.

At best, Congress is guessing. The fact is, no one knows how much this monstrosity is going to cost, no one knows how it is going to be paid for, and no one knows what effect it will have on the quality of care or on the private insurance industry.

The ideas being implemented are untried. And, unlike NASA testing a new rocket or the Air Force testing a new fighter where failure is expected, there is no room for error. However this thing works itself out, we are stuck with it. History is a telling guide here as well; there has never been an entitlement once created that was later rescinded.

Elmendorf’s testimony and budget outlook should be heeded. Yes, we need to reform the health care system — badly. But the Democrats’ plan is not the only game in town. There are many proposals left unexamined by the Democrats in their haste to give their president a triumph. The partisan nature of the debate, the deliberate closing off of alternatives that would cost far less and perhaps do as much as is being proposed, and the damnable rush to get it all done before anything is digested or weighed against the long term, is frightening.

The major justification for speed in passing this legislation just went out the window with Director Elmendorf’s admission that the health care reform bill will only add many billions to the record deficits we will already be running over the next decade. Is that reason enough to slow down or even stop what the Congress is doing in order to think this thing through and try to come up with alternatives?

Not when it’s easier to ignore the fire lapping at your toes in order to grant a political victory to a president in trouble with the voters.

They say elections have consequences, and since the country voted for total Democrat control, we should let the Democrats have their shot.  That may be true.  But what we did as a nation in November was vote to slash our jugular veins, so that the blood of the entire nation (measured in the red ink of crippling debts) would gush out until we are left with less than a banana republic.

It is my sincerely held belief that those who truly understand the real picture are not telling us how truly bad things are, lest the people bring the nation down in one massively giant “bank run.”

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Tax Increases on ‘Rich’ People Planned by Democrats Would Hit Over A Million Small Businesses

July 17, 2009

Let’s file this under the category, “Yet another stupid Democrat idea”: Let’s finance a socialized medicine plan that Americans don’t want by taxing the owners of small business who create the few jobs we’ve got left.

Tax Increase on ‘Rich’ People Planned by House Democrats Would Strike More Than a Million U.S. Small Businesses
Tuesday, July 14, 2009
By Christopher Neefus

(CNSNews.com) – More than a million small business owners and about two-thirds of the profits earned by U.S. small businesses would be hit by the income tax increase on the “rich” that House Democratic leaders want to enact to pay for the health-care reform plan President Obama wants passed this summer, a taxpayer watchdog say s.

Ryan Ellis, director of tax policy for Americans for Tax Reform, told CNSNews.com he calculated that 1.09 million of 21.5 million small business owners would see a one- to three-percent surtax on their profits in order to fund the House of Representatives’ trillion-dollar health care reform bill.

While only about five percent of small business owners would be exposed to the extra charge, Ellis says two in every three dollars of profit made by small businesses would be subject to it.

Rep. Charles Rangel (D-N.Y.), chairman of the House Ways and Means Committee, announced late Friday that Democrats want to enact  this tax increase.

The plan reportedly would include a one percent increase in the income tax rate paid by individuals earning $280,000 or more and by households earning at least $350,000. Steeper rate increases of up to three percent would be imposed on those earning $500,000 and $1 million or more. The committee hopes these income-tax rate increases will raise about $540 billion for the federal government over a decade.

Small business owners would be subject to the income-tax rate increases because many of them report the profits of their small businesses on individual tax returns. As a result, the roughly five percent who make more than $200,000 a year would be hit with the extra tax.

Ellis said the Obama administration’s claims that only a few small businesses will be affected misses the point. “(T)hat’s what the Obama guys will always tell you. It’s a small, single-digit percentage of small businesses that would be affected by this, and that’s absolutely true. It’s probably somewhere between five and 10 percent … of all small businesses.

“But if you actually look at the small business profits being reported, two-thirds of all small business profits are reported in these households.”

Indeed, IRS figures from 2006, the most recent year reported, show that $479 billion of the $707 billion in small business profits was reported by households in the top two percent of earners, those earning more than $200,000.

Republicans went on the offensive after Rangel’s Friday announcement. A spokesman for House Minority Leader John Boehner (R-Ohio) said, “In the middle of a serious recession, with unemployment nearing double digits nationwide, the last thing we need is a tax increase on small businesses, which will cost the American economy even more jobs.”

Blue Dog Democrats in the House also voiced some concern. Rep. Jason Altmire (D-Pa.) told CQ Today, “I have a concern with going outside the health care system” when discussing funding options.

“I feel like the House has moved this issue so far to the left we’ve taken ourselves out of the discussion entirely.”

But Ways and Means Committee member Rep. Allyson Schwartz (D-Pa.) told The Washington Post that “if (the bill) works right,” the high earners who pay extra taxes will also see lowered health insurance premiums.

Ellis, however, is skeptical. “If you’re a very successful company and you’re making more than a million dollars a year,” he said, then at “a three percentage point surtax, you basically have to assume that their healthcare costs will go down by 3 percent of their profits in order to even themselves out.”

“That’s just not reasonable to expect,” he told CNSNews.com. “(T)here’s not one example of where the government is going to go in and take over something and start spending money on something and then it saves money.”

Rea Hederman, assistant director of the Center for Data Analysis at the conservative Heritage Foundation, also said small business owners will not see their money back unless they force their employees to take the proposed public health care option.

“The only way they would see reductions in health care,” he said, “is if small businesses just say we’re not going to offer health care to our employees all together, and I don’t think that’s a direction that people want to go,” Hederman said.

While the surtax for small businesses may top out at three percent, Hederman said, “in percentage terms, the tax burden is jumping somewhere between four and a half to five percent, and this is going to be combined with the expiration of some of President Bush’s tax cuts.”

The health care surtax would come in addition to the scheduled expiration of the Bush tax cuts at the end of 2010, which will move the federal top rate from 35 percent to 39.6 percent.

In a statement, Thomas Hodge, president of the nonpartisan Tax Foundation, said total top rates, including federal taxes, could push past the 50 percent mark in some states.

“Combining top federal and state rates, and factoring in all deductions, the government would be taking over half of every additional dollar from high-income taxpayers in two-thirds of the states under this latest funding scheme.”

According to Hederman, “Unfortunately, right now, businesses are going to have trouble pricing in (these) cost increases.

“(So) businesses will continue to try to wring out as much efficiency as they can in the labor force, and that means cutting back hours and cutting back jobs,” he said.

A May 2009 survey performed by the National Federation of Independent Businesses, small business owners identified high taxes as the second biggest problem facing them, trailing only poor sales.

The tax increase, if enacted, would take effect in 2011.

People see the “small number” of small businesses affected by the tax and think it’s no big deal.  But think about it: there’s the difference between small businesses that are truly small and small business that are big enough to actually hire people.

When I was a kid I had a paper route.  I didn’t work directly for the newspaper; rather, I was listed as “an independent contractor.”

I had a small business.  And like the overwhelming majority of small businesses, I didn’t make a ton of money, and I certainly didn’t hire anybody.

The small businesses that are going to be the most impacted – and the most negatively impacted at that – are the ones that hire people.  And given that these small businesses are going to experience the double whammy of having to pay for Obama’s imposed health care burden even as their profits are taxed to pay for everyone else’s health care, there are going to be a lot of job losses, as surely as 1 + 1 = 2.  Only a fool, or a Democrat, would 1) raise a business’ cost while 2) reducing its profits and NOT expect that business to cut back.

The Democrats’ plan imposes an additional 8% payroll tax on businesses unless they meet the Democrats’ health care requirements.

Another (related) factor that needs to be contemplated emerges from thinking about the concern of the blue dog Democrats regarding going outside the health care system to fund the Obama health care system.  If the darn Democrat health care plan is REALLY something that will save money for the health care system, then why do you have to go outside the system to pay for it?  Why impose so much in additional taxes for something that is supposed to cost LESS? The fact of the matter is that this thing is going to cost TRILLIONS.  It will be like Medicare, with its $61.6 trillion unfunded liabilities, and which is expected to go completely bankrupt by 2015.

And a frightening corollary to that is exactly why people like me keep calling Obama’s health care grab “socialized medicine” to begin with.  Because the plan will necessarily push people into the government plan in FAR greater numbers than Democrats claim will go in.  Small business who employ most American workers, squeezed by the double whammy, will have absolutely no choice but to push their workers into the government plan.

Democrats naively argue that a government plan would not be intended to replace private health care plans, but would only reduce costs by “competition.”  They just don’t have enough functioning brain cells to understand that a government system – which does NOT have to depend upon profitability the way private systems do, and which can draw its funding by forcing even its competition to pay for it through taxation – doesn’t “compete.”  It devours.  The way Republican Rep. Mike Pence put it:

But what I heard yesterday at my town hall meeting was profound skepticism about the introduction of a government option to compete with private health insurance companies within this economy. I think most Americans know that the government competes with the private sector the way an alligator competes with a duck. It consumes it.

That, and of course, the fact that every conspiracy theory about government health care is about to come true: Democrats are openly claiming that they are going to use Obama’s health care plan as a backdoor to socialized medicine.

Bottom line: we’re going to tax our producers into non-producers in order to create a socialized medicine boondoggle that is going to be a disaster.

It is long past time we stopped listening to liberals’ Marxist class warfare messages.  The rich aren’t the bourgeoisie, and the rest of us aren’t the proletariat.  Rather than welcoming the government seizing the rich’s wealth to create one social program after another, we seriously need to start demanding that government finally get the hell out of the way and let all the people have the freedom to invest and spend as we see fit.  For it is liberty and freedom, rather than tyranny and big-government control, that made this country great.  And only returning to the fundamental principles of liberty and freedom are going to be able to get us out of the massive crisis that too much government has forced us into.

Reuters’ Nine Reasons Democrats’ Healthcare Surtax Is Dangerous

July 16, 2009

Our republic is in the worst kind of danger.  No enemy could do to us from without what Obama and liberal Democrats are doing to us from within.

9 reasons Pelosi’s healthcare surtax is disastrous

by: James Pethokoukis

So what explains the crazy, cockeyed optimism of House Democrats? Maybe they still believe Team Obama’s rosy-scenario forecast that shows the stimulus package a) keeping unemployment under 8 percent this year and b) launching an economic boom next year and beyond. For some reason, though, they think the battered U.S. economy is so strong that politicians can pile tax upon tax on it with no fear of further harm. Less than three weeks after passing a costly cap-and-trade carbon emission plan, Pelosi & Co. have giddily unveiled a $1.2 trillion healthcare plan partially funded by a $544 billion surtax on the work and investment income of wealthier Americans, including small business owners.

[See why Obama’s economic gamble is failing.]

The ten-year proposal calls for a 1 percent surtax on adjusted gross income — including capital gains — between $350,000 and $500,000; a 1.5% surtax on income between $500,000 and $1 million; and a 5.4% surtax on income exceeding $1 million. (Interestingly, the House fact sheet on the surtax forgets to mention the highest tax rate. Hey, they were in a rush.) How bad an idea is this? Let me count the ways:

It’s not the first Obama tax hike. This tax would be in addition to the $1 trillion in new taxes that Obama called for in his budget released earlier this year. (And then there’s cap and trade, remember.) And if healthcare reform costs more than expected — what are the odds of that, you think? — the surtax would go up.

[See 5 economic stimulus plans better than the one we’ve got.]

It pushes income tax rates above a key threshhold. Once you take into account state income taxes, the top tax rate would sneak above 50 percent. Research by former White House economist Lawrence Lindsey has found that rates above 40 percent really start to hit economic growth especially hard.

It’s risky in a weak economy. Democrats love the “consensus view” when it comes to climate change, so how about the economy? The consensus view is for unemployment to hit double digits this year and stay high throughout 2010 and beyond as the economy staggers to its feet. Even Treasury Secretary Tim Geithner said “it seems realistic to expect a gradual recovery, with more than the usual ups and downs and temporary reversals.” In a “long recession” environment, do we really want a policy that, according to research that current White House economic adviser Christina Romer conducted at Stanford University, is “highly contractionary.”

It actually makes America’s healthcare problem worse. Entitlements, including Medicare, will eventually bankrupt the economy unless action is taken. Agreed. But lowering the potential U.S. growth rate will only make those problems worse by generating lower tax revenue and making the overall pie smaller than it would be otherwise. Yet many economists think government interventions in finance, housing, autos, energy and now healthcare will do just that. And adding layers of additional new taxes helps how?

It makes the tax code more lopsided and inefficient. As it is, the top 1 percent of Americans in terms of income pay 40 percent of taxes. Not only would this plan exacerbate this imbalance, it adds further complexity to the tax code. Most tax reformers favor a simpler system with fewer brackets and deductions matched by a lower rate. Indeed, Howard Gleckman of the Tax Policy Center points out the following:

Many of the uber-rich are unlikely to pay much more in taxes than they do now, despite the rate increase. Since we’d be returning to pre-1986 rates, we shouldn’t be surprised when the very wealthy reprise their pre-1986 sheltering behavior. The hoary financial alchemy of turning ordinary income into capital gains, morphing individuals into corporations, and deferring compensation will return. Remember, the targets of these tax hikes are the people who can most easily manipulate their income. The bad old days of bull semen partnerships may not return, but I suspect the financial Merlins are already cooking up new shelters for what promises to be a booming new market.

It hurts U.S. competitiveness. America already has the second highest corporate tax rate in the world. Under the House plan, the top U.S. income tax rate would be higher than the OECD (advanced economies) average of 42 percent. France and Germany, by contrast, are looking to keep rates stable or lower them. Pro-growth China doesn’t even tax investment income.

It ignores the lessons of Clinton. Democrats love to point out how the Clinton tax increases didn’t tank the economy back in the 1990s. Oh, you mean the economy that was expanding for more than two years before he signed his tax increases? The economy is far weaker today and may be anemic for some time given the history of economies that suffered a banking crisis.

It ignores the lessons of 1937. The slowly recovering 1930s economy weakened again in 1937 and 1938. Again, Christina Romer tells all:

In this fragile environment, fiscal policy turned sharply contractionary. The one-time veterans’ bonus ended, and Social Security taxes were collected for the first time in 1937. … GDP rose by only 5% in 1937 and then fell by 3% in 1938, and unemployment rose dramatically, reaching 19% in 1938. The 1937 episode is an important cautionary tale for modern policymakers. At some point, recovery will take on a life of its own, as rising output generates rising investment and inventory demand through accelerator effects, and confidence and optimism replace caution and pessimism. But, we will need to monitor the economy closely to be sure that the private sector is back in the saddle before government takes away its crucial lifeline.

Except in this the case, Uncle Sam is not taking away a lifeline but tightening the noose.

It pays for a wrong-headed healthcare reform plan. Health exchanges, a public option, subsidies, taxes … well, we could go on and on. Or we could try to create a simpler consumer-driven market. Harvard Business economist Regina Herzlinger recommends reforming the tax system by making the money spent by employers on health insurance available as cash, tax-free, to employees. “Insurers would then compete for customers with policies that offer better value for the money,” she wrote in an analysis for consultancy McKinsey. Not even on the Obamacrat radar screen, though.

All in all, it’s another sign from the Obama administration and the Obamacrats in Congress that their top priority is redistributing existing wealth — at least what’s left of it — rather than creating new wealth. That, I guess, explains those ear-to-ear smiles on Capitol Hill.

Small businesses – widely recognized as by far and away the biggest job- and wealth-creating engines for our economy – are about to get hit with a massive double whammy.  Since most file as “S corporations” by which they are taxed on their total earnings, they will fall under the Democrats plans to “tax the rich.”  More than 1 million of our most successful small businesses which employ the most workers will be hit by this tax.  And at the same time, all but the very smallest small business will be hit with Obama’s additional 8% payroll tax unless they provide health care insurance that passes liberals’ scrutiny.

Meredith Whitney, who gained a great deal of credibility after predicting much of the economic calamity that has since come to pass, has predicted that unemployment will surpass 13%, and continue to harm the banking industry and the overall economy for years to come.  What fool thinks it’s a good idea to impose job-crushing policies while our unemployment rate is already soaring?

We are facing deficits and debts that dwarf anything ever seen in human history.  And we are about to reach a critical mass, a point at which the entire house of cards comes crashing down.  And America is going to experience suffering on a scale never even imagined before.

Gerald Celente, CEO of the highly regarded Trends Research Institute, predicted that we will have food riots and tax revolts by 2012.  He said “America’s going to go through a transition the likes of which no one is prepared for.”

Obama and his giant nest of liberal snakes have already imposed shocking levels of debt on this nation that will almost certainly result in hyperinflation in coming years.  And he is hard at work poisoning our economy with stupid and immoral health care legislation and even more stupid and immoral cap-and-trade legislation that will kill our economic output without even slightly reducing overall global warming gasses.

What is going to happen in the next few weeks is the difference between whether this nation has any chance whatsoever to recover, or whether we are destined to become a banana republic spiralling down a cyle of violence and repressive government regimes.