QandO

Archive for the ‘Taxation’ Category

That’s the buzz going around some liberal blogs about a Rasmussen poll which claims that a plurality of Republicans polled would rather see tax cuts and a deficit than a balanced budget and tax increases (one supposes the increases would be used to balance it.  The history of our government says otherwise).

Of course I’m of the opinion there’s a third choice.  Cut spending commensurate with the tax cuts and reduce the size of government until you’re able to balance the budget.  Then start reducing the debt.  Apparently that wasn’t one of the choices however.

On to the poll.  Here are the results with which the left has decided it can use to deride the right as lying no-good deficit lovers:

Fifty percent (50%) of conservatives are comfortable with a budget deficit if taxes are cut versus 63% of liberals who favor a balanced budget with higher taxes. But then 50% of conservative voters also think the federal budget can be balanced without a tax increase. Sixty-one percent (61%) of liberals say that’s impossible.

Ah, ha! Apparently my choice is in the mix, albeit hidden – what do you supposed those 50% who think the federal budget can be balanced without a tax increase mean?

So let’s recast the findings – 50% of “conservatives” want tax cuts and can live with deficits, 50% of “conservatives” say a blanced budget can be done with spending cuts and 61% of “liberals” believe the only way to balance the budget is to increase taxes (apparently eschewing any spending cuts).

Fair recap?

Now here’s the shocker for you (ok, sarcasm again):

Sixty-two percent (62%) of the Political Class prefer a balanced budget with higher taxes, compared to just 26% of Mainstream voters. Forty-six percent (46%) of Mainstream voters would rather see a budget deficit with tax cuts.

Those in the Political Class are twice as likely as Mainstream voters – 70% to 35% – to believe it is not possible to balance the federal budget without raising taxes.

This is a clever way Rasmussen has of letting us know what our political betters think about those questions vs. what you the mainstream voters think (Proles! When will you wise up?).

So what this portion of the poll tells us is if the “Political Class” ever actually gets serious about debt and deficit reduction, you can throw the “cut spending” mantra right out the window (along with tax cuts) and bend over while grabbing your wallet.  At the rate they’re spending right now though, “serious about the deficit” is lightyears away from being considered.  Lip service, however, will be extravagent, since it’s politically cheap.

But it is, as usual, instructive to see how out of touch the “Political Class” is with it’s voters. 

And speaking of our policial masters and referencing the story about Joe Biden below, here’s the public’s answer to Bidenomics:

Fifty-three percent (53%) of voters believe decreasing the level of government spending will help the U.S. economy. Sixty-one percent (61%) say cutting taxes will boost the economy, the highest level of support since May.

What are the administion’s plans?  Increased government spending and higher taxes, of course.  If you want to see the “deficit of trust” Obama spoke about in the SOTU, read through the entire poll results.  It tells the story of the rise of the Tea Parties with percentages.

And we’re suposed to be the ‘ungovernable’ ones?

~McQ

Progressives like to talk about “progressive taxes”. It’s code language for screw the rich. That’s precisely what President Obama is proposing in his budget proposal. Now to be clear, none of this is new or a surprise – he said this is what he planned on doing all along. However that doesn’t make it “progressive” or sustainable. His budget proposal includes plans to:

—Raise the top two income tax rates for individuals, from 33 percent and 35 percent, to 36 percent and 39.6 percent, respectively. Unless Congress intervenes, those rates will rise next Jan. 1 when Bush’s tax cuts expire. That government would reap $365 billion over the next decade.

—Limit the itemized tax deductions high earners can claim for charitable donations, mortgage interest and state and local taxes, raising about $210 billion for the next decade.

—Increase the top capital gains tax rate from 15 percent to 20 percent for families making more than $250,000 a year and individuals making more than $200,000. The proposal would raise about $105 billion.

Of course we’re back to the old “static” analysis model here. These numbers hold if none of those effected do anything to protect their earnings and assets (or the market doesn’t research and find loopholes which allow such protection of assets) over the next decade.

So the chance of this revenue stream remaining intact and at the level suggested here is highly unlikely if you know anything about human nature and how markets work. Look at the UK for instance where the same sort of nonsense is happening:

Mike Warburton, senior tax adviser at Grant Thornton, one of Britain’s biggest accounting firms, said that clients were pursuing four main ways to avoid paying half their salary in tax: bumping up this year’s pay; storing up pay in their firm to be drawn down at a later date; leaving the country; or choosing to pay it to charity rather than the taxman.

“People are taking obvious avoidance measures because they are not prepared to pay 50 per cent tax,” Mr Warburton said.

It is unlikely they’ll be any more “prepared” to do so here than there.

Also unlikely are cuts in spending which are really what are needed. Once Congress sees this revenue stream established, even for a year – heck, even hypothetically – they’re likely to spend what is promised in the outlying years and use it in their PAYGO justifications.

Then there’s the aspect of his proposals which use the tax code to punish businesses or encourage them to not do business here at the level at which they are now engaged:

—Change the way profits made by investment fund managers are taxed, raising an additional $24 billion over the next decade.

—Impose a “financial crisis responsibility fee” on large financial institutions, raising $90 billion over the next decade.

—Restrict the ability of international companies to defer taxes on profits made overseas, raising about $26 billion over the next decade.

—Impose a total of about $39 billion in tax increases on oil, gas and coal companies over the next decade.

The tax on oil, gas and coal will simply raise the price at the retail level for all consumers, giving lie to the Obama promise that taxes won’t go up “one dime” for 95% of Americans. Additionally, the tax on the energy companies, passed on to consumers, will affect the poor much more than others. There are other ways to extract that pound of flesh than through income taxes and the administration knows that only too well, whether or not Obama supporters want to admit it or not.

And both he and they will have difficulty making that claim at all if this remains in the budget:

According to a report by The Hill President Barack Obama is seeking to end a middle-class tax break he once said would be permanent.

The $3.8 trillion budget request rolled out by the White House on Monday would renew the Making Work Pay tax credit for fiscal 2011, but then would have it sunset

Yes, that’s right, instead of making that middle class tax cut permanent as he promised, he’s proposing it “sunset” (i.e. go away) after FY 2011 (just before the 2012 election and the tax prep season so it won’t effect voters till after the election).

All in all, taxes would increase $1.1 trillion (again, assuming no person or no business effected does anything to avoid these taxes) over a decade.

Yes, that’s a lot of money – but then we’re running a deficit this year of $1.6 trillion, of which 40 cents of every dollar spent is borrowed. So while $1.1 trillion seems enormous, it’s really a drop in the ocean when looking at the promised spending over the next decade.

So listen carefully to soothing promises of fiscal restraint and concern about the deficit (and debt) in the coming weeks as the administration and Congressional Democrats give lip service to PAYGO and spending restraint. Then review this chart. The chart is their plan. If you can find any spending restraint or real deficit or debt reduction in there, please point it out. This budget and the outlying budgets are a plan for fiscal ruin. We now, for the first time, owe more than our entire GDP is worth, and the Obama administration apparently plans to see if it can double that in the shortest time possible. Any doubts about where this is headed?

And: are you beginning to understand what the Tea Parties are about yet?

~McQ

If you were to ask them though, the taxes will be collected only from corporations and the rich.  The idea is to stick them with the bill for services the rest of the voters have decided they’d like but can’t afford.  It’s a bit like getting on a train without a ticket, finding a well dressed man, and having the ticket collector point a gun at him and demand ticket money for your trip.

If I were the well dressed man, I’d probably find alternate transportation for my next trip. If I was a “rich” person in Oregon, I might begin scouting out a new place to live. The voters have certainly made it clear they feel they have every right to loot my earnings at will. Why would I want to give them any more chances?

Measure 66 raises the income tax paid by households earning at or above $250,000 a year or individual filers who make $125,000 or more. Measure 67 raises the state’s $10 minimum corporate income tax.

Together they generate an estimated $727 million, which has already been budgeted by the 2009 Legislature for public schools and other state services.

So instead of cutting budgets at the state level to what they can afford, Oregon voters have doubled down and bought into the populist notion that they can do it on back of those demonized rich people and evil corporations.

Corporations, of course, have a number of choices. Among them, if the tax isn’t too high, is pass the cost on to their customers. That would most likely be those who voted “yes” on Measure 67 ironically. If it is a large tax which is not easily passed on to the consumer, the corporation has other choices. It can cut headcount – lay people off – to recoup the cost. Or, if it is really crippling, find a new home for their business in a state which is friendlier toward business than is Oregon. What they most likely won’t do, at least not anytime soon, is hire and expand.  And if I was a corporation looking for a new home, this vote would have me cross Oregon off the list.

The “rich” also have options. Find ways to hide that income. Like increase 401k savings so that taxable income is below that number. Many are probably small businesses which will hide income in the business vs. putting it in the owner’s income. If none of that’s possible they may find a new home for themselves and their business. One of the benefits of being “rich” is it does tend to give one some options as to where to live.

That’s not to say they will or even that all of them object to this new tax, but Oregon voters shouldn’t fool themselves that this sort of taxation is beneficial in the long run to an atmosphere which will attract and keep businesses or people who have the money to help the economy. Oregon might be a nice place to live, but it’s not that nice – especially when alternatives exist.

UPDATE: Megan McArdle points out something about the  tax on business that makes it even worse:

The business tax changes apparently include a gross receipts tax, which is really an awful tax, especially during a downturn. Companies which are actually losing money may still owe taxes, which could hasten their closure, and the evaporation of any jobs they provide.

Any business that took in a dollar last year owe taxes on it. That means, as McArdle points out, marginal businesses who have just managed to hang on (and continue to provide employment) may be forced to lay off or close their doors and liquidate to pay the tax. A particularly “smart” move in a recession.

Additionally, as Tonus points out in the comments – the $727 million will be spent on the static analysis which said such a tax would yield that amount of revenue. But life isn’t static and those effected will immediately begin to do things which will lessen the impact on them and, of course, make that revenue stream smaller than anticipated. That means two things – more deficit spending and, most likely, more taxes on those who approved these to measures in order to make up the revenue shortfall.

~McQ

The progressive base is having conniptions over the failure of President Obama to get his agenda through Congress despite having supermajorities. Now that Obama is making token gestures (however feeble [via:HA]) towards fiscal sanity, they are experiencing political apoplexy:

As noted in quick hits by BDB and rayj, [UPDATE] and by David in a diary that just caused me to push back this diary’s publication time, Obama has now gone off the deep end. After passing a stimulus that most economists (not just liberal ones) said was too small, and that was made even more inadequate by being heavily tilted toward poor-performing tax-cuts, Obama is now intentionally recreating FDR’s mistake of 1937, when he prematurely cut back spending to try to balance the budget, and sent the country into a new recession.

[...]

Specifically: He’s going to announce a spending freeze on domestic programs (but not, of course, on the military) that is “projected to save $250 billion.” The rationale is that he wants to appease folks worried about runaway deficits. Which is just what FDR was worried about in 1937.

This is Bush-style idiocy. There is no other word for it.

The cause of this consternation is magical thinking on the part of the author, Paul Rosenberg.

Here, to remind you, is the chart I put together during the stimulus debate, showing, among other things, the relative ineffectiveness of tax cuts vs. spending in generating jobs, which is the key to getting the nation out of this recession–the only way that we can rationally hope to start bringing down the deficits:

While some tax cuts are much better than the real stinkers, it’s virtually a given that once Obama starts talking about tax cuts, the GOP is going to start demanding that Bush’s tax cuts be made permanent. Not only–as you can see from the chart–are these about the least helpful tax cuts of all, they are also heavily skewed toward helping the rich and the super-rich.

If you look closely at the chart you will be unsurprised to find that government spending is calculated to provide substantially more “bang for the buck” in creating wealth and jobs. That’s unsurprising because this chart is intended to support a progressive prescription for the economy. Of course it will show government as the answer.

Without arguing the statistical or modeling specifics behind the chart, there is one glaring item that reveals how much magical thinking went into its creation. By far the most “stimulating” actions set forth are “Temporary Increase in Food Stamps”(calculated to create 9,803,333 jobs), “Extending Unemployment Insurance” (9,236,667 jobs), and “Increased infrastructure Spending” (9,010,000 jobs). The closest tax-cutting measure, according to this analysis, in job creation is a “Payroll Tax Holiday” which is estimated to create 7,253,333 jobs. Do you see the problem?

How, exactly, do food stamps and unemployment benefits create jobs? Arguably, spending on infrastructure could create construction jobs on a temporary basis, although that hasn’t proven to be the case with the stimulus bill that was passed. But there is simply no logic to the idea that providing government benefits to the poor and unemployed will serve to create jobs, much less 9 to 10 million of them. That’s just magical thinking.

Rosenberg provides this explanation for the employment fairy (from Mark Zandi of Moody’s Economy.com):

Income support

The House stimulus plan includes some $100 billion over two years in income support for those households under significant financial pressure. This includes extra benefits for workers who exhaust their regular 26 weeks of unemployment insurance benefits; expanded food stamp payments; and help meeting COBRA payments for unemployed workers trying to hold onto their health insurance.

Increased income support has been part of the federal response to most recessions, and for good reason: It is the most efficient way to prime the economy’s pump. Simulations of the Moody’s Economy.com macroeconomic model show that every dollar spent on UI benefits generates an estimated $1.63 in near-term GDP.x Boosting food stamp payments by $1 increases GDP by $1.73 (see Table 2). People who receive these benefits are hard pressed and will spend any financial aid they receive very quickly.

Another advantage is that these programs are already operating and can quickly deliver a benefit increase to recipients. The virtue of extending UI benefits goes beyond simply providing aid for the jobless to more broadly shoring up household confidence. Nothing is more psychologically debilitating, even to those still employed, than watching unemployed friends and relatives lose their sources of support.xi Increasing food stamp benefits has the added virtue of helping people ineligible for UI such as part-time workers.

Whatever the virtues of income support, and even if that support will be quickly spent in the economy, there is no justification for concluding that it will expand the economy. At best, it can stabilize a downturn by maintaining some level of consumer spending. But that does not expand the economy in any way, shape or form, and it certainly doesn’t create jobs an unprecedented level as suggested by Rosenberg.

Indeed, in order to give money to the poor and jobless, the government has to take money fr0m someplace else. Since it doesn’t create anything, the government will either (i) tax those who are working and creating wealth at higher rates, (ii) borrow money, or (iii) print money. Again, these are not wealth producing actions, but instead wealth destroying ones. It is true that, assuming such income support shortens a downturn, tax receipts will eventually outpace the costs of funding those supports. What is not true is that the government benefits will create jobs.

On the one hand, of course, I don’t want to discourage the left from turning on Obama (enemy of my enemy and all that). It just pains me to see it done based on such absurd premises.

Barack Obama was quite fond of quoting Buffet during the campaign. My guess is he’ll not be as willing to quote Buffet about his opposition to the President’s proposed bank tax:

“I don’t see any reason why they should be paying a special tax,” said Buffett, the chairman and chief executive officer of Berkshire Hathaway Inc., in an interview on Bloomberg Television today. Supporters of the plan to tax the banks “are trying to punish people,” he said. “I don’t see the rationale for it.”

What he’s talking about, of course, is the tax Obama has proposed ostensibly to recover the losses incurred in the TARP program. Obama has targeted about 50 banks to make this repayment.

The levy would apply to firms with more than $50 billion in assets, including Wells Fargo and Goldman Sachs, two companies that Berkshire has investments in. It would exclude Fannie Mae and Freddie Mac, the government-sponsored mortgage lenders taken over by the U.S.

“Look at the damage Fannie and Freddie caused, and they were run by the Congress,” said Buffett. “Should they have a special tax on congressmen because they let this thing happen to Freddie and Fannie? I don’t think so.”

Of course Buffet throws out a point, which I’ve put it bold, that the administration, Democrats in general and the media have studiously avoided. That’s the role that the two quasi-governmental organizations, Freddie Mac and Fannie Mae, played in the financial meltdown (and how much of the TARP money they sucked down). In fact, the tax is as much about recovering the money they required as anything. But pointing that out would be detrimental to the narrative the administration has been building about the “greed of Wall Street” and their unilateral culpability. According to Bloomberg data, Freddie and Fanny owe about $110 billion. Buffet, of course, is not so easily fooled:

The levy would apply to firms with more than $50 billion in assets, including Wells Fargo and Goldman Sachs, two companies that Berkshire has investments in. It would exclude Fannie Mae and Freddie Mac, the government-sponsored mortgage lenders taken over by the U.S.

“Most of the banks didn’t need to be saved,” Buffett said. “Including Wells Fargo.”

The bank tax would raise $90 billion over 10 years and, of course, be paid for by the banks customers. Also note that the sum of $90 billion is very close to the amount owed by Freddie and Fanny.

Obama is correct – “we want out money back”. But we want it back from the institutions which wasted it. Of course that’s impossible since taxing Freddie and Fanny is taxing ourselves. Of course, so is taxing banks. However, it is much more useful to demonize them, play the greed card and pretend the government is blameless than to tell the truth, isn’t it?

I mean, if they told the truth, they’d have to implicate Congressional Democrats like Barney Frank, wouldn’t they – and that would never do.

~McQ

There’s a war going on within the Democratic party. And it is between the Krugman/Hamsher/Ed Schultz/Olberman wing of the extreme left and the more moderate (and politically aware) wing of the party. It’s focus is on health care. And the war was started Tuesday when Republican Scott Brown buried Democrat Martha Coakely and Teddy Kennedy’s legacy with a convincing defeat in the Massachusetts Senate special election. As I called it then, it was a game changer. The most immediate “game” it has changed is how to pass this health care monstrosity pending in Congress.

First the dawning awareness of what happened Tuesday to change the game from Lanny J. Davis (former counsel to Bill Clinton for two years):

Liberal Democrats might attempt to spin the shocking victory of Republican Scott Brown in Massachusetts by claiming that the loss was a result of a poor campaign by Martha Coakley. Would that it were so. This was a defeat not of the messenger, but of the message—and the sooner progressive Democrats face up to that fact, the better.

It’s the substance, stupid!

According to polls, fears about the Democrats’ health-care proposal played a prominent role in Mr. Brown’s victory yesterday. In the last several months, the minority congressional Republicans have dominated the message on health care—and stamped on the Democratic Party the perception that we stand for big government, higher taxes, and health insecurity when it comes to Medicare.

Perception? It’s 2000 pages of big government, higher taxes and “health insecurity” brought to you exclusively (since no Republicans have been allowed to participate) by Democrats. How is that just a perception, Mr. Davis?

But Davis is, at least, seeming to gain some insight as to what is going on. However, after saying “it’s the substance, stupid”, he claims that the reason for the public’s poor perception of the health care proposal is spin, not substance:

The Democrats have a simple message on health care that has still not really gotten through: If our bill passes, you never have to worry about getting, or losing, health insurance for the rest of your life. How is it that so few people have heard that message?

Very simply, it’s not gotten through because it’s not true. That certainly may be what Democrats hoped to accomplish, but that’s not at all what they’re crafted in this bill. So while Davis exhibits some inkling of what is going on, he’s still blinded to the reality of the true Democratic message. It is a big government, higher taxes and “health insecurity” monstrosity that the public rejects overwhelmingly.

Some Democratic Congressional types, however, are seeing the light. Here, for instance, is Senator Dianne Feinstein:

California Democrat Dianne Feinstein, for one, said the election of Republican Scott Brown in Massachusetts shows the fundamental political landscape has shifted and Democrats across the country have to take note, focusing on how to create jobs and keep people in their homes instead of trying to explain the need for sweeping social programs.

“I can tell you the situation has changed dramatically. And I think it’s a sweep across the country and I think that the (White House Economic Adviser) Larry Summers’s of the world have to see it, the administration has to see it and we have to see it. And Therefore everything is jobs and the economy and education. People are worried about education,” she said.

“You see anger. People are worried. And when they’re worried they don’t want to take on a broad new responsibility,” like health care reform, she said.

That is a politician in full survival mode sniffing the wind and determining how it is blowing. And she’d dead on right. She nails it. She’s figured it out. And that doesn’t bode well for HCR. It isn’t that the message hasn’t been presented properly like Davis claims. It is that the message has been rejected. The answer is “no”. The priorities have drastically shifted and it has taken a year for the out-of-touch Democrats to figure it out. But, as witnessed by DiFi (and Evan Bayh), some are beginning to do so.

That’s worrisome to the likes of Paul Krugman, as illustrated below, and to Joan Walsh of Salon.com:

Maybe House Democrats can pull this out, even with a gaping hole in White House leadership. Barney Frank seems to have thought better of his initial defeatism. But I have to say, I’m pretty close to giving up on Mr. Obama, who seems determined to confirm every doubt I and others ever had about whether he was ready to fight for what his supporters believed in.

Wow. If you recall, it was Ms. Walsh who claimed Republican criticism of Mr. Obama was “traitorous” and “un-American”. I’m sure since Walsh is doing it, this falls under “dissent is the highest form of patriotism” instead.  Walsh comes from the “damn the public’s wishes, full speed ahead” wing of the extreme left part of the Democratic party. She, like Krugman below (and I’d bet the words she used are really his, not hers – they’re very similar), want this travesty pushed through no matter what – precedent and rules be damned, pass the bill.

Her attitude reflects much of the netroots and a growing disillusionment with the Democrats in general, not just Obama. And it is possible that disillusionment may begin to effect the rank-and-file Dems as well. One of the things that was obvious in MA on Tuesday was the huge enthusiasm gap in the state. Congressional Democrats are well on their way to increasing that gap by their actions, or, more properly, lack of action:

So why even vote for Democrats now? Really – the Senate Democrats just made us ask ourselves that. Have a super majority is a very uncommon thing in the Senate, with the last time being in 1965. Now the Democrats are saying “well we can’t do anything unless we have a super majority again”, or in other words, “go ahead and stay home Democrats”.

This really shows that Democrats excel at one thing – being losers. We need a tidal wave of new blood in the party to push out the old farts, who are driving the Democratic party into the grave with them.

Final point – Republicans should take heart (the public’s reaction fits their ideology much better than it does the Democrat’s), but need to figure out quickly that this dissatisfaction and disillusionment doesn’t mean they are automatically validated as being the party of choice because of it. They’ve been the party of the only resort for the most part.

This is a rebellion of the independents which includes dissatisfied and disillusioned former Democrats and Republicans. Probably not the Democrats I cite above – as the writer indicates, they’ll stay home – but certainly those who would be characterized as “conservative” Dems. The movement is loosely called the “Teaparty” movement. Tuesday it elected its first major candidate. Unless the GOP realizes this and realizes it soon, they stand as good a chance as the Democrats to see incumbents go down in November. This movement is just as likely to back an independent candidate (NY 23) or an insurgent candidate (Rubio) as a party candidate.  That will become evident in the primaries.  This is no longer about party politics. This is about forcing an issue – smaller and less intrusive government, fewer taxes, more freedom.

Figure it out or join the unemployment line, Dems and GOP.

Fair warning.

~McQ

Jake Tapper, today, asking Presidential spokesperson Robert Gibbs about the bank tax:

TAPPER: On the fee for banks, without asking for any details, how can you guarantee that this, that this fee, tax, levy, whatever it ends up being, is not passed on to consumers and they take another hit when it comes to Wall Street?

GIBBS: Yeah, well, look, obviously, Jake we’ll have a chance to go through the structure of this. The economic team has worked for quite some time on a structure that will ensure that what taxpayers gave to banks to ensure their safety and security, in a time of crisis, is paid back in full. And I can assure you that is one of the things the economic team has taken into account in the structure.

Unless the “structure” plans to ensure bank fees aren’t raised in any other area to capture the money this “fee, tax, levy, whatever” from the banks, then of course banks are going to pass it on. If the “structure” is going to prevent such a raise in fees anywhere within the bank, then this isn’t a new tax, it’s a government takeover of the banks.

~McQ

Today the Wall Street Journal asks what many of us have been asking for quite some time – why aren’t the numerous and specific warnings about the real cost and destructiveness of the proposed health care plan being heeded?

Of course the simple answer is those who are determined to take health care under the government’s purview really don’t care – they finally have the opportunity long denied them and they plan on taking advantage of it. So, much like the “science” of man-made global warming, they’ve picked their narrative, settled on it and will not entertain anything which might impede them from attaining their goal – government control of the health care market.

Those who’ve read this blog are very familiar with how Democrats have gamed the system (CBO’s statutory 10 year window) and used cheap accounting tricks (collect taxes immediately, don’t start paying benefits for 5 years – gives the appearance of bending the cost curve down) to make the case that they’re actually spending less on health care over the years and saving us from the bankruptcy they claim the status quo will eventually bring.

Another report, which I mentioned last week, carries a devastating warning about the plan being considered behind closed doors by Congressional Democrats. Yet it has received no major media exposure.

It is the Centers for Medicare and Medicaid Services (CMMS) report. And chief actuary Richard Foster is very candid about the impact of what Congress is planning. Not the smoke and mirror show Congress puts out there, but a peek at the reality of what Congress is proposing:

Richard Foster, the chief actuary for the Centers for Medicare and Medicaid Services, reports that under his analysis national health spending will rise under the bills by $222 billion over the next 10 years. In other words, ObamaCare really does “bend the cost curve”—up.

Even that estimate exists only on paper, as Mr. Foster has the honesty to admit. Because “most of the coverage provisions would be in effect for only six of the 10 years of the budget period, the cost estimates shown in this memorandum do not represent a full 10-year cost for the proposed legislation,” he writes. The report is punctuated by phrases like “unrealistic” and “doubtful,” and Mr. Foster adds that “the scope and magnitude of these changes are such that few precedents exist for use in estimation.”

Let’s stop right here with the obvious point to be made. The $222 billion, as mentioned, is the estimate for the next 10 years. However, as Foster points out, the spending would occur in only 6 of those 10 years. So that spending is offset by 4 years of revenue collection. If we remove that buffer and simply take 6 into 222 and then multiply it by 10, we’re most likely a bit closer to the real spending number than the contrived one – $370 billion, a difference of a mere $148 billion. Or, in reality, the $222 is a number that was tweaked to ensure when it was added to the other numbers the total fell below the threshold of $900 billion – the point at which it was claimed the cost curve would be bent upward. Had Congress found that to get to the number they needed they would have to collect taxes for 10 years and not provide benefits for 8 years, that’s how the bill would have been written.

It was never really about actually bending the cost curve down – it was all about creating the perception that the cost curve was being bent down, nothing more.

And there’s more to understand about that $222 billion number:

That $222 billion is a net figure, even after accounting for the fact that most of the newly insured—18 million people—will be dumped into Medicaid, “where provider payment rates are well below average.” And for the fact that ObamaCare is “paid for” only in the sense that Medicare’s payments to doctors are assumed in the bill to be cut by more than 20% this spring and even deeper after that, which will never happen in practice.

Mr. Foster adds that other planned Medicare cuts would damage doctors and hospitals: “Over time, a sustained reduction in payment updates, based on productivity expectations that are difficult to attain, would cause Medicare payment rates to grow more slowly than, and in a way that was unrelated to, the providers’ costs of furnishing services to beneficiaries.” This is how price controls would work in practice, even as Medicare has hit its spending targets only four times in the last 25 years.

Again, we know that Congress plans a “doc fix” which will amend the law to keep the 20% cut from taking place this year. And there’s nothing, given the history of this program, that argues that 20% cut will ever take place. It is a figure based on an assumption that will most likely never happen. Note well the last sentence – with an addition of 18 million new Medicaid insured, how many times in the next 25 years do you supposed Medicaid will hit its spending targets? You might also want to keep in mind that is mostly a federally mandated program administered by the states who share the cost. What will this addition of 18 million new insured do to state budgets – especially if the assumed cuts in payments are never made?

But let’s say Congress, somewhere along the line, finds the intestinal fortitude to cut those payments to providers as they say they are. What would be the impact?

He says many providers will be forced to stop accepting patients who are insured by the government, as opposed to those who have private coverage “with relatively attractive payment rates.” The resulting two-tier health-care system “should be considered plausible and even probable initially.”

If they cut, those patients they bring on may not be able to find a health care provider, so the patients suffer. If they don’t make the cuts, spending goes through the roof and the taxpayer suffers. It’s a lose/lose. But what should be patently obvious to anyone reading all of this is the $222 billion net spending claim by Congress for this particular part of the health care reform bill is as bogus as their promise of transparency.

Just delving into the particulars of this one portion of the bill should disabuse any objective person of the belief that what is being proposed is going to cost less than what we presently have. It is all a wretchedly wrought political façade designed to gain your support for long enough to pass this monstrosity. And my guess is should it pass, we’ll all be poorer and eventually sicker for its passage.

~McQ

One of the more pernicious provisions of the ObamaCare bills working their way through Congress is the mandate to purchase health care insurance. It’s probably unconstitutional (arrogating to the federal government an unprecedented power to force Americans to purchase a service or product), but that isn’t going to stop it from being shoved down our collective throats anyway. According to a DKos blogger, however, the Senate bill removes the provision’s bite, which may render it constitutionally valid:

To briefly recap- the HCR requires everyone (except native americans, low income people, undocumented immigrants, followers of my cult, the grandfathered**, etc) to purchase health insurance. Violators will have to pay a $750 per head penalty on their tax returns starting in 2016. If you want to pull a Keith Olbermann and become a Mandate dodger, predictably, the HCR has this to say about it:

SEC. 5000A(g)(1)

(1) IN GENERAL.—The penalty provided by this section shall be paid upon notice and demand by the Secretary, and except as provided in paragraph (2), shall be assessed and collected in the same manner as an assessable penalty under subchapter B of 23 chapter 68.

The IRS will have your ass, etc, etc. All very predictable. UNTIL you read on to section (2):

(2) SPECIAL RULES.—Notwithstanding any other provision of law—
‘‘(A) WAIVER OF CRIMINAL PENALTIES.— In the case of any failure by a taxpayer to timely pay any penalty imposed by this section, such taxpayer shall not be subject to any criminal prosecution or penalty with respect to such failure.
‘‘(B) LIMITATIONS ON LIENS AND LEVIES.—The Secretary shall not—
‘‘(i) file notice of lien with respect to any property of a taxpayer by reason of any failure to pay the penalty imposed by this section, or
‘‘(ii) levy on any such property with respect to such failure.

Woah!!!! The mother of all loopholes! It turns out the mandate is not mandatory because the penalty is purely voluntary! What happens if you failed to pay that penalty? Nothing! No criminal charges will be filed, no penalties will be assessed, and the IRS has no right to file any lien on you. Imagine a judge saying to a convict: “This court hereby sentences you to death. Pssss- don’t worry, son- our electric chairs are not plugged in.”

Of course, just because the teeth were removed in the Senate bill doesn’t mean that they won’t be added back in when it gets reconciled with the House version.

Nevertheless, it is interesting that the Senate would make the penalty seemingly voluntary. I say “seemingly” because the provision’s language leaves open the door to other means of exacting a penalty from non-compliers. While Section 2 negates criminal penalties and prohibits liens or levies from attaching to a taxpayer’s property, just what constitutes someone’s property isn’t spelled out. It may surprise you to learn, for example, that tax dollars are not deemed your property by the federal government, such that once they are paid (or deemed owing) you don’t have any say in how they are spent outside the ballot box. By the same token, if you were to be due a tax refund of some sort, this provision appears to allow the federal government to withhold the $750 penalty. Similarly, it could also declare certain dollar-for-dollar income deductions to be invalid (up to $750) if you refuse to abide by the mandate. My reading of the provision would allow all sorts of federal government gimmicks to be used while still remaining within the letter of the law.

Another interesting aspect of Congress placing this muzzle on the mandate, is that we know it will raise costs. Indeed, the CBO has stated about other bills that an ineffective individual mandate would make the costs skyrocket as the uninsured wait until they are sick before getting any coverage. Without paying into the system from the start, this sick population will basically just receive heavily subsidized health care, paid for by the dopes who paid while they were healthy.

In short, Congress is faced with two poison pills and must choose one: either (i) unconstitutionally force Amercians to purchase insurance, or (ii) create mandates without teeth, and ensure that the bill costs far more than promised. It will be interesting to see which of the two survives.

What in the world are the Senate Democrats thinking?  Isn’t this supposed to be about “health care reform”?  Apparently their idea of reform is to take a system that has trillions of dollars in unfunded liabilities and expand it without ever addressing the underlying reason for the huge future debt?

Brilliant.  Just brilliant.

But apparently winning the process (passing something called “health care reform”) has become more important than the original purpose of “reform”.

This is just a stunningly bad idea, but one that seems to be generating some “enthusiasm” among Democrats and “progressives”:

Now, it appears, negotiators are making headway to ensure that the [Medicare] expansion would take place at a far quicker pace than any proposed public option. According to the well-placed source, Democrats are rallying behind a proposal that would allow a portion of the 55-64 year old age group to buy in to the Medicare system as early as 2010. By contrast, a public plan for insurance coverage would not come into being until 2014.

That group which would get immediate access, of course, would the the high-risk group that will cost the most to treat.

In addition to debating a potential start date for a Medicare buy-in proposal, Senate Democrats are also in negotiations over who, exactly, should be allowed to qualify for the expanded Medicare program. At this juncture, it doesn’t appear that everyone in the 55-64-age bracket would be granted access. Negotiators are considering limiting consumers to those who would qualify for high-risk insurance pools already set up under the Senate’s health care legislation. This would mean primarily those who have been uninsured for a certain amount of time, have a history of poor health or are unable to get insurance because of a preexisting condition. The Senate has already earmarked $5 billion for subsidies for this group to buy insurance and may increase that total to help them pay for Medicare coverage — should it become available to those under 65 and above 55 years of age.

Note that the subsidy is only to help this group buy insurance coverage under Medicare. It says nothing about the cost of that pool to Medicare. And, don’t forget, they’re cutting Medicare payments by $500 billion over then next 10 years.

Then, in 2014, they’re going to bring in the rest of that age group in total. And they’re going to tell you this will save money and “reform” health care?

What a load of horse apples. A little reminder for those who seem unable to remember or remain willfully ignorant:

According to the Medicare Trustees:

* Medicare’s expected future obligations exceeded premiums and dedicated taxes by $89 trillion.
* In other words, Medicare’s liability is about 5 1/2 times the size of Social Security’s ($18 trillion) and about six times the size of the entire U.S. economy.
* Throw in Medicaid, and health care spending alone will crowd out every other thing the federal government is doing by mid-century, says Goodman.

Yet to date, other than a claim they’re going to cut that $500 billion out of it – a claim I’d be willing to bet never happens – there is no recognition of the huge unfunded liability nor the fact that these additions they’re “negotiating” will simply swell it even more.

What does that mean to those starting to build a life for themselves now? Well, it isn’t pretty:

Future Payroll Tax Burdens. Currently, a 12.4 percent payroll tax on wages funds Social Se­curity and a 2.9 percent payroll tax funds Medicare Part A (Hospital Insurance). But if payroll tax rates rise to meet unfunded obligations:

* When today’s college students reach retirement (about 2054), Social Security alone will require a 16.6 percent payroll tax, one-third greater than today’s rate.
* When Medicare Part A is included, the payroll tax burden will rise to 25.7 percent – more than one of every four dollars workers will earn that year.
* If Medicare Part B (physician services) and Part D are included, the total Social Security/Medicare burden will climb to 37 percent of payroll by 2054 – one in three dollars of taxable payroll, and twice the size of today’s payroll tax burden!

Thus, more than one-third of the wages workers earn in 2054 will need to be committed to pay benefits promised under current law. That is before any bridges or highways are built and before any teachers’ or police officers’ salaries are paid.

That’s also before this latest hare-brained idea by the Democrats (adding another entire decade’s worth of people to Medicare).

Look, you don’t have to be a Harvard PhD to figure this out (in fact, it appears it’s better if you’re not). We are being again sold further down an unsustainable river by a bunch of yahoos who seemingly have no cognizance of the detrimental future impact of what they’re proposing.

Between the promises they’ve made with Social Security and Medicare/Medicaid, we’ll be broke before you know it:

* By 2020, in addition to payroll taxes and premiums, Social Security and Medicare will require more than one in four federal income tax dollars.
* By 2030, about the midpoint of the baby boomer retirement years, the programs will require nearly half of all income tax dollars.
* By 2060, they will require nearly three out of four income tax dollars.

And instead of fixing this, they’re now talking about adding to it and making it worse? If you need a picture (this is primarily for those Harvard PhDs who can’t seem to wrap their heads around the nonsense that’s being proposed) here you go:

This is the mess the Democrats are “enthusiastic” about adding on too with trillions more in unfunded liabilities without addressing the necessary reform to “bend the cost curve down”. It is, in the truest sense, generational theft. It is unacceptable. It is obviously unaffordable and, unfortunately, they don’t seem smart enough to realize that.

This is an outrage and they need to know that they are so far afield on this that they’ve lost site of the goal – reform which makes health care more affordable. This monstrosity just gets more expensive as they “negotiate”.

Just kill it.

~McQ