Observations: The QandO Podcast for 25 Nov 12
This week, Bruce, Michael, and Dale discuss Israel and Obamacare.
The direct link to the podcast can be found here.
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Pizza? This is about slow suffocation by government (update)
Rob Port brings attention to the Papa John’s story:
At Slate, Matthew Yglesias scoffs at Papa Johns’ founder John Schnatter saying the Affordable Care Act, Obamacare, will drive up costs for his company by roughly $0.20 per order, something his company will be passing along to customers.
“Stipulating for a moment that this is true, doesn’t it seem like a rather small price to pay?” asks Yglesias.
No, it’s not small at all.
Rob then covers just the Papa John’s part of this formulation:
Papa John’s operates 3,973 restaurants. I can’t figure out how many orders the company processes daily, but let’s assume a very conservative 100 orders per store. That’s 397,300 orders every day. Adding $0.20 to ever order in additional labor costs translates into just over $29 million in additional costs for Papa Johns customers annually.
But, of course, as you’ve already figured out, if that’s true for Papa John’s, it is probably true for most other companies in the US as well.
So as Rob says, “no, it’s not small at all”. In fact, it is potentially a huge increase in the price people will pay for all goods and services.
Papa John’s isn’t alone in seeing a price increase in their futures. As the magazine relates, in its most recent earnings call, McDonald’s said the health care plan will cost their stores an extra $10,000 to $30,000. While the vast expansion of government power involved in the bill will result in more federal expenditures, the pizza magnate’s comment highlights the fact that it will create an across-the-board surtax on virtually all expenditures by families and individuals. This will mean an increase in the cost of living that will hit the poor a lot harder than the rich the president claims to want to tax.
In fact, as pointed out, it has the same effect as a tax on the poor.
Yet the left simply seems unable to wrap their heads around that. Here’s a commenter to the article I took the paragraph above from:
It is shocking that the CEO of Papa John’s and this magazine commentator would begrudge the near-poor workers of that company health insurance — and better healthcare for a few cents per pie!! Our country is based on the premise that we all pay a little more to help those less fortunate — the key here is “a little more.” Does anyone really object to that??
Yes. Strenuously. And by the way, this country was not founded on the premise “that we all pay a little more to help those less fortunate” and claiming that to be so is an attempt to rewrite history. It was about providing everyone an equal opportunity under the law to succeed while protecting their basic rights to life, liberty and property.
So we have the probability that prices will increase in the future as companies charge more for their products to cover health care. And that brings us to a pretty basic point, here made by Bethany Mandel at Commentary Magazine:
What this person and other liberals have wrong is this: It’s not about the price of pizza. If it were actually possible to improve healthcare for millions of Americans and insure millions more, conservatives would be on board. The basis of conservative opposition to ObamaCare is this: We do not think it will help the majority of Americans. The bill is titled the “Affordable Care Act,” but does nothing to make healthcare more affordable, nor will it improve health care. In reality, it provides a worse standard of care at a higher cost.
Under ObamaCare, 17 million Americans will be added to Medicaid’s rolls in order to move some Americans from the uninsured to the insured column. Are they actually better off?
I, of course, wouldn’t be “on board” if it had to do with government intervention, however I understand the point she’s trying to make. What has been passed won’t a) reduce costs and make health care more affordable or b) improve health care.
It is the “big lie” writ large. The parameters defining health care delivery are finite, not infinite. You have 24 hours in a day and x number of providers. Is adding 17 million to the welfare portion of government health care (the one most providers refuse to take because of the supreme hassle and low reimbursement rate) really going to improve their lives?
As Avik Roy notes, even though we’ll be paying more across the board to make it possible, probably not:
In July 2010, at National Review Online’s Critical Condition blog, I wrote about a University of Virginia study, published in Annals of Surgery, finding that surgical patients on Medicaid endured a 97 percent higher likelihood of in-hospital death than patients with private insurance, and a 13 percent greater chance of death than those with no insurance at all. I noted several other clinical studies that showed similar results.
And that’s before the 17 million are added. This is the mess we find ourselves in when agenda driven politicians pass laws they haven’t even read over and above the objections of the majority of the people.
It’s hard to call that a “representative democracy” isn’t it?
And, no, this still isn’t about pizza.
UPDATE: Morning Bell (Heritage Foundation) weighs in:
At least 60 percent of firms are estimating Obamacare will raise their health care costs, according to a new study released Wednesday by Mercer, a human resources consulting firm. One-third of those expect a cost increase of 5 percent or more.
The study states:
The employers that will be hit hardest are those with large part-time populations—employers in retail and hospitality services. Nearly half of these employers (46%) expect PPACA will push up cost by at least 3% in 2014—and another third don’t yet know what the impact will be.
An example of the impact from the CEO of CKE Restaurants:
The money to comply with the [Affordable Care Act] must come from somewhere. We use our revenue to pay our bills and expenses, to pay down our debt, and we reinvest what’s left in our business. That’s how we create jobs. There’s no corporate pot of gold we can go to, to cover increased health care costs. New unit construction will cease if we have to allocate moneys for that construction to the ACA. And building new restaurants is how we create jobs.
As we’ve said many times before, this isn’t rocket science and they’re called “economic laws” for a reason. Unfortunately the left continues to ignore them (or pretend they don’t exist) with predictable results.
~McQ
Twitter: @McQandO
Medicare’s Doctor (and patient) trap
John Goodman poses a scenario for you to consider:
Suppose you are accused of a crime and suppose your lawyer is paid the way doctors are paid. That is, suppose some third-party payer bureaucracy pays your lawyer a different fee for each separate task she performs in your defense. Just to make up some numbers that reflect the full degree of arbitrariness we find in medicine, let’s suppose your lawyer is paid $50 per hour for jury selection and $500 per hour for making your final case to the jury.
What would happen? At the end of your trial, your lawyer’s summation would be stirring, compelling, logical and persuasive. In fact, it might well get you off scot free if only it were delivered to the right jury. But you don’t have the right jury. Because of the fee schedule, your lawyer skimped on jury selection way back at the beginning of your trial.
This is why you don’t want to pay a lawyer, or any other professional, by task. You want your lawyer to be able to reallocate her time — in this case, from the summation speech to the voir dire proceeding. If each hour of her time is compensated at the same rate, she will feel free to allocate the last hour spent on your case to its highest valued use rather than to the activity that is paid the highest fee.
None of us would ever want to pay a lawyer by task, would we (not talking about a will or legal document production here, but instead some form of defense against charges which necessitates a jury trial and requiring the accomplishment of many tasks)? We’d instead insist upon paying them for a package of services designed to do whatever is necessary to defend us to the best of their ability with the ultimate goal of us walking free.
Right?
So why is it we can’t demand the same of doctors? Why can’t we demand a package of services designed by them to address all of our medical problems?
Well if your stuck with Medicare or Medicaid, you’re stuck with government price fixing and payment by task, that’s why. First the price fixing:
Medicare has a list of some 7,500 separate tasks it pays physicians to perform. For each task there is a price that varies according to location and other factors. Of the 800,000 practicing physicians in this country, not all are in Medicare and no doctor is going to perform every task on Medicare’s list.
Yet Medicare is potentially setting about 6 billion prices across the country at any one time.
OK? Bad enough that Medicare has completely removed the price mechanism from the process. As economist Dr. Mark Perry notes:
These problems sound a lot like the deficiencies of Soviet-style central planning in general when the government, rather than the market, sets prices, see Economic Calculation Problem.
Exactly and stultifyingly obvious, correct? In fact, it’s something one shouldn’t have to point out. Nor, would it seem, should it be something that we’re doing either. But we are. You just have to remember, our government doesn’t care about history, because, well, you know, it will get it right where all these other governments have failed. Just watch.
If the price fixing isn’t bad enough, it has also hit upon a procedure that actually inhibits the delivery of good health care rather than incentivizing it.
Medicare has strict rules about how tasks can be combined. For example, “special needs” patients typically have five or more comorbidities — a fancy way of saying that a lot of things are going wrong at once. These patients are costing Medicare about $60,000 a year and they consume a large share of Medicare’s entire budget. Ideally, when one of these patients sees a doctor, the doctor will deal with all five problems sequentially. That would economize on the patient’s time and ensure that the treatment regime for each malady is integrated and consistent with all the others.
Under Medicare’s payment system, however, a specialist can only bill Medicare the full fee for treating one of the five conditions during a single visit. If she treats the other four, she can only bill half price for those services. It’s even worse for primary care physicians. They cannot bill anything for treating the additional four conditions.
So, for example, if you have diabetes, COPD, high blood pressure or any combination of a number of other chronic diseases, tough cookies, your doc can only treat one per visit – unless, of course, he or she wants to work for free on the others.
Don’t believe me?
[When Dr. Young] sees Medicare or Medicaid patients at Tarrant County’s JPS Physicians Group, he can only deal with one ailment at a time. Even if a patient has several chronic diseases — diabetes, congestive heart failure, high blood pressure — the government’s payment rules allow him to only charge for one.
“You could spend the extra time and deal with everything, but you are completely giving away your services to do that,” he said. Patients are told to schedule another appointment or see a specialist.
Young calls the payment rules “ridiculously complicated.”
That has nothing to do with being complicated. It has to do with stupidity overruling common sense and the stupidity being enforced by an uncaring bureaucracy. “Rulz is rulz, Doc”. Do what is best for your patient and do it for free – that’s one way to lower costs, isn’t it?
But don’t forget – government involvement will mean better care at lower cost. That’s the promise, right?
Instead government is now redefining “better” to mean “their way or the highway”. It has nothing to do with what is better for the patient or the doctor. It has to do with what is better politically. And, of course, better for the bureaucracy. In this case, that means squeezing the doctor for everything they can get at the expense of the patient. Since you don’t have a choice about Medicare when you reach 65, any doctor you see doesn’t have a choice about how he or she treats you.
The only choice you have?
Live with it … if you can.
~McQ
Twitter: @McQandO
SCOTUS takes on ObamaCare–Bigger than Roe v Wade?
ObamaCare, as mentioned in a previous post, gets its Constitutional review by the Supreme Court today. CATO’s Ilya Shapiro lays out the agenda:
This morning, as expected, the Supreme Court agreed to take up Obamacare. What was unexpected — and unprecedented in modern times — is that it set aside five-and-a-half hours for the argument. Here are the issues the Court will decide:
- Whether Congress has the power to enact the individual mandate. – 2 hours
- Whether the challenge to the individual mandate is barred by the Anti-Injunction Act. – 1 hour
- Whether and to what extent the individual mandate, if unconstitutional, is severable from the rest of the Act. – 90 minutes
- Whether the new conditions on all federal Medicaid funding (expanding eligibility, greater coverage, etc.) constitute an unconstitutional coercion of the states. – 1 hour
Those are critical questions. They tend to define in four points, how threatened our rights are by this awful legislation. Forget what it is about, consider to what level it intrudes and what, if found Constitutional, it portends.
If found Constitutional, you can take the actual Constitution, the one that no fair reading gives an inkling of support to such nonsense as ObamaCare, and cut it up for toilet paper. It will be, officially, dead.
A decision that supports those 4 points (or even some of them) means the end of federalism and the final establishment of an all powerful national government which can (and will) run your life just about any way it wishes. If it has the power to enact a mandate such as that called for in ObamaCare, it can mandate just about anything it wishes. And, if the new conditions on all federal Medicaid funding stand, the states have no grounds to resist or refuse other federal intrusion.
In any event, the Supreme Court has now set the stage for the most significant case since Roe v. Wade. Indeed, this litigation implicates the future of the Republic as Roe never did. On both the individual-mandate and Medicaid-coercion issues, the Court will decide whether the Constitution’s structure — federalism and enumeration of powers — is judicially enforceable or whether Congress is the sole judge of its own authority. In other words, do we have a government of laws or men?
If you’re devoted to freedom and liberty and opposed to intrusive and coercive government, you know how you want this to come out.
And it isn’t to the advantage of ObamaCare.
~McQ
Twitter: @McQandO
Study says health care costs projected to rise more under ObamaCare
Promises, promises, promises. President Obama promised the passage of the Affordable Care Act would lower health care costs across the board, making health care “more affordable”. The entire premise of the massive government intrusion in that market was to lower costs and make insurance more affordable.
A new study says that doing nothing would actually have been slightly less expensive. The irony is this isn’t some opposition think tank which has put up these numbers but the Centers for Medicare and Medicaid Services:
Despite President Obama’s promises to rein in health care costs as part of his reform bill, health spending nationwide is expected to rise more than if the sweeping legislation had never become law.
Total spending is projected to grow annually by 5.8 percent under Mr. Obama’s Affordable Care Act, according to a 10-year forecast by the Centers for Medicare and Medicaid Services released Thursday. Without the ACA, spending would grow at a slightly slower rate of 5.7 percent annually.
The primary reason, supporters say, is more people will have insurance.
CMS officials attributed the growth to an expansion of the insured population. Under the plan, an estimated 23 million Americans are expected to obtain insurance in 2014, largely through state-based exchanges and expanded Medicaid eligibility.
The federal government is projected to spend 20 percent more on Medicaid, while spending on private health insurance is expected to rise by 9.4 percent.
Anyone – do you know why “private health insurance costs” are expected to rise by 9.4%? Because the privately insured will be tapped to help pay the difference between what an expanded Medicaid base pays and what doctors charge. Or, in other words, they will be the victim of government intrusion and market distortion. And of course government is then going to point to the costs its distortion caused and claim it should help solve the problem it has created. And what will be eventual answer to those increased costs caused by government distortion be? Single-payer, of course.
This study doesn’t address the other real problem – you may expand Medicaid dramatically, but having that insurance doesn’t guarantee seeing a doctor. Other studies have shown that increasing the insurance base doesn’t decrease emergency room use, but instead increases it in the face of a building doctor shortage. And then, of course, there are those doctors who simply won’t take Medicaid (or any more than they now have) because of the low reimbursement rate.
So when the White House’s Nancy-Ann DeParle says:
“The Affordable Care Act creates changes to the health care system that typically don’t show up on an accounting table,” she said. “We know these new provisions will save money for the health care system, even if today’s report doesn’t credit these strategies with reducing costs.”
She’s also leaving out that part of the problem that doesn’t “show up on an accounting table” as well.
Bottom line, we were sold a lemon, a bill of goods, snake oil. All the ACA does is give the government a legal ability to intrude deeper and deeper in a market it really has no business being in at all and to distort that market even further. And that’s precisely what is going to happen. We all know that when government gets in as deep as it will be in this market, nothing ends up “costing less”.
~McQ
Twitter: @McQandO
ObamaCare will allow middle class retirees to go on Medicaid
Good thing we passed this ObamaCare monstrosity so we could finally find out what is in it. More and more surprises, as the Daily Caller points out:
President Barack Obama’s health care law would let several million middle-class people get nearly free insurance meant for the poor, a twist government number crunchers say they discovered only after the complex bill was signed.
The change would affect early retirees: A married couple could have an annual income of about $64,000 and still get Medicaid, said officials who make long-range cost estimates for the Health and Human Services department.
Brilliant. The states, which pay over 40% of Medicare costs, are, of course, not thrilled by this revelation.
Governors have been clamoring for relief from Medicaid costs, complaining that federal rules drive up spending and limit state options. The program is now one of the top issues in budget negotiations between the White House and Congress. Republicans want to roll back federal requirements that block states from limiting eligibility.
Medicaid is a safety net program that serves more than 50 million vulnerable Americans, from low-income children and pregnant women to Alzheimer’s patients in nursing homes. It’s designed as a federal-state partnership, with Washington paying close to 60 percent of the total cost.
Early retirees would be a new group for Medicaid. While retirees can now start collecting Social Security at age 62, they must wait another three years to get Medicare, unless they’re disabled.
Some early retirees who worked all their lives may not want to join a program for the poor, but others might see it as a relatively painless way to satisfy the new law’s requirement that most Americans carry health insurance starting in 2014. It would help tide them over until they qualify for Medicare.
Remember, they have a mandated requirement to carry insurance. They’re not eligible for Medicare and they’re retired. COBRA is very expensive. But the new rules in ObamaCare make those who are drawing up to $64,000 a year in retirement eligible for a program that is supposed to serve only the very poorest among us:
The Medicare actuary’s office roughed out some examples to illustrate how the provision would work. A married couple retiring at 62 in 2014 and receiving the maximum Social Security benefit of $23,500 apiece could get $17,000 from other sources and still qualify for Medicaid with a total income of $64,000.
That $64,000 would put them at about four times the federal poverty level, which for a two-person household is $14,710 this year. The Medicaid expansion in the health care law was supposed to benefit childless adults with incomes up to 133 percent of the poverty level. A fudge factor built into the law bumps that up to 138 percent.
The actuary’s office acknowledged its $64,000 example would represent an unusual case, but nonetheless the hypothetical couple would still qualify for Medicaid.
Now you’re saying, “wait a minute, they’re at 4 times the poverty level with their income and it clearly states that only those who are at 138% can get Medicaid – that’s exactly what $17,000 represents.
Oh, didn’t I tell you? ObamaCare’s new law doesn’t count Social Security as income. So in essence, our mythical couple only claims $17,000 a year income and qualifies.
So, they look at the options – let’s say COBRA would run $1,000 a month for the two of them for sake of argument (it could be much higher) and simple math. They’re looking at an outlay of $12,000 a year. Medicaid, however, is probably less than a $100 a month and copays. A thousand a month or a hundred a month – you make the call.
Here’s the bottom line truth:
Former Utah governor Mike Leavitt said bringing early retirees in will “just add fuel to the fire,” bolstering the argument from Republican governors that some of Washington’s rules don’t make sense.
“The fact that this is being discovered now tells you, what else is baked into this law?” said Leavitt, who served as Health and Human Services secretary under President George H.W. Bush. “It clearly begins to reveal that the nature of the law was to put more and more people under eligibility for government insurance.”
It is hard not to interpret it that way, isn’t it? Everyone claims they didn’t know this was “in there”. Really? And it literally has been discovered recently. Not only does it make you wonder what else is “baked into this law”, but it makes you realize how really “half baked” this law is.
This is a law that has to be repealed in full. It is terrible law. It continues to see little surprises like this pop to the surface. And, as governor Leavitt points out, these sorts of revelations do indeed point to the real nature of the law – that is to make more and more people dependent on government.
Any presidential candidate who is wishy-washy on this issue doesn’t deserve the time of day, much less your vote.
~McQ
Twitter: @McQandO
Ryan budget proposal: you can pay me now or you can really pay me a heck of a lot later (updated)
Problem: As a nation we’re in dangerous debt territory. If we don’t do something quickly and dramatically, we’re headed for some very rough and painful times.
But while it seems the American public senses this on the whole, polls seem to indicate that all the “free” stuff handed out by government is popular with a large percentage of the population. Or said another way, they understand that we have a debt problem, they understand the implications of that problem and they don’t mind spending cuts – just so the spending cuts don’t effect programs they like.
The problem is further compounded by an irresponsible administration which gives the debt problem lip service but submits budgets that exponentially increase the problem:
The president’s recent budget proposal would accelerate America’s descent into a debt crisis. It doubles debt held by the public by the end of his first term and triples it by 2021. It imposes $1.5 trillion in new taxes, with spending that never falls below 23% of the economy. His budget permanently enlarges the size of government. It offers no reforms to save government health and retirement programs, and no leadership.
Both of these facts make it hard for those who would actually like to address the problem of debt before it overwhelms us. That’s because they’ll really get no support politically from the administration, no call to arms and leadership, and the American people are proving to be fickle about the whole process sending very mixed signals.
Solution?
Well the obvious solution is to find some means of cutting spending to at least the level of revenue and to begin working to pay the debt down in an earnest and timely manner. What isn’t a solution is business as usual but on steroids as proposed by the President. So today, Rep. Paul Ryan (R-WI) introduced the GOP plan to address the problem. Or at least part of the problem. That of out-of-control spending and addressing the debt. How it will play with the American people remains to be seen, but it is both an earnest and timely proposal. It also makes some pretty dramatic cuts which is where you can expect to see the pushback.
For starters, it cuts $6.2 trillion in spending from the president’s budget over the next 10 years, reduces the debt as a percentage of the economy, and puts the nation on a path to actually pay off our national debt. Our proposal brings federal spending to below 20% of gross domestic product (GDP), consistent with the postwar average, and reduces deficits by $4.4 trillion.
But there’s pain in them thar words. And it means things are going to have to be quite different in some areas than they are now. Government is going to have to be rolled back. That is unless we’re partial to a complete collapse of our economy and our currency, hyper inflation and all the good times those developments would bring.
So to specifics in Ryan’s proposal. Addressing welfare in general, he says:
This budget will build upon the historic welfare reforms of the late 1990s by converting the federal share of Medicaid spending into a block grant that lets states create a range of options and gives Medicaid patients access to better care. It proposes similar reforms to the food-stamp program, ending the flawed incentive structure that rewards states for adding to the rolls. Finally, this budget recognizes that the best welfare program is one that ends with a job—it consolidates dozens of duplicative job-training programs into more accessible, accountable career scholarships that will better serve people looking for work.
As we strengthen and improve welfare programs for those who need them, we eliminate welfare for those who don’t. Our budget targets corporate welfare, starting by ending the conservatorship of Fannie Mae and Freddie Mac that is costing taxpayers hundreds of billions of dollars. It gets rid of the permanent Wall Street bailout authority that Congress created last year. And it rolls back expensive handouts for uncompetitive sources of energy, calling instead for a free and open marketplace for energy development, innovation and exploration.
I am quite pleased to see the second paragraph. It is indeed time to eliminate “corporate welfare” and subsidies for favored industries. It also takes on what we would call traditional welfare. And make no mistake about it Medicaid and food stamps are welfare. As for the “perverse incentives” Ryan points too, here’s what they’ve yielded recently:
I’m sure some of that comes with the economic downturn, but it also indicates the effect of the incentives to sign people up for the welfare program.
We can’t afford the level of welfare we’re paying out now – and that included corporate welfare and subsidies. We are a compassionate people, but I end up shaking my head when I hear government officials claiming that people at “4 times the poverty level” need help? Really? So what’s the purpose of the poverty level as a measure and why are we now convinced we have to “help” people well above that level?
Then there are the twin third rails of politics, but areas where dramatic reforms are absolutely necessary to get us on the right fiscal track as a country. And those are Medicare and Social Security. The Ryan plan:
Health and retirement security: This budget’s reforms will protect health and retirement security. This starts with saving Medicare. The open-ended, blank-check nature of the Medicare subsidy threatens the solvency of this critical program and creates inexcusable levels of waste. This budget takes action where others have ducked. But because government should not force people to reorganize their lives, its reforms will not affect those in or near retirement in any way.
Starting in 2022, new Medicare beneficiaries will be enrolled in the same kind of health-care program that members of Congress enjoy. Future Medicare recipients will be able to choose a plan that works best for them from a list of guaranteed coverage options. This is not a voucher program but rather a premium-support model. A Medicare premium-support payment would be paid, by Medicare, to the plan chosen by the beneficiary, subsidizing its cost.
In addition, Medicare will provide increased assistance for lower- income beneficiaries and those with greater health risks. Reform that empowers individuals—with more help for the poor and the sick—will guarantee that Medicare can fulfill the promise of health security for America’s seniors.
I’ve already seen some on the left characterizing this as "privatizing" Medicare. And, of course, as we all know, that’s dangerous as government always does it better – look at the budgets for example. Look at the debt.
In fact, what Ryan is talking about is giving seniors a choice vs. automatically enrolling them in a government insurance program that averages about $60 billion a year in waste, fraud and abuse. There will be a subsidy – probably means tested. Is the the ideal libertarian answer? No. But as I’ve said before, freedom is choice and any legislation that expands that is at least a step in the right direction.
We must also reform Social Security to prevent severe cuts to future benefits. This budget forces policy makers to work together to enact common-sense reforms. The goal of this proposal is to save Social Security for current retirees and strengthen it for future generations by building upon ideas offered by the president’s bipartisan fiscal commission.
Perhaps raise the caps (I gave a certain percentage to my 401k regardless of how much I earned, so doing the same with Social Security doesn’t really bother me. And it will provide increased revenue for the fund. Again, ideal? No, but then I don’t consider either Medicare or Social Security to be “welfare” since most participants have paid into those systems for their entire working life. But there are changes which will have to be made. I don’t favor means testing if the cap is raised. But I do think that a hard look at the retirement age is necessary. My ideal outcome, obviously, would be getting government out of the retirement income business, but that’s not going to happen. So Social Security has to be made self-supporting and not a drain on the budget – as does Medicare.
Budget enforcement: This budget recognizes that it is not enough to change how much government spends. We must also change how government spends. It proposes budget-process reforms—including real, enforceable caps on spending—to make sure government spends and taxes only as much as it needs to fulfill its constitutionally prescribed roles.
If we don’t get some restrictions on government spending, nothing is going to change. Nothing. We’ve watched Congress talk the talk for decades, ala Nancy PAYGO Pelosi. But they ignore their own legislation and policy at will. As Ryan says, there have to be “real, enforceable caps on spending”. I interpret that as “you cannot and will not spend more than you take in”. We’ll see how the Congress interprets that.
Tax reform: This budget would focus on growth by reforming the nation’s outdated tax code, consolidating brackets, lowering tax rates, and assuming top individual and corporate rates of 25%. It maintains a revenue-neutral approach by clearing out a burdensome tangle of deductions and loopholes that distort economic activity and leave some corporations paying no income taxes at all.
Here is something that is going to be as hard to do as entitlement reform. Why? Because the tax system provides Congress with another way to wield its power. But the way it has wielded this power has done precisely what Rep. Ryan points too here – it has “distort[ed] economic activity.” Make the system simple, remove the loopholes, broaden the base (get some more “skin” in the game from those who now don’t pay taxes) and my guess is you’ll not only see an increase in revenue, but a far greater increase in economic activity.
Bottom line: We are in a “you can pay me now or you can pay me later” moment. And if we wait, we’re going to be paying a price we’re just not willing to pay, all because we chose to avoid the pain now. I’m sure the opponents of this proposal are going to call it “extreme” and something that will “hurt the children”. Trust me, if you want to see extreme, put it off until this house of cards collapses. And if you want to avoid “hurting the children”, man up and face the pain now to avoid it later when it really will “hurt the children”.
UPDATE: Chris Edwards at CATO gives his take on the Ryan budget. I’m pretty much agreed with everything Edwards says:
- Ryan doesn’t provide specific Social Security cuts, instead proposing a budget mechanism to force Congress to take action on the program. It is disappointing that his plan doesn’t include common sense reforms such raising the retirement age.
- Ryan finds modest Medicare savings in the short term, but the big savings occur beyond 10 years when his “premium support” reform is fully implemented. I would rather see Ryan’s Medicare reforms kick in sooner, which after all are designed to improve quality and efficiency in the health care system.
- Ryan adopts Obama’s proposed defense (security) savings, but larger cuts are called for. After all, defense spending has doubled over the last decade, even excluding the costs of wars in Iraq and Afghanistan.
- Ryan includes modest cuts to nonsecurity discretionary spending. Larger cuts are needed, including termination of entire agencies. See DownsizingGovernment.org.
- Ryan makes substantial cuts to other entitlements, such as farm subsidies. Bravo!
- Ryan would turn Medicaid and food stamps into block grants. That is an excellent direction for reform, and it would allow Congress to steadily reduce spending and ultimately devolve these programs to the states.
- Ryan would repeal the costly 2010 health care law. Bravo!
Here’s a chart Edwards includes in his post:
I’m a huge supporter of military spending in order to maintain our national security and technological edge, but I find it hard to believe that there aren’t many places where savings could be accrued in “Security”. And I’d also note under the broad “Security” umbrella fall many other programs that could be cut – like the entire TSA. But, in any event, it is an area that should also be looked at with an eye for cutting spending. It would get us to our goal of paying down the debt even sooner and it can be done without jeopardizing our security (cut costs not capability).
UPDATE II: Geoff over at Ace of Spades gives a little context to the Ryan proposal:
Now, where I come from, the “extremes” are on either side of a situation, right?
~McQ
Is the US bankrupt?
A good number of voices are beginning to say that technically, if not in fact, the country is bankrupt.
America is a "Mickey Mouse economy" that is technically bankrupt, according to Jochen Wermuth, the Chief Investment Officer (CIO) and managing partner at Wermuth Asset Management.
"America today looks like Russia in 1998. Consumers, companies and the government are all highly indebted. America as a result is a bankrupt Mickey Mouse economy," Wermuth told CNBC.
Wermuth goes on to say that if the same IMF team that managed the 1998 Russian financial crisis in Russia were to walk into the US Treasury today, “they would withdraw support for current US policy”.
And don’t forget Mort Zuckerman who called the present policies our “economic Katrina”.
But as bad as present policies are, they aren’t solely the reason we’re in the awful economic shape we’re in. We have a history of that.
"Even before the (Troubled Asset Relief Program) and the expansion of the Fed’s balance sheet, total US public and private debt as a percentage of GDP in the US stood at 290 percent, that figure is now far higher," Wermuth added.
Laurence Kotlikof explains it in terms of a “fiscal gap”.
The fiscal gap is the value today (the present value) of the difference between projected spending (including servicing official debt) and projected revenue in all future years.
The IMF pointed out in its last report that the US must close this fiscal gap to “stabilize the debt to GDP ratio”. The IMF estimates ““closing the fiscal gap requires a permanent annual fiscal adjustment equal to about 14 percent of U.S. GDP.”
So what does that mean in dollars?
To put 14 percent of gross domestic product in perspective, current federal revenue totals 14.9 percent of GDP. So the IMF is saying that closing the U.S. fiscal gap, from the revenue side, requires, roughly speaking, an immediate and permanent doubling of our personal-income, corporate and federal taxes as well as the payroll levy set down in the Federal Insurance Contribution Act.
Note the two words – “immediate” and “permanent”. In order to pay off the huge debt our “betters” in Washington DC have run up over the years, strictly from the revenue side, our taxes would have to see an “immediate” and “permanent” doubling.
Sounds like bankruptcy to me.
Kotlikof also tells us about the shady book keeping Congress has been engaged in for decades and what the books probably really look like:
Based on the CBO’s data, I calculate a fiscal gap of $202 trillion, which is more than 15 times the official debt. This gargantuan discrepancy between our “official” debt and our actual net indebtedness isn’t surprising. It reflects what economists call the labeling problem. Congress has been very careful over the years to label most of its liabilities “unofficial” to keep them off the books and far in the future.
But of course, “official” or “unofficial” it is still debt. Whether Congress will admit to it doesn’t change the fact that it is future debt that Congress has incurred through its profligate policies.
And what’s going to bring this all crashing down, despite the smooth and reassuring words of politicians without a clue? Promises made with no fiscal ability to keep them because, in reality, they’re Ponzi schemes:
We have 78 million baby boomers who, when fully retired, will collect benefits from Social Security, Medicare, and Medicaid that, on average, exceed per-capita GDP. The annual costs of these entitlements will total about $4 trillion in today’s dollars. Yes, our economy will be bigger in 20 years, but not big enough to handle this size load year after year.
Got that – government promised $4 trillion a year that it doesn’t have and never has had. And, thanks to Congressional Democrats, it just expanded that bill under ObamaCare. The system, much like an engine running at hight RPMs with no oil, is going to stop and stop abruptly:
The first possibility is massive benefit cuts visited on the baby boomers in retirement. The second is astronomical tax increases that leave the young with little incentive to work and save. And the third is the government simply printing vast quantities of money to cover its bills.
The result of any of those, of course, would be economically catastrophic. And the results among the citizens of this country would be horrible:
Most likely we will see a combination of all three responses with dramatic increases in poverty, tax, interest rates and consumer prices. This is an awful, downhill road to follow, but it’s the one we are on. And bond traders will kick us miles down our road once they wake up and realize the U.S. is in worse fiscal shape than Greece.
For years and years, politicians have claimed all is well with these programs, that we can afford them and that they’ll always be there for those who need them. None of the above is or has been true since their inception. If any private business operated as these programs have, the CEOs would be under the jail and wouldn’t see daylight until our sun exploded.
For years, the left and Democrats have made war on corporations and businesses all the while it has been government leading us to financial ruin. This debt isn’t debt run up by the private side of the economy. It is purely government’s doing. Now, given the gravity of the situation, we have very few options and the future does not look bright.
Next time you see your Congressional representative or Senator, thank him or her for the mess they’ve had a hand in creating and ask them how they are going to fix it. Don’t be surprised by the blank stare you receive in return. They haven’t a clue.
~McQ
Catch-22
Trust me – this example I’m about to paste below isn’t the first nor will it be the last example of government health care and how it will work. Or in this case, how it works now:
A Hollywood woman who was dropped from Medicaid coverage while needing a bone marrow transplant is finally getting the coverage and treatment she needs to stay alive.
Diana Smith is battling a rare form of Leukemia and needs the transplant to survive. She managed to raise money to pay for it thanks to her friends and the community, but then last week she found out her Medicaid coverage was dropped – putting her operation on hold.
Yes, that’s right, she was dropped by Medicaid and had to raise the money herself to have the treatment she needed to survive. She’d been in remission after chemo treatments which was a prerequisite to receive the bone marrow transplant. Here’s the ironic part:
But her hopes of receiving the transplant were dashed in March, when she says, the Social Security Administration contacted her –without her soliciting it — and told her that her three year-old son was entitled to receive Social Security disability payments. Even though she didn’t ask for it, she signed the form and received her son’s first check.
In April, Medicaid canceled her universal health care policy because her income level had risen with her son’s payments – making her ineligible for the insurance program.
The problem is Jackson Memorial Hospital could not provide the procedure because the risk is too high. The universal policy from Medicaid helps shield the hospital from liability in this kind of case. Without it, they are subject to liability issues.
Even though Smith offered to cancel her son’s disability benefits, she was told it’s too late.
The bureaucracy had spoken, she was denied any appeal and Smith was left to fend for herself. The not so amazing thing is she found a way to do that through the charity of others. But the “compassionate government” – which promised to make this all better and ensure that things like this wouldn’t be perpertrated by heartless and evil insurance companies – could care less.
Now you may say this is just an odd-ball exception to what normally happens – a set of circumstances which aren’t normal or what one could consider routine. Well, it was easily fixable, wasn’t it? Just accept her offer to cancel the disability benefits, schedule repayment and resume her treatment. Why was it be “too late” to do that? What possible reason makes it “too late”? Obviously she needed the treatment, had undergone the requisite chemo to get to a state of remission and was scheduled to receive it because of that. How could a compassionate government not quickly cancel her son’s unsolicited disability payment and resume her treatment?
Easy – bureaucracies aren’t compassionate. They’re inflexible rule followers, most of which they write themselves. One government program’s bureaucracy (Medicare) denies more claims per year than do the evil, heartless insurance companies. Stories like Diana Smith’s aren’t particularly unusual, nor will the likely be rare if we ever have a fully government run system. Bureaucracies will rule and their only rule will be to follow the rules – their rules, and you’d better know them – or find yourself in Smith’s position.
~McQ
Health care reform – update
Byron York’s count has it at 209 “no”, 204 “yes”, with 18 undecided. David Dayden at FDL puts the count at 191 “yes”, 206 “no” (205-209 with leaners), with 17 undecided.
As you can imagine, the pressure on the remaining 17 or 18 is going to be enormous. Bart Stupak claims it has been a “living hell”.
Still nothing out of the CBO which means a Saturday vote is unlikely.
Obama’s interview with Brett Baier of Fox is likely to do nothing to change minds about health care, just as his speech in Ohio had little effect. He may as well have gone to Australia as this is shaping up. But it is clear he and the Democrats want to avoid any talk about “process” and continue to wave it away as something the American people just aren’t concerned with. Big mistake.
And although he wouldn’t own up to it in the Baier interview, Obama has told others that the fate of his presidency is on the line with this vote.
All it took for Dennis Kucinich to cave was a 45 minute ride on Airforce One. The liberal Ohio Democrat has found a way to rationalize his change of mind.
If you don’t think this is having an effect throughout the land, just remind yourself of the Scott Brown race, where Brown ran for liberal lion and chief health care reform advocate Teddy Kennedy’s seat as the “41st vote against health care”. Then cast your eyes west and note that Barbara Boxer, another Senate liberal is vulnerable as well.
Speaking of California Senators, Dianne Feinstein’s “National Insurance Rate Authority” has been dropped from the reconciliation bill. Since it has nothing to do with budgetary matters, it can’t be included. If this monstrosity passes, look for her to attempt to add it at another time as an amendment to some other Senate bill.
And Code Red suspects two new “yes” votes for the bill, from California Democratic Reps Dennis Cardoza and Jim Costa have to do with announced water allocations for the water starved Central Valley in the state. Yesterday the Interior Department moved up the March allocation, something never done in the past. A “back room deal” for their votes?
One of the things Baier did in his interview is question the health of Medicare. He got the president to admit that the bill doesn’t fix the structural problems of the program. More and more medical providers are recognizing that problem and opting out of taking Medicare patients because they claim they can’t afford them. And if Medicare is in bad shape, Medicaid is in worse shape. As if to emphasize that point, drug store chain Walgreens has announced that after April 16th, it will no longer take new Medicaid patients.
The point, of course, is this “reform” does nothing to address the structural problems of the two government run systems which are at the core of the health care cost problem in the US.
Last, but not least, the Attorney General of Virginia has announced the state’s intention to sue the federal government if the present health care bill is passed under the “deem and pass” rule. Virginia has already passed a law declaring it illegal for the federal government to require individuals to purchase health insurance.
~McQ