Two Wall Street Journal op-eds for the price of none! What a deal, huh? No need to thank me…
This “prebuttal” will appear in tomorrow’s (Wednesday’s) Wall Street Journal…
Obama and the Bureaucratization of Health Care
The president’s proposals would give unelected officials life-and-death rationing powers.
By Sarah Palin
Writing in the New York Times last month, President Barack Obama asked that Americans “talk with one another, and not over one another” as our health-care debate moves forward.
I couldn’t agree more. Let’s engage the other side’s arguments, and let’s allow Americans to decide for themselves whether the Democrats’ health-care proposals should become governing law.
Some 45 years ago Ronald Reagan said that “no one in this country should be denied medical care because of a lack of funds.” Each of us knows that we have an obligation to care for the old, the young and the sick. We stand strongest when we stand with the weakest among us.
We also know that our current health-care system too often burdens individuals and businesses—particularly small businesses—with crippling expenses. And we know that allowing government health-care spending to continue at current rates will only add to our ever-expanding deficit.
How can we ensure that those who need medical care receive it while also reducing health-care costs? The answers offered by Democrats in Washington all rest on one principle: that increased government involvement can solve the problem. I fundamentally disagree.
Common sense tells us that the government’s attempts to solve large problems more often create new ones. Common sense also tells us that a top-down, one-size-fits-all plan will not improve the workings of a nationwide health-care system that accounts for one-sixth of our economy. And common sense tells us to be skeptical when President Obama promises that the Democrats’ proposals “will provide more stability and security to every American.”
With all due respect, Americans are used to this kind of sweeping promise from Washington. And we know from long experience that it’s a promise Washington can’t keep.
Let’s talk about specifics. In his Times op-ed, the president argues that the Democrats’ proposals “will finally bring skyrocketing health-care costs under control” by “cutting . . . waste and inefficiency in federal health programs like Medicare and Medicaid and in unwarranted subsidies to insurance companies . . . .”
First, ask yourself whether the government that brought us such “waste and inefficiency” and “unwarranted subsidies” in the first place can be believed when it says that this time it will get things right. The nonpartistan Congressional Budget Office (CBO) doesn’t think so: Its director, Douglas Elmendorf, told the Senate Budget Committee in July that “in the legislation that has been reported we do not see the sort of fundamental changes that would be necessary to reduce the trajectory of federal health spending by a significant amount.”
Now look at one way Mr. Obama wants to eliminate inefficiency and waste: He’s asked Congress to create an Independent Medicare Advisory Council—an unelected, largely unaccountable group of experts charged with containing Medicare costs. In an interview with the New York Times in April, the president suggested that such a group, working outside of “normal political channels,” should guide decisions regarding that “huge driver of cost . . . the chronically ill and those toward the end of their lives . . . .”
Given such statements, is it any wonder that many of the sick and elderly are concerned that the Democrats’ proposals will ultimately lead to rationing of their health care by—dare I say it—death panels? Establishment voices dismissed that phrase, but it rang true for many Americans. Working through “normal political channels,” they made themselves heard, and as a result Congress will likely reject a wrong-headed proposal to authorize end-of-life counseling in this cost-cutting context. But the fact remains that the Democrats’ proposals would still empower unelected bureaucrats to make decisions affecting life or death health-care matters. Such government overreaching is what we’ve come to expect from this administration.
Speaking of government overreaching, how will the Democrats’ proposals affect the deficit? The CBO estimates that the current House proposal not only won’t reduce the deficit but will actually increase it by $239 billion over 10 years. Only in Washington could a plan that adds hundreds of billions to the deficit be hailed as a cost-cutting measure.
The economic effects won’t be limited to abstract deficit numbers; they’ll reach the wallets of everyday Americans. Should the Democrats’ proposals expand health-care coverage while failing to curb health-care inflation rates, smaller paychecks will result. A new study for Watson Wyatt Worldwide by Steven Nyce and Syl Schieber concludes that if the government expands health-care coverage while health-care inflation continues to rise “the higher costs would drive disposable wages downward across most of the earnings spectrum, although the declines would be steepest for lower-earning workers.” Lower wages are the last thing Americans need in these difficult economic times.
And here’s another WSJ op-ed about the REAL cost and massive tax increases to pay for Obamacare…
ObamaCare’s Crippling Deficits
The higher taxes, debt payments and interest rates needed to pay for health reform mean lower living standards.
By MARTIN FELDSTEIN
While the deficits caused by the fiscal stimulus package will end in 2011 and will help to sustain a fragile recovery in 2010, the deficits projected for the longer term are a threat to our economic future. The starting point for controlling those future deficits is for Congress to abandon the administration’s health-care plan—a plan that will cost more than $1 trillion.
The deficits projected for the next decade and beyond are unprecedented. According to an assessment released in March by the Congressional Budget Office (CBO), the president’s budget implies that deficits will average 5.2% of GDP over the next decade and will be 5.5% of GDP in 2019. Without the president’s proposals, the budget office forecasts a 2019 deficit of only 2% of GDP.
The CBO’s deficit projections are based on the optimistic assumptions that the economy will grow at a healthy 3% pace with no recessions during the next decade; that there will be no new spending programs after this year’s budget; and that the rising national debt will increase the rate of interest on government bonds by less than 1%. More realistic assumptions would imply a 2019 deficit of more than 8% of GDP and a government debt of more than 100% of GDP.
Such enormous deficits would crowd out productivity-enhancing investments in new equipment and software as the government borrows funds otherwise available to private investors. The result would be slower economic growth and a lower standard of living.
In the nearer term, the projected deficits could cause interest rates on bonds and mortgages to rise sharply if bond investors fear that the government will not prevent inflation. This is a greater risk now that more than half of the U.S. government debt is held by the Chinese and other foreign investors. Such an interest rate rise could kill a recovery in 2010 or 2011 and depress growth in the years that follow.
Dropping the Obama health plan would significantly reduce fiscal deficits over the next decade and help restore public confidence in the ability of Congress to control spending. The CBO estimates that the House committee versions of the Obama health plan would add more than $1 trillion to federal deficits over the next decade. But the actual costs would be much higher.
For starters, $1 trillion of extra debt-financed spending would cause the government to pay about $300 billion of extra interest in the next decade. Moreover, the CBO’s method of estimating the cost of such a program doesn’t recognize the incentives it creates for households and firms to change their behavior.
The House health-care bill gives a large subsidy to millions of families with incomes up to three times the poverty level (i.e., up to $66,000 now for a family of four) if they buy their insurance through one of the newly created “insurance exchanges,” but not if they get their insurance from their employer. The CBO’s cost estimate understates the number who would receive the subsidy because it ignores the incentive for many firms to drop employer-provided coverage. It also ignores the strong incentive that individuals would have to reduce reportable cash incomes to qualify for higher subsidy rates. The total cost of ObamaCare over the next decade likely would be closer to $2 trillion than to $1 trillion.
The administration’s claim that the health-care plan would be “self-financing” is both false and irrelevant. It is false because it would only be self-financing if one counts a variety of President Obama’s proposed tax increases—and even those would produce much less revenue than is assumed in the budget calculations. The claim is irrelevant because those tax increases have nothing to do with health care and could be used instead to reduce other projected deficits.
For example, the administration and the congressional designers of ObamaCare say they would finance a substantial part of health reform with the revenue from new taxes on corporate foreign profits and on high-income individuals. The likely revenue from these tax changes would be much less than the official estimates because of the induced changes in taxpayer behavior that the estimators ignore.
Previous experience with changes in the marginal tax rates of high-income individuals implies that the current proposal to raise the marginal tax rate to about 50% from today’s 40% would produce only about half of the official revenue estimates. No one knows how much of the estimated extra tax revenue on foreign profits would be lost as the resulting fall in international competitiveness reduces profits, and as businesses sell their overseas subsidiaries or shift their profits in other ways.
While abandoning health reform would be an important step, it would not be enough to limit the exploding level of future deficits and debt. That requires substantial reductions in existing spending programs, if large tax increases are to be avoided. Since Medicare is the largest contributor to the explosive growth in government spending, a good way to start shrinking government outlays would be by restructuring Medicare to shift more of its costs to supplementary private insurance, perhaps on an income-related basis.
Given the perceived need for significant additional tax revenue to shrink future fiscal deficits, there is now talk in Washington of introducing a value-added tax (VAT), the kind of national sales tax that European governments use to finance their welfare states. That would be a triply bad idea. Although it is a tax on spending, a VAT effectively raises marginal tax rates. Like the income tax, it reduces the reward for work and entrepreneurship by adding a tax to the prices of all goods and services. A VAT would also be grossly unfair to those whose lifetime savings would now be subject to a new tax when they start to spend those savings.
A VAT would open the door to an explosion of new spending programs. That’s because, no matter how low the initial rate, the tax rate would be drawn inevitably to European rates of more than 15%—on top of existing income and payroll taxes.