ObamaCare–The Way of the Dodo
In the latest issue of Virtual Mentor, a journal of the American Medical Association, I try to capture the multiple absurdities that make up ObamaCare. An encapsulation:
During the initial debate over ObamaCare, House Speaker Nancy Pelosi (D-CA) famously said, “We have to pass [it] so you can find out what’s in it.” One irreverent heir to Hippocrates quipped, “That’s what I tell my patients when I ask them for a stool sample.” The similarities scarcely end there…
ObamaCare supporters are ignoring the federal government’s dire fiscal situation; ignoring the law’s impact on premiums, jobs, and access to health insurance; ignoring that a strikingly similar law has sent health care costs higher in Massachusetts; ignoring public opinion, which has been solidly against the law for more than 2 years; ignoring the law’s failures (when they’re not declaring them successes); and ignoring that the law was so incompetently drafted that it cannot be implemented without shredding the separation of powers, the rule of law, and the U.S. Constitution itself. Rather than confront their own errors of judgment, they self-soothe: The public just doesn’t understand the law. The more they learn about it, the more they’ll like it…
This denial takes its most sophisticated form in the periodic surveys that purport to show how those silly voters still don’t understand the law. (In the mind of the ObamaCare zombie, no one really understands the law until they support it.) A prominent health care journalist had just filed her umpteenth story on such surveys when I asked her, “At what point do you start to question whether ObamaCare supporters are just kidding themselves?”
Her response? “Soon…”
(For more proof that ObamaCare supporters can draw from an apparently bottomless well of denial, see this article by Politico.)
Latest ObamaCare Glitch Enables States to Block New Entitlement Spending
Investors Business Daily reports on the latest glitch found in ObamaCare‘s 2,000-plus pages:
Because of a quirk in ObamaCare, people who buy health insurance through a federally run exchange may not be eligible for premium subsidies.
Government-created exchanges are places for individuals to shop and purchase health insurance. ObamaCare will require individuals and families to buy insurance, starting in 2014.
Those with incomes at 100% to 400% of the federal poverty level will be eligible for taxpayer funded subsidies — a tax credit to help pay for the premium.
It turns out that the legislation isn’t so clear, the latest example of what analysts predicted would be a stream of surprises from the mammoth health law.
Section 1311 of ObamaCare instructs state governments to set up an exchange. If a state refuses, Section 1321 lets the federal government establish an exchange in the state.
Yet ObamaCare states that the tax credit is available to people who are enrolled in an “an exchange established by the state under (Section) 1311.” It makes no mention of people enrolled in federal exchanges being eligible for the tax credit.
“There is this technical problem in the law,” said James Blumstein, a professor at Vanderbilt Law School. “I don’t see how you get around that.”
I guess the folks who chanted, “Read the bill!” seem a little less crazy now.
Regrettably, the IRS has tried to “get around” the clear meaning of the law. In a proposed rule, the IRS writes that taxpayers will be eligible for ObamaCare’s “tax credits” — which are more government spending than – if they are enrolled in a health plan “established under section 1311 or 1321” [emphasis added]. But that’s not what the law says. As I told IBD:
“Congress did not delegate this discretion to the IRS,” Cannon said. “Congress created a tax credit for A, and the IRS is saying it applies to A and B. If the IRS offers this tax credit to federally run exchanges, the IRS will be assuming powers the Constitution vests only in Congress to alter the tax code and spend money.”
Citizens have until October 31 to share with the IRS their thoughts about the agency’s overly broad interpretation of its powers (see here).
More broadly, this bug feature means that states can block ObamaCare’s new entitlement spending, and possibly the entire law, just by refusing to create an Exchange:
“The whole structure of the law collapses without a state-run exchange,” said Michael Cannon, director of health policy studies at the libertarian Cato Institute. “That forces Congress to either repeal ObamaCare or significantly alter it.”
Yesterday, Rep. Michael Burgess (R-Texas) helpfully suggested that the so-called “Super Committee” should meet its target of $1.5 trillion in spending reductions by cutting ObamaCare’s new entitlement spending:
The Select Committee is getting to work, and I encourage both parties, all 12 members, to put the Affordable Care Act on the table, alongside other entitlements in need of reform…The easiest money to save is money you haven’t yet spent…This new select committee could easily achieve almost their entire target of reducing the nation’s deficit, and…almost every dollar would come from benefits that do not yet exist.
The wonderful thing about this newly discovered feature of ObamaCare is that states don’t have to wait for Congress to act. They can reduce federal spending simply by not creating a health insurance Exchange.
Washington Post Asks for Budget Plans
The Washington Post’s editorial board issued a challenge to the president and his Republican opponents: “show us your plans” for deficit reduction. In fact, the Post says it would be “delighted” to receive plans from its readers. However, the Post isn’t interested in “meaningless promises” to cut “waste, fraud, and abuse”—it wants specifics:
Here’s what we’re not looking for: pablum about eliminating unnecessary spending without identifying where. Gauzy rhetoric about making hard choices without making them. Meaningless promises about eliminating waste, fraud and abuse. Broad assertions about where to find the money — “Medicare savings,” “tax reform” — without specifics. Arbitrary spending caps without accompanying details about how those limits are to be met. If you believe, for example, that federal spending should be kept to a specific share of the economy — 18 percent? 20 percent? — show the plausible path to getting there.
Amen. Chris Edwards and I have been beating the drum for Republican policymakers in particular to get specific about what they would cut. Chris recently noted that with the exception of Sen. Tom Coburn (R-OK), Sen. Rand Paul (R-KY), and perhaps a few others, Republicans aren’t putting much effort into identifying programs to terminate. And I have noted that “It’s more common to hear Republicans blubber on about ‘reducing waste, fraud, and abuse’ in government programs and ‘saving’ the pillars of the welfare state (Social Security and Medicare) for ‘future generations.’”
As for deficit reduction ideas from Washington Post readers, we have a balanced budget plan on our Downsizing the Federal Government website. In fact, not only do we have a plan, we have over three dozen essays on numerous government agencies that provide details on what programs to cut and why.
Military Spending and the Budget Deal
The budget deal announced last night offers two sets of potential cuts in military spending.
The first set of potential cuts, created by the budget caps, target “security” spending. That includes the Pentagon, State, foreign aid, the Department of Homeland Security and Veterans (the discretionary portion of Veterans spending, to be precise). The deal caps “security” spending at $684 billion for this fiscal year and $686 for the next. That requires little pain; the 2012 security cap is only $5 billion below what we’ll spend on those categories in fiscal 2011. The White House claims that the caps will generate $350 billion in savings from base defense spending for ten years. They get there, dubiously, by projecting security spending at the capped level across the decade, even after the caps expire, and counting as savings the difference between that spending trajectory and what CBO now projects. They are also assuming that all the savings go to defense, even though Republicans will try to make the other security categories absorb the pain.
The second set of potential cuts, which occur automatically if the Joint Committee fails to reach its spending cut goals, target defense spending directly. This could add $500 billion in defense cuts over ten years, the White House says.
Assuming that is true, the maximum amount of defense cuts possible here is $850 billion. That is a cut of roughly 15 percent compared to planned spending based on the president’s February 2011 budget submission — not including the wars. It is roughly on par with the cuts proposed by the Bowles-Simpson Commission. The total savings are much lower, roughly half, if you compare the cuts to what we actually spend now, rather than the increases we were planning on in past planning documents.
And remember, that $850 billion is a maximum; it may not materialize. It will be lower, if, as hawks hope, the cuts fall on the non-defense elements of the security category. It will be lower if the Joint Committee finds other accounts to cut, avoiding the triggers.
Still, that possible amount is enough to make hawks apoplectic. We are sure to hear more complaints about “gutting or “hollowing out” the force. But let’s keep some facts about military spending in mind:
The Pentagon’s budget has more than doubled over the past decade, and current projections call for the Pentagon to receive more than $6 trillion from U.S. taxpayers through 2021. If its budget got cut by 15 percent, that would return us to roughly 2007 levels. That hardly seems like “gutting“. After such cuts, we would still account for more than 40 percent of global military spending, and our margin of military superiority over any combination of rivals would remain unrivaled.
The focus should now shift to strategy. The White House says the Pentagon’s ongoing roles and missions review will guide the first round of security cuts. The aim is to eliminate military capabilities that are unnecessary or provided by multiple services. We should go deeper, looking to what missions, allies, and possible wars, we can jettison. The recommendations should guide not only the first set of cuts, but also the second. That means making recommendations for the Joint Committee on additional defense cuts and preparing for automatic cuts should they occur. There is nothing preventing those cuts from being achieved by retiring force structure required by needless missions—such as defending rich allies that can defend themselves.
We should also keep in mind that this deal hardly solves our deficit problem and does not exhaust the possible savings we should seek. Deeper military cuts are possible and could even enhance security given the right strategy.
The 2011 Social Security Trustees Report — Harbinger of Bad News
The just-released 2011 annual report of the Social Security Trustees shows a significant worsening of the program’s finances.
Last year we were told that we would see payroll tax surpluses over benefit expenditures for a few more years — until 2015. That won’t happen according to the 2011 report; the program will now add to federal deficits in every future year — and increasingly so, which will ramp-up financial pressure to downsize other federal programs, increase taxes, or create yet more debt.
Note that both Republicans and Democrats negotiating over how to reduce federal deficits and the national debt have resolved to leave Social Security untouched for now. That leaves the program’s finances to fester and worsen — increasing the costs of future adjustments and burdens on future generations.
Many people, especially those who favor early reforms, say that the Social Security trust funds “don’t matter.” Note, however, that they lock up future federal revenues for Social Security benefit payments — on par with future dedicated payroll taxes.
The lock-up effect of the Social Security trust funds is demonstrated by the fact that the program’s cash flow deficits today are not forcing any benefit cuts or payroll tax increases. This can continue until the year 2036 according to the 2011 report.
But if we allow the situation to continue for that long, fixing the program will require a permanent benefit cut of at least 25 percent or a payroll tax increase of at least 40 percent of payrolls in 2036 and beyond.
’1099′ Repeal Speaks Volumes About ObamaCare
From my latest Kaiser Health News op-ed:
When 34 Senate Democrats joined all 47 Republicans last week to repeal ObamaCare’s 1099 reporting requirement, their votes confirmed what their talking points still deny: ObamaCare will increase the deficit, no matter what the official cost projections say…
This public-choice dynamic [of concentrated benefits and diffuse costs] is why the Congressional Budget Office, the chief Medicare actuary, and even the International Monetary Fund have discredited the idea that ObamaCare will reduce the deficit. It is one of the principal reasons why, as Thomas Jefferson wrote, “The natural progress of things is for liberty to yield, and government to gain ground.” In other words, the game is rigged in favor of bigger government.
It also explains why the Obama administration is sprinting to implement ObamaCare in spite of a federal court having struck down the law as unconstitutional. The White House needs to get some concentrated interest groups hooked on ObamaCare’s subsidies – fast.
Read the whole thing here.
Obama’s Fiscal Commission and Health Care Spending
Following up on what Dan and Chris have said …
If the co-chairs of President Obama’s fiscal commission were serious about reducing federal spending and deficits, they would have proposed eliminating the federal deficit, rather than “reduc[ing] it to 2.2 percent of GDP by 2015.” Yawn. They would have proposed cutting federal spending (currently, 24 percent of GDP and rising) to match federal tax revenue (currently at 15 percent of GDP). But the co-chairs proposed only to “bring spending down to 22 percent and eventually 21 percent of GDP.” Not only does that elicit another yawn, but since the co-chairs only asked for half a loaf, they won’t even get that much.
If the co-chairs were serious about reducing federal spending and deficits, they would have proposed a balanced-budget amendment. They would have proposed block-granting Medicaid. They would have proposed implementing Medicare vouchers immediately. (Vouchers are the only way to reduce Medicare spending while protecting seniors from government rationing. They would also change the political dynamics that repeatedly stymie efforts to reduce Medicare spending.) Instead, the co-chairs propose the same ol’ failed strategy of trying to limit Medicare and Medicaid spending using government price-and-exchange controls, which they euphemistically describe as “rebates” and ”payment reforms.” Along the same lines, they propose strengthening IPAB, ObamaCare‘s rationing board. IPAB’s mandate is — you guessed it — to ration care by fiddling with Medicare and Medicaid’s price and exchange controls. It will therefore inevitably fall prey to the same political buzzsaw. To appease Republicans, the co-chairs propose unwise and unconstitutional federal rules that would prevent patients injured by negligent physicians from recovering the full amount they are due (euphemism: medical malpractice liability “reform”). Finally, the co-chairs propose that if federal health spending continues to grow faster than GDP growth plus 1 percent, Congress should consider “a premium support system for Medicare” (which could mean vouchers) and “a robust public option and/or all-payer system” for people under age 65 — a debate that wouldn’t even begin until 2020.
Fiscal Commission members, congresscritters, and citizens who are serious about reducing federal spending and deficits — and who are looking for specific ways to cut government spending — should instead consult Cato’s excellent web site DownsizingGovernment.org.
Conservative Rift Widening over Military Spending
More and more figures on the right — especially some darlings of the all-important tea party movement — are coming forward to utter a conservative heresy: that the Pentagon budget cow perhaps should not be so sacred after all.
Senator-elect Rand Paul of Kentucky was the latest, declaring on ABC’s “This Week” on Sunday that military spending should not be exempt from the electorate’s clear
desire to reduce the massive federal deficit.
His comments follow similar musings by leading fiscal hawks Sen. Tom Coburn of Oklahoma and Gov. Mitch Daniels of Indiana, a presumptive contender for the GOP nomination in 2012. Others who agree that military spending shouldn’t get a free pass as we search for savings include Sen. Johnny Isakson, Sen. Bob Corker, Sen.-elect Pat Toomey—the list goes on.
Will tea partiers extend their limited government principles to foreign policy? I certainly hope so, although I caution that any move to bring down Pentagon spending must include a change in our foreign policy that currently commits our military to far too many missions abroad. To cut spending without reducing overseas commitments merely places additional strains on the men and women serving in our military, which is no one’s desired outcome.
If tea partiers need the specifics they have been criticized for lacking in their drive for fiscal discipline, they need look no further than the Cato Institute’s DownSizingGovernment.org project. As of today, that web site includes recommendations for over a trillion dollars in targeted cuts to the Pentagon budget over ten years.
Meanwhile, the hawkish elements of the right have been at pains to declare military spending off-limits in any moves toward fiscal austerity. That perspective is best epitomized in a Wall Street Journal op-ed by Ed Feulner of the Heritage Foundation, Arthur Brooks of AEI and Bill Kristol of the Weekly Standard published on Oct. 4—a month before the tea party fueled a GOP landslide. (Ed Crane and I penned a letter responding to that piece.) Thankfully, it looks like neoconservative attempts to forestall a debate over military spending have failed. That debate is already well along.
Bending the Cost Curve: Ryan’s Roadmap Would Succeed Where ObamaCare Fails
From my oped in today’s Investors Business Daily:
Rep. Paul Ryan’s (R-Wis.) “Roadmap for America’s Future” proposes even tighter limits on Medicare’s growth, leading columnist Bruce Bartlett to opine, “the Medicare actuaries have shown the absurdity of the Ryan plan by denying that Medicare cuts already enacted into law are even worthy of projecting into the future.”
On the contrary, experience and public choice theory suggest that the Ryan plan has a better shot at reducing future Medicare outlays than past efforts, because the Roadmap would change the lobbying game that fuels Medicare’s growth.
For more on Ryan’s Roadmap, click here. For more on Medicare, read David Hyman’s Medicare Meets Mephistopheles. For more on public choice economics, click here.
USA Today Abets ObamaCare Supporters’ Misinformation Campaign
An article in today’s The USA Today titled, “With Many Still in Dark, Groups Shed Light on Health Care Law,” aims to correct misinformation about ObamaCare. Ironically, the article is itself a monument to misinformation.
It begins:
True or false: The new health care law will cut Medicare benefits for seniors. It will slash Medicare payments to doctors. It will ration health care.
In three polls conducted last month, large percentages of Americans answered “true” to each statement. All three are false.
In fact, two of the three statements are 100-percent true.
First, ObamaCare will cut payments to the private health insurance companies that provide coverage to the 20 percent of Medicare enrollees who participate in the Medicare Advantage program. That will eliminate many types of coverage for seniors in Medicare Advantage. That should be painfully obvious, but if you require confirmation, visit FactCheck.org. ObamaCare will also ratchet down the price controls that Medicare uses to pay hospitals and many other health care providers. It should likewise be obvious that that will reduce access to services that are ostensibly “guaranteed” to all enrollees. But again, if you need confirmation, check in with Medicare’s chief actuary, who works for President Obama. We can debate whether that’s good or bad. What’s not up for debate: ObamaCare in fact “will cut Medicare benefits for seniors.”
Second, it is also true — ipso facto – that ObamaCare “will ration health care.” To ration is to limit consumption. When ObamaCare reduces coverage for Medicare Advantage enrollees and reduces access to care for all Medicare enrollees, it limits seniors’ consumption of medical care. We can debate whether that’s good or bad. What’s not up for debate: that is rationing.
Finally, yes, it is technically false that ObamaCare “will slash Medicare payments to doctors.” But since current law will slash Medicare payments to doctors if Congress does nothing, and since an earlier version of ObamaCare would have eliminated those cuts, but ObamaCare’s architects dropped that provision so as to make ObamaCare appear deficit-neutral… well, perhaps the public can be forgiven if it confuses “eliminating a provision that would have prevented cuts in Medicare payments to doctors” with “slashing Medicare payments to doctors.”
How Big Were the Bush Tax Cuts?
The debate on extending the Bush tax cuts has begun. Those opposed to extension argue that the cuts would greatly increase the federal deficit.
The first thing to note is that extending all the 2001 and 2003 tax cuts would lose the government about $216 billion a year in 2012 and rising amounts after that (see page 16). By contrast, federal spending in 2011 will be almost $2 trillion higher than in 2001 when the first Bush tax cuts were passed. Thus, in a rough sense, spending increases have had a nine times greater impact on our changed budget situation since 2001 than have tax cuts.
How big were the Bush tax cuts compared to previous tax legislation? One way to compare different tax bills is to look at the initial projections of the effects when they were passed. I assembled the figure below based on official scores of past tax legislation, as reported by the CBO at the time. The revenue effects of each tax bill are measured over the first five years as a share of GDP.
The figure shows that the Bush tax cuts were small compared to the Reagan tax cuts of 1981. The Revenue Act of 1978 was also a big tax cut. Note that the Tax Reform Act of 1986 was scored as being revenue neutral, and thus isn’t shown.
The figure also shows that the combined effect of tax cuts from 1997 forward were not large enough to offset the tax hikes under Reagan and the first Bush between 1982 and 1993.
I have a detailed discussion of federal tax policy between 1994 and 2004, here.
Why Politics Is Stupid
Ezra Klein and Jonathan Chait argue the only way government could reduce inefficient Medicare spending was to create a new health care entitlement program. Think about that.
The worst part is, they’re not entirely wrong. And that same system will now be controlling your health care and an ever-growing share of your income.
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