Tag: debt

‘Unthinkable, Draconian’ Spending Cuts

It’s my job to advocate for spending cuts. It’s a job I’ve been doing in one form or another for over a decade. If I’ve ever experienced a victory, it must have been a pretty small one, because I can’t recall any.

So why do I persist?

For one, I’m a naturally optimistic person. And fueling that optimism is the press. I’m constantly reading about the possibility of spending cuts, and those articles usually say that the cuts would be major … or massive … or severe … or even draconian! The possibility sends a thrill up my leg.

Alas, the “draconian” spending cuts invariably turn out to be not-so-draconian after all. In fact, it’s often the case that reporters are talking about smaller spending increases rather than real spending cuts. Other times, the cuts are likely to only be temporary or come after years and years of increases.

In today’s example, a National Journal article reports that the “unthinkable” could happen: the fiscal 2013 sequestration cuts–just reduced and postponed by the fiscal cliff deal–might actually go into effect March 1st as scheduled:

Republicans and Democrats in the Senate appear to be coming to the same conclusion on spending, namely that once unthinkable, draconian cuts designed to force a more reasonable compromise may be much harder to undo than anyone ever imagined.

How “draconian” would these “unthinkable” cuts be? About $85 billion. To put that in context, the federal government will spend around $3,500 billion ($3.5 trillion) this year. The deficit alone is likely to approach or exceed $1 trillion (the federal government has run a deficit in excess of $1 trillion for four straight years).

If that’s draconian, what would the press call cutting enough spending just to balance the budget?

As we’ve been trying to demonstrate at DownsizingGovernment.org, spending cuts would be good for the country. I encourage journalists who cover federal policy to check out the site to see what real spending cuts are all about. It might cause you to have to find new adjectives to use to describe what Republicans and Democrats are really doing, but your readers would be better served–especially the wild-eyed optimists like me.

Why ‘Obamacare’s Critics Refuse to Give Up’

Jonathan Adler and I have a paper titled, “Taxation Without Representation: The Illegal IRS Rule to Expand Tax Credits Under the PPACA.” Our central claims are:

  1. The Patient Protection and Affordable Care Act explicitly restricts its “premium-assistance tax credits” (and thus the “cost-sharing subsidies” and employer- and individual-mandate penalties those tax credits trigger) to health insurance “exchanges” established by states;
  2. The IRS has no authority to offer those entitlements or impose those taxes in states that opt not to create Exchanges; and
  3. The IRS’s ongoing attempt to impose those taxes and issue those entitlements through Exchanges established by the federal government is contrary to congressional intent and the clear language of the Act.

Over at The New Republic’s blog The Plank, my friend Jonathan Cohn says this is “preposterous”:

No sentient being following the health care debate could argue, in good faith, that Obamacare’s architects intended for the federal government to set up exchanges without subsidies. It would completely subvert the law’s intent.

It appears my friend does not know the statute, the legislative history, or what Congress’ intent was.

Cohn writes that the statute is “a little fuzzy” on this issue. Quite the contrary: the statute is crystal clear. It explicitly and laboriously restricts tax credits to those who buy health insurance in Exchanges “established by the State under section 1311.” There is no parallel language – none whatsoever – granting eligibility through Exchanges established by the federal government (section 1321). The tax-credit eligibility rules are so tightly worded, they seem designed to prevent precisely what the IRS is trying to do.

ObamaCare supporters just know that can’t be right. It must have been an oversight. Congress could not have written the law that way. It doesn’t make any sense. Those provisions must take effect in federal Exchanges for the law to work. Why would Congress give states the power to blow the whole thing up??

The answer is that Congress didn’t have any choice. Congress intended for ObamaCare to work this way because this was the only way that ObamaCare could become law.

  • The Senate bill had to have state-run Exchanges in order to win the essential votes of moderate Democrats. Without state-run Exchanges, it would not have passed.
  • In order to have state-run Exchanges, the bill needed some way to encourage states to create them without “commandeering” the states. In early 2009, well before House and Senate Democrats introduced their bills, an influential law professor named Timothy Jost advised congressional Democrats of one way to get around the commandeering problem: “Congress could invite state participation…by offering tax subsidies for insurance only in states that complied with federal requirements…”. Both the Finance bill and the HELP bill made premium assistance conditional on state compliance. Senate Democrats settled on the Finance language, which passed without a vote to spare. (Emphasis added.)
  • The Finance Committee had even more reason to condition tax credits on state compliance: it doesn’t have direct jurisdiction over health insurance. Conditioning the tax credits on state compliance was the only way the Committee could even consider legislation directing states to establish Exchanges. Committee chairman Max Baucus admitted this during mark-up.
  • Then something funny happened. Massachusetts voters sent Republican Scott Brown to the Senate, partly due to his pledge to prevent any compromise between the House and Senate bills from passing the Senate. With no other options, House Democrats swallowed hard and passed Senate bill. (They made limited amendments through the reconciliation process. These amendments did not touch the tax-credit eligibility rules, and indeed strengthen the case against the IRS.)

A law limiting tax credits to state-created Exchanges, therefore, is exactly what Congress intended, because Congress had no other choice. On the day Scott Brown took office, any and all other approaches to Exchanges ceased to embody congressional intent. If Congress had intended for some other approach to become law, there would be no law. What made it all palatable was that it never occurred to ObamaCare supporters that states would refuse to comply. The New York Times reports, “Mr. Obama and lawmakers assumed that every state would set up its own exchange.”

Oops.

The only preposterous parts of this debate are the legal theories that the IRS and its defenders have offered to support the Obama administration’s unlawful attempt to create entitlements and impose taxes that Congress clearly and intentionally did not authorize. (But don’t take my word for it. Read the statute. Read our paper. Read this, and this. Watch this video and our debate with Jost. Click on our links to all the stuff the IRS and Treasury and Jost have written.) I wonder if Cohn would tolerate such lawlessness from a Republican administration.

Cohn further claims the many states that are refusing to create Exchanges are “totally sticking it to their own citizens” and people who encourage them “are essentially calling upon states to block their citizens from receiving federal tax breaks, worth as much as several thousand dollars per person. Aren’t conservatives and libertarians supposed to be the party that likes giving tax money back to the people?” Seriously?

  • Fourteen states have enacted statutes or constitutional amendments – often by referendum, often by huge margins – that prohibit state employees from directly or indirectly participating in an essential Exchange function: implementing employer or individual mandates. In those instances, the voters have spoken.
  • Only 22 percent of the budgetary impact of these credits and subsidies is actual tax reduction, and the employer- and individual-mandate penalties triggered by those tax “credits” wipe out most of that. The other 78 percent is new deficit spending. So what we’re really talking about here is $700 billion of new deficit spending.
  • When states refuse to establish Exchanges, they block that new spending, which reduces the deficit and the overall burden of government.
  • In addition, those states exempt their employers from the employer mandate (a tax of $2,000 per worker) and exempt millions of taxpayers from the individual mandate (a tax of $2,085 on families of four earning as little as $24,000).

Who’s for tax cuts now?

Here’s what I think is really bothering Cohn and other ObamaCare supporters. The purpose of those credits and subsidies is to shift the cost of ObamaCare’s community-rating price controls and individual mandate to taxpayers, so that consumers don’t notice them. When states prevent such cost-shifting, they’re not increasing the cost of ObamaCare – they’re revealing it.

And that’s what worries Cohn. If the full cost of ObamaCare appears in people’s health insurance premiums, people will rise up and demand that Congress get rid of it. Cohn isn’t worried about states “sticking it to their citizens.” He’s worried about states sticking it to ObamaCare.

The title of Cohn’s blog post is, “Obamacare’s Critics Refuse to Give Up.” At least we can agree on that much.

I Agree with Stuart Butler

ObamaCare is far from settled law. Here’s an excerpt from Butler’s blog post for the Journal of the American Medical Association:

President Obama’s narrow victory has left proponents of the Affordable Care Act (ACA) breathing a collective sigh of relief, believing that the legislation is safe. It’s true, of course, that the election’s outcome has ended the prospect of a new administration using Republican majorities in both chambers and the budget reconciliation process to force outright repeal. But the reality of the economic and political situation means the core elements of the ACA remain very much in play.

The primary reasons for this are the continuing problems with the federal budget deficit and the national debt and the worrying long-term weakness of the economy. Add to that the increasing skepticism that the ACA’s blunt tools will slow costs.

Let’s remember that the most important provisions of the ACA, such as penalties for Americans lacking insurance and firms not offering it, the expansion of Medicaid, and the heavily subsidized exchange-based coverage, do not go into effect until 2014. Meanwhile, new taxes on self-employment and limits on flexible spending accounts are scheduled to go into effect next year, just as Congress will be trying to boost employment growth. Additionally, lawmakers will be desperately searching for ways to delay or cut spending to deal with the deficit. That adds up to 2013 being a year for buyer’s remorse in Congress and around the country.

Read the whole thing.

Trick-or-Treat at 1600 Pennsylvania Avenue

I shared a cartoon last Halloween that made fun of those who support class-warfare tax policy.

Now we have a related cartoon, featuring a stop at the White House.

The next two cartoons are almost identical. We’ll start with this one from Michael Ramirez.

Ramirez is one of my favorite cartoonists, incidentally, and you can see more of his work here, here, here, here, here, here, here, here, here, here, herehereherehereherehere, and here.

Here’s a Gary Varvel cartoon with the exact same message.

Instead of great minds thinking alike, this is a case of great cartoonists thinking alike. Though they probably have great minds as well.

But I don’t want to make too many fawning comments since I would modify both of these cartoons so that the kids were looking at papers that said “Medicare” and “Social Security” instead of “debt.”

It’s always important to focus first and foremost on the disease of spending, after all, and not the symptom of red ink.

Last but not least, I can’t resist linking to this comedian’s video, which includes some very good economic insights about work incentives.

Sort of like this Wizard of Id parody featuring Obama.

‘Dems and GOP Agree, Government Needs More Money’

That’s the (fair) title of this blog post over at National Journal’s Influence Alley:

The federal government needs more money. That’s one thing both parties can agree on, Republican and Democratic lawmakers said Tuesday. The rub, of course, is how to get it.

Reps. Peter Roskam, R-Ill., and Allyson Schwartz, D-Pa. said at a National Journal panel on Tuesday morning that there’s no question that more revenue is needed. Democrats say they can raise the money by letting upper-income tax cuts expire, while Republicans say economic growth alone will help raise the cash.

“We need more revenue,” said Roskam, the House GOP’s chief deputy whip. “If you can get the money to satisfy obligations, that’s an area of common ground.”

Let’s hear it for duopoly, eh, comrades? Without it, we might suffer political parties that question whether those government “obligations” are wise, or necessary, or constitutional; or that point out governments don’t have needs, people do; or that reject the premise that politics is an exercise in deciding who needs what; or that argue for eliminating entire spheres of government activity. Can you tell I’ve just watched a presidential debate?

France to Ban School Homework

Let’s say that you are a newly-elected French president and you have a lot on your plate. The unemployment rate is 10.2 percent and youth unemployment hovers around 23 percent. The budget deficit is 4.5 percent of the GDP and the explicit national debt 90 percent of the GDP. Your economy is at a standstill and your currency is on the verge of collapse. Many of your most productive people wonder if they should pack up and leave, because you have just asked them to fork over 75 percent of their earnings to the taxman. Your popularity is shrinking faster than you can say sacre bleu! So, what do you do?

Easy. You switch the subject and start talking about something completely different …  even if it is, well, a little crazy.

Thus, “French President François Hollande has said he will end homework as part of a series of reforms to overhaul the country’s education system. He doesn’t think it is fair that some kids get help from their parents at home while children who come from disadvantaged families don’t.”

Better that all children suffer, so long as they suffer equally. Equality of misery—that pretty much sums up socialist mentality everywhere.