Tag: mandate

“Opt-Out” Smoke and Mirrors

At today’s Politico Arena the editors ask:

Reid’s Option: Does it help or hurt the chances for healthcare passage by Christmas?

My response:

Like every other part of ObamaCare, the “opt-out” proposal for the “public option” is a mystery – and almost certainly will continue to be even after the likely 1,500-page bill emerges, if ever it does. Will residents in states that opt-out be able to opt-out of the taxes needed to support the public option? (Please don’t say the public option will be self-supporting: we’re grown-ups.) Healthy taxpayers in North Dakota, after all, have no incentive to subsidize unhealthy New Yorkers. But if states can opt out of the tax part, then we’ll have “adverse selection” at the state level, the very thing the “individual mandate” is meant to stop at the individual level. Yet if states won’t be able to opt out of the tax component, then what’s the incentive for states to opt out of the public option? All pay, no benefit, is a sucker’s game.

This is all smoke and mirrors. And it’s laughable to think that the Congressional Budget Office can score any of this, when nobody knows what “this” is. For all the backroom dealings so far, enough has taken place in public to enable the public to see what’s going on, and it’s not pretty. It’s the usual something-for-nothing gimmickry, like last week’s “doc-fix” joke. The vote on that is the best predictor so far of where this whole thing is going. When labor tells us they might accept a tax on high-value insurance plans if it doesn’t hit the middle class, we know the money isn’t there. May ObamaCare rest in peace until more sober people are able to attend to what’s really required to straighten out the health care mess that Congress created in the first place.

Baucus Bill Would Cost More than $2 Trillion

Sen. Max Baucus’s (D-MT) health care overhaul would cost more than $2 trillion.  It would expand the deficit.  But he has carefully and methodically hidden those facts – so well that he has completely hoodwinked nearly all the major media.

The media are reporting that the Baucus bill would reduce the deficit by $81 billion over 10 years.  Wrong.

The Baucus bill assumes that Congress will allow the “sustainable growth rate” cuts in Medicare’s physician payments to occur beginning in 2012.  Yet Congress has routinely and repeatedly blocked those cuts, making Baucus’s assumption preposterous.  The CBO handled the issue delicately, but essentially said, “Sure, provided that the sun rises in the west in 2012, then yes, this bill would reduce the deficit.”

That means Baucus will come up at least $200 billion short on the revenue side, making his bill a budget-buster.

The media are reporting that the Baucus bill would cost just $829 billion over 10 years.  Wrong.

As Donald Marron observes, that number omits as much as $75 billion in new federal spending.  It also omits a $33 billion unfunded mandate on state governments.

But the worst part is that the Congressional Budget Office’s preliminary cost estimate omits the cost of the private sector mandates in the Baucus bill.  In Massachusetts, those costs accounted for 60 percent of the total cost of reform.  That suggests the actual cost of the Baucus bill – $829 billion plus $75 billion plus $33 billion, times 2.5 – is well over $2 trillion.

Yet the CBO score pretends those costs aren’t even there.  It’s like a mystery novel that’s missing the last 50 pages.  And the media aren’t even curious.

In the words of Brad DeLong, why, oh why, can’t we have a better press corps?

Cross-posted at Politico’s Health Care Arena.

“Keep Your Subsidies off My Ovaries”

In my recent Cato paper, “All the President’s Mandates: Compulsory Health Insurance Is a Government Takeover,” I explain that if Congress compels Americans to purchase health insurance, it would “inevitably and unnecessarily open a new front in the abortion debate, one where either side—and possibly both sides—could lose.”

Slate’s William Saletan explains how the pro-choice side could lose:

This week, the Senate finance committee is considering amendments that would bar coverage of abortions under federally subsidized health insurance. Pro-choice groups are up in arms. After all, says NARAL Pro-Choice America, “In the current insurance marketplace, private plans can choose whether to cover abortion care—and most do.” If Congress enacts subsidies that exclude abortion, “women could lose coverage for abortion care, even if their private health-insurance plan already covers it!“…

The argument these groups make is perfectly logical: If you standardize health insurance through federal subsidies and coverage requirements, people might lose benefits they used to enjoy in the private sector. But that’s more than an argument against excluding abortion. It’s an argument against health care reform altogether.

Saletan also explains why pro-life and pro-choice positions on Obama’s health plan are irreconcilable:

To get what they consider neutrality, pro-choicers have to make pro-lifers pay indirectly for abortions. And to keep what they consider clean hands, pro-lifers have to make abortion coverage federally unsupportable and therefore, in a subsidy-dependent system, commercially nonviable.

Rather than an argument against all health care reform, I’d say this is an argument against reforms that expand government subsidies or otherwise give government the power to choose what kind of insurance you purchase.  Fortunately, there are better ways to reform health care.

Thursday Links

  • More on the health care mandate: “Compulsory health insurance could require nearly 100 million Americans to switch to a more expensive health plan and would therefore violate President Barack Obama’s pledge to let people keep their current health insurance.”
  • Why the U.S. slapped a trade tariff  on Chinese tires: “President Obama’s decision was guided strictly by selfish, political considerations: He felt he owed American unions for their previous and continuing support, regardless of the economic and diplomatic fallout.”
Topics:

The President’s Health Care Tax

As Michael Cannon discussed in an earlier post, the White House is trying to claim that health care “reform” does not mean higher taxes. This is a two-pronged issue. First, there is a mandate to purchase health insurance. Second, there is a tax (the White House calls it a fee) on people who fail to purchase a policy.

The White House claims this mandate is akin to state-level requirements for the purchase of health insurance, and that the newly-insured people will be getting some value (a health insurance policy) in exchange for their money. These assertions are defensible, but that does not change the fact that a tax is being imposed.

It might be plausible to argue that the mandate is not a tax if the value of the insurance policy to the individual was equal to the cost. But since these are people who are not buying policies, their behavior reveals that this obviously cannot be true. So this means that they will be worse off under Obama’s plan and that at least some of the cost should be considered a tax.

The Social Security payroll tax allows a good analogy. Labor economists correctly argue that the payroll tax functions, in part, as a “premium” for what can be considered a government-provided annuity. As such, when we try to measure the disincentive effect of the payroll tax, it is appropriate to include the perceived value of future Social Security benefits (for most Americans, especially with average or above-average incomes, the “rate of return” is very low or negative, so a substantial share of the payroll tax is a tax both in the legal sense and economic-distortion sense). The same is true of a mandatory health insurance policy (even if the money does not go through the government’s hands).

On the broader issue of paying money and getting something of value in return, another analogy is helpful. A share of the gasoline excise tax is used for road construction and maintenance. We all benefit from roads, even if we don’t drive (let’s set aside issues such as whether the benefits equal the costs, whether the federal government should be involved, etc). Does that somehow mean the gasoline excise tax is not a tax? Of course not.

Turning now to the excise tax, the Administration’s argument that this is a fee is even less defensible. The Baucus legislation in the Senate Finance Committee explicitly references an excise tax. Equally revealing (and even more ominous), the IRS is charged with collecting the fee. The White House can argue that the tax - in the economic sense - is lower than the fee if something of value is exchanged. But the tax is still there.

Rather than play games, the White House should make an open argument for bigger government. The fact that the Administration prefers to be deceptive says a lot about the underlying merits of their proposal.

Taking Over Everything

“My critics say that I’m taking over every sector of the economy,” President Obama sighed to George Stephanopoulos during his Sunday media blitz.

Not every sector. Just

This president and his Ivy League advisers believe that they know how an economy should develop better than hundreds of millions of market participants spending their own money every day. That is what F. A. Hayek called the “fatal conceit,” the idea that smart people can design a real economy on the basis of their abstract ideas.

This is not quite socialism. In most of these cases, President Obama doesn’t propose to actually nationalize the means of production. (In the case of the automobile companies, he clearly did.) He just wants to use government money and government regulations to extend political control over all these sectors of the economy. And the more political control achieves, the more we can expect political favoritism, corruption, uneconomic decisions, and slower economic growth.