Tag: Obamacare

By Pulling His Punches, Bernanke Shatters ObamaCare’s Credibility

Federal Reserve Chairman Ben Bernanke gave a speech in Dallas yesterday where he inadvertently discredited claims that ObamaCare would reduce health care costs and the federal deficit.  According to The Washington Post:

Federal Reserve Chairman Ben S. Bernanke warned Wednesday that Americans may have to accept higher taxes or changes in cherished entitlements such as Medicare and Social Security if the nation is to avoid staggering budget deficits that threaten to choke off economic growth…

While the immediate audience for the speech was the Dallas Regional Chamber, his message was intended for Congress and the Obama administration…

Bernanke has urged Congress to address long-term fiscal imbalances in congressional testimony before, but usually only when he is asked about them by lawmakers. His speech Wednesday aimed to reach a broader audience, steering away from technical economic speak and using plain, sometimes wry, language – a rare thing for a Fed chairman.

The non-partisan Congressional Budget Office projects the annual federal deficit will be at least $700 billion in each of the next 10 years.  Deficit spending is a form of taxation without representation, because it increases the tax burden of generations who cannot yet vote (often because they are as yet unborn).  Bernanke wants us to end deficit spending.  Kudos to him.

But consider the timing of his speech.  Why wait until April 7, 2010, to deliver that message directly to the public?  Why not give that speech in January? Or February? Or any time before March 21?

The reason is obvious: Bernanke held back to appease his political masters.

Until three weeks ago, the nation was locked in a debate over whether Congress should enact ObamaCare, the most sweeping piece of social legislation in American history.  That law includes two new health care entitlements – the very type of government spending driving the federal budget further into the red.  Democrats rigged the bill so that the CBO was obliged to score it as deficit-reducing, but 87 percent of the public weren’t buying it.

If Bernanke really wanted to warn the American public about the dangers of rising budget deficits, then a congressional debate over creating two new entitlement programs would be the most important time to deliver that message.  Democrats would have responded that ObamaCare would reduce the deficit.  But since voters believe ObamaCare to be a budget-buster, Bernanke’s warning would have dealt ObamaCare a serious blow.

Had Bernanke delivered his populist warning before January 28, it could have jeopardized his confirmation by the Senate to a second term as Fed chairman.  Had he done so between January 28 and March 21, he would have suffered a storm of criticism from Democrats (and possible retribution when his term came up for renewal in 2013) because his sensible, responsible warning would have made moderate House Democrats more skeptical about ObamaCare’s new entitlements.

So Bernanke pulled his punches.  As Dick Morris would put it, anyone who doesn’t think that political concerns affected Bernanke’s timing is too naive for politics.

Bernanke’s behavior thus reveals why ObamaCare’s cost would exceed projections and would increase the deficit.

Knowledgeable leftists, notably Tom Daschle and Uwe Reinhardt, recognize that Congress is no good at eliminating wasteful health care spending because politics gets in the way.  (Every dollar of wasteful health care spending is a dollar of income to somebody, and that somebody has a lobbyist.)

The Left’s central planners believe they can contain health care costs by creating an independent government bureaucracy that sets prices and otherwise rations care without interference from (read: without being accountable to) Congress.  ObamaCare’s new Independent Payment Advisory Board is a precursor to what Daschle calls a “Health Fed,” so named to convey that this new bureaucracy would have the same vaunted reputation for independence as the Federal Reserve.

Yet Fed scholar Allan Meltzer reports, and Bernanke’s behavior confirms, that not even the hallowed Federal Reserve can escape politics:

In reading the minutes of the Fed and watching what they do, the Fed has always been very much afraid of Congress…The idea of having a really independent agency in Washington, that’s just not going to happen…[The Fed] is very much concerned — always — about what the Congress is doing, and doesn’t want to deviate very far from that.

Politics affects Bernanke’s behavior and the Fed’s behavior.  Politics will defang the Independent Payment Advisory Board, and many of  ObamaCare’s other purported cost-cutting measures.  ObamaCare’s cost will outpace projections. The deficit will rise.

Repeal the bill.

Regulation and the Knowledge Problem

Glenn Reynolds, a law professor at the University of Tennessee but better known as Instapundit, writes in the Washington Examiner that the controversy over big corporations’ reporting the impact of the new health care legislation on their tax bills illustrates the “Knowledge Problem” identified by Nobel laureate F. A. Hayek in “The Use of Knowledge in Society” and other writings. Hayek pointed out that the information needed to run an economy doesn’t exist in any one database or agency. It is scattered among millions of people and made available to others by means of the price system. Planning and regulation do away with the information embodied in prices and try to improve on market outcomes by making use of far less information.

Reynolds writes, “Recent events suggest that it’s not just the economy that regulators don’t understand well enough – it’s also their own regulations.”

More on the (Un)Constitutionality of Obamacare

Earlier this week, I reacted to reports that the University of Washington couldn’t find any legal scholars willing to question Obamacare’s constitutionality by issuing a challenge: I will debate the constitutional merits of Obamacare against anyone, anytime, anywhere (as long as the sponsoring group/individual covers my travel expenses).  Here’s a video version of my challenge:

Cato adjunct scholars Dave Kopel and Ilya Somin, blogging at the Volokh Conspiracy, go into much greater depth on the myth of an expert consensus.

And if you’re tired of hearing the debate about the debate and want to hear the latest on why the individual mandate is unconstitutional, listen to my colleague (and Cato’s chairman) Bob Levy’s podcast.

Constitution, Schmonstitution — The Law Is What I Say It Is

The health care debate has illuminated how little regard many members of Congress have for the U.S. Constitution.

First, Rep. Alcee Hastings (D-FL) said, “There ain’t no rules here… When the deal goes down … we make ‘em up as we go along.

Then, House Judiciary Committee chairman John Conyers (D-MI) claimed that the Constitution’s non-existent “Good and Welfare clause” grants Congress the power to compel Americans to purchase health insurance.

Now, Rep. Phil Hare (D-IL) admits he doesn’t really care whether the Constitution grants Congress that power:

Off-camera: Where in the Constitution…

Rep. Hare: I don’t worry about the Constitution on this, to be honest.

Off-camera: [Laughter.] Jackpot, brother.

Rep. Hare: What I care more about — I care more about the people that are dying every day that don’t have health insurance.

Off-camera: You care more about that than the U.S. Constitution that you swore to uphold!

Rep. Hare: I believe that it says we have the right to life, liberty, and the pursuit of happiness.  Now you tell me…

Off-camera: That’s the Declaration of Independence.

Rep. Hare: It doesn’t matter to me. Either one…

[Lots of childish sniping.]

Off-camera: Where in the Constitution does it give you the authority to…

Rep. Hare: I don’t know.  I don’t know.

Off-camera: That’s what I thought.

Of course, that doesn’t really capture how annoying both the congressman and his interrogators are.  So here’s the video:

Rep. Hare is channeling Chicken Little: because the sky is falling, we don’t have time to worry about the Constitution’s restraints on congressional power.  We all know how that story ends.  Indeed, true to the fable, there’s no convincing evidence that Rep. Hare’s solution would save the lives he thinks it would save, and it could even cost lives in the long run.  (Fun fact: Wikipedia reports that in early versions of the fable, Chicken Little is actually a hare.)

In addition to brushing up on their Chicken Little, Rep. Hare and his colleagues might want to rent A Man for All Seasons to remind themselves why it’s important to pay attention to what the law actually says:

Sir Thomas More: What would you do? Cut a great road through the law to get after the Devil?

William Roper: Yes, I’d cut down every law in England to do that!

Sir Thomas More: Oh? And when the last law was down, and the Devil turned ‘round on you, where would you hide, Roper, the laws all being flat? This country is planted thick with laws, from coast to coast, Man’s laws, not God’s! And if you cut them down, and you’re just the man to do it, do you really think you could stand upright in the winds that would blow then? Yes, I’d give the Devil benefit of law, for my own safety’s sake!

Will Debate Constitutionality of Obamacare Anytime, Anywhere

Zaid Jilani at the Center for American Progress put up a blog post titled, “College debate organizers unable to find any law professors to argue health reform is unconstitutional.” Indeed, it seems that none of the four panelists at the University of Washington Law School event had any issues with Obamacare.

Maybe the UW organizers, who couldn’t find anyone with the opposing view, are talking to the same folks who told John Conyers about the “Good and Welfare Clause.” Because, as I said before, it’s not that hard to find constitutional scholars who have problems with this legislation.

OK, look, I’ll make it easier:  I hereby announce that I am willing to travel anywhere at anytime to debate the constitutionality of Obamacare. Whoever sets up the debate has to pay my travel expenses, but that’s it.  Any takers?

ObamaCare: Still a Bad Deal for Young Adults

The Associated Press reports that young adults will face higher premiums under ObamaCare:

Beginning in 2014, most Americans will be required to buy insurance or pay a tax penalty. That’s when premiums for young adults seeking coverage on the individual market would likely climb by 17 percent on average, or roughly $42 a month, according to an analysis of the plan conducted for The Associated Press. The analysis did not factor in tax credits to help offset the increase.

The higher costs will pinch many people in their 20s and early 30s who are struggling to start or advance their careers with the highest unemployment rate in 26 years.

The article cited additional studies estimating premiums increases young adults as high as 50 percent. That was essentially the message of my recent Cato briefing paper, “ObamaCare: A Bad Deal for Young Adults.”

Supporters claim the new law provides subsidies that would help people afford the higher premiums. As I write in my paper, however:

The money for those subsidies has to come from somewhere, though. Presumably, some of it would come from young adults themselves in the form of higher taxes or the tax penalties imposed on those who do not purchase insurance…So the presence of subsidies does not necessarily mean that young adults would come out winners. Ironically, all the complexity may actually help the legislation pass Congress precisely because it obscures whom the legislation would tax.

Supporters also claim that although the higher premiums might be actuarially unfair for people who are young and healthy today, those people will eventually be old and unhealthy. Over the course of a lifetime, they reason, such policies would be closer to actuarially fair.

The problem is that we’ve heard this line before. Inter-generational redistribution is fundamentally unfair to the young because it creates a situation where the old, who vote, have incentives to ratchet up benefits – and to ratchet up taxes on the young, who don’t vote. Social Security collects from the young and gives to the old, and is clearly a net tax on the young. As Jonathan Gruber reports, the young have very little confidence – deservedly so – in Social Security’s implicit promises. Experience shows that whatever new taxes ObamaCare imposes on the young will grow over time.

Regardless, most young uninsured people already obtain insurance as they get older. As I report in my paper, 30.4 percent of those age 20-29 were uninsured in 2008 (including 33.8 percent of 23-year-olds), but only 13.4 percent of those aged 50-64 years were uninsured. So a significant number of uninsured young adults naturally transition into insured older adults. The main effect of the new law will be to take young adults who think health insurance is a bad deal at today’s prices and force them to health insurance at even higher prices.

ObamaCare’s New Entitlement Spending “Sows the Seeds” of a Budget Crisis

From Robert J. Samuelson’s column in today’s Washington Post:

When historians recount the momentous events of recent weeks, they will note a curious coincidence. On March 15, Moody’s Investors Service – the bond rating agency – published a paper warning that the exploding U.S. government debt could cause a downgrade of Treasury bonds. Just six days later, the House of Representatives passed President Obama’s health-care legislation costing $900 billion or so over a decade and worsening an already-bleak budget outlook.

Should the United States someday suffer a budget crisis, it will be hard not to conclude that Obama and his allies sowed the seeds, because they ignored conspicuous warnings. A further irony will not escape historians. For two years, Obama and members of Congress have angrily blamed the shortsightedness and selfishness of bankers and rating agencies for causing the recent financial crisis. The president and his supporters, historians will note, were equally shortsighted and self-centered – though their quest was for political glory, not financial gain.

I hope Samuelson is wrong, but it’s probably a good idea to behave as if he’s right, and repeal ObamaCare’s new entitlement spending.