Tag: Jeff Flake

Members of Congress Introduce Cato ‘Large HSAs’ Concept

WASHINGTON, DC - JANUARY 29: (L-R) Sen. Jeff Flake (R-AZ), and Sen. Patrick Leahy (D-VT) speak at a press conference on Cuba at the U.S. Capitol January 29, 2015 in Washington, DC. Flake is introducing legislation with bipartisan support that would lift a longstanding ban on U.S. citizens traveling freely to Cuba. (Photo by Win McNamee/Getty Images)

Sen. Jeff Flake (R-AZ), Rep. Dave Brat (R-VA), and other members of Congress have introduced legislation based on the “Large HSAs” concept I first proposed here and developed herehereherehere, and here.

The “Health Savings Account Expansion Act” (H.R. 5324S. 2980) would expand the availability and benefits of tax-free health savings accounts (HSAs) in several ways. It would nearly triple existing HSA contribution limits from $3,400 for individuals and $6,750 for families to $9,000 and $18,000. It would allow tax-free HSA funds to purchase health insurance, over-the-counter medications, and direct primary care. It would eliminate the mandate that HSA holders purchase a government-designed high-deductible health plan. And it would repeal ObamaCare’s increase of the penalty on non-medical withdrawals. Americans for Tax Reform and FreedomWorks have endorsed the bill.

I’m sure I will have lots to say about Flake-Brat, but here are a few initial impressions.

  1. Flake-Brat would free workers from the government program we call employer-sponsored insurance—but only if that’s what workers want. The federal tax code currently tells the average worker with family coverage she can either surrender $13,000 of income to her employer and let her employer choose her health plan, or surrender a huge chunk of that money to the government by paying income and payroll taxes on it. The Flake-Brat bill would allow her to keep that money and either save it, use it to stay on her employer’s health plan, or use it to purchase better coverage somewhere else, all tax-free. The choice would belong to her, not to Congress or the IRS.
  2. Flake-Brat is a bigger tax cut than you’ve ever seen.  Large HSAs would be the largest-ever scaling back of the federal government’s role in health care. The Flake-Brat bill is effectively a $9 trillion tax cut. That’s how much money the current tax exclusion for employer-sponsored insurance will divert from workers to their employers over the next decade. Flake-Brat would return that money to the workers who earned it. Flake-Brat is thus an effective tax cut equal to all of the Reagan and Bush tax cuts combined. It is nine times the size of the tax cut associated with repealing ObamaCare.  Unlike health-insurance tax credits, Large HSAs involve no government spending and would not mandate that taxpayers purchase health insurance, as existing HSAs and health-insurance tax credits do. (The bill and its sponsors describe that requirement as a “mandate.”)
  3. Flake-Brat would make health care better, more affordable, and more secure. It would do so by dramatically reducing government’s influence over the health care sector. By shifting from employers to consumers nearly a quarter of the $3 trillion Americans spend annually on health care, Large HSAs would begin to make the health care sector and health policy respond to the needs of patients. Large HSAs are also less restrictive than existing HSA law or health-insurance tax credits. As a replacement for ObamaCare, Large HSAs would encourage innovative products like pre-existing conditions insurance that make coverage more affordable and secure.
  4. Flake-Brat shows Congress could create Large HSAs with or without repealing ObamaCare. Large HSAs are the most promising ObamaCare replacement plan to date, but Congress can create them before it repeals ObamaCare. The Flake-Brat bill would create Large HSAs even with ObamaCare still on the books. In fact, Flake-Brat would build support for repealing ObamaCare by exposing consumers to the full cost of its hidden taxes.
  5. Flake-Brat is a marker. The Flake-Brat bill defers consideration of a number of issues. All else equal, expanding tax breaks for HSA contributions would reduce federal revenues and increase federal deficits and debt. Like any proposal to level the playing field between employer-sponsored coverage and other coverage, the bill creates the potential for employer plans to unravel as (healthy) people choose better options. Were Congress to enact Flake-Brat with ObamaCare still on the books, there could be even more complicated interactions. The bill doesn’t totally level the playing field, either. Everyone would get an income-tax break, but only those with an employer who facilitates HSA contributions would get the payroll tax break. (Large HSAs can completely level the playing field with a simple tax credit that mimics that exclusion for such workers.) The authors don’t address these issues in the bill, or their supplemental materials. They will have to address them at some point. Fortunately, there are solutions. (For more on those solutions, see the “developed” links in the second paragraph.)

All in all, the Flake-Brat bill is a much-needed addition to the debate over the future of American health care.

Good News on Cotton

We’re another step closer to putting a shameful chapter of America’s trade policy behind us, with the good news that the House today approved (by a margin of 223-197, roll call here) an amendment offered by Rep. Ron Kind (D-WI) and Rep. Jeff Flake (R-AZ) to prohibit the use of funds in the appropriations bill to provide payment to the Brazil Cotton Institute: the administration signed a deal last year with Brazil to send $147 million a year of taxpayers money to Brazil so they would look the other way while the United States continued to subsidize our cotton farmers illegally. Mr Kind and Mr Flake rightly argued that was an egregious use of taxpayer money. Some lawmakers agitated against stopping the payments in case it sparked a trade war, but the answer to that, of course, is to bring U.S. cotton policy into compliance with WTO rules (and rulings). More background here.

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This Week in Government Failure

Over at Downsizing the Federal Government, we focused on the following issues this week:

  • Unfortunately, the president’s Fiscal Commission appears to have operated on the premise that the federal government should continue to do everything it now does.
  • Getting Rep. Jeff Flake on appropriations is a step in the right direction, but his appointment can’t be a token gesture.
  • A new study finds that policymakers needn’t fear spending cuts.
  • House Republican leaders’ support for “Prince of Pork” Hal Rogers to chair the chamber’s appropriations committee is a slap in the face of voters who demanded change in November.
  • Michigan Gov. Jennifer Granholm, whose state’s unemployment rate is almost 13 percent, has advice for Washington on how to create jobs. No, it’s not April 1st.

Rep. Jeff Flake to Appropriations

In-coming House Speaker John Boehner’s endorsement of Rep. Jeff Flake (R-AZ) for a seat on the chamber’s appropriations committee means that it’s probably a done deal. Flake is one of the few policymakers who actually lives up to the fiscal conservative label. Thus, Flake’s appointment to a committee that many members think only exists to increase spending on special interests would be welcome news.

Boehner also endorsed a suggestion from Rep. Jeff Kingston (R-GA), who has mounted a dark-horse campaign to chair the appropriations committee, to create a subcommittee focused on investigating federal programs. Flake would chair this subcommittee, and according to a release on his website, he has already lined up worthy targets like Head Start and farm subsidies.

How much success will Flake have within the committee?

The New York Times quotes Flake as boldly saying, “It has been a favor factory for years, and now it is going to become a slaughterhouse.” At the same time, Flake acknowledged to Politico that putting a few anti-spenders on appropriations isn’t going to be enough:

Flake said the conservatives that Boehner wants to get on the committee will be “marginalized” if they’re scattered throughout the panel.

“It’s not enough just to have a few going on the committee,” he said. “They could be dispersed among the subcommittees that are forgotten.”

I recently warned the House Republican leadership against serving tea party voters re-heated meatloaf by allowing old-school spenders to dominate the committees. Getting Jeff Flake on appropriations is a step in the right direction, but his appointment can’t be a token gesture. Anti-spenders like Flake will need support from their leadership to succeed because they sure won’t be making friends with the big-spending old bulls.

Dueling Earmark Op-Eds

With a key vote on earmarks slated for next Tuesday in the Senate Republican Conference, Republican leaders are having it out on whether their party should eschew earmarking or continue the practice. The debate centers on the division of power between Congress and the executive branch.

On NRO’s “The Corner” blog, Senator James Inhofe (R-Okla.) calls earmarks a “phony issue.” Doing away with earmarks doesn’t reduce spending. It simply transfers authority for spending decisions to the executive:

Earmarks have been part of the congressional process since the founding of our country. As James Madison, the father of the Constitution viewed it, appropriating funds is the job of the legislature. Writing in the Federalist, he noted that Congress holds the power of the purse for the very reason that it is closer to the people. The words of Madison and Article 1 Section 9 of the Constitution say that authorization and appropriations are exclusively the responsibility of the legislative branch. Congress should not cede this authority to the executive branch.

And he criticizes the anti-earmark movement as “pseudo” fiscal responsibility:

While anti-earmarkers bloviate about the billions spent through earmarks, many of them supported the trillions of dollars in extra spending for bailouts, stimulus, and foreign aid. Talk about specks versus planks! Over the course of the last several years, the overall number and dollar amount of earmarks has steadily decreased. During that same time, overall spending has ballooned by over $1.3 trillion. In reality, ballyhooing about earmarks has been used as a ruse by some to seem more fiscally responsible than they really are.

Taking the other side, Rep. Jeff Flake (R-AZ) writes in the Washington Post that earmarks are part and parcel of Congress’s abdication:

Those who view earmarking as an expression of the “congressional prerogative” sell Congress short of its preeminent role as the first branch of government. As the defenders of earmarking are fond of saying, earmarks represent less than 2 percent of all federal spending. Precisely! By focusing on a measly 2 percent of spending, we have given up effective oversight on the remaining 98 percent.

This lopsided exchange can be examined empirically. As the number of earmarks has risen significantly over the past two decades, the amount of oversight exercised by the House Appropriations Committee — as measured by the number of hearings held, witnesses called, etc. — has declined substantially. It is as if Congress has called a truce with the executive branch: Don’t hassle us about our 2 percent, and we’ll offer only token interference with your 98 percent.

Senator Inhofe misuses Federalist #58. The “power of the purse” refers to the fact that revenue measures must originate in the popularly elected House, strengthening its hand against the Senate, whose membership was to be selected by state legislatures. But he is right to castigate the earmark opponents who have thrown buckets of taxpayer money into the wind when Washington, D.C., has lately spun itself into a whirl.

Inhofe’s static view of earmarking produces the weaker of the two arguments, though. Rep. Flake is right to recognize earmarking’s dynamic effects. The fiscal weaklings—majorities in both parties—decline oversight and go along with spending bills they might otherwise oppose because of goodies for their home states or districts.

Earmarker comity may even cause fiscal conservatives to go wobbly. Try counting the number of amendments Senator Inhofe has offered seeking to strike earmarks in 23 years of debating spending bills on the Senate floor, and you may not need to raise a finger on either of your hands.

The right answer is to take what both of these debaters has to offer. Earmarks should go, and Congress should withdraw spending discretion from the executive branch while it reduces spending overall.

I’ll be speaking Monday at a Hill event on earmark transparency. Should be a barn burner!

Gov. Barbour Breaks with GOP on Immigration

OK, the headline may be a bit overstated, but recent comments on immigration by Gov. Haley Barbour of Mississippi are different enough from what most of his fellow Republicans are saying to be newsworthy.

In a video interview released earlier this week (see link below), Barbour expressed appreciation for the Hispanic immigrant workers who helped rebuild his state after Hurricane Katrina in 2005, and for the need to be more open to highly skilled immigrants from countries such as India.

Barbour is an important figure in the GOP. He is in his second term, chairs the Republican Governors Association, and led the Republican National Committee back in 1994 when the party swept into power in Congress.

When asked what he would say to people in California who are upset about illegal immigration, Barbour responded:

Let me just tell you, I’ve had a different experience than perhaps some other governors. I don’t know where we would have been in Mississippi after Katrina if it hadn’t been for the Spanish speakers that came in to help rebuild, and there’s no doubt in my mind some of them weren’t here legally. Some of them were, some of them weren’t. But they came in, they looked for the work—if they hadn’t been there, if they hadn’t come and stayed for a few months or a couple of years, we would be way, way, way behind where we are now.

Every country—I don’t care if it’s the United States of America or Papua New Guinea, every country has gotta have a secure border. If you can’t secure your border, you’re not much of a country, and we’ve gotta secure our border. But we’ve gotta do so with the recognition that even in our lifetime we’re gonna have a labor shortage in the United States. We don’t want to be like Japan, where the aging population is supported by fewer and fewer and fewer and fewer.

So there’s gotta be a way—a) we gotta secure the border, but b) we’ve got to work through how are we gonna make sure we’ve got the labor we need in the United States. H1B visas—a huge, huge thing. My idea is everybody from Stanford who’s from India that gets a PhD, we oughta stamp citizenship on his diploma, so instead of him going back to India and starting a business that employs 1,800 people, that he’ll start a business that employs 1,800 people in Des Moines, Iowa, instead of India. A lot of this is just common sense, and common sense tells us we’re not gonna take ten or twelve or fourteen million people [currently here illegally] and put them in jail and deport them. We’re not gonna do it, and we need to quit—some people need to quit acting like we are, and let’s talk about real solutions.

You can view the video here, where the subject of immigration comes up at the 5:50 mark.

Although Barbour may be a minority voice on the issue within his party, he is not alone. The host of the show, the Hoover Institution’s Peter Robinson, is a former speech writer for Ronald Reagan who wrote back in June on the former president’s more inclusive view of immigrants. And I was joined at a Cato Hill Briefing in July by Rep. Jeff Flake, R-Ariz., on the need for a temporary worker program as a key to immigration reform.

Let’s hope their fellow Republicans are listening.

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