Tag: paul ryan

CBO Projections: Unhealthy Basis for Health Policy

In the political hullabaloo over efforts to shift costs of health care to someone else, the argument for keeping Obamacare’s compulsory insurance and ever-expanding Medicaid enrollment relies naïvely on notoriously comical Congressional Budget Office (CBO) 10-year “projections.” 

CBO claims the initial House Republican plan would eventually cause 3 million to “lose” health insurance simply because they would no longer be fined up to 2.5% of income for not buying a policy designed by and for politicians. This not a loss, but a gain – in freedom of choice.

CBO claims the GOP plan would “lose” another 14 million by not expanding Medicaid enrollment as rapidly as Obamacare hopes to. The federal government pays about 57% of the cost of Medicaid for poor people, but 90-93% (until 2022) to the 31 states that provide Medicaid to those earning up to 138% of the poverty line. That has added 17 million to the Medicaid rolls, and enriched big health insurers and Kaiser Permanente.

The House GOP Leadership’s Health Care Bill Is ObamaCare-Lite — Or Worse

During the presidential campaign, Donald Trump promised legislation that “fully repeals ObamaCare.” Monday night, the Republican leadership of the House of Representatives released legislation it claims would repeal and replace ObamaCare. Tuesday afternoon, Vice President Mike Pence will travel to Capitol Hill to pressure members of Congress to support the bill. On Wednesday, two House Committees will begin to mark-up the legislation. House and Senate leaders are hoping for quick consideration and a signing ceremony, maybe by May, so they can move on to other things, like tax reform and confirming Supreme Court nominee Judge Neil Gorsuch.

Everyone needs to take a step back. This bill is a train wreck waiting to happen.

The House leadership bill isn’t even a repeal bill. Not by a long shot. It would repeal far less of ObamaCare than the bill Republicans sent to President Obama one year ago. The ObamaCare regulations it retains are already causing insurance markets to collapse. It would allow that collapse to continue, and even accelerate the collapse. Republicans would then own whatever damage ObamaCare causes, such as when the law leaves seriously ill patients with no coverage at all. Congress would have to revisit ObamaCare again and again to address problems they failed to fix the first time around. ObamaCare would consume the rest of Congress’ and President Trump’s agenda. Delaying or dooming other priorities like tax reform, infrastructure spending, and Gorsuch. The fallout could dog Republicans all the way into 2018 and 2020, when it could lead to a Democratic wave election like the one we saw in 2008. Only then, Democrats won’t have ObamaCare on their mind but single-payer.

First, let’s look at how the main features of this bill fall short of repeal.

Concerns about the”Border Adjustable” Tax Plan from the House GOP, Part II

I wrote yesterday to praise the Better Way tax plan put forth by House Republicans, but I added a very important caveat: The “destination-based” nature of the revised corporate income tax could be a poison pill for reform.

I listed five concerns about a so-called destination-based cash flow tax (DBCFT), most notably my concerns that it would undermine tax competition (folks on the left think it creates a “race to the bottom” when governments have to compete with each other) and also that it could (because of international trade treaties) be an inadvertent stepping stone for a government-expanding value-added tax.

Brian Garst of the Center for Freedom and Prosperity has just authored a new study on the DBCFT. Here’s his summary description of the tax.

The DBCFT would be a new type of corporate income tax that disallows any deductions for imports while also exempting export-related revenue from taxation. This mercantilist system is based on the same “destination” principle as European value-added taxes, which means that it is explicitly designed to preclude tax competition.

Since CF&P was created to protect and promote tax competition, you won’t be surprised to learn that the DBCFT’s anti-tax competition structure is a primary objection to this new tax.

First, the DBCFT is likely to grow government in the long-run due to its weakening of international tax competition and the loss of its disciplinary impact on political behavior. … Tax competition works because assets are mobile. This provides pressure on politicians to keep rates from climbing too high. When the tax base shifts heavily toward immobile economic activity, such competition is dramatically weakened. This is cited as a benefit of the tax by those seeking higher and more progressive rates. …Alan Auerbach, touts that the DBCFT “alleviates the pressure to reduce the corporate tax rate,” and that it would “alter fundamentally the terms of international tax competition.” This raises the obvious question—would those businesses and economists that favor the DBCFT at a 20% rate be so supportive at a higher rate?

Brian also shares my concern that the plan may morph into a VAT if the WTO ultimately decides that is violates trade rules.

Second, the DBCFT almost certainly violates World Trade Organization commitments. …Unfortunately, it is quite possible that lawmakers will try to “fix” the tax by making it into an actual value-added tax rather than something that is merely based on the same anti-tax competition principles as European-style VATs. …the close similarity of the VAT and the DBCFT is worrisome… Before VATs were widely adopted, European nations featured similar levels of government spending as the United States… Feeding at least in part off the easy revenue generate by their VATs, European nations grew much more drastically over the last half century than the United States and now feature higher burdens of government spending. The lack of a VAT-like revenue engine in the U.S. constrained efforts to put the United States on a similar trajectory as European nations.

And if you’re wondering why a VAT would be a bad idea, here’s a chart from Brian’s paper showing how the burden of government spending in Europe increased once that tax was imposed.

Concerns about the”Border Adjustable” Tax Plan from the House GOP, Part I

The Republicans in the House of Representatives, led by Ways & Means Chairman Kevin Brady and Speaker Paul Ryan, have proposed a “Better Way” tax plan that has many very desirable features.

And there are many other provisions that would reduce penalties on work, saving, investment, and entrepreneurship. No, it’s not quite a flat tax, which is the gold standard of tax reform, but it is a very pro-growth initiative worthy of praise.

That being said, there is a feature of the plan that merits closer inspection. The plan would radically change the structure of business taxation by imposing a 20 percent tax on all imports and providing a special exemption for all export-related income. This approach, known as “border adjustability,” is part of the plan to create a “destination-based cash flow tax” (DBCFT).

When I spoke about the Better Way plan at the Heritage Foundation last month (my portion of the panel starts about 1:11:00 if you want to skip ahead), I highlighted the good features of the plan in the first few minutes of my brief remarks, but raised my concerns about the DBCFT in my final few minutes.

Allow me to elaborate on those comments with five specific worries about the proposal.

House Republican Health Plan Might Provide Even Worse Coverage For The Sick Than ObamaCare

WASHINGTON, DC - JUNE 22: House Speaker Paul Ryan (R-WI) discusses the release of the House Republican plank on health care reform at The American Enterprise Institute for Public Policy Research on June 22, 2016 in Washington, DC. (Photo by Allison Shelley/Getty Images)

After six-plus years, congressional Republicans have finally offered an ObamaCare-replacement plan. They should have taken longer. Perhaps we should not be surprised that House Republican leaders* who have thrown their support behind a presidential candidate who praises single-payer and ObamaCare’s individual mandate would not even realize that the plan cobbled together is just ObamaCare-lite. Don’t get me wrong. The plan is not all bad. Where it matters most, however, House Republicans would repeal ObamaCare only to replace it with slightly modified versions of that law’s worst provisions.

Here are some of ObamaCare’s core private-health insurance provisions that the House Republicans’ plan would retain or mimic.

  1. ObamaCare offers refundable health-insurance tax credits to low- and middle-income taxpayers who don’t have access to qualified coverage from an employer, don’t qualify for Medicare or Medicaid, and who purchase health insurance through an Exchange. House Republicans would retain these tax credits. They would still only be available to people ineligible for qualified employer coverage, Medicare, or Medicaid. But Republicans would offer them to everyone, regardless of income or where they purchase coverage.
  2. These expanded tax credits would therefore preserve much of ObamaCare’s new spending. The refundable part of “refundable tax credits” means that if you’re eligible for a tax credit that exceeds your income-tax liability, the government cuts you a check. That’s spending, not tax reduction. ObamaCare’s so-called “tax credits” spend $4 for every $1 of tax cuts. House Republicans know they are creating (preserving?) entitlement spending because they say things like, “this new payment would not be allowed to pay for abortion coverage or services,” and “Robust verification methods would be put in place to protect taxpayer dollars and quickly resolve any inconsistencies that occur,” and that their subsidies don’t grow as rapidly as the Democrats’ subsidies do. Maybe not, but they do something that Democrats’ subsidies don’t: give a bipartisan imprimatur to ObamaCare’s redistribution of income.
  3. As I have tried to warn Republicans before, these and all health-insurance tax credits are indistinguishable from an individual mandate.  Under either a tax credit or a mandate, the government requires you to buy health insurance or to pay more money to the IRS. John Goodman, the dean of conservative health policy wonks, supports health-insurance tax credits and calls them “a financial mandate.” Supporters protest that a mandate is a tax increase while credits—or at least, the non-refundable portion—are a tax cut. But that’s illusory. True, the credit may reduce the recipient’s tax liability. But it does nothing to reduce the overall tax burden imposed by the federal government, which is determined by how much the government spends. And wouldn’t you know, the refundable portion of the credit increases the overall tax burden because it increases government spending, which Congress ultimately must finance with additional taxes. So refundable tax credits do increase taxes, just like a mandate.

Not a “Better Way” on Education

Yesterday, the House GOP released a report called A Better Way: Our Vision for a Confident America. Alas, at least in education, only if you think doing basically the same thing we’re doing right now is a “better way” could this report please you. And there is little to suggest what we’re doing now is working.

Start with pre-k education. While acknowledging the undeniable—“gold-standard” research commissioned by the feds themselves has shown federal Head Start has no discernable, lasting benefits—the report does not call for even decreasing Head Start spending, much less eliminating the program. No, it proclaims that early-childhood programs are very important and what Washington should do—again, with no talk about actually decreasing funding—is “streamline” duplicative programs and fund more research into “what works.” Because states, or local governments, or philanthropists, could never fund such research!

That’s not a better way. That is a way, maybe, to mute attacks that Republicans “don’t care” about little children or the poor. So maybe it’s a politically better way. But it isn’t a better way on policy.

At the elementary and secondary level, the report says nice things about choice, including the DC voucher program, which is all well and good. It also touts the Every Student Succeeds Act—the replacement for No Child Left Behind—before, frankly, we know what it is going to look like in practice. More and more, it seems the law may have given too much power to the U.S. Secretary of Education, which the report warns against in only the broadest terms.

A better way? We’ll see.

Perhaps the biggest disappointment is the report’s higher education discussion. Basically, the better way is—of course—to “streamline” stuff, including federal regulations, while failing to even mention the mountain of evidence that federal student aid—all $161 billion of it—fuels rampant price inflation and student debt; encourages massive noncompletion; finances credential inflation; and abets demand for on-campus water parks and other extreme amenities.

While we’re on the subject, the report falls all over itself to tout Pell Grants, but it would sure be refreshing if someone, in looking for a better way for everyone—taxpayers included—were to at least note how fundamentally unfair Pell Grants are. A huge benefit of completing college is to greatly increase one’s lifetime earnings—to use a term some people find distasteful, to profit—and what Pell says is you should be able to make that profit with other people’s money and no obligation to pay them back. How’s that fair?

There is one more omission from the report: any mention of the Constitution, and whether it gives the federal government authority to do any of these things. But if whether the programs work doesn’t matter, probably no one is going to care about a minor, abstract thing like the rule of law.

The “better way” on all these issues would be to be frank about the effects of federal policies, what the federal government is constitutionally permitted to do, and act accordingly. But that seems to be asking way too much.

What Does It Mean to Ask Donald Trump to Change His Tone?

As Republicans fall in line behind Donald Trump, despite their misgivings, many of them are urging him to “change his tone” as he moves toward the general election. But is a change in tone sufficient or even honest?

Last Thursday, announcing his endorsement, Speaker Paul Ryan said, “It is my hope the campaign improves its tone as we go forward and it’s all a campaign we can be proud of.” Former Republican nominee Bob Dole says, “I can already see sort of a shift with Trump. He needs to start talking (like) he is about to be president.” Asked about Trump’s repeated comments that offend Hispanic voters, Senate majority leader Mitch McConnell says, “I hope he’ll change his direction on that.” Republican chair Reince Priebus says, “I think there’s work to do, and I think that there’s work on tone to do. I’ve been clear about that…. I think he gets it…I think you’re going to see the change in tone.”

But what does “change his tone” mean? These pleas don’t ask him to change his policies. He has proposed, among other things, building a wall on our southern border, deporting 11 million Mexican-Americans, banning Muslims from entering the United States, blowing up U.S.-China trade, forcing American companies to stop manufacturing products overseas, torturing suspected terrorists and killing their families, not touching entitlement benefits, ending our 200-year-old policy of birthright citizenship, “loosen[ing] up” libel laws to make it easier to sue newspapers, and much more. He has also supported, in the recent past, single-payer health care and the largest tax increase in world history. Are Republicans OK with those policies as long as Trump changes his tone?

He remains, as George Will puts it, an “impetuous, vicious, ignorant and anti-constitutional man.” He insults Mexicans, women, disabled Americans, Muslim Americans, and so on. Are Republicans comfortable with that man having the nuclear codes, as long as he tones it down?

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