Conservative Principles Now

On the eve of the House of Representatives push to jam through the misguided and highly unpopular Senate health care bill, , the President continues to try and convince the American people that the health care bill would reduce cost while showing his commitment to creating jobs and improving the economy. The raw facts make it clear that he cannot keep either of these promises. For example:

• The President claims the health care proposals would reduce health care spending. The reality is health care spending would increase. According to the latest Congressional Budget Office report of the Senate bill, health care spending under the Senate bill would increase by $210 billion over the next 10 years. This is similar to the results found by the President’s Chief Actuary which estimated an increase of $222 billion. While CBO predicts spending would decrease in the second decade, history shows spending rarely, if ever, goes down on government health programs. Medicare is hurtling toward a financial crisis, and Medicaid is breaking state budgets.
• The President claims the health care proposals would reduce premiums. The reality is premiums will go up for many under the Senate bill. The Congressional Budget Office and the Joint Committee on Taxation have estimated premiums in the non-group market would be 10 to 13 percent higher in 2016 than they would be with no bill and cost would likely fall higher on young and healthy families. In addition, this is before the government specifies and locks into place new federal benefit mandates that will no doubt further increase premiums for all Americans. There is little or no experience of government officials reversing these trends.
• The President claims the health care proposals would cost under a trillion. But, that figure excludes major health care provisions – like filling the Medicare “donut hole”, fixing Medicare reimbursement to physicians, and creating a new long-term entitlement program – pushing the price tag to over $2 trillion. Only in Washington does spending more money equal saving money.
• The President claims the health care proposals would reduce the deficit. Unlike CBO’s restricted scope of analysis, the independent analysis by the Lewin Group estimates that when taken in its entirety, which means accounting for the expected $200 billion plus boost in Medicare reimbursement for physicians, the proposal would actually add to the deficit, not reduce it.
• The President claims he is committed to improving jobs and the economy. Based on his own policies, the opposite is true. The Senate bill would result in 620,000 fewer job opportunities and would increase the national debt by $755 billion through its lethal combination of mandates, taxes, and government spending. As Heritage analysts have pointed out, “Because investment is what drives productivity and economic growth, less investment–even if only slightly less–leads to lower productivity, slower economic growth, weaker wages and salaries, and lower household wealth.” Even worse, his own proposal to “fix” the bill adds a new tax on investment income that would result in 115,000 lost job opportunities and disposable income is estimated to be $17.3 billion less per year than it otherwise would be.
• The President claims he will “fix” the bill. Although he promised to ensure no federal funding would be used for abortions and eliminate the repugnant special deals, House passage of the Senate bill would lock these into place, and they could only be undone through a highly uncertain reconciliation process to “fix” the bill in the Senate.  Not only is taxpayer funding of abortion not fixed, it is expanded under the Senate bill. Moreover, the ugly special state deals at the expense of the taxpayers still remain.

President Obama keeps rolling out the tax hikes. In his budget released earlier this month, excluding the tax hikes he assumed to pay for health care, he called for $1.3 trillion in higher taxes over the next decade. Now in his recently released health reform plan, he calls for even more tax increases. Today, the Joint Committee on Taxation (JCT) released their analysis of the tax increases in the President’s plan. According to the JCT, the plan will raise taxes by another $414 billion between 2010 and 2019. The taxes the President Obama proposed hiking are as follows (the year the tax kicks in and the amount the tax will raise between 2010 and 2019 are in parentheses):

• Require information reporting on payments to corporations (2011 – $17.1 billion)
• Exclusion of unprocessed fuels from the cellulosic biofuel produce credit (immediately upon passage – $23.9 billion)
• Codify economic substance doctrine and impose penalties for underpayments (immediately upon passage – $4.9 billion)
• Increase Hospital Insurance portion of the payroll tax and apply it to investment income for families earning more than $250,000 a year ($200,000 for single filers) (2012 – $183.6)
•  Excise tax on “Cadillac” insurance plans valued at more than $10,200 for individuals and $27,500 for families (2018 – $32.7 billion)*
• Impose annual fee on manufacturers and importers of branded drugs (2011 – $33.4 billion)*
• Impose excise tax on manufacturers and importers of medical devices (2012 – $20 billion)*
• Impose annual fee on health insurance companies (2014 – $59.5 billion)*
• Excise tax on indoor tanning services (2010 – $2.7 billion)*
• Limit Health Savings Accounts (HSA) (2011 – $5.0 billion)*
• Increase taxes on unqualified distributions from HSAs (2011 – $1.4 billion)*
• Limit Flexible Spending Accounts (FSA) (2014 – $11.4 billion)*
• Eliminate deduction of expenses allocable to Medicare Part D subsidy (2012 – $2.6 billion)*
• Limit deductions for medical expenses (2013 – $15.2 billion)*
• Higher taxes on compensation above $500,000 paid to officers, employees, directors and service providers of covered health insurance providers (2013 – $0.6 billion)
• Higher taxes on certain health organizations (2010 – $0.4 billion)*

The taxes with the (*) will directly apply, or will be passed on to, families earning less than $250,000 a year. This is a contradiction of President Obama’s campaign pledge not to raise taxes on these families.

Almost all of these taxes came out of the separate bills passed by the House of Representatives and the Senate. The only new tax the President proposed is applying the Hospital Insurance (HI) portion of the payroll tax to investment income for the first time. This would be a dangerous break with past precedent and would slow economic growth at the worst time.

The President’s plan assumes raising $24 billion by excluding paper companies from taking the celluslosic biofuel producer credit. This credit was only supposed to apply to producers of biofuels, but a technicality in the law allowed paper companies to qualify. The Senate already laid claim to this exclusion in their recently passed “jobs” bill. It that becomes law, policy and germaneness aside, the President will have to conjure up some more new taxes or spending cuts to pay for his new plan.

The hefty tax increases are a heavy blow to a struggling economy, but they do not come close to covering the full cost of the President’s plan which will cost more than $1 trillion over ten years. The President has repeatedly insisted that his plan will not increase the deficit. If that is so, he needs to explain how he will fill the $600 billion shortfall. The gap could mean even more tax increases are on the way. Unfortunately, such calls are now commonplace for the President.