The White House and its congressional allies are trying to suggest that the latest Congressional Budget Office (CBO) cost estimate proves that their health-care plan is fiscally responsible.
But, in fact, the latest CBO projections confirm — again — that the President’s health plan would pile more another unfinanced entitlement program on top of the unaffordable ones already on the federal books.
According to CBO, the new entitlement spending in the plan would cost $216 billion by 2019, and then increase by 8 percent every year thereafter. In other words, the President’s plan would stand up another health entitlement program that will grow much faster than the nation’s economy or revenue base. The changes the Democrats would make to the Senate-passed bill would make the entitlement program even more expensive.
Over a full ten years of implementation, the cost of the new entitlement spending would reach $2.5 trillion, at least, not $1 trillion as advertised by the White House.
The President and his congressional allies have suggested that the offsets they are pushing will more than cover this massive spending increase. But even a modest amount of scrutiny reveals these supposed offsets are nothing more than gimmicks and implausible assumptions.
For starters, the plan doesn’t count $371 billion in spending for physician fees under the Medicare program. The President and Congressional Democrats want to spend this money, for sure. They just don’t want it counted against the health bill. That’s because they want to reserve all of the Medicare cuts in the bill as offsets for another entitlement instead of using them to pay for the problem that everyone knows needs fixing. The President says he shouldn’t have to pay for the “doc fix.” But why not? Never before did congress move to add the cost of a permanent fix to the national debt. But that is exactly what the President now wants to do. When the cost of the “doc fix” is properly included in the accounting, all of the claimed deficit reduction from the President’s health plan vanishes.
Then there’s the “Cadillac” tax on high-cost insurance plans. Because of union pressure, the President pushed the tax back to 2018, well passed the point when he will have left office. But once in place, he now would allow the threshold used to determine “high-cost” to rise only with the CPI, beginning in 2020. That means a very large segment of the middle class would get hit with the tax as the years passed. The President has shown that he is unwilling to actually collect this tax. But he wants us to believe we can count on a huge revenue jump over the long-run because his successors will have more stomach for it than he does.
Similarly, to jury-rig “long-term deficit reduction,” the latest plan would first increase the premium assistance subsidies paid to low and moderate wage families above the levels in the Senate-passed bill, but then index their value to something below the growth in premiums to give the appearance of deficit reduction in the decade after 2019.
There’s no “bending of the cost-curve” here. It’s sleight of hand that, if actually implemented, would force millions of low-income families to pay ever higher premiums every year. The Democrats don’t want to talk about that. They just want to pretend they have been serious with fiscal discipline.
The other gimmicks remain in the plan as well. The double-counting of premiums for a long-term care insurance programs an offset for the health entitlement spending. The assumption that congress will allow Medicare reimbursement rates to fall so low that one in five hospitals and nursing homes might be forced to stop taking Medicare patients. And the expectation that somehow congress can hand out generous new subsidies to those getting insurance through the exchanges, even though many tens of millions of others with the same resources would get no additional help for their job-based coverage.
The bottom line here has been clear for months. The bill being pushed by the President would take what’s already a very bleak budget outlook and make it much, much worse.
Cross-posted at The Corner.
Senate Majority Leader Harry Reid (D-NV) says “the American people need a message. The message that they need is that we are doing something on jobs.” Reid’s real message is to confirm what is now obvious to all, which is that he and his congressional allies have nary a clue as to how an economy creates jobs.
In lieu of an ineffectual bi-partisan compromise bill crafted by Chairman Baucus (D-MT) and Senator Grassley (R-IA), Reid has reportedly developed a slimmed down, equally ineffectual bill including a new payroll tax exemption plus extensions to three existing programs – Build America Bonds, small business expensing, and a one-year extension of the highway program.
To get a sense of how nonsensical this is, suppose the Federal government actually had an effective stimulus program somewhere, and suppose it was slated to expire. Extending the program would not create any new jobs, but would merely preserve the jobs already created. Calling such an extension a “jobs bill” demonstrates messaging once again trumping substance. Yet this is essentially what is happening with the three existing programs reported to be included in the Reid bill, except of course that two of the three have little or nothing to do with employment one way or the other. Only the small business expensing clearly is a job creator.
So the only new element of the Reid jobs bill that offers a glimmer of hope for creating jobs is a payroll tax exemption. This exemption would encourage businesses to create some jobs but only if paid for by cutting spending. Whatever job gains it might create would be lost if the exemption were paid for through more borrowing or through harmful tax hikes on other taxpayers. And even analysis by the Congressional Budget Office, which casts a disturbingly benign eye on such proposals, suggests that $10 billion in payroll tax relief would create as little as 80,000 jobs. To put that in perspective, that’s creating 1 job for every 100 jobs lost thus far, and again even that figure ignores the actions Congress would be taken simultaneously to destroy jobs.
Whether the Reid mini-bill, the Baucus-Grassley compromise, or last year’s $872 billion monster stimulus, the result is the same – failure. And these bills fail because they ignore the processes by which the private sector creates jobs. Jobs are created when businesses are hopeful about the future. When they see opportunity and are confident enough to take the risks in pursuit of gain.
The American economy is a fountain of opportunities for new businesses, growing businesses, and jobs. The entrepreneurial spirit is alive and willing. But it is not foolish. American businesses see Washington awash in conflict, its leaders messaging on jobs while threatening higher taxes and more regulations. They see an endless train of trillion dollar budget deficits. They worry about resurgent inflation.
Risk and uncertainty are fundamental to business investment. Without risk, there would be no reward. But businesses considering the investments that lead to hiring today must weigh the risks emanating from Washington along with the risks inherent in business. If Senator Reid and his colleagues want a message on jobs, a good one would be: We get it. We’re the problem.
He would then vow to oppose any tax hikes for the balance of this Congress, and offer legislation delaying the tax hikes scheduled for 2011 for at least 5 years. President Obama would join in by telling his bureaucracies to freeze all regulatory projects that involve imposing more risks and more burdens on business. And together with Republicans, they would slash federal spending to restore some sense of fiscal discipline to the federal budget.
According to a CBS/NY Times poll out this morning, only 1 voter in 8 approves of the job Congress is doing. The Reid bill is a good of example of the source of the voters’ ire.