Conservative Principles Now

President Barack Obama and congressional leaders claim that the Senate health bill, which will likely face a vote in the House by the end of the week, will decrease the deficit and bend the cost curve related to health care spending.  However, recent analysis by The Heritage Foundation’s Center for Data Analysis (CDA) shows that this is far from true.  Instead, the bill’s mandates and numerous new taxes will have tumultuous effects.  Passing Obamacare will come at the expense of the American people as it would grow the federal debt, increase premiums, and stifle economic growth.

The Senate bill would have disastrous effects on the economy and federal spending.  CDA shows that the bill:

• Increases the federal deficit and national debt. The Congressional Budget Office shows deficit neutrality for the Senate bill—however, this is based on static analysis which ignores the effects new taxes and an individual and employer mandate would have on economic growth.  These provisions would decrease investment in the economy, resulting in lower wages and salaries.  This means less taxable income, lowering federal revenues and growing the debt. Increased borrowing puts upward pressure on interest rates causing some private sector productive investment opportunities to be foregone.  This also increases the interest owed on the national debt, such that the government would pay, on average, $20 billion more in interest between 2010 and 2020.  By the end of the decade, CDA estimates the publicly held debt would be $755 billion dollars more than under current law.

• Increases insurance premiums. Mandates in the Senate bill would require health plans to offer more generous coverage, increasing the cost of insurance.  Increased spending on premiums, accompanied by increased medical spending, would create upward pressure on prices.  This would further increase government spending, since offering the current levels of care covered by Medicaid and the proposed subsidies would cost significantly more.  Another choice would be to ration provider payments even more severely.

• Increases unemployment. The bill also places new taxes on “the rich”—or, in more realistic terms, small businesses and those who create jobs.  CDA’s dynamic analysis of the bill shows that an average 690,000 jobs per year would be lost due to the effects described above.

Americans have recently voiced that Congress’ top legislative priority should be restoring jobs and the economy.  Instead, congressional leaders have focused their agenda on passing the Senate health care bill, which would have the opposite effect of killing jobs growth, suppressing economic growth, and adding to the nation’s already unsustainable levels of federal spending.

Candidate Obama campaigned as a fierce opponent of special interests that use their clout and connections to secure special favors from the government. As President, Obama has made it clear that he only objected to particular special interests getting handouts. Obama happily gives some liberal special interests loopholes and exemptions from the laws that affect everyone else.

The closed-door negotiations over the health care bill have made this clear. Unions strongly objected to the excise tax on “Cadillac” health plans. By some estimates the tax would hit one in four union members. Union lobbyists pressured the White House to drop that tax. After a high-profile meeting between Obama and union lobbyists on Monday, the unions apparently have gotten what they asked for: the excise tax will not apply to collectively bargained health plans. The tax that unions found so onerous will now apply to everyone but them.

What a deal. Unions want the health care spending, but they do not want to pay for it. Obama gave them just that. It also makes for a great recruiting pitch: join a union, get a tax cut.

That is just one of the many handouts unions get in the health care bill. It sets aside $5 billion to subsidize the costs of employer health benefits for early retirees. Few nonunion employers, of course, pay pension and health benefits for workers to retire at 55.

Or consider the small business exemption from the employer mandate for businesses with less than 50 employees. All businesses, that is, except construction companies. The costly employer mandate applies to any construction firm with more than four workers. Why would Congress kick small construction contractors when they are down? Because the construction unions asked Congress to. They did not want their small competitors to get out from under the bill’s costs and gain a competitive advantage. What if those costs put small contractors out of business? That is just too bad.

Obama’s handouts for unions go beyond the health care bill:

• All that federal spending on public works construction projects? The President’s Executive Order on Project Labor Agreements reserves most of those jobs for union members.
• The Detroit bailout was bad policy in its own right. Now the pensions of union retirees at GM subsidiaries will get generous taxpayer top-ups to prevent benefit cuts. The pension plans of nonunion retirees, however, will not get a cent.
• The law requires unions to partner with federal “green job” training programs. Union members will stand first in line for the “green jobs” Obama talks about creating.

Time and again this administration has given unions privileges denied to other Americans. Perhaps this should not surprise. Organized Labor spent hundreds of millions of dollars electing President Obama and the current Congress. Now the President has given them a healthy return on their investment. Isn’t that the way Washington works?

It should not. Congress should write laws that apply equally to all citizens to promote the common good – not to pay off political constituencies. Obama promised to change politics as usual. We’re waiting to see if he’ll do that.