Freedom Line Blog

In his otherwise lackluster State of the Union address this week, President Obama stated to bipartisan applause that he’d like to lower America’s corporate tax rate and reduce the Byzantine array of loopholes in our code.  That policy is actually supported by leaders in both parties, including Speaker John Boehner, and the Republican and Democratic chairmen of the House and Senate tax-writing committees.

And as we recently noted, reform is necessary, given the complexity of America’s nearly three-decade old tax code.  The problem remains that Congress has been too timid to take the hard steps necessary to lower America’s corporate tax rate to 25% from 35% – which is the highest rate amongst all OECD nations.  Because of this anticompetitive rate, the United States is at a huge comparative disadvantage globally.

And CEOs have taken notice.

Several hundred corporations have unfortunately chosen to reincorporate abroad to dodge U.S. taxes in recent years.  While the practice is technically legal, the opportunity costs for the United States are huge.   Some 484 U.S. companies were bought by foreign companies in the first half of 2013, for a total of $43.6 billion, according to Thomson Reuters.  That provides a wake-up call that action on corporate tax reform is absolutely crucial.  President Obama called for a ‘year of action’ in this week’s address, and threatened to use his executive powers in a constitutionally dubious manner.

For tax reform, Congress needs to act swiftly to ride this rare bipartisan wave and introduce legislation that supports a fundamental overhaul of America’s tax code.  American-owned businesses lead globally in innovation and economic growth, and our tax reform should support their success, not drive it overseas.

This week’s edition of the Liberty Update, CFIF’s weekly e-newsletter, is out. Below is a summary of its contents:

Senik:  The State of the Union and the State of the Presidency
Lee:  New Worldwide Index Reveals Value of Intellectual Property to U.S. Prosperity
Ellis:  How ObamaCare’s Insurance Bailouts Add Up to Crony Capitalism

Video:  The Inequality Illusion
Podcast:  Another Way ObamaCare Will Hurt Taxpayers
Jester’s Courtroom:  Bar Sued for Loud Noise

Editorial Cartoons:  Latest Cartoons of Michael Ramirez
Quiz:  Question of the Week
Notable Quotes:  Quotes of the Week

If you are not already signed up to receive CFIF’s Liberty Update by e-mail, sign up here.

“Health economists worry that mergers could end up increasing what you pay. Hospital systems can often negotiate higher rates with insurers for the same care,” says a report at CNN Money.

The mergers in question are the result of an incentive structure within Obamacare that gives financial rewards to doctors and hospitals that create “Accountable Care Organizations” (ACOs) that, according to the report, “coordinate treatments with the goal of delivering quality care for less.”

In order to increase their eligibility for ACO benefits, hospitals across the country are scooping up individual and small group medical practices. The reason this may be bad for patients is that mergers allow hospitals to increase their market share, giving them greater leverage to negotiate higher rates with insurance companies. Cigna, a health insurance company, has seen bills for routine procedures spike 300 percent to 500 percent after a hospital acquires a practice.

Of course, those increased costs are passed on to patients, many of whom may not realize it until they get hit with a new “facility fee” that tacks on $75 to $150 for a routine visit.

One would think that a program designed to deliver “quality care for less” would pass on the savings to the patient. Instead, it looks like patients will pay more while the federal government rewards hospitals for cornering the market.

CFIF Senior Vice President Timothy Lee discusses how the U.S. has fallen from the top ten most economically free nations in the world and how, in unrelated news, temperatures have fallen too despite the warnings from the global warming alarmists.

Listen to the interview here.

Yesterday, three senior Republican Senators introduced a set of ideas that could eventually turn into the upper chamber’s Obamacare alternative.

The proposal – coauthored by Senators Tom Coburn (Oklahoma), Richard Burr (North Carolina) and Orrin Hatch (Utah) – is a welcome companion to the repeal and reform plan put forward by the House Republican Study Committee (RSC).

The plans share some important elements. Both would repeal Obamacare (though the Senate plan would reinstate certain Medicare changes). Both limit medical malpractice awards in an attempt to cut down on junk lawsuits. And both would increase access to various tax-shielded vehicles like Health Savings Accounts.

An interesting divergence is over whether to allow consumers to purchase health insurance across state lines. The RSC bill does, while the Coburn-Burr-Hatch proposal does not. If allowed, consumers would have more choices, including access to cheaper out-of-state plans for those living in high regulation states.

On the other hand, there is the possibility that insurance companies might cluster in a low-regulation state, leading to a domino effect where all states cut back on coverage requirements or risk losing companies to more business-friendly states. Stripped down health insurance is fine for young and healthy people, but hardly adequate for older and sicker persons. If enough people are priced out of the market, expect the liberal solution to be expanding government programs to cover them.

We know, because that’s one of the arguments liberal defenders of Obamacare used to justify its passage. As Republicans deliberate on how best to reform Obamacare after it’s repealed, figuring out a way to avoid that trap should be high on the priority list.

Below is one of the latest cartoons from two-time Pulitzer Prize-winner Michael Ramirez.

View more of Michael Ramirez’s cartoons on CFIF’s website here.

Join CFIF Corporate Counsel and Senior Vice President Renee Giachino today from 4:00 p.m. CST to 6:00 p.m. CST (that’s 5:00 p.m. to 7:00 p.m. EST) on Northwest Florida’s 1330 AM WEBY, as she hosts her radio show, “Your Turn: Meeting Nonsense with Commonsense.”  Today’s guest lineup includes:

4:00 (CST)/5:00 pm (EST): Cleta Mitchell, Partner, Foley & Lardner LLP: Proposed IRS Rules on 501(c)(4) Social Welfare Groups;

4:30 (CST)/5:30 (EST): Nan Swift, Federal Government Affairs Manager, National Taxpayers Union: Obama’s Insurance Bailout;

5:00 (CST)/6:00 pm (EST): George Landrith,President and CEO, Frontiers of Freedom: Drones, Security at Sochi and Other Issues; and

5:30 (CST)/6:30 pm (EST): CFIF’s Tim Lee, Sr. Vice President: Obama’s American Unexceptionalism.

Listen live on the Internet here.   Call in to share your comments or ask questions of today’s guests at (850) 623-1330.

Talk about a New York state of mind.

In the run-up to the 2014 election, U.S. Senator Chuck Schumer (D-NY) “charts an agenda for Congress that includes extending unemployment benefits, raising the minimum wage, making college more affordable and investing in infrastructure,” according to the L.A. Times.

“Times are now ripe for a renewed and robust defense of government,” Schumer said in a speech to the liberal Center for American Progress Action Fund. And he clearly doesn’t fear any potential downside. “The best way to deal with the tea party’s obsessive anti-government mania is to confront it directly, by showing the people the need for government to help them out of their morass.”

Those who live in glass houses shouldn’t throw stones. The real maniacs in Washington, D.C. are liberals like Schumer who think Americans are eager to be told how government will meddle even more in the economy. Raising the minimum wage in an anemic employment market is a sure way to increase joblessness. But maybe that’s the point. The result is more people directly dependent on government outlays for their daily needs.

And then there is the inflationary effect of government spending on the price of college tuition, as well as the fact that ‘infrastructure investment’ is really code for pork barrel projects channeled to public employee unions.

Schumer’s call for a full-throated defense of government may get cheers in the liberal salons of the NYC-DC corridor, but echoing it would bring swift electoral defeat for his colleagues in more conservative states.

For all the attention given to Obamacare’s federal and state exchanges it’s easy to forget that expanding Medicaid remains the single biggest way the controversial law intends to increase the amount of people covered by health insurance.

And unlike the private plans available on the exchanges, every new Medicaid enrollee is completely dependent on the government.

In states where Democratic lawmakers chose to expand Medicaid under Obamacare, the spike in enrollments could pose problems for Republican candidates.

Greg Sargent, after noting that around 75,000 people have signed up for expanded Medicaid in West Virginia, asks, “How would the GOP Senate candidate in West Virginia, Rep. Shelley More Capito, respond if asked directly if she would take insurance away from all these people?”

Sargent’s liberal frame is sure to be echoed in the 2014 election as Democrats try to portray Republicans as heartless skinflints. In this telling, the only options are either to embrace Obamacare’s massive expansion of the welfare state or return to the status quo of sizeable numbers of people unable to get health insurance. (To combat this framing, Republicans should unite around an already existing proposal that gives them the upper hand.)

But that’s at the federal level. More locally, GOP gubernatorial candidates in states that (1) expanded Medicaid and (2) appear most likely to elect a Republican governor are staying mum about repealing Obamacare’s Medicaid expansion.

“None of these Republicans is pledging to repeal the Medicaid expansion put in place by a Democratic governor,” according to Jonathan Bernstein.

As Bernstein puts it, “Liberals assume that once benefits are extended, no government will take them away.”

Unless Republicans at the state level show the kind of policy moxie exhibited by Wisconsin’s Scott Walker, that prediction might come true.

In an interview with CFIF, Sally Pipes, President and Chief Executive Officer of the Pacific Research Institute, discusses how the federal government fumble on the meningitis vaccine Bexsero is partially to blame for outbreaks of bacterial meningitis on college campuses and how other regulatory hurdles in the healthcare arena must be taken down.

Listen to the interview here.

This week’s edition of the Liberty Update, CFIF’s weekly e-newsletter, is out. Below is a summary of its contents:

Senik:  The Results Are In: Red States Dominate
Lee:  Global Cooling? Great Lakes Experiencing Deepest Freeze in 25 Years

Podcast:  Is the Government is to Blame for Recent Meningitis Outbreaks?
Jester’s Courtroom:  Tequila Pour Stirs Up a Lawsuit

Editorial Cartoons:  Latest Cartoons of Michael Ramirez
Quiz:  Question of the Week
Notable Quotes:  Quotes of the Week

If you are not already signed up to receive CFIF’s Liberty Update by e-mail, sign up here.

You’d think the Obama Administration would have been sufficiently chastened by the IRS scandal not to push their luck. You’d have thought wrong. From the New York Times:

LOS ANGELES — In a famously left-leaning Hollywood, where Democratic fund-raisers fill the social calendar, Friends of Abe stands out as a conservative group that bucks the prevailing political winds.

A collection of perhaps 1,500 right-leaning players in the entertainment industry, Friends of Abe keeps a low profile and fiercely protects its membership list, to avoid what it presumes would result in a sort of 21st-century blacklist, albeit on the other side of the partisan spectrum.

Now the Internal Revenue Service is reviewing the group’s activities in connection with its application for tax-exempt status. Last week, federal tax authorities presented the group with a 10-point request for detailed information about its meetings with politicians like Paul D. Ryan, Thaddeus McCotter and Herman Cain, among other matters, according to people briefed on the inquiry.

Here’s the Administration’s problem: One of the reasons they were able to get away with targeting Tea Party groups for so long was because most of the victimized organizations were grassroots affairs without megaphones. But go after Hollywood? The tinseltown conservatives may have spent the past decade content to keep their opinions to themselves—but politically-motivated audits have a way of upsetting that equilibrium (how do you think the story got to the Times, after all?).

The old saying is “never pick a fight with someone who buys ink by the barrel.” Ink may be going by the wayside these days, but it’s still ill-advised to throw a haymaker at people with this kind of clout. I suspect the White House will learn that sooner rather than later.

Below is one of the latest cartoons from two-time Pulitzer Prize-winner Michael Ramirez.

View more of Michael Ramirez’s cartoons on CFIF’s website here.

Steven Hayward is out with a blistering piece on the need to remember that state and local governments can be just as mind-numbingly bureaucratic as the feds.

“A key principle of federalism is that state and local government would resist the centralization of power in Washington, and defend the principle of ruling with and by the consent of the governed,” writes Hayward. “It is time to recognize that this kind of government no longer exists…”

As proof he cites several stories of local cops shutting down kids’ lemonade stands, and county air pollution regulators that make more than the top officials at the federal EPA. One could add to this Santa Monica’s “ban the [plastic] bag” campaign, and any of former New York City Mayor Michael Bloomberg’s wars on salt and soda, among many others.

And it’s not just in deeply blue states that bureaucrats revel in meddling. The four lemonade stand shut-downs that Hayward spotlighted occurred in Texas, Georgia, Iowa and Wisconsin.

In a nutshell, states and localities have succumbed to a me-too mentality that simply creates mirror images of federal bureaucracy all the way down. In order to justify their existence, each level imposes fines, collects fees and issues regulations – many times at odds with each other. The duels over rule have gotten so pervasive, there’s even a judicial doctrine called “preemption” to help courts sort through competing claims over which gang of regulators gets to control citizens’ lives.

One way to limit any bureaucracy’s social footprint is to make its decisions subject to approval by the legislature that creates it. At the federal level, the REINS Act would require congressional approval before any regulation costing $100 million or more annually goes into effect. Similar efforts, with lower thresholds, could and should be pursued at the state and local level.

Putting state legislators and city council members on the record when it comes to imposing increases to the costs of living will likely reduce the number of increases imposed. After all, if it makes sense at the federal level, why not closer to home?

I’ve watched with interest over the past few weeks as the media has feasted on excerpts from the new memoir, Duty, by former Secretary of Defense Bob Gates. This is a pretty well-worn Washington tradition: do advance publicity for an otherwise workmanlike book by leaking its few moments of genuine provocation, then sit back and watch the sharks circle.

Truth be told, I don’t regard most of the “revelations” as befitting the name. Is anyone surprised that President Obama’s heart didn’t seem to be in the Afghan War (for Obama, it was only “the good war” relative to Iraq, not in absolute terms). Is anyone shocked that Vice President Biden consistently displays a facile approach to foreign policy? Are we stunned that Hillary Clinton and President Obama admitted behind closed doors that their opposition to the surge in Iraq was based on cynical political calculations (I actually find this somewhat heartening—I’d rather think of them as skilled, amoral politicos than complete naifs).

Gates—like his predecessor, Donald Rumsfeld, and his successor, Leon Panetta—is a decent man who genuinely wanted what was best for the country and the military. He’s also, it turns out, a bit of a firecracker (it helps in that job). From Joel Gehrke, writing at the Washington Examiner:

Former Defense Secretary Robert Gates didn’t hide his contempt for Senate Majority Leader Harry Reid, D-Nev., when asked to answer Reid’s claim that he “denigrated” colleagues “to make a buck” with his new memoir.

“It’s common practice on the Hill to vote on bills you haven’t read, and it’s perfectly clear that Sen. Reid has not read the book. He will find that I do denigrate him,” Gates cracked back at a Politico event promoting his new book, Duty: Memoirs of a Secretary at War.

I like the cut of his jib.

If you know a young person who is unemployed, has no health insurance and spends waaay too much time using social media, the Obama administration has just the timewaster they’re looking for.

At tellafriendgetcovered.com, America’s healthiest non-working adults can absorb six straight hours of sales pitches and snarky humor trying to lure them into purchasing an Obamacare-approved health insurance policy that they probably won’t use.

One segment has a balding Richard Simmons bantering with a Miley Cyrus look-a-like. There are also ads featuring Oscar winner Jennifer Hudson, and former NBA stars Magic Johnson and Alonzo Mourning.

The one with Hudson portrays the starlet telling a distraught father of a recent college graduate not to worry – his uninsured son can stay on his company’s policy through age 26! All seems well in la-la land as father and son ignore the fact the company will be paying up to four more years to cover someone who isn’t helping the firm increase its revenue.

Sedentary viewers are encouraged to tweet, post and otherwise spread the fleeting joy they get from watching taxpayer-funded, government-directed infomericals. The goal is to create a social media buzz among young adults to increase their enrollment in Obamacare exchange plans.

The move is motivated by desperation. Currently, Obamacare-related enrollments by young and healthy people are at 24%. Originally, the Obama administration estimated that this cohort needed to be at least 40% of Obamacare’s risk pool to make it financially viable. The disparity could be disastrous.

If the White House’s celebrity-themed push doesn’t work, it won’t be for lack of creativity and spending. It will be because a sizeable number of young and healthy people wind up laughing at the administration’s pitch, not with it.

H/T: CNBC

There is no better example of Washington’s dysfunction than the U.S. tax code.  With President Obama’s annual State of the Union Address less than two weeks away, discussion about how to fix our broken tax code is growing.  In particular, the House Ways & Means Committee released a video this week highlighting its problems, and some proposals about how to fix it.

WATCH THE VIDEO: https://www.youtube.com/watch?v=BGizlBE-u10&feature=youtu.be

The last time America’s tax code was overhauled was in 1986, under President Ronald Reagan.  Obviously, very much has changed since then, from the dot-com boom-and-bust, the rise of China as an economic powerhouse and the sub-prime mortgage crisis, just to name a few.  What’s more, the tax code continues to grow more complicated with each passing day.   According to House Ways & Means Committee research, more than 4,400 changes to the tax code have occurred in the last 10 years, amounting to about one change per day.  While other countries have been simplifying their codes and reducing rates, America’s tax burden continues to grow in scope and complexity.

While the fleeting political will do something still exists – even President Obama himself proclaimed, “Our corporate tax rate is too high” – action is urgently required.  The best solution is one that makes America more competitive globally and leads to economic growth.  America’s corporate tax rate currently stands at 35% – the highest in the world.  Accordingly, a proposal to lower that corporate rate, while broadening the base, will result in a simpler, fairer tax code that both sides of Congress can get behind.

In today’s Wall Street Journal, former Japanese Diet member Mieko Nakabayashi and former U.S. Deputy Assistant Secretary of the Treasury James Carter spell out in stark terms the need for reform and reduction of U.S. corporate taxes, now the highest in the industrialized world.  In particular, they highlight the alarming exodus of large corporations from America to more hospitable tax regimes with this statistic:

When the U.S. last cut its corporate tax rate in 1986, 218 of the world’s 500 largest corporations measured by revenue were in the U.S.  Today, that number is 137.  Similarly, the number of Japanese corporations in the Fortune Global 500 fell to 68 last year from 81 in 2005.  While there is no single explanation for the drop, Tax Foundation chief economist William McBride tells us:  ‘The common thread behind all of this is the U.S. corporate tax, which is the most punitive in the developed world.’”

We live in a period of unprecedented political polarization.  The need to reduce our corporate rate, however, has actually achieved bipartisan agreement, with Barack Obama himself proclaiming the rate too high.  Accordingly, the time is now to enact reduction and reform, lest America’s legacy of economic leadership deteriorate further.

This week’s edition of the Liberty Update, CFIF’s weekly e-newsletter, is out. Below is a summary of its contents:

Lee:  Obama’s Unexceptionalism: U.S. Plummets from Economic Freedom Index Top 10 for First Time
Senik:  Will the Supreme Court Rein in Obama’s Lawlessness?

Video:  The Single-Payer Lie
Podcast:  Arctic Vortex and Finger Pointing – Interview w/ CEI’s Myron Ebell
Jester’s Courtroom:  Just Don’t Do It

Editorial Cartoons:  Latest Cartoons of Michael Ramirez
Quiz:  Question of the Week
Notable Quotes:  Quotes of the Week

If you are not already signed up to receive CFIF’s Liberty Update by e-mail, sign up here.

In this week’s Freedom Minute, CFIF’s Renee Giachino explains that ObamaCare is failing not because its authors are  leftist geniuses who concocted some deliberate scheme to impose a national single-payer healthcare system, but because it fails to recognize the basic truths of American government.