Freedom Line Blog

The Wall Street Journal reports that President Barack Obama’s upcoming speech about how to balance the budget will include tax increases along with cuts to programs like Medicare and Medicaid.

The call for higher taxes on America’s job creators will solidify the decision facing voters next year.  The Democrats want more money, while the Republicans want less government.

If there is a positive aspect about the president showing his true tax-and-spend colors, it’s that ideology – how serious people frame reality and their decisions about it – is now front and center in politics.

Rep. Paul Ryan (R-WI) and the GOP want lower taxes and private sector growth.  President Obama and the Democrats want to spend taxpayer money into an ever-growing share of GDP.

Let the debate begin.

Today,  Budget Committee Chairman Paul Ryan and the House Republican majority are introducing their much-anticipated 2012 budget plan.  The bold proposal — “The Path to Prosperity” — is refreshingly comprehensive in addressing the nation’s debt crisis and promoting economic prosperity.  According to Congressman Ryan:

For starters, it cuts $6.2 trillion in spending from the president’s budget over the next 10 years, reduces the debt as a percentage of the economy, and puts the nation on a path to actually pay off our national debt. Our proposal brings federal spending to below 20% of gross domestic product (GDP), consistent with the postwar average, and reduces deficits by $4.4 trillion.

A study just released by the Heritage Center for Data Analysis projects that The Path to Prosperity will help create nearly one million new private-sector jobs next year, bring the unemployment rate down to 4% by 2015, and result in 2.5 million additional private-sector jobs in the last year of the decade. It spurs economic growth, with $1.5 trillion in additional real GDP over the decade. According to Heritage’s analysis, it would result in $1.1 trillion in higher wages and an average of $1,000 in additional family income each year.

Furthermore, Ryan’s budget cuts taxes and strengthens to the social safety net with commonsense reforms to Medicare and Medicaid and by advancing the discussion to sure up Social Security for future generations.

Simply put, the proposal is a real and comprehensive solution to a grave spending and debt crisis that threatens America’s future.  Failure to act to right the nation’s fiscal ship, and now, is no longer an option.  The Path to Prosperity budget deserves serious consideration, not the partisan politics as usual that has already begun.

Read more details on Ryan’s budget plan here.  For the complete plan, click here (.pdf).

Republicans in Congress are currently split on whether to accept incremental budget cuts in the name of political pragmatism or to hold a hard line — and face the possibility of a government shutdown or a freeze in the debt ceiling — in the name of principle. Freshman Florida Senator Marco Rubio takes to the editorial pages of the Wednesday edition of the Wall Street Journal with a message that leaves no doubt where he stands:

“Raising America’s debt limit is a sign of leadership failure.” So said then-Sen. Obama in 2006, when he voted against raising the debt ceiling by less than $800 billion to a new limit of $8.965 trillion. As America’s debt now approaches its current $14.29 trillion limit, we are witnessing leadership failure of epic proportions.

I will vote to defeat an increase in the debt limit unless it is the last one we ever authorize and is accompanied by a plan for fundamental tax reform, an overhaul of our regulatory structure, a cut to discretionary spending, a balanced-budget amendment, and reforms to save Social Security, Medicare and Medicaid.

For months now, we’ve heard “sober” politicians tell us that it’s time to have “an adult conversation” about the size and cost of government in which “everything is on the table”. It looks like Marco Rubio is calling their bluff.

So maybe the era of big government really wasn’t over when former President Bill Clinton declared it so.  Jim MacDougald of the Free Enterprise Nation explains that the balanced budget Clinton delivered was the product of a shell game with the Social Security Trust Fund, not a profile in political courage.  From a blog entry discussing the history of Social Security and Medicare:

The federal government recognized that beginning in about 2011 the transfer payment system wouldn’t work. There would be too many recipients of benefits and not enough workers to take money from to pay for it. To avoid the financial catastrophe that loomed ahead, in 1983 the government substantially increased employer and employee contribution requirements to (at least partially) pre-fund for 2011 and thereafter.

Planning ahead for an event that would occur 28 years in the future was a commendable and far-sighted act by our elected officials. “Baby-boomers,” who made up the majority of our workforce, were subsequently “taxed twice,” with matching contributions from employers. One portion of their tax was to pay for those on Social Security who had already retired, the second portion was to pre-fund a part of their own retirement benefits.

Congress took this excess tax revenue and put it in a “trust fund” to pay future benefits. But the trust fund they established was an enormous shell game because the money was treated as general revenues…a huge windfall to the federal government. It enabled President Clinton to announce at a State of the Union address, that the deficit was “exactly zero.” Even today, people are still congratulating Presidents Clinton and H.W. Bush for having balanced budgets and reducing national debt. But Congress had accomplished that feat by taking and spending all of the “excess revenue” that was coming in from payroll taxes for Social Security, and there was a lot of it to spend! From 1983 to 2008, the federal government took $2.5 trillion more than required to pay current Medicare and Social Security recipients, and they “bought Treasuries” with it. In other words, they spent it all.

Now, it makes a lot more sense how the federal government could “balance” the budget so quickly with nary a squeal heard from entrenched interests.  As MacDougald makes clear in the rest of his article, starting next year there are no more games to play.  The 2011 budget for Social Security and Medicare is $1.22 TRILLION – more than all of the federal income taxes paid by all of the workers in America last year.  In order to pay for the payments owed to Baby Boomers (who, as a cohort, begin reaching 65 in 2011), every American worker will have to pay at least $10,000 in new federal taxes every year.

Add this to the cost of ObamaCare and….pass the tryptophan and bring on the food coma.

In Friday’s Liberty Update commentary “The ObamaCare Fit Hits the Shan,” we noted how quickly the negative consequences of ObamaCare are arriving in the form of higher health care spending and insurance rates.

Well, Kathleen Sebelius, President Obama’s Health and Human Services Secretary, seems to believe that she can terrify the economic laws of supply and demand into deference.  Attacking private health insurers for doing nothing more than adjusting their bottom lines to meet business realities imposed by ObamaCare mandates, Sebelius ordained:

There will be zero tolerance for this type of misinformation and unjustified rate increases.  We will not stand idly by as insurers blame their premium hikes and increased profits on the requirement that they provide consumers with basic protections.”

Karen Ignagni, who leads America’s Health Insurance Plans, provided an Economics 101 primer that Sebelius should have received in college by saying, “It’s a basic law of economics that additional benefits incur additional costs, and the impact on premiums depends on the type and amount coverage policyholders had before.”

Simple economics aside, who does Sebelius think she is?  A Soviet-era commissar who can cow American citizens and businesses by thundering such threats?  Ms. Sebelius, you’re about to receive a true lesson in “zero tolerance” when Americans head to the ballots in November.

Ohhhh, so ~now~ they tell us?  White House allies are instructing operatives to abandon the claim that ObamaCare will reduce healthcare costs and the deficit.  Instead, they now seek to persuade the electorate that we can “improve it.”

According to Politico, the messaging conference call and PowerPoint presentation acknowledges the failure of the promises shamelessly fed to the public by ObamaCare advocates:

The presentation’s final page of ‘Don’ts’ counsels against claiming ‘the law will reduce costs and the deficit.’  The presentation advises, instead, sales pitches that play on personal narratives and promises to change the legislation.”

If this doesn’t make you angry and ready to line up at dawn to vote this November, have your pulse checked.

As usual, Jay Cost has an eyebrow raising piece of analysis – today discussing in Technicolor detail how President Barack Obama’s narrow geographic popularity foretold of a need to govern from the center of the country; not the center of his party.

What he should have done instead was disarm his opponents. If he had built initial policy proposals from the middle, he could have wooed the moderate flank of the Republican party, marginalized the conservatives, and alleviated the concerns of those gettable voters in the South and the Midwest. This is precisely what Bill Clinton did between 1995 and 2000, and it is what the President’s promises of “post-partisanship” suggested.

Our system of government can only produce policy when geographically broad coalitions favor it. The Senate, more than any other institution, forces such breadth. Obama created breadth the wrong way. He watered down initially liberal legislation to prompt just enough moderate Democrats to sign on. Instead, he should have built policy from the center, then worked to pick up enough votes on either side. The left would have been disappointed, but the right would have been marginalized and, most importantly, Independent voters – who have abandoned the President in droves – might still be on board.

One of the great ironies of liberal politicians is that they so often discount the yen of conservative intellectuals to participate in policy making.  People like Rep. Paul Ryan (R-WI) and former House Speaker Newt Gingrich (R-GA) are driven by ideas, and enjoy the process of fashioning policies that get as many of them enacted as possible.

But they are not necessarily “my-way-or-the-highway” types.  Ryan’s Roadmap for America’s Future is a multi-decade plan for balancing the budget.  Implicit in its longevity is Ryan’s willingness to work out compromises that preserve Social Security and Medicare while making them fiscally sound.  For his part, Gingrich has always been the kind of politician willing to hammer out solutions with the other side, as he attempted to do with Bill Clinton.

People wonder why we don’t have bipartisan breakthroughs anymore.  In part, it’s because politicians like Barack Obama don’t have the political sense to “spread the success around” turning their adversaries into cooperators.

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

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

As we mentioned earlier today, Dr. Donald Berwick has received a recess appointment from President Obama to head the Centers for Medicare and Medicaid Services. You’ll hear a lot in the next few days from the conservative press about Berwick’s radical affection for rationing and his distaste for the free market system. Lest you think any of it hyperbolic, let the man tell you for himself:

In an absolutely chilling piece at RealClearPolitics today, Dr. Hal Scherz examines an Obama nominee who otherwise may have escaped public scrutiny: Dr. Donald Berwick, who’s been tapped by 44 to run the Center for Medicare & Medicaid Services. The picture that emerges is of an individual who makes even the most wall-eyed health care fears seem credible. Here’s Scherz, quoting Berwick in the first and third paragraphs:

“Any healthcare funding plan that is just, equitable, civilized and humane, must redistribute wealth from the richer among us to the poorer and the less fortunate. Excellent healthcare is by definition redistributional”.

Indeed, lest there be any doubt about the range of Dr Berwick’s schemes for “redistribution” – code for transferring power to the government — he makes clear how grand his vision for statist health care.

“There needs to be global budget caps on total healthcare spending for designated populations (ie-rationing)” Dr. Berwick says. “The simplest way to reach these goals is with a single payer system.”

The whole thing has to be read to be believed, but Scherz wraps it up with a nice injection of humanity:

But if Dr Berwick leaves little doubt who is going to be in charge of the redistribution, global caps, and the single payer systems, he shows with his use of words like “politically accountable” or “democratic”, the sort of verbal tic that betrays his own understanding. He seeks not broad-based, bottom-up decision-making but top-own edicts from elite panels of enlightened and, of course, “global” thinkers like himself that preempt decisions now made by doctors and their patients.

And that is what those of us who are practicing physicians find so troubling about Dr. Berwick’s nomination. We see him as a White House Rose Garden, photo-op doctor with a borrowed white coat; an academic who runs a $58 million institute, who analyzes numbers and reports and theories about populations but is now totally out of touch with his former peers and the patients that they treat every day. And this is the sobering point– Dr Berwick will not be there with us at the patient’s bedside looking them in the eye and telling them that the life saving treatment that they need is not approved because they don’t fit into the right demographic.

Welcome to the ObamaCare hangover, America.

In his weekly Main Street column entitled “The Tax Police and the Health Care Mandate,” Wall Street Journal columnist William McGurn points out a malignant paradox within ObamaCare.  Namely, that ObmaCare’s infamous individual mandate (which compels uninsured Americans to suddenly purchase insurance under penalty of prosecution) will have one of two consequences.  It will either (1) penalize poorer Americans who fail – or find themselves unable – to purchase insurance by unleashing a horde of IRS enforcers upon them;  or, alternatively, (2) remain lightly enforced in order to avoid punishing the poor, thereby escalating our collective taxpayer cost into the stratosphere.

The rationale behind the individual mandate, of course, is that many of ObamaCare’s provisions, such as forcing insurers to cover people with preexisting conditions, would make its total cost unaffordable unless healthier and younger uninsured Americans were required to buy coverage.  McGurn notes that Obama was against this individual mandate before he was for it, opposing it during the 2008 Democrat primaries against Hillary Clinton, but unsurprisingly inserting it into ObamaCare’s provisions later on.  Nevertheless, enforcing the individual mandate will require new legions of IRS agents to target Americans who refuse to either purchase insurance or pay the federal tax penalty.

Which creates the paradox.  Those who consider themselves too poor to buy insurance today may still feel that way even when ObamaCare’s mandate is imposed, in which case they’ll find themselves the targets of the IRS.  If, however, federal bureaucrats in their famed mercy refrain from enforcing ObamaCare’s individual mandate in order to avoid persecuting poorer Americans (just as they do not penalize failure to return census forms), the total cost of ObamaCare will far exceed what its proponents promised us while they shoved it up our…  noses.

Nancy Pelosi was right about one thing, though.  We’re sure finding out a lot about ObamaCare now that it’s passed.

Are you curious to know when your taxes will spike?  When one of approximately 17,000 new IRS agents will come knocking for failure to have government-approved insurance?  When senior citizens can expect to see those massive cuts to their Medicare Advantage plans?

Congressman Dave Camp, Ranking Member of the House Ways and Means Committee, has put together a handy timeline outlining when all the major provisions of ObamaCare are set to kick in.

Check it out here (.pdf).

As desperation to pass ObamaCare grows, so do the number of peripheral schemes.

Today’s, according to the AP, is an Obama plan to hire bounty hunters, “in this case…private auditors armed with sophisticated computer programs to scan Medicare and Medicaid billing data for patterns of bogus claims.  The auditors would get to keep part of any funds they recover.  The White House said a Medicare pilot program recouped $900 million for taxpayers from 2005-2008.”

Well, we have questions:  Wasn’t 2005-2008 during the Bush administration?  Where’s Obama’s union scam for this one?  Can you picture “Dog” wearing a green eye shade running his “sophisticated computer program?”

As discussed previously by CFIF, Representative Paul Ryan (R-WI) is getting some much deserved attention for his path breaking proposal, “A Roadmap for America’s Future.”  The Roadmap lays out a comprehensive vision for matching spending on federal entitlements like Medicare, Medicaid, and Social Security with tax receipts.  In other words, it offers specifics on the GOP’s long-stated aim to make government live within its means.

Of course, proposing an elegant, tough-minded legislative solution in an election year doesn’t win many co-sponsors.  In Ryan’s case, he’s got 9.  The folks at Newsweek noticed and are calling out Republicans for their lack of agreement on a substantive way forward.  Being a man of substance and conviction isn’t easy in Washington, D.C., especially for a member of Congress.  That Paul Ryan is willing to put his policies where his rhetoric is deserves not only a nod, but broad based conservative support as well.

That seems to be the solution from Senate Democrats seeking to broker a political path toward government-run health care.

With the public option running low on support, Senate Democrats are now floating a plan that would lower the age for Medicare enrollment to as low as 55.

According to Senate Democrats, even though Medicare has $89 trillion in long-term unfunded liabilities, adding a few million patients to the ledger shouldn’t be a problem.  Brilliant thinking.

More of CFIF on health care here.

The U.S. Senate this afternoon voted 42-58 to reject an amendment, sponsored by Senator John McCain (R-AZ), that would have sent the Senate health care “reform” bill back to the chamber’s Finance Committee with instructions to strip out nearly $500 billion in Medicare cuts.  In other words, 58 Senate Democrats reaffirmed their desire to cut Medicare by nearly a half trillion dollars.

Democrats Jim Webb and Ben Nelson voted with all Senate Republicans in favor of the amendment.

As Senate Minority Leader Mitch McConnell said in a statement sent out immediately following the vote:

If anyone had any question about the Democrat plan to use Medicare as a piggy-bank to fund their new government programs, those doubts are now gone. 58 Democrats just voted to reject a common-sense proposal to protect senior’s health care from a half-trillion dollars in cuts to Medicare.  Only in Washington would anyone have the nerve to claim that such drastic cuts won’t harm the very program millions of seniors have paid into for years and now rely on.” 

As the Senate continues to debate the future of health care in America, the California Medical Association handed the White House a blow today when it announced that it would oppose the current health care bill.

The California Medical Association has more than 35,000 physicians, the second largest state-based group in the nation.   Though the American Medical Association (AMA) is still supportive of the House version of “reform,” state medical associations in Texas, Florida and Georgia have all joined to oppose a government takeover of health care.

Their main objection is reimbursement rates under Medicare.  The Senate bill is set to slash physician reimbursement under Medicare by 40%, and as a result, most doctors would simply refuse to take Medicare patients.

As Dr. Dev GnanaDev noted, “If doctors can’t see you, the only choice you have is the emergency room, which is a very bad way to get healthcare.”

Let’s hope the AMA joins with California doctors to oppose the Senate bill.

The chorus of opposition to ObamaCare is growing louder among the ranks of medical academe.  Dr. Jeffrey Flier, dean of Harvard Medical School, says ObamaCare would receive a “failing grade” at Harvard.

He wrote:

Our health-care system suffers from problems of cost, access and quality, and needs major reform. Tax policy drives employment-based insurance; this begets overinsurance and drives costs upward while creating inequities for the unemployed and self-employed. A regulatory morass limits innovation. And deep flaws in Medicare and Medicaid drive spending without optimizing care.

His conclusion:

In discussions with dozens of health-care leaders and economists, I find near unanimity of opinion that, whatever its shape, the final legislation that will emerge from Congress will markedly accelerate national health-care spending rather than restrain it. Likewise, nearly all agree that the legislation would do little or nothing to improve quality or change health-care’s dysfunctional delivery system.

The government can’t manage to control the laws of economics like it used to.

No surprise here, but according to a new study released by the non-partisan Center for Medicare and Medicaid Studies, the House health care bill will increase health care costs by $289 billion in the next ten years.

As much as the White House talked about “bending the health care cost curve” downward, the House health care bill, H.R.3962, does the exact opposite.

For some reason the Administration can’t understand that more government spending on health care without commensurate gains in supply leads to health care inflation, driving up costs for all consumers.

Other highlights from the report:

By calendar year 2019, the mandates, coupled with the Medicaid expansion, would reduce the number of uninsured from 57 million, as projected under current law, to an estimated 23 million under H.R. 3962.

The estimated effects of H.R. 3962 on overall national health expenditures (NHE) are shown in table 5. In aggregate, we estimate that for calendar years 2010 through 2019 NHE would increase by $289 billion, or 0.8 percent, over the updated baseline projection that was released on June 29, 2009… The NHE share of GDP is projected to be 21.1 percent in 2019, compared to 20.8 percent under current law.

Public spending would increase under H.R. 3962 as a result of the expansion of the Medicaid program and other Medicaid changes, less the net Medicare savings under the bill. Private expenditures would be higher as well…

Well, not yet.  But this week Congressional Budget Office (CBO) Director Doug Elmendorf issued a sobering report on the state of the nation’s finances.

The largest problem by far?  Entitlements … those “popular” little nuggets of government largesse that everyone enjoys receiving but no one (maybe some liberals) enjoys paying for out of their paycheck.  For example, Medicare and Medicaid are projected to grow by 80% over the next 25 years, while Social Security will only grow 20%.

As Elmendorf notes, the nation simply can’t continue to run up the national debt, currently at almost $12 trillion.  He alludes to possible crises down the road: a drastic drop in the dollar, an increase in interest rates and massive tax hikes.

His conclusion:

[F]iscal policy is on an unsustainable path to an extent that cannot be solved by minor tinkering. The country faces a fundamental disconnect between the services the people expect the government to provide, particularly in the form of benefits for older Americans, and the tax revenues that people are willing to send to the government to finance those services. That fundamental disconnect will have to be addressed in some way if the budget is to be placed on a sustainable course.