Henry Waxman


The Obama Budget Plan: Taxes and Rationing

Suddenly, the Obama administration and Democratic congressional leaders seem to want health care news stories to fall off of the front page.

This week, House Energy and Commerce Chairman Henry Waxman abruptly cancelled a high-profile hearing he had called just days earlier to berate corporate CEOs who dared to tell their investors that the health-care bill would raise their costs. It seems to have dawned on Congressman Waxman and his staff that his transparent effort to intimidate anyone who tells the truth about the legislation could actually backfire on him and turn into a PR disaster.

The Democratic contention that the bill actually lowers costs for American business is not supported by any rigorous analysis that would justify use in auditable corporate accounting methods. The Business Roundtable study that many Obamacare advocates like to cite as proof of the bill’s savings provides no such proof at all. The prediction of cost savings in the study from the mostly minor provisions in the legislation aimed at “delivery system reform” are highly speculative at best. Indeed, the study itself notes the potential for much higher costs and cites many cost-cutting provisions that are not in the new health law.

What is certain is that the new health law reduced the value to America’s corporations of federal support for retiree drug-benefit coverage. That means it will cost these companies more to provide such coverage in the future. There’s no disputing that. Indeed, there’s no disputing that the companies had an obligation to acknowledge this cost in their financial statements. One way or another, some Americans will be forced to pay higher costs because of this provision, in the form of reduced prescription-drug benefits for retirees or reduced value for the shareholders of the firms in question.

Perhaps Congressman Waxman realized the tables might actually get turned on him this time. A hearing in which Democratic congressmen lectured private-sector CEOs — CEOs who employ tens of thousands of people — for following the law and telling the truth would only make an out-of-touch Democratic Congress look even more disconnected from reality.

Democrats are also contemplating (though no decisions have been made) shelving consideration of the congressional budget resolution to avoid having to debate levels of taxation, federal spending, deficits, and debt before the midterm election. The budget resolution is the annual blueprint that sets parameters for considering budget-related legislation during the rest of a congressional session.

Their reticence is understandable. President Obama is presiding over the largest expansion of the federal government in a generation, even though the federal government is already rushing headlong toward a debt crisis. The government is expected to run a budget deficit in excess of $1 trillion in 2010, after running a deficit of $1.4 trillion in 2009. And that’s just the beginning of an endless sea of red ink. The Congressional Budget Office expects the Obama administration’s latest budget plan would push the nation’s debt to more than $20 trillion in 2020, up from $5.8 trillion in 2008. No wonder congressional Democrats want to change the subject.

But no one should be fooled into thinking the administration and its allies in Congress will never again revisit the budget and health care. They will — largely because the president will have no choice. He is presiding over a spending and borrowing binge unlike anything ever experienced in the nation’s post-war history. And it can’t go on much longer before it will precipitate an economic crisis of one sort or another.

So the president and his team will come back to the budget, just not before the midterm election. That’s the whole point of standing up the debt commission. To every question about runaway deficits and debt, they have a ready answer to divert the press.

But, as Charles Krauthammer noted recently, there are signs aplenty of what the administration will push for when they do come back to the budget gap, probably just after the midterm election. It’s no accident that the debt commission will make its recommendations known only after the November elections. That way Democratic candidates can run for office by suggesting the commission will solve our budget problems without ever having to specify any tax or spending cut.

When, however, the administration does make a push for closing the budget deficit, its plan will start with the mother of all tax increases, probably a value-added tax (VAT). When the problem is as big as it is today, Democrats will see no use in nickel-and-diming it. With a VAT, they would get a large new revenue stream, not collected directly from voters, and one that they could expand endlessly as they further enlarged the government.

But an Obama-style budget fix almost certainly wouldn’t end there. To get a tax increase, he and his advisors surely realize they will need to look like they are cutting some spending too. And, contrary to some perceptions, liberals are definitely willing to cut some entitlement spending; it’s just that they insist it be done in only one way: with price controls on payments to medical providers.

Look at the recently enacted health bill. It includes large cuts in Medicare’s payments to hospitals, nursing homes, and others. These cuts aren’t calibrated based on quality or efficiency. They are across-the-board cuts hitting every service provider. And the bill also stands up a new independent board that is charged with essentially enforcing a cap on overall Medicare spending beginning in 2015. But the only changes in Medicare the board can recommend to stay within the cap are more reductions in provider-payment rates. The board can’t touch the Medicare benefit, much less propose a Ryan-style move toward more choice and market competition. No, the only option is more and deeper price controls.

So, it is entirely predictable where Democrats will turn when they need show their willingness to cut entitlement spending. They will push to broaden the reach of Medicare’s price controls to parts of the health system currently beyond their reach, including prescription drugs and the federally-subsidized insurance arrangements enacted as part of the new health law. It will be one more step toward their ultimate goal, which is a fully government-run health system, with all that entails — including waiting lists and restricted access to care.

posted by James C. Capretta | 4:14 pm
Tags: Debt Commission, debt, deficit, Henry Waxman
File As: Health Care

Let the Unraveling Begin

The Obama administration has been desperately trying to create a sense of momentum around its health-care push, which is why it is touting the latest “deal” with hospital associations so heavily.

But there are clear signs that Congressional Democrats and the Obama White House have steered the health-care effort into seriously choppy political waters.

Consider:

  1. Yesterday, Senate Democratic leaders all but rejected Senate Finance Committee Chairman Max Baucus’s months-long effort to impose a limit on the tax preference for employer-paid premiums as a way to pay for his reform plan. Media reports indicate he was hoping to generate $340 billion from such a tax to pay for his plan, but that looks highly unlikely now. House leaders were never much interested in the idea, given the adamant opposition of organized labor, and won’t include it in their bill. Revising the tax treatment of job-based insurance was the one potential “reform” with some potential for bipartisan appeal, as it could, under the right circumstances, encourage more cost-conscious consumption of health care. Senator Baucus had been planning to take up consideration of his bill — with the tax on benefits in it — in his committee next week. Where is he going to find a politically palatable $300 billion in a matter of days, let alone one that can also appeal to committee Republicans?
     
  2. Party activists pushed Congressional Democrats over the July 4th recess to write a bill reflecting long-standing party goals — which means government-run insurance and near-total government control. This push has made the chances for bipartisan compromise — already remote — even less likely. In response to the pressure, Senate Majority Leader Harry Reid told Senator Baucus that he is not authorized to cut any deals with Senator Charles Grassley, the ranking Republican on the Finance Committee, which would bind the rest of the Democratic caucus. Senate Democrats have now committed themselves to including a muscular, government-run insurance option in the bill — which is, rightfully, a deal-breaker for the vast majority of Republicans. Indeed, at this point, it is hard to see why Senator Grassley or any other Republican senator would continue to negotiate with Senator Baucus or Senator Reid at all, as it is beyond obvious that Congressional Democrats are only interested in Grassley’s views until they can get a bill off the Senate floor — and even then, they are not interested in true bipartisanship but only enough to get two or three Republican votes.
     
  3. Congressional Budget Office (CBO) Director Doug Elmendorf explained in a letter to Sen. Judd Gregg that adding Medicaid coverage for persons with incomes below 150 percent of the poverty line to the Kennedy-Dodd legislation under consideration in the Senate Health, Education, Labor, and Pensions Committee (HELP) would increase the cost of that bill by around $500 billion. That would put the total cost of the bill at about $1.1 trillion, but it is likely to go even higher because states will balk at picking up their part of the tab for the new Medicaid coverage. Thus, when all of the details are finally in the bill, the Kennedy-Dodd plan is likely to cost close to $1.5 trillion over a decade. But even with this massive expenditure, Elmendorf predicted there would still be 15 to 20 million uninsured Americans.
     
  4. In testimony before the HELP Committee today, Elmendorf said this about the Kennedy-Dodd proposal: “This bill will add substantially to the long-term spending burden for health care on the federal government.” Recall that President Obama pledged to oppose any bill that does not — eventually — “bend the cost-curve” and reduces the government’s long-term cost burden.
     
  5. Rumors are circulating that House leaders are apparently considering a trifecta of popular “pay fors”: $500 to $600 billion in Medicare cuts, a new surtax for households making more than $250,000 per year, and $350 billion in funding from the so-called “pay or pay” employer mandate — while unemployment heads toward 10 percent. All of these proposals are going to generate substantial controversy and opposition, to put it mildly. The surtax would come on top of the Obama administration’s plan to let the Bush tax cuts expire for upper-income households, which would increase the top rate from 35 to 39.6 percent. A new, three-percentage point surtax, for instance, would push the top income tax rate to 42.6 percent — a rate not seen in more than two decades.
     
  6. Oh, and those momentum-generating “deals” with PhRMA and the hospital associations — turns out they aren’t deals after all. House Energy and Commerce Committee Chairman Henry Waxman said today that neither he nor the White House is bound by them, and a White House official agreed. Moreover, it remains unclear how much federal savings they will generate anyway, as they have not yet been assessed by CBO. So what do the deals signify exactly?

The Obama White House and its congressional allies have built expectations among their core supporters that this is the year to pass a government takeover of American health care. With expectations set so high, most elected Democrats have concluded they have no choice but to set out on a forced march to try to do exactly that — despite unified Republican opposition. But a partisan bill means that Democrats own all of the messy and unattractive details too. The debate is no longer about vague concepts of “coverage” and “cost-control” but who pays and who is forced out of their job-based plans. The more people learn about these details, the less they will like them —which is why the Democratic committee chairmen are working desperately to shorten the time between a full public airing and a vote. They’re hoping there won’t be enough time for public opposition to put a halt to the proceedings.

posted by James C. Capretta | 5:40 pm
Tags: ObamaCare, House bill, Max Baucus, Harry Reid, Charles Grassley, CBO, Doug Elmendorf, HELP, cost-curve, mandate, pay or play, Henry Waxman
File As: Health Care