James Pethokoukis

Politics and policy from inside Washington

Tax cuts: Felix Salmon vs. John Taylor

May 27, 2009 14:57 UTC

My Reuters Commentary pal and fellow snappy dresser Felix Salmon wonders how noted Stanford economist John Taylor can be worried about big budget deficits and also be in favor of low taxes: “Or maybe deficits caused by permanent tax cuts are somehow to be preferred to deficits caused by temporary stimulus spending”

Me: Yes, they are! The deficits would likely be smaller since the tax cuts are more likely to generate stronger — certainly more sustainable — economic growth, as Taylor explains.

COMMENT

The idea of our country,s budget deficits, and lowering taxes seems impossible, true. But putting myself at risk hear this.The original U.S. Treasury was based on gold.If we use oil in a simmilar way, buy using the Alaska Reserve to pump it from, and having it run by the Army, to defend and controll it as to protect the environment, and disbursement.Use the oil money to go into the New Health Programs, repair Social Security, keeping GM,and others going to promote envioronmentally safe cars, and boosting imployment , putting familey’s back into lost homes. Helping us become energy independant,and controlling the price of gas in this Country as to insure no more overpricing,not just so the big oil can gain a notch. The Americian people need to gain a few notches.And if they won’t employ it ,the truckers can dock there trucks and demand it. While they can still afford their vehicles.And if immagrants stay they have to pay for schools, roads, police and fire. To put money back into our system , no more paying for there free ride. We pay taxes.

VAT attack! Will Obama push for a big healthcare tax?

May 27, 2009 14:28 UTC

The WaPo discovers that a value-added tax would be one way to pay for Obama’s healthcare reform plan. (White House healthcare adviser Ezekiel Emanuel is a big VAT fan and even wrote a book about it.)   Len Burman of the Tax Policy Center describes a VAT this way (in a different report):

A VAT is a tax on consumption, similar to sales taxes levied by states, except that it is collected in stages from each business that contributes to the production and sale of consumer goods. It is universal in the rest of the industrialized world and generally thought to be relatively easy to administer and for businesses to comply with.

Burman, quoted in the article, thinks a 25 percent VAT could plug the government’s budget hole, while one of 10-15 percent could pay for healthcare reform, the story also notes. Burman adds that one of the complaints “leveled at the VAT is that it would be a money machine and fuel the growth of government.” To a great degree, a VAT would be hidden tax since it would incorporated into what we buy.

Also consider this: These estimate of how expensive Obamacare might be could be way low. Indeed, the Urban Institute speculated that the ten-year cost might be close to $2 trillion rather than $1 trillion. That VAT might need to be way higher, gang. Either way, somebody in that 95 percent of us who are supposed to get a tax cut would be paying higher taxes.

COMMENT

Right now we pay for health care with premiums to insurance companies who take money off the top. If we index health care to 1970 levels and cap costs to this index we can pay for adequate health care. No we cannot continue to pay for transplants, new joints for people who have only 6 months to live and also cannot pay to keep brain dead people alive. Oh, we also cannot pay for elective plastic surgury.

If individuals and their families have money to spend above and beyond the normal level let them do it, but everyone deserves basic coverage.

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Did the GOP capitulate on healthcare?

May 27, 2009 12:44 UTC

ambulance– James Pethokoukis is a Reuters columnist. The opinions expressed are his own –

You can’t beat something with nothing” often passes for political wisdom in Washington. In 1994, Republicans defeated Bill and Hillary Clinton’s healthcare reform plan with pretty much nothing — well, at least with nothing positive.

Republican congressional solidarity, along with help from business group attack ads and the Clintons’ own political miscues, were enough to doom the landmark legislative effort. Back then, “No” was sufficient.

But 2009 is not 1994. A “Just say no” strategy seem laughably insufficient this time around. Economic anxieties are much higher, the Democrat president more popular, the Democrat-controlled Congress more committed and aggressive.

Want even more evidence of the changed economic and political landscape?

Just take a look at the 248-page Patients Choice Act, a comprehensive GOP healthcare reform plan drafted by Senators Tom Coburn and Richard Burr, and Representatives Paul Ryan and Devin Nunes.

A big feature of the plan calls for redirecting the $300 billion-a-year tax exclusion for employer-based health benefits into refundable tax credits to purchase private plans.

Low-income families would be subsidized so they could also buy private health insurance. The theory here is that people act more like cost-conscious consumers when they have to select and purchase their own health insurance rather than pay premiums indirectly through their employers via lower wages.

While the bill doesn’t stand a chance of passage with the Obamacrats in charge, it does reflect a recognition by congressional Republicans that if they are to derail or significantly modify Democratic healthcare efforts, they need a positive and serious policy rejoinder of their own.

“I think it is a good, bold, free-market alternative,” says James Capretta, an economist at the Office of Management and Budget under President George W. Bush and now a fellow at the Ethics and Public Policy Center.

“Broadly defined, this is where the conservative coalition can plant a flag and begin engaging in the debate.”

But is the bill really a choice rather than an echo? The indisputable conservative credentials of Coburn, Burr, Ryan and Nunes have not prevented some free marketeers from scowling and some liberal policy wonks from cackling after taking a look at the legislation.

Michael Tanner, a healthcare expert at the libertarian Cato Institute immediately tagged the plan “Obamacare Lite” and claimed it would “increase regulation, mandates and government control over the healthcare system.”

At the same time, liberal healthcare blogger Ezra Klein was almost rapturous: “The core elements of this plan…make it the same type of plan Democrats are offering….And it’s further evidence that the argument over health reform is narrowing, rather than widening. And it’s narrowing in a direction that favors the Democrats.”

Both Tanner and Klein have read page 5 of the bill’s summary and this sentence in particular: “Many states have led the nation in finding comprehensive healthcare solutions for their citizens, including the well-known, bi-partisan achievement of universal healthcare through a private system in Massachusetts.”

Now many on the right consider that state’s 2006 healthcare reform, led by former Governor Mitt Romney, to be a big-government system which mandates every resident buy health insurance.

Even worse, in their view, is the Connector, a “state exchange” that Tanner describes as “a super-regulatory body, adding new mandated benefits, restricting consumer’s choice of plans, and adding both regulatory and administrative costs to insurance.”

Indeed, the Coburn-Burr-Ryan-Nunes bill explicitly states that it “will utilize state-driven exchanges to facilitate real competition between private plans and give Americans — for the first time — a choice of health care plans.”

But no worries, say the bill sponsors who have been reassuring worried conservatives privately that their version of a state exchange is similar to the one found in Utah which acts more like a matchmaker between insurers on one side and individuals and small businesses on the other than a big regulatory body.

When pressed on whether the Coburn-Burr-Ryan-Nunes plan increases the role of the government in healthcare or diminishes it, Tanner can conclude only that “it’s mixed”.

Now all this brings to mind what a high-ranking Republican House member asked me earlier this spring: “So what should we do about healthcare? More health savings accounts?”

Given both the member’s snarky tone and the context of our preceding conversation, this is what I’m pretty sure the high-ranking House Republican actually meant by those questions: “We are going to get our collective heads kicked in if we don’t come up with a strong alternative to Obamacare. Health savings accounts alone ain’t going to cut it. We need to raise our game, and fast.”

And part of that “game raising” means accepting that it won’t be easy to budge voters.

Not all American families are going to prefer high-deductible HSAs — previously the Republican healthcare policy of choice — especially when one of the supposed selling points of these plans is the ability to invest money from accounts into the battered stock market.

And certainly voters are not ready for a hypermarket approach such as the one advocated by libertarian economist Arnold Kling. He has argued that “real” health insurance would pay only for treatments that are “unavoidable, prohibitively expensive and relatively rare.” Everything else would be out of pocket.

And that “game raising” also apparently means adopting some of the Democratic rhetoric on healthcare to appeal to more centrist voters.

In addition to using the Massachusetts plan as an example rather than the plan from conservative Utah, the authors employ a liberal-flavoured critique of America’s healthcare system:

“The health care system in America is broken. Costs are rising at an unacceptable rate — more than doubling over the last 10 years, which is nearly four times the rate of wage growth. Too many patients feel trapped by healthcare decisions dictated by HMOs. Too many doctors are torn between practicing medicine and practicing insurance. And 47 million Americans worry what will happen to them or their children if they get sick.” Ted Kennedy couldn’t have said it better.

The big risk to Republicans is that if they adopt the language and critique of Democrats, the public will miss the policy subtleties and start viewing the Dem and GOP approaches as more less the same. That could give further momentum to Democratic healthcare efforts and actually bring about the outcome Republicans are trying to avoid.

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