James Pethokoukis

Politics and policy from inside Washington

Healthcare reform effort stumbles over spending and taxes

Oct 16, 2009 13:43 UTC

The great Dan Clifton of Strategas Group nails the difficulties of paying for reform through spending cuts or tax hikes:

But these goals are now in jeopardy as the process moves forward. Doctors want legislation to permanently fix their payments holding a cost roughly of $250bn and Senators are pushing for an expansion of coverage. Both initiatives raise the fiscal cost of healthcare program to roughly $1.2 trillion (violating the total cost goal) and there are no additional options to pay for this expansion (violating the deficit neutral goal). Not only is the cost of spending going up, but the push is now to lower the impact of the revenue raisers as unions push to reduce the tax on high end insurance plans. This provision is one-quarter of the total offsets for healthcare and reducing that further exacerbates the gap between revenues and spending. Also, this is viewed as a key provision to reduce the cost of healthcare and will added further headwinds to passage.

COMMENT

Don’t knock it. If a company drops coverage and doesn’t raise salaries, the savings presumably come under the corporate income tax rate, which last I knew was 40%.

Posted by Pete Cann | Report as abusive

Follow the Japanese example on stimulus

Oct 16, 2009 13:21 UTC

The new Japanese government is redirecting the country’s stimulus plan (WSJ):

The Japanese government said Friday it will scrap part of the previous Cabinet’s stimulus package, freeing up 2.926 trillion yen ($32.38 billion) so that it can redirect the money toward more effective projects to stimulate growth.

Me:  For the cost of the remaining stimulus program in the US, you could cut the cap gains rate by 25 percent for a decade. (Plus it likely wouldn’t cost nearly that much.) Just an idea …

COMMENT

Typically, I’m a supply-sider as well, but there seems to be two problems with this line of thinking IMHO:

1. As far as I understand, much of the remaining stimulus is aimed at helping states through their budget crisis. While I don’t agree with this, it seems a bit late to go back now, given that states have already made their 2010 budgets.
2. What we need are jobs, not necessarily more consumer spending. A cut in the capital gains rate sort of encourages more investment, but it’s a long term process. A targeted jobs program (more than just a bunch of money thrown about) that accomplishes longer term objectives would be preferable. For instance, the US Government gives out zero interest loans and tax credits for all vehicle fleet operators to transition to natural gas. Investment, lower dependence on foreign oil, and environmental benefit. There’s a stimulus plan…

We’re gutting the middle class in this country. I’m not sure we need more tax cuts in the ‘trickle down’ theory. The Goldman bankers have enough money as it is…

Posted by John Thomson | Report as abusive

3 myths about ObamaCare, the Baucus bill and healthcare reform

Oct 16, 2009 13:17 UTC

I just wanted to highlight some items from a previous post on healthcare reform:

1) It costs $829 billion.

It accomplishes this financial feat, however, through budgetary trickery. The plan includes a start year of 2010, even though no money is spent that year and just $14 billion through 2013. Cost the plan out from 2011 through 2020 and it suddenly morphs into a trillion-dollar plan. Indeed, the average annual cost from 2015 through 2019 is $150 billion a year

2) It will cut entitlement spending.

The CBO projects $81 billion in savings over the first decade and then “the added revenues and cost savings are projected to grow more rapidly than the cost of the coverage expansion.”

Great news. But those savings will materialize only if Congress actually cuts a projected $400 billion in government healthcare spending — including Medicare reimbursements to hospitals, doctors and other providers –  over 10 years.

Skepticism here is warranted. Previous congressional promises to cut reimbursements haven’t panned out. And Senator Debbie Stabenow, a Michigan Democrat, has just introduced a bill that would actually increase Medicare fees to doctors by $247 billion over the next decade  That $247 billion should, by all rights, be added to the cost of the Baucus bill. (Interestingly, if Congress actually stuck to the cuts, the tax increases would not be necessary, according to the Tax Foundation.)

3) It only raises taxes on companies.

Then there are the hidden fees. The Baucus bill imposes a $200 billion excise tax on expensive insurance plans. That’s a cost insurers will certainly pass onto consumers, nearly 90 percent of whom would make under $200,000, according to the Joint Committee on Taxation.  That kind of sounds like a stealth middle-class tax increase.

And you can be sure few taxpayers understand that a catch accompanies new government subsidies to cover the cost of private insurance. Those subsidies phase out as incomes rise. The result is a huge effective tax increase. As the CBO puts it: “Marginal tax rates would go up by about 22 percentage points for all families whose income was between 100 percent and 400 percent of the poverty level.”

COMMENT

3 myths. Here’s the deal. How far are the dumbascraps ready to go. Harry Reid speaks of the nuclear option. What’s next illegal alien 30 million amnesty and union workers with lower wages since there will be 30 million newly legal citizens competing for their jobs. All this talk about the nuclear option…just let reid do it. He’s already gonna be out of office in 2010. Watch Corzine go by by. Obama’s approval is 47% in rasmussment. Facts are if the dumbascraps are willing to destroy america like that then they who can support that garbage. Hey hispanic and white women come back home to the republican party. the black mentality will only take you to the poor house.

Posted by Sarah | Report as abusive

A stronger dollar on the way?

Oct 16, 2009 12:07 UTC

The conclusion from this interesting VoxEU piece:

In short, in contrast with growing dollar scepticism and even though US external accounts continue to point to dollar weakness despite the recent correction, the fast rebound of the US economy and the undoing of the monetary stimulus may deliver higher rates in lieu of a weaker dollar in 2010.

COMMENT

“Fast rebound” of the US economy? What green shoots are they smoking? Foreclosures up, jobs being lost left and right, higher regulation, higher taxes, etc. Where’s the growth going to come from? The over-burdened consumer buying more foreign produced stuff?

Posted by John Thomson | Report as abusive
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