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Thursday, July 16, 2009

Sizing Up the Day's Activities on Health Care Reform

It was a day that every political junkie would love regarding health care reform. It was also a day that will likely have ramifications for the future of health care reform. The first event was another nuclear bomb handed down by the Congressional Budget Office.

Instead of saving the federal government from fiscal catastrophe, the health reform measures being drafted by congressional Democrats would increase rather than reduce public spending on health care, potentially worsening an already bleak budget outlook, the director of the nonpartisan Congressional Budget Office said this morning.

Under questioning by members of the Senate Budget Committee, CBO director Douglas Elmendorf said bills crafted by House leaders and the Senate health committee do not propose "the sort of fundamental changes that would be necessary to reduce the trajectory of federal health spending by a significant amount."

"On the contrary," Elmendorf said, "the legislation significantly expands the federal responsibility for health-care costs."

It's amazing how much political power the CBO has garnered, and they have again flexed their muscles. In this case, they have totally repudiated the idea that Obama's health care approach will save money. Instead, the CBO has figured out that Obama's health care approach will only make costs more. Because the CBO's analysis is respected on all sides of the aisle, this analysis will have reverberations throughout the debate.

Next came the news conference put on by Senate Finance Chair Max Baucus.

The only bipartisan effort, being hammered out in the Finance Committee, is still stuck in a rut as members try to come up with about $320 billion in revenue to pay for the massive reforms.Committee Chairman Max Baucus, D-MT, who has been working for months on a bipartisan overhaul, was clearly frustrated Thursday, telling reporters, “The President is not helping us,” as Obama opposes one major way of bringing in the money: taxing employer-provided health benefits.

Normally these benefits are excluded from taxation, but Baucus is finding it difficult to continue this exclusion as he searches for revenue. “Is tax exclusion off the table? No,” Baucus said, emphatically bucking the President

Not only did Baucus' statement show a splinter in the Democratic Party, more importantly, Baucas' statement means that taxing health care benefits is OFF the table. This takes away a farily popular option, at least among Senate Democrats, to try and pay for health care reform. This was yet another step toward making health care reform more difficult.

Meanwhile, Nancy Pelosi continued to add to her legend of infamy in her news conferences. First, the Speaker asserted that she believed that health care reform could be paid for with savings within the system. This lead to the obvious question. Why were tax increases still in the bill then? Here is how she answered.

But the Speaker made it clear that Democrats still plan to tax the rich, and said if the money isn't needed to pay for health care it would be directed at the nation's budget deficit. "There is going to be a revenue change at the high end. It will be directly to reduce the deficit or to reduce the deficit by helping to cover the cost of this initiative

I can only assume that her call to reduce the deficit was a fig leaf to the Blue Dogs who are skeptical of the bill. I doubt anyone will be swayed. More likely, it appears both bizarre and disingenuous that there are both mysterious "savings" that will be found and that tax increases are still necessary.

The reality of the day was that haymakers were reigned on health care reform. Right now, it's a total mess. The Blue Dogs are NOT on board. Several are threatening to clog it up in committee. Meanwhile, the Senate still hasn't figured out how to pay for it and now an option is off the table. Meanwhile, it's Democrat against Democrat trying to figure it out. Furthermore, Nancy Pelosi needs to stop talking because she embarrasses herself and everything near her everytime she opens her mouth. Health care reform is still a long way away and passing it prior to August appears to be slim at best.

If it isn't passed by August, then at least two sets of jobs' numbers will come out before it is passed. If they continue to show an economy mired in deep recession, that will make passing it that much more difficult. I firmly believe that if we lose 500,000 or more jobs in July that will end his agenda for this year at least. As such, if health care doesn't pass prior to August, those August numbers will take on much more significance.


Anonymous said...

Its Democrat vs. Democrat, and that's what they wanted. By going after Blue Dogs rather than the Republicans, supporters of health care reform have effectively de-legitimized the Republicans ideas.

Case in point, Max Baucus is complaining that he doesn't have the President's support because, well, he doesn't. In fact, Harry Reid already told Baucus to stop working with the Republicans because he'd lose more Democratic votes than he'd gain Republican votes by incorporating ideas that Republicans would be willing to vote for. Case in point, taxing health benefits. If Baucus is considering it, its because he thinks the Republicans are open to the idea. And that leads me to believe they want it in the bill primarily to force Obama to vote on it. Obama probably knows this. If its off the table, that's probably why.

And how exactly do you think taxing health care benefits is popular? Earlier you said it would be political suicide for Obama to do that after criticizing McCain for proposing it and now you think its popular?

Anonymous said...

I think the CBO only wields power to the extent it is willing to be brutally truthful about the real fiscal impact of the laws Congress proposes and passes.

mike volpe said...

You're right. That wasn't phrased properly. I should have been more clear that it's popular among Democrats. It would, however, be political suicide. I will change the language.

Vigilante said...

It's the most blatant form of Robin-Hood economics ever proposed. The House of Representatives' universal health-care bill, announced yesterday, pays for the health insurance of the poorest 20 percent of Americans who need help affording it with a tax surcharge on the richest 1 percent.

I don't remember a redistribution this direct ever coming out of Congress. I mean, occasionally Congress closes a few tax loopholes at the top and offers a refundable tax credit to people near the bottom. Or creates a poor people's program like Medicaid, paid for out of general revenues from a progressive income tax. But to say out loud that those in our society who can most easily afford it should pay for health insurance of those who can not is, well, audacious.

There's another word for it: fair. According to the most recent data, the richest 1 percent of American households now take home about 20 percent of total income, the highest percentage since 1928. Now, yes, I know: Critics will charge that these are the very people who invest, innovate, and hire, and thereby keep the economy going. So raising their taxes will burden the economy and thereby hurt everyone, including those who are supposed to be helped.

But there's no reason to suppose that taking a tiny sliver of the incomes of the top 1 percent will reduce all that much of their ardor to invest, innovate and hire in the future. Yet if this tiny sliver means affordable health care for a far larger number of Americans, they'll be able to get regular checkups and thereby stay healthy and productive. And a more healthy and productive workforce will do far more to build the American economy.

One other virtue of this funding mechanism is its simplicity. A surtax is simple to administer. And the whole idea is easily understood.

Tax the very wealthy to keep everyone healthy.

Not even a bad bumper sticker.

mike volpe said...

I think you've already left the exact same comment before on another of my pieces.

You have a very perverted sense of "fairness". One set of tax payers give fifty percent and more of their income in taxes while another set not only pay no taxes but receive all sorts of benefits. If that's fair, then I would like to know what isn't fair in your mind.