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| On the day of his State of the Union address, President Barack Obama walks from the Oval Office along the Colonnade of the White House in Washington, Tuesday, 24 January 2012. |
Days after signing the $787 billion economic stimulus package into law in February 2009, President Obama hosted a fiscal responsibility summit at the White House.
It was at the event that then-budget director Peter Orszag declared: "Health care reform is entitlement reform."
Orszag was correct that controlling health care costs must be central to any effort to rein in entitlements, but the problem is that the legislation that Obama ended up signing 13 months later made the problem far worse.
By 2019, according to the chief actuary of the Centers for Medicare & Medicaid Services, health care spending will gobble up a staggering 21 percent of the economic output of the United States -- a number that's higher than projections before the health care law passed, which Obama himself had declared "unsustainable."
Defenders of the national health care law often tout the fact that the Congressional Budget Office determined it would reduce the deficit over 10 years. But this includes numerous accounting gimmicks -- one of which has already been exposed as a farce by the Obama administration itself.
The CLASS Act is a long-term care program within Obamacare. Because it was slated to collect five years of premiums before doling out any benefits, the CBO determined it would reduce the deficit by $70 billion over 10 years -- or about half of the deficit reduction Democrats claimed from the health care law.
But in October 2011, the Obama administration abandoned the program after detailed studies proved what most observers were saying all along -- that it was unworkable as designed. Thus, they won't enjoy any of the short-term deficit reduction that the program produced on paper.
Otherwise, Democrats mostly depended on a combination of Medicare cuts and tax increases to offset the costs of Obamacare. But both CBO and CMS have expressed doubts that the Medicare cuts will ever actually go into effect, because historically, Congress has over-ridden such changes to the program when it comes time to make them.
CMS went on to note that the claimed savings "may be unrealistic" because, if the proposed cuts to payments to hospitals, nursing facilities and home health agencies go into effect, "roughly 15 percent of [Medicare hospital insurance] providers would become unprofitable within the 10-year projection period ..."
After protests by the unions, Obama agreed to
delay until 2018 a provision to raise taxes on high value health
insurance plans -- but that, too, may not go into effect.
Ultimately, though, the reason why Obamacare
will make our fiscal crisis worse is simply that it drastically
increases spending. The new Obama subsidies for individuals to buy
insurance on the government insurance exchanges and add 17 million
people to the Medicaid rolls is now projected to cost $1.4 trillion from
2012 through 2021 alone, which doesn't even take into account full
implementation.
So even if the combination of tax hikes and
Medicare cuts go into effect, the money raised will be used to pay for
this new entitlement rather than deficit reduction.
This isn't a theoretical argument. Back
during the 2008 presidential campaign, Obama proposed raising the
payroll tax on higher income earners to help extend the solvency of
Social Security.
Yet he passed a similar tax to help raise
money for the health care legislation. As passed, the law will hike the
payroll tax by .9 percent on income over $200,000 and impose an
additional 3.8 percent capital gains tax on top of it.
Now that his tax idea was absorbed by the
health care law, Obama has no plan to stabilize the program's finances
as baby boomer's are starting to retire.
Instead of calming the rapidly spreading entitlement fire, Obamacare doused it with gasoline.
Philip Klein is senior editorial writer for The Examiner. He can be reached at pklein@washingtonexaminer.com.
HOW THE LEFT GOT AMERICANS HOOKED ON WELFARE
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| President Lyndon Johnson and Vice-President Hubert Humphrey swear in Wilbur Cohen as Secretary of Health, Education, and Welfare |
25 January 2012
Occupy
Wall Street protesters have been evicted from almost every major U.S.
city. They have failed. But despite their movement's underlying
anti-capitalist message, it did have at least one good point.
America's 1 percent is in fact reaping benefits from taxpayers with much lower incomes, and the federal government is to blame.
Sen. Tom Coburn, R-Okla., released a report
last November looking at government welfare payments to millionaires. He
found that since 2003, tax filers reporting at least $1 million in
annual adjusted gross income have collected more than $9 billion in
government retirement benefits.
Why is our cash-strapped federal government
sending billions to millionaires? The answer begins in the 1930s, when
Democrats where scheming on how to sell their expansive new programs to
the American public.
Even at the height of the Great Depression,
liberals knew they would have a tough time selling new programs like
Social Security if they were viewed as welfare. Wilbur Cohen, then an
assistant to Social Security Board Chairman Robert Altmeyer, explained,
"The American public was and still is insurance-minded and opposed to
welfare, the dole, and handouts."
So Democrats sold Social Security as
"insurance" instead. A 1938 pamphlet promoting Social
Security read:
"Your Social Security card shows that you have an insurance account with
the U.S. Government - Federal old age insurance."
This was, and is, a lie. Social Security is,
and always has been a welfare program in that one set of people is taxed
to pay for the benefits of another set of people. There is no legal
obligation between the two.
The federal government was forced to admit
this in the U.S. Supreme Court 40 years later in the case of Fleming v.
Nestor. Plaintiff Ephram Nestor had paid Social Security taxes for 19
years.
When he was deported for being a member of
the Communist Party, he sued to collect on his insurance contract. The
Supreme Court ruled that no contract existed, that Social Security was
just a welfare program.
Since that time, Democrats have fought
tenaciously not to give any ground on making sure all Americans are
forced to participate in the Social Security system. Cohen, again,
provided the rationale: "In the United States, a program that deals only
with the poor will end up being a poor program."
This mentality has created what Coburn calls
"an intentional effort to get all Americans bought into a system where
everyone appears to benefit." According to Census Bureau data, thanks to
programs like Social Security, Medicare, Medicaid, and food stamps,
nearly half, 48.5 percent, of all U.S. households received some type of
government benefit. And the cost to taxpayers is huge.
According to the American Enterprise
Institute's Andrew Biggs, a typical taxpayer retiring today will have
paid around $65,000 in Medicare taxes over his lifetime (inflation
adjusted.)
But that same beneficiary will also receive
around $174,000 in lifetime Medicare benefits (also inflation adjusted).
That sounds like a great deal for the average American until you
realize that, if you currently pay taxes, you are the one picking up
that $109,000 difference.
Middle-class and upper-class welfare have
become such common political tools that the question of whether
millionaires should actually get the money -- whether it's a good use of
taxpayers' funds to pay them -- rarely arises.
Cohen and the planners of the liberal welfare
state have succeeded beyond their wildest dreams. They created the
"third-rail" issues of American politics today. They succeeded in
paralyzing their children and grandchildren, who are now confronted with
the uncomfortable matter of paying the bill.
David Freddoso is The Examiner's online opinion editor. He can be reached at dfreddoso@washingtonexaminer.com.
ENDING THE WELFARE STATE
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| The Dominoes of the EU have begun to fall. |
26 January 2012
The
future of the European Union does not look bright. Just this month,
Standard & Poor's slashed the credit ratings of France and eight
other major EU nations. The exact details in each country are different,
but the outlines are the same: Inadequate economic growth slowed by
high taxes, burdensome regulation, and an aging population increasingly
dependent on the government.
The United States could be headed down this
European path. The so-called big three entitlement programs (Social
Security, Medicare and Medicaid) consume 43 percent of all federal
spending today. In 2011, 48.5 percent, of all U.S. households received
some type of government benefit. And we are already borrowing 40 cents
of every dollar spent on these programs.
And the situation will only get worse. Fifty
years ago, five workers were being taxed to pay for each beneficiary.
Today, it is only three. In 20 years, it will be only two.
What can America do to escape the
slow-growth, high-dependency path that our big-three entitlement
programs have put us on? There are no easy answers. But the first step
is to avoid making the situation any worse. The second is to reform the
programs themselves.
The easiest way we could make the current
problem worse is by giving in to liberal demands to solve the problem
with tax increases. The United States already has the most progressive
tax system in the world. Our top quintile of earners pays 69 percent of
all federal taxes -- a greater percentage than the rich of any other
developed nation.
Moreover, if we wanted to fix our spending
problems with tax increases alone, we would have to double marginal tax
rates for all income brackets and corporations. This could squelch
already anemic economic growth, making us less competitive on the global
stage. We would be dooming ourselves to a European path upon which
economic growth cannot catch up with debt.
The other short-term decision we must make is
to avoid establishing a fourth crushing new entitlement: Obamacare.
This president will never revisit his wildly unpopular signature
domestic accomplishment, but whoever runs the next administration should
make its repeal their top priority.
Looking ahead, Americans must be broken of
the current entitlement mind-set. Instead of guaranteeing defined
benefits to everyone regardless of need, the U.S. government should
return these programs to the model upon which they were originally sold
to the America people: as insurance programs that focus on those who
need them.
House Budget Committee Chairman Paul Ryan's
Path to Prosperity Medicare proposal provides one example of how to do
this. Instead of price-controlled health care, delivered by doctors who
increasingly refuse to participate in the system, Ryan's plan would give
each senior a "premium support payment" starting in 2022. They could
use the payment to purchase their own health services, and it would vary
according to health need (sicker patients would get a higher payment)
and income (richer beneficiaries would get a smaller payment).
The Heritage Foundation has put forward a
similar solution for Social Security. Instead of the "income
replacement" system we have today, Heritage would slowly change Social
Security into a flat payment, sufficient to keep beneficiaries out of
poverty through retirement. Like the Medicare changes above, those with
higher incomes would receive a smaller check.
Medicaid funding should be capped for each
state, and the states should be given maximum flexibility to target
these programs to the populations that need them most.
We can reform all of our entitlement
programs, cut spending, and eliminate our deficit without raising taxes.
The Peter G. Peterson Foundation has certified that the Heritage
Foundation's Saving the American Dream plan, submitted alongside other
ideas from both liberal and conservative think thanks, does exactly
that.
There is a way to avoid following in Europe's
footsteps. We can choose to end our entitlement mind-set, reduce our
dependence on the federal government, and return to strong economic
growth. But first we have to bring the entitlement state as we know it
to an end.
Conn Carroll is a senior editorial writer for The Washington Examiner. He can be reached at ccarroll@washingtonexaminer.com.
"Being a Progressive means never having to admit that you were wrong or saying you're sorry."
- Sophie R.
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