Archive for the ‘healthcare legislation’ Category

The tax breaks that Paul Ryan will have to eliminate

March 24, 2012

Paul Ryan claims that he has proposed a neutral federal tax reform by replacing a system based on six tax rates by one based on only two: 10 percent and 25 percent.  Ryan claims that he can raise $1 trillion per annum to finance these tax cuts simply by eliminating ‘special interest’ credits and deductions.

Unwilling to face the political backlash, Congressman Ryan refuses to name the tax break credits and deductions that he must eliminate in order to achieve such revenue neutrality. So let me say what he will not. If he disagrees, he has plenty of opportunity to explain his alternative scenario. Alternatively, Paul Ryan may choose to follow the usual cowardly politician’s path and say nothing about the bad news for many voters implicit in his proposal.

The non partizan Congressional Research Service, this week, released a report which identifies 20 top tax breaks, each as a percentage of the total  loss to federal revenues projected for fiscal year 2014. This  is as good a basis as any to confront Congressman Ryan with the opportunity cost of his proposed tax reforms.

1.  Tax breaks that are technically difficult to remove

Some 40 per cent of the lost revenue would be difficult to capture under any circumstances because they take the form of  in-kind benefits that cannot easily be enumerated on individual tax forms. Prominent among these are employer-provided health insurance and employer pension benefits, jointly accounting for some 30 percent of the total. These are not tallied in employee paychecks and would be very difficult to enumerate for purposes of federal income taxes.

2. Tax breaks that would have to go

Paul Ryan would have to eliminate virtually all other tax breaks in order to achieve fiscal neutrality for his reform proposal. These include all mortgage interest deductions (8.4 percent of the total), medicare exclusions (6.4 percent), earned income credit (4.9 percent) , state and local income tax deductions (4.5 percent), charitable contributions deductions (4.3 percent), tax exempt/tax credit bonds (3.6 percent), social security benefit exclusions (3.6 percent), capital gains on housing exclusions (2.3 percent), property tax deductions (1.4 percent), medical expenditure deductions (1.4 percent), individual retirement accounts (1.3 percent), and child credit (1.3 percent).  In addition, personal allowances would have to be severely paired down in order to achieve full revenue neutrality against the 2012 expiration of the Bush tax cuts standard.

Now such a recommendation has a great deal going for it. It would eliminate a lot of tax distortions, especially those that exaggerate the demand for home ownership and stimulate healthcare cost bloating. It would restore incentives to create wealth and promote economic growth.

But the tax credits are highly specific and favored by large identifiable groups of voters. The tax rate deductions are dispersed across the population as a whole and, as such, are less salient in the political market-place.

As a vote-seeking politician, Paul Ryan seemingly favors the provision of concentrated over diverse benefits. If he can get away with both, then he is in the political paradise enjoyed by Republicans during the early noughties, a paradise that  turned into hell in 2008, when the electorate  finally caught on to the evil of  spend and borrow Republicanism.

So which way will you twist, Mr Ryan, in the 2012 poilitical winds? Will it be a return to the naughty noughties? Or will you show more political courage than you have so far been able to muster and become a statesman rather than a politician? Come on, Mr. Ryan, you can steel yourself to take the plunge. There are plenty of opportunities outside of politics for a young man like you, should you be voted out of the Congress in 2012.

London replaces Washington as the thinking capital

June 6, 2011

“Labour must compete with a coalition that has not stopped thinking.  Figures from both sides of the government (Conservative and Liberal Democrat) are meeting to concoct policies for the second half of this parliament.  These brainstorms for ‘Coalition 2.0’  feature not only ministers but also think-tank bosses and the more cerebral kind of journalist.  Westminster, say old hands, was not always like this.  The stupid party (the Tories) is a thing of the past.  So too is the stupid capital (London).” Bagehot, ‘The thinking capital’ The Economist,April 30, 2011

Sadly, over the past decade, the stupid capital has become Washington largely because two intellectually brain-dead presidents – George W. Bush and Barack Obama – have dominated the political arena.  Leadership matters and when  non-thinkers rule, intellectuals  do not die but slowly fade into the distance.

Let us hope that a politically sensible intellectual makes his way to the White House before Washington sinks into the lowest depths of unthinking inanity.

The political cowardice of Newt Gingrich

May 23, 2011

Last week, presidential candidate – dare I now say erstwhile presidential candidate – Newt Gingrich, attacked Paul Ryan’s proposal for reforming Medicare  using the nasty  rhetoric that Ryan’s proposal represents ‘right-wing social engineering’. In reality, Gingrich was displaying political cowardice of the first order, a cowardice that should disqualify him forever from any political career in a self-respecting constitutional republic:

“Entitlement reform is the hardest challenge in politics, which is one reason we oppose all new entitlements.  But Republicans now tempted to retreat at the first smell of cordite need to understand that they are taking even larger political and policy risks than Mr. Ryan is.  The Medicare status quo of even two years ago, much less 20, is irretrievably gone, and anyone pining for its return is merely making President Obama’s vision of government-run health care inevitable.”  Editorial, ‘Republicans and Mediscare’, The Wall Street Journal, May 23, 2011

The Medicare reality is outlined in the recently-released Report of the Medicare Trustees.  The Report clearly shows that the program’s finances have deteriorated even over the last 12 months.  Medicare is now carrying $24.6 trillion in unfunded liabilities through 2085.  Even this projection ‘does not represent a reasonable expectation for actual program operations’ (chief actuary, Richard Foster).

The Medicare problem cannot be resolved through tax increases, since the program’s costs are increasing by several orders of magnitude faster than the economy as a whole.  Some form of rationing, therefore, is inevitable. 

Under Obamacare, a 15-member unelected board, would impose the rationing. This board would be empowered to set prices for doctors, hospitals and other providers, driving some suppliers and some services out of the market entirely. It would be empowered to regulate how services are provided and to determine what government will or will not pay for. Individuals would have no right to supplement their medical purchases, as long as they continued to utilize the Medicare program. As is always the case, such a powerful non-market program would be riddled with corruption as the politically-privileged gained differential access to its services.

Representative Paul Ryan has responded with a market-based ‘premium support’ alternative. Seniors would receive a fixed-dollar subsidy from the government to expend among a range of competing private insurance options. Higher support subsidies would be made to the poor and to the chonically sick. All individuals would be free to supplement their support premiums, should they so wish. In such circumstances, consumers would be encouraged to make cost-conscious choices with respect to their health care and insurers and providers would be encouraged to compete in terms of health-care value and quality.

Of course, a reform proposal of this magnitude bears with it a high political risk. The GOP-controlled House of Representatives had the courage to bear that risk when endorsing Paul Ryan’s proposal.  If the GOP now retreats from this courageous position, as Newt Gingrich demands for his own political safety, the road will be paved for the Obamacare disaster”

The political forces unleashed by Obamacare will grow unimpeded if Republicans now retreat from offering an alternative.  Once the White House’s efforts to limit costs by fiat fail – as they inevitably will – liberals will turn to even harsher controls.  This future is already emerging in post-Mitt Romney Massachusetts, and also in Vermont, which wants to move to single government payer.” ibid.

By his self-serving cowardice, Newt Gingrich has struck a dangerous blow against market-based reform for Medicare.  Focus your attentions on your third wife, Mr. Ex-Speaker, pay off your reputed half million debt to Tiffany & Co., for who-knows what bauble that you acquired,  and for what purpose, and leave the 2012 presidential elections to true leaders  imbued with the courage and statesmanship to serve the People well.  The GOP could do much worse than to turn its attentions to Paul Ryan, who has already demonstrated in spades the courage and foresight that you so clearly lack, and an ability to strike down President Obama is a widely-televised debate over the then-controversial  Obamacare bill.