Tuesday, August 4, 2009

Obamacare - The smell test

On July 16th Douglas Elmendorf, director of the nonpartisan Congressional Budget Office issued an analysis of the Obama health care reform proposals (there are more than one, and they are in constant flux) .

Elmendorf's message: The numbers don’t add up.

Obama called him to the principal’s office on July 21st. He was sent into the room with the Obama braintrust. Elmendorf went over his analysis again and told them what was wrong. He even gave them some ideas for improvement based on CBO research.

Most importantly, he didn’t walk out of the meeting with Obama and revise his analysis.
The bottom line: Health care reform won’t pay for itself and Obama should stop saying it will.

Even factcheck.org, a group I believe has a strong liberal bias (see the Michelle Obama analysis below), doesn’t buy Obama’s numbers.

It only makes sense that you can't play Robin Hood all the time. Health care is too big a nut to crack.

Besides, insurance companies have been at this game for decades, trying to reduce costs. We've all had battles over coverage and fees. And we've all paid more for our insurance coverage over the years (except maybe government employees).

On the other hand, government health programs have had significant cost overruns, been rife with corruption cases, and are of lesser quality than what is available to the privately insured.

Then there is the temptation for providers to get rich off the government. Just watch local TV during the daytime. The pitch is the same, If you are on Medicaid we'll do all the paperwork and it won't cost you a dime. And they promise the world if you call the 800 number.

These pitches are for adult diapers, diabetes meters/supplies, and motorized wheelchairs.

Have you ever wondered why they don't make a big deal of these products if you have Blue Cross? Maybe because the insurance companies are doing a pretty good job in the control department. (Too good by most accounts.)

Here's the rub, and it is finally coming to light. Obama can't do all he promises without going to the bank...the bank called the middle class taxpayer. I end today's lesson with a masterful editorial by The Detroit News.

Editorial: Soaking the middle class
The Detroit News
Tuesday, August 4, 2009

Having doubled the federal budget deficit in just six months in office, the Obama administration now says that the expanding deficit threatens the nation's fragile economic recovery and will require sacrifice to contain.

Sacrifice in the form of middle-class tax hikes, according to Treasury Secretary Timothy Geithner and Chief Economic Adviser Larry Summers.

Voters who swallowed candidate Barack Obama's oft-repeated pledge not to increase taxes on anyone making less than $250,000 a year may be surprised to hear this warning. But they shouldn't be.

Politicians are notorious for breaking no-new-taxes pledges. Had they only done the math, voters would have realized that Obama couldn't deliver on his sweeping expansion of government by cutting out waste and soaking the rich, as he promised. The president gave up early trying to find big money from trimming government fat, coming up with less than a half-percent of savings in his first budget. And there's only so much he can squeeze out of the wealthy.

The middle class is where the money is, and that's where the administration will have to go to get the cash to fund its programs.

This would be a good time for those middle-income earners to think about how much they're willing to pay for Obama's ambitions. Congress is on summer vacation, and most members are back in their districts, presumably listening to constituents.

They should be getting an earful from the taxpayers who will be saddled with the $1 trillion to $2 trillion 10-year cost of the administration's health care plan.

With Summers and Geithner already talking about broad tax hikes to cover the deficits the administration has posted so far, voters may want to seriously weigh how much more government they can afford.

Likewise with the carbon cap-and-trade proposal that has already passed the House. It will cost the average household an estimated $3,000 annually in the form of higher prices for goods and services.

Everyone wants a cleaner environment and everyone wants health care reform. But how much of each taxpayers are able to pay for should be a major consideration as these policies are shaped.

This isn't the end of what Obama has on his wish list. He also envisions expanding social spending on everything from college tuition to housing, and can be expected to drive up the deficit further with additional economic stimulus outlays.

It's good that Geithner and Summers have finally dropped the fantasy that the wealthy will pick up the tab for these vast new programs and everyone else will enjoy a free ride. It's not going to happen that way.

Taxpayers should make sure Congress understands their tolerance level for higher tax bills before it resumes debate this fall on massive new spending programs.
And the next time they come across a political candidate who promises them they can have a bright, new world that someone else will pay for, they should be a lot less gullible.

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