With the clock ticking ever closer to the tax-filing deadline, this is the time of year we should be especially cognizant of America’s awful tax system.
Disdain for the corrupt tax code certainly motivates me. As such, even though the panel was stacked against me with three proponents of Obama’s class warfare approach, I hope I did a decent job of defending good tax policy against the statists in this debate on government-subsidized TV.
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Dan Mitchell Battling against Tax Hikes and Class Warfare on PBS
I also had a couple of good lines when discussing the value-added tax.
Nonetheless, I think I was disadvantaged by the editing process since many of my comments from our hour-long taping got cut out. If you are sufficiently masochistic, you can listen to the entire program at this link.
I’ll close with an observation. If you support freedom and liberty and work in public policy, you better get used to being outnumbered. When I testified to the Ways & Means Committee about the VAT, I was a lone voice against this pernicious tax while the other four witnesses supported making America more like Greece.
But at least I have truth on my side, so that compensates.
________________
Thank you so much for your time. I know how valuable it is. I also appreciate the fine family that you have and your commitment as a father and a husband.
Sincerely,
Everette Hatcher III, 13900 Cottontail Lane, Alexander, AR 72002, ph 501-920-5733, lowcostsqueegees@yahoo.com
Ronald Reagan and Bill Clinton both reduced the relative burden of government, largely because they were able to restrain the growth of domestic spending. The mini-documentary from the Center for Freedom and Prosperity uses data from the Historical Tables of the Budget to show how Reagan and Clinton succeeded and compares their record to the fiscal profligacy of the Bush-Obama years.
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Ronald Reagan was my hero and he did slow the growth of federal spending. In this post I did want to admit that Republicans have spent way too much in the past too, but we do have some spending cut heroes too. I have a lot of respect for Tea Party heroes like Tim Huelskamp and Justin Amash who are willing to propose deep spending cuts so we can eventually balance our budget.
John Brummett wrote in the online addition of the Arkansas Democrat-Gazette on May 30, 2012:
Obama did indeed run up the deficit with a stimulus measure to keep the economy from collapsing as he entered office…But in regard to budgets that he actually has proposed as president, beginning with the one for the fiscal year starting nearly a year after his election, Obama has raised spending at a slower rate than Clinton…
Republicans simply are more effective than Democrats at declaring a simple untruth loudly and repetitively through a pliable and powerful echo chamber of talk radio and cable news, thus embedding that untruth beneath the superficial consciousness of people otherwise disengaged.
__________
Now the truth of the matter is that Obama has spent around 25% of GDP when Clinton and most of the other presidents spent 20% or less. This fact allow disproves Brummett’s assertions listed above, but I will admit the Republicans have been guilty of spending too much also.
Dan Mitchell of the Cato Institute sets the record straight concerning the Republican’s spending which has been excessive too at times:
In a post last week, I explained that Obama has been a big spender, but noted his profligacy is disguised because TARP outlays caused a spike in spending during Bush’s last fiscal year (FY2009, which began October 1, 2008). Meanwhile, repayments from banks in subsequent years count as “negative spending,” further hiding the underlying trend in outlays.
When you strip away those one-time factors, it turns out that Obama has allowed domestic spending to increase at the fastest rate since Richard Nixon.
President George W. Bush, for instance, scores below both Clinton and Jimmy Carter, regardless of whether defense outlays are included in the calculations. That’s not a fiscally conservative record, even if you’re grading on a generous curve.
Here’s a simple suggestion for Mitt Romney: Admit that the Democrats have a point. Right before the Memorial Day weekend, Washington was consumed by a debate over how much Barack Obama has spent as president, and it looks like it’s picking up again. …all of these numbers are a sideshow: Republicans in Washington helped create the problem, and Romney should concede the point. Focused on fighting a war, Bush — never a tightwad to begin with — handed the keys to the Treasury to Tom DeLay and Denny Hastert, and they spent enough money to burn a wet mule. On Bush’s watch, education spending more than doubled, the government enacted the biggest expansion in entitlements since the Great Society (Medicare Part D), and we created a vast new government agency (the Department of Homeland Security). …Nearly every problem with spending and debt associated with the Bush years was made far worse under Obama. The man campaigned as an outsider who was going to change course before we went over a fiscal cliff. Instead, when he got behind the wheel, as it were, he hit the gas instead of the brakes — and yet has the temerity to claim that all of the forward momentum is Bush’s fault. …Romney is under no obligation to defend the Republican performance during the Bush years. Indeed, if he’s serious about fixing what’s wrong with Washington, he has an obligation not to defend it. This is an argument that the Tea Party — which famously dealt Obama’s party a shellacking in 2010 — and independents alike are entirely open to. Voters don’t want a president to rein in runaway Democratic spending; they want one to rein in runaway Washington spending.
Jonah’s point about “fixing what’s wrong with Washington” is not a throwaway line. Romney has pledged to voters that he won’t raise taxes. He also has promised to bring the burden of federal spending down to 20 percent of GDP by the end of a first term.
But even those modest commitments will be difficult to achieve if he isn’t willing to gain credibility with the American people by admitting that Republicans helped create the fiscal mess in Washington. Especially since today’s GOP leaders in the House and Senate were all in office last decade and voted for Bush’s wasteful spending.
It actually doesn’t even take much to move fiscal policy in the right direction. All that’s required is to restrain spending so that is grows more slowly than the private sector (with the kind of humility you only find in Washington, I call this “Mitchell’s Golden Rule“). The entitlement reforms in the Ryan budget would be a good start, along with some much-needed pruning of discretionary spending.
Dan Mitchell of the Cato Institute has hit a home run with this post. If Congressman Paul Ryan could get criticized for wanting to bring down our federal spending to around 20% in 11 years and earn the label of “social darwinist” from you then surely you would have thought President Clinton’s effort to cut spending to 18.2 % of GDP in 2001 as extremely devilish.
Actually, Bill Clinton must be something even worse than a social Darwinist. That’s because the title of this post is wrong. Obama said that Paul Ryan’s plan (which allows spending to grow by an average of 3.1 percent per year over the next decade) is a form of “social Darwinism.”
Yet when Bill Clinton left office in 2001, following several years of spending restraint, the federal government was consuming 18.2 percent of economic output.
And by the President’s reasoning, this must make Clinton something worse than a Darwinist. Perhaps Marquis de Sade or Hannibal Lecter.
Mr. Obama’s attack, in a speech during a lunch with editors and reporters from The Associated Press, was part of a broader indictment of the Republican economic blueprint for the nation. The Republican budget, and the philosophy it represents, he said in remarks prepared for delivery, is “antithetical to our entire history as a land of opportunity and upward mobility for everyone who’s willing to work for it.” …“Disguised as a deficit reduction plan, it’s really an attempt to impose a radical vision on our country. It’s nothing but thinly veiled social Darwinism,” Mr. Obama said. “By gutting the very things we need to grow an economy that’s built to last — education and training, research and development — it’s a prescription for decline.”
I’m particularly amused by the President’s demagoguery that Ryan’s plan is “antithetical to our entire history” and “a radical vision.”
Is he really unaware that a small and constrained central government is part of America’s history and vision? Doesn’t he know that the federal government, for two-thirds of our nation’s history, consumed less than 5 percent of GDP?
Of course, that was back in the dark ages when people in Washington actually believed that the Constitution’s list of enumerated powers in Article 1, Section 8, actually enumerated the powers of the federal government. How quaint.
Thank you so much for your time. I know how valuable it is. I also appreciate the fine family that you have and your commitment as a father and a husband.
Sincerely,
Everette Hatcher III, 13900 Cottontail Lane, Alexander, AR 72002, ph 501-920-5733, lowcostsqueegees@yahoo.com
Unfortunately, some people misinterpret the insights of the Laffer Curve. Politicians, for instance, tend to either pretend it doesn’t exist, or they embrace it with excessive zeal and assume all tax cuts “pay for themselves.”
That’s the theory of the Laffer Curve. What about the evidence? Where are the revenue-maximizing and growth-maximizing points on the Laffer Curve?
Well, ask five economists and you’ll get nine answers. In part, this is because the answers vary depending on the type of tax, the country, and the time frame. In other words, there is more than one Laffer Curve.
With those caveats in mind, we have some very interesting research produced by two economists, one from the Federal Reserve and the other from the University of Chicago. They have authored a new study that attempts to measure the revenue-maximizing point on the Laffer Curve for the United States and several European nations. Here’s an excerpt from their research.
Figure 6 shows the comparison for the US and EU-14. Interestingly, the capital tax Laffer curve is affected only very little across countries when human capital is introduced. By contrast, the introduction of human capital has important effects for the labor income tax Laffer curve. Several countries are pushed on the slippery slope sides of their labor tax Laffer curves. …human capital turns labor into a stock variable rather than a flow variable as in the baseline model. Higher labor taxes induce households to work less and to acquire less human capital which in turn leads to lower labor income. Consequently, the labor tax base shrinks much more quickly when labor taxes are raised.
There’s a bit of jargon in this passage, so here are the charts from Figure 6. They look complex, but here are the basic facts to make them easy to understand.
The top chart shows the Laffer Curve for labor taxation, and the bottom chart shows the Laffer Curve for capital taxation. And both charts show different curves for the United States and an average of 14 European nations. Last but not least, the charts show how the Laffer Curves change is you add some real-world assumptions about the role of human capital.
Some people will look at these charts and conclude that there should be higher tax rates. After all, neither the U.S. or E.U. nations are at the revenue-maximizing point (though the paper explains that some European nations actually are on the downward-sloping portion of the curve for capital taxes).
But let’s think about what higher tax rates imply, and we’ll focus on the United States. According to the first chart, labor taxes could be approximately doubled before getting to the downward-sloping portion of the curve. But notice that this means that tax revenues only increase by about 10 percent.
This implies that taxable income would be significantly smaller, presumably because of lower output, but also perhaps due to some combination of tax avoidance and tax evasion.
The key factoid (assuming my late-at-night, back-of-the-envelope calculations are right) is that this study implies that the government would reduce private-sector taxable income by about $20 for every $1 of new tax revenue.
Does that seem like good public policy? Ask yourself what sort of politicians are willing to destroy so much private sector output to get their greedy paws on a bit more revenue.
What about capital taxation? According to the second chart, the government could increase the tax rate from about 40 percent to 70 percent before getting to the revenue-maximizing point.
But that 75 percent increase in the tax rate wouldn’t generate much tax revenue, not even a 10 percent increase. So the question then becomes whether it’s good public policy to destroy a large amount of private output in exchange for a small increase in tax revenue.
Once again, the loss of taxable income to the private sector would dwarf the new revenue for the political class. And the question from above bears repeating. What should we think about politicians willing to make that trade?
And that’s the real lesson of the Laffer Curve. Yes, the politicians usually can collect more revenue, but the concomitant damage to the private sector is very large and people have lower living standards. So that leaves us with one final question. Do we think government spending has a sufficiently high rate-of-return to justify that kind of burden? This Rahn Curve video provides the answer.
Class warfare is not going to help anybody. The best policy is to lower government spending and lower taxes. Take a look at the comments by Dan Mitchell of the Cato Institute.
And my closing point, which I snuck in before they could go off air, was that the left should want lower tax rates if they want more revenue from the rich. It’s called the Laffer Curve.
___________
Thank you so much for your time. I know how valuable it is. I also appreciate the fine family that you have and your commitment as a father and a husband.
Sincerely,
Everette Hatcher III, 13900 Cottontail Lane, Alexander, AR 72002, ph 501-920-5733, lowcostsqueegees@yahoo.com
I personally saw Arthur Laffer speak in 1981 and he predicted what would happen in the next few years because of the Reagan tax cuts and he was right. Why do liberals ignore these facts? Raising taxes will not work. Liberals act like the Laffer Curve does not exist.
Unfortunately, some people misinterpret the insights of the Laffer Curve. Politicians, for instance, tend to either pretend it doesn’t exist, or they embrace it with excessive zeal and assume all tax cuts “pay for themselves.”
That’s the theory of the Laffer Curve. What about the evidence? Where are the revenue-maximizing and growth-maximizing points on the Laffer Curve?
Well, ask five economists and you’ll get nine answers. In part, this is because the answers vary depending on the type of tax, the country, and the time frame. In other words, there is more than one Laffer Curve.
With those caveats in mind, we have some very interesting research produced by two economists, one from the Federal Reserve and the other from the University of Chicago. They have authored a new study that attempts to measure the revenue-maximizing point on the Laffer Curve for the United States and several European nations. Here’s an excerpt from their research.
Figure 6 shows the comparison for the US and EU-14. Interestingly, the capital tax Laffer curve is affected only very little across countries when human capital is introduced. By contrast, the introduction of human capital has important effects for the labor income tax Laffer curve. Several countries are pushed on the slippery slope sides of their labor tax Laffer curves. …human capital turns labor into a stock variable rather than a flow variable as in the baseline model. Higher labor taxes induce households to work less and to acquire less human capital which in turn leads to lower labor income. Consequently, the labor tax base shrinks much more quickly when labor taxes are raised.
There’s a bit of jargon in this passage, so here are the charts from Figure 6. They look complex, but here are the basic facts to make them easy to understand.
The top chart shows the Laffer Curve for labor taxation, and the bottom chart shows the Laffer Curve for capital taxation. And both charts show different curves for the United States and an average of 14 European nations. Last but not least, the charts show how the Laffer Curves change is you add some real-world assumptions about the role of human capital.
Some people will look at these charts and conclude that there should be higher tax rates. After all, neither the U.S. or E.U. nations are at the revenue-maximizing point (though the paper explains that some European nations actually are on the downward-sloping portion of the curve for capital taxes).
But let’s think about what higher tax rates imply, and we’ll focus on the United States. According to the first chart, labor taxes could be approximately doubled before getting to the downward-sloping portion of the curve. But notice that this means that tax revenues only increase by about 10 percent.
This implies that taxable income would be significantly smaller, presumably because of lower output, but also perhaps due to some combination of tax avoidance and tax evasion.
The key factoid (assuming my late-at-night, back-of-the-envelope calculations are right) is that this study implies that the government would reduce private-sector taxable income by about $20 for every $1 of new tax revenue.
Does that seem like good public policy? Ask yourself what sort of politicians are willing to destroy so much private sector output to get their greedy paws on a bit more revenue.
What about capital taxation? According to the second chart, the government could increase the tax rate from about 40 percent to 70 percent before getting to the revenue-maximizing point.
But that 75 percent increase in the tax rate wouldn’t generate much tax revenue, not even a 10 percent increase. So the question then becomes whether it’s good public policy to destroy a large amount of private output in exchange for a small increase in tax revenue.
Once again, the loss of taxable income to the private sector would dwarf the new revenue for the political class. And the question from above bears repeating. What should we think about politicians willing to make that trade?
And that’s the real lesson of the Laffer Curve. Yes, the politicians usually can collect more revenue, but the concomitant damage to the private sector is very large and people have lower living standards. So that leaves us with one final question. Do we think government spending has a sufficiently high rate-of-return to justify that kind of burden? This Rahn Curve video provides the answer.
______________
Thank you so much for your time. I know how valuable it is. I also appreciate the fine family that you have and your commitment as a father and a husband.
Sincerely,
Everette Hatcher III, 13900 Cottontail Lane, Alexander, AR 72002, ph 501-920-5733, lowcostsqueegees@yahoo.com
I learned so much from the books and films of Francis Schaeffer. He really got me excited about the pro-life movement. In order to understand where I am coming from it is best to take a look at where Schaeffer was coming from and his thought processes. Take a look at this article below that appeared 13 years after his death in Christianity Today. Schaeffer really was able to relate the Bible to modern culture. In this essay below Michael Hamilton notes:
Francis Schaeffer tore down the gospel curtain that had separated evangelicals from contemporary cultural expression, giving Christians object lessons in how to interpret sculpture, music, painting, and literature as philosophical statements of the modern mind.
Thirteen years after his death, Schaeffer’s vision and frustrations continue to haunt evangelicalism.
by Michael S. Hamilton | posted 3/03/1997 12:00AM
Hospitality at L’Abri
In 1954 Schaeffer took his new message of “observational love” back to the Bible Presbyterians in the U.S., where it was not universally received as a word from the Lord. Moreover, the Schaeffers reported that the simple receiving of guests was an increasingly important part of their work, prompting the mission board to cut their pay. So in 1955 they resigned and set up their own independent ministry organization called L’Abri (“The Shelter”) in the mountain village of Huámoz.
Immediately, the oldest of their three daughters began bringing home fellow students from the University of Lausanne. In short order, students were coming to L’Abri every weekend. The Schaeffers developed a pattern of meals, walks, and a Sunday church service all geared toward providing an atmosphere that would stimulate conversation about philosophical and religious ideas.
In this the Schaeffers were brilliant. For Edith, homemaking was high art, and she created an atmosphere that drew people in and invited them to relax. Francis was a superb and caring interlocutor who listened attentively, made guests feel important, and spoke with earnest confidence of Christianity’s ability to solve the human dilemma. Wrote Francis, “This was and is the real basis of L’Abri. Teaching the historic Christian answers and giving honest answers to honest questions.” A number of students converted to Christianity as a result of these weekends, and a few volunteered to stay on to help with the growing workload.
Word about this unique open home in the mountains quickly spread, and by 1957 they were hosting up to 25 people every weekend. Francis spent weekdays teaching classes for students in several locations in Switzerland and Italy. Though the Schaeffers never appealed directly for funds, Edith kept a growing list of supporters abreast of L’Abri’s activities through her “Family Letter.”
The Schaeffers learned firsthand that keeping their door open was very costly. Francis later remembered, “In about the first three years of L’Abri all our wedding presents were wiped out. Our sheets were torn. Holes were burned in our rugs. Indeed once a whole curtain almost burned up from somebody smoking in our living room. … Drugs came to our place. People vomited in our rooms.”
At this time, many of the students who came to L’Abri were Europeans, well-schooled in the philosophies of Hegel, Kierkegaard, and Heidegger and in the existentialist literature of Sartre and Camus. These students tutored Francis in the details of modern post-Christian thought, while he observed its impact on their lives. They had been taught that human beings were the mere product of time and chance in a materialistic world. This left many of them unable to find any basis for distinctions between right and wrong nor meaning in the normal activities of human life. The young people’s self-destructive moral confusion, alienation from society, and sincere search for something better stirred the Schaeffers’ compassion. It made the cost of an open home worth bearing, and it compelled Francis into ever-deeper reflection on the trajectory of modern culture.
By 1960, L’Abri had become such a phenomenon that it attracted the notice of Time magazine. Facilities had expanded to three chalets, Edith’s “Family Letter” had a circulation of 1,300, and her Sunday evening “High Tea” was hosting upwards of 50 people from around the world every week. Sheer numbers made it necessary to replace the informal weekends with a full-time program of lectures, discussions, study, work, and worship. L’Abri workers taped Francis’s lectures on the philosophical meaning of modern theology and culture, and these tapes quickly developed an international circulation. “Study” at L’Abri consisted of listening to and discussing Francis’s recorded lectures.
These may have been the hardest years of marriage for the Schaeffers, both of whom were extraordinarily intense, work-centered personalities. Edith was by nature proud and competitive, and Francis had for a long time struggled with a plant-throwing, pot-smashing temper. Stormy sessions between them were not infrequent. The most demanding years of L’Abri’s ministry had coincided with their son Franky’s early childhood, made twice difficult because he had contracted polio at age three. L’Abri’s financial situation was always precarious and sometimes desperate—more than once they faced a table full of guests with only a few basic staples in the pantry. Edith, who from the start bore much of the practical burden, began to resent her role. She remembers the early 1960s as “a time that could only be described as one of self-pity. I had begun to look away from ‘willingness for anything’ to a desire for ‘something for myself,’ and this filled far too much of my thoughts and prayer times.”
Francis was receiving an increasing number of invitations to speak to groups in Europe and North America, but Edith resisted his going on extended lecture tours. Giving up this opportunity was terribly frustrating for him. By this time he was the veteran of hundreds of conversations with well-educated doubters, agnostics, and scoffers. He had developed great confidence in his by now standard replies, and he was ambitious for larger audiences. Edith remembers many nights after small-group discussions at L’Abri when he would come upstairs to their bedroom and pound the wall with his fist until it turned red, saying, “Oh, Edith, I’m sure I have true answers. … I know they can help people . …But no one is ever going to hear … except a handful. … What are we doing? What am I doing?”
Return to North America
In 1965 Edith at last relented, and Francis got the larger stage he longed for. Harold O. J. Brown, then working with college students in Boston, arranged for Francis to give several lectures in the area. These were followed by a series of talks at Wheaton College, which were later published as his first book, The God Who Is There. Schaeffer ranged widely over the arts and sciences to argue that all of modern thought and culture was based on the presupposition that human beings were the chance product of an impersonal universe. But systems of thought based on this presupposition could not explain the origin of human personality, of “hope of purpose and significance, love, notions of morality and rationality, beauty and verbal communication.” Apart from Christianity, one is left with two choices—escape into the unreality of mysticism, or descent into nihilistic barbarism that debases humans by reducing them to machines. Christianity alone, because it is true and therefore comports with the lived reality of human existence, has the power to solve this existential dilemma. But Christians cannot effectively present the gospel in this modern era until they first learn to speak the language of twentieth-century culture and thereby persuade non-Christians to face the logical conclusions of their presuppositions.
This small, intense man from the Swiss mountains delivered a message unlike any heard in evangelical circles in the mid-1960s. At Wheaton College, students were fighting to show films like Bambi, while Francis was talking about the films of Bergman and Fellini. Administrators were censoring existential themes out of student publications, while Francis was discussing Camus, Sartre, and Heidegger. He quoted Dylan Thomas, knew the artwork of Salvador Dali, listened to the music of the Beatles and John Cage.
The effect of this tour de force on evangelical students was electrifying. Schaeffer’s Boston lectures, Ronald Wells later wrote, commenced “my excitement about the task of Christian scholarship.” Historian Mark Noll remembers the Wheaton talks as the most stimulating campus intellectual event of his student years. Francis Schaeffer tore down the gospel curtain that had separated evangelicals from contemporary cultural expression, giving Christians object lessons in how to interpret sculpture, music, painting, and literature as philosophical statements of the modern mind. Future historian Arlin Migliazzo was thrilled: “Schaeffer showed me that Christians didn’t have to be dumb.”
In the next ten years, the Schaeffers became well-known figures in American evangelicalism. Francis published 18 books and booklets, most of which came out of lectures and talks he had been giving since the 1950s. (Four more books were to follow after 1975; total U.S. sales alone exceeded 2.5 million copies.) Edith accompanied him on many of his speaking tours, developing her own messages and popular following. On college campuses, Edith liked to treat young women in the dorms to “an intimate, candid talk about marriage, sex, and the career of being creative as a homemaker.” Edith also took up her typewriter, publishing L’Abri in 1969. In the mid-1970s, she wrote a regular column for Christianity Today, and by 1981 had completed a total of eight books on family life and devotional topics that had sold over 1 million copies. In her writing she often voiced opposition to “women’s liberation” and the trend toward two-career families. This latter was curious, given that Francis’s wider ministry commenced for her a new full-time career as a writer and lecturer. Meanwhile, 11-year-old Franky was trundled off to English boarding school.
Her depiction of L’Abri’s early years was perfectly pitched to the countercultural sentiments of young people, with its homey images of young people with backpacks, shared labor, fresh whole-grain bread, and intellectual conversations by the fireside, all under the umbrella of God’s supernatural provision through prayer. The book brought in hundreds of new visitors, mostly American evangelicals. Nevertheless, L’Abri still attracted a fair number of non-Christians—even Timothy Leary, the guru of lsd, managed to find his way there. Francis and Edith now spent but three months per year in residence, the work being carried on by their daughters’ families and by volunteers.
I see a few problems with Obamacare. Although you promised that it would cover everyone, Obamacare will not give everyone coverage!!! Also there are religious values that Obamacare would trangress. For instance, you promised Ben Nelson and other prolife members of Congress that these healthcare plans would not cover abortion.
I also anticipate a drop in quality we will be seeing and it seems stupid to shove millions into an already bankrupt Medicaid system that will bankrupt Arkansas’ state government.
The real question is how efficient is the government versus the private market. Take your $50 lightbulb.
But even I’m shocked the federal government gave an affordability award for a light bulb that costs $50. I’m not making this up. Here’s a blurb from ABC News.
The U.S. government has awarded appliance-maker Philips $10 million for devising an “affordable” alternative to today’s standard 60-watt incandescent bulb. That standard bulb sells for around $1. The Philips alternative sells for $50. Of course, the award-winner is no ordinary bulb. It uses only one-sixth the energy of an incandescent. And it lasts 30,000 hours–about 30 times as long. In fact, if you don’t drop it, it may last 10 years or more. But only the U.S. Government (in this case, the Department of Energy) could view a $50 bulb as cheap.
Isn’t that wonderful? My tax dollars were used to reward a company that produced a light bulb I can’t afford.
Michael Tanner is a senior fellow at the Cato Institute and author of Leviathan on the Right: How Big-Government Conservatism Brought Down the Republican Revolution.
This week marks two years since of the passage of the Patient Protection and Affordable Care Act, and if the Obama administration has chosen to all but ignore the second anniversary of Obamacare, the rest of us should pause and reflect on just what a monumental failure of policy the health-care-reform law has been.
What’s more, it has been a failure on its own terms. After all, when health-care reform was passed, we were promised that it would do three things: 1) provide health-insurance coverage for all Americans; 2) reduce insurance costs for individuals, businesses, and government; and 3) increase the quality of health care and the value received for each dollar of health-care spending. At the same time, the president and the law’s supporters in Congress promised that the legislation would not increase the federal-budget deficit or unduly burden the economy. And it would do all these things while letting those of us who were happy with our current health insurance keep it unchanged. Two years in, we can see that none of these things is true.
Obamacare is a costly and dangerous failure.
For example, we now know that, contrary to claims made when the bill passed, the law will not come close to achieving universal coverage. In fact, as time goes by, it looks as if the bill will cover fewer and fewer people than advertised. According to a report from the Congressional Budget Office released last week, Obamacare will leave 27 million Americans uninsured by 2022. This represents an increase of 2–4 million uninsured over previous reports. Moreover, it should be noted that, of the 23 million Americans who will gain coverage under Obamacare, 17 million will not be covered by real insurance, but will simply be dumped into the Medicaid system, with all its problems of access and quality. Thus, only about 20 million Americans will receive actual insurance coverage under Obamacare. That’s certainly an improvement over the status quo, but it’s also a far cry from universal coverage — and not much bang for the buck, given Obamacare’s ever-rising cost.
At the same time, the legislation is a major failure when it comes to controlling costs. While we were once told that health-care reform would “bend the cost curve down,” we now know that Obamacare will actually increase U.S. health-care spending. This should come as no surprise: If you are going to provide more benefits to more people, it is going to cost you more money. The law contained few efforts to actually contain health-care costs, and the CBO now reports that many of the programs it did contain, such as disease management and care coordination, will not actually reduce costs. As the CBO noted, “in nearly every program involving disease management and care coordination, spending was either unchanged or increased relative to the spending that would have occurred in the absence of the program, when the fees paid to the participating organization were considered.”
This failure to control costs means that the law will add significantly to the already-crushing burden of government spending, taxes, and debt. According to the CBO, Obamacare will cost $1.76 trillion by 2022. To be fair, some media outlets misreported this new estimate as a doubling of the law’s originally estimated cost of $940 billion. In reality, most of the increased cost estimate is the result, not of increased programmatic costs, but of an extra two years of implementation. Still, many observers warned at the time that the original $940 million estimate was misleading because it included only six years of actual expenditures, with the ten-year budget window. The new estimate is, therefore, a more accurate measure of how expensive this law will be. Yet even this estimate covers only eight years of implementation. And it leaves out more than $115 billion in important implementation costs, as well as costs of the so-called doc fix. It also double-counts Social Security taxes and Medicare savings. Some studies suggest a better estimate of Obamacare’s real ten-year cost could run as high as $2.7–3 trillion. And this does not even include the over $4.3 trillion in costs shifted to businesses, individuals, and state governments.
All this spending means that we will pay much more in debt and taxes. But we will also pay more in insurance premiums. Once upon a time, the president promised us that health-care reform would lower our insurance premiums by $2,500 per year. That claim has long since been abandoned. Insurance premiums are continuing to rise at record rates. And, while there are many factors driving premiums up, Obamacare itself is one of them. According to the Kaiser Family Foundation, insurance premiums had been rising at roughly 5 percent per year pre-Obamacare. That jumped to 9 percent last year. And roughly half that four-percentage-point increase can be directly attributed to Obamacare. Even Jonathan Gruber of MIT, one of the architects of both Obamacare and Romneycare, now admits that many individuals will end up paying more for insurance than they would have without the reform — even after taking into account government subsidies — and that those increases will be substantial. According to Gruber, “after the application of tax subsidies, 59 percent of the individual market will experience an average premium increase of 31 percent.”
Finally, if the past two years should have taught us anything, it is that we may not be able to keep our current insurance, even if we are happy with it. The CBO suggests that as many as 20 million workers could lose their employer-provided health insurance as a result of Obamacare. Instead, they will be dumped into government-run insurance exchanges. And, the recent dust-up over insurance coverage for contraceptives is a clear illustration of how the government will now be designing insurance plans for all of us. Regardless of how one feels about the contraceptive mandate itself, it is just the tip of the iceberg as government mandates tell employers what insurance they must provide, and tell us what insurance we must buy, even if that insurance is more expensive, contains benefits we don’t want, or violates our consciences.
Next week, Obamacare will slouch its way to the Supreme Court. How the justices decide will be based on questions of constitutional law. Their decision will set a crucial precedent in setting the boundaries between government power and individual rights. But regardless of whether the Court upholds Obamacare or strikes it down, in whole or in part, we should understand that, simply as a matter of health-care reform, Obamacare is a costly and dangerous failure.
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Thank you so much for your time. I know how valuable it is. I also appreciate the fine family that you have and your commitment as a father and a husband.
Sincerely,
Everette Hatcher III, 13900 Cottontail Lane, Alexander, AR 72002, ph 501-920-5733, lowcostsqueegees@yahoo.com
More Than Half of the President’s Budget Would Be Spent on Entitlement Programs
Everyone wants to know more about the budget and here is some key information with a chart from the Heritage Foundation and a video from the Cato Institute.
In combination with other entitlements, such as food stamps, unemployment, and housing assistance,Medicare, Medicaid, and Social Security constitute the lion’s share of President Obama’s 2012 budget. In contrast, spending on foreign aid represents 2 percent.
PERCENTAGE OF THE PRESIDENT’S FY2012 BUDGET
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Source: White House Office of Management and Budget.
The charts in this book are based primarily on data available as of March 2011 from the Office of Management and Budget (OMB) and the Congressional Budget Office (CBO). The charts using OMB data display the historical growth of the federal government to 2010 while the charts using CBO data display both historical and projected growth from as early as 1940 to 2084. Projections based on OMB data are taken from the White House Fiscal Year 2012 budget. The charts provide data on an annual basis except… Read More
Authors
Emily GoffResearch Assistant
Thomas A. Roe Institute for Economic Policy StudiesKathryn NixPolicy Analyst
Center for Health Policy StudiesJohn FlemingSenior Data Graphics Editor
What is the true cost of public education? According to a new study by the Cato Institute, some of the nation’s largest public school districts are underreporting the true cost of government-run education programs.
Cato Education Analyst Adam B. Schaeffer explains that the nations five largest metro areas and the District of Columbia are blurring the numbers on education costs. On average, per-pupil spending in these areas is 44 percent higher than officially reported. Districts on average spent nearly $18,000 per student and yet claimed to spend just $12,500 last year.
It is impossible to have a public debate about education policy if public schools can’t be straight forward about their spending.
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If we want the best education possible at the lowest cost for the inner city youth then we need to install the voucher system.
Four years ago, I wrote an op-ed for the Washington Post revealing that DC spent nearly $25,000 per pupil during the 2007-08 school year. I calculated this figure from the public budget documents of the District of Columbia, which I subsequently summarized and linked on this blog.
No education reporter followed up on my findings, and much lower per pupil figures continue to be reported to this day. My $25,000 figure was even greeted with skepticism by analysts at free market think tanks. One state education policy analyst wrote to say that my figure was “out of line with credible information,” and that I gave my critics “too much ammunition with this clearly questionable set of statistics.”
Indeed, the Census Bureau figures for DC’s total K-12 expenditures were substantially lower than mine. I made a note to track down the discrepancy, but other projects intervened. When I updated my calculation to use DC budget estimates for the 2008-09 school year, I found that District spending had risen to over $28,000 / pupil. The comparable number for that year reported by the Bureau of the Census was just $18,181 (which you get by dividing the total expenditure figure in Table 1 by the enrollment figure in Table 15).
So you can see why most folks were skeptical. Skeptical, but wrong.
Back in March of this year I asked my then research intern to contact the Census Bureau and ask where they got their total spending data. It turns out, they got them from a DCPS official. We presented evidence to the Bureau that that DCPS official had missed a few line items when completing the Census Bureau’s forms—to the tune of about $400 million. The Census Bureau agreed and is in the process of obtaining corrected data for the 2008-09 year. In the meantime, they made sure to ask DC officials to include all relevant items when filling out their forms for the 2009-10 school year. The result: Census Bureau data now show DC spent a total of $29,409 per pupil (obtained by dividing total expenditures in Table 1 by enrollment in Table 15). This is just a bit higher than my calculation for the preceding year.
Kudos to the Census Bureau for taking the initiative and getting DC to accurately report its public school expenditures. Now that education reporters can simply open a Census Bureau .pdf file and divide one number by another, I wonder if any will report what DC really spends per pupil? I suspect that they still will not, continuing to mislead the general public, but I would be delighted to be proven wrong.
Oh, and, BTW, this spending figure is about triple what the DC voucher program spends per pupil—and the voucher students have a much higher graduation rate and perform as well or better academically.
Proponent of social Darwinism?
Obama’s Budget Would Reduce National Defense Spending
Total Welfare Spending Is Rising Despite Attempts at Reform
The Daily Hatch 