As my somewhat less Conservative Brother notes in his recent post (Obama Address to Congress, Part Deux), Obama gave another brilliant speech in Wednesday’s address. He did an amazing job at invoking emotions using anecdotal evidence and heart tugging rhetoric, and I believe this speech will give him at least a temporary boost in public approval. The question is, will the temporary uplift in sentiment towards a health care overhaul be sustained until Senator Max Baucas presents the new bill in late September? Baucus has said publicly that he intends to push the bill forward with or without bi-partisan backing. Think the overhaul sounds inevitable? Think again. There has been one common denominator amidst pundits on both sides of the spectrum. How will we pay for the plan? And, are Obama’s figures for funding the plan even possible. Lets take them one by one.
First, President Obama estimates that his new plan will cost some 900 billion dollars over the next 10 years. About thirty minutes into his speech, Obama said, “we’ve estimated that most of this plan can be paid for by finding savings within the existing health care system, a system that is currently full of waste and abuse.” He later clarified, “Reducing the waste and inefficiency in Medicare and Medicaid will pay for most of this plan.” There are many studies that document fraud within the existing healthcare system, specifically within Medicare and Medicaid. One study from a few years ago estimated Medicaid fraud alone in New York State to be nearly 5 billion per year. James Mehmet, former chief state investigator of Medicaid fraud and abuse in New York City, said he believes up to 40% of claims are “questionable.” That would obviously put the figure into the hundreds of billions per year. But, do we really believe the Government will not only want to, but be able to reduce nearly ALL of the suspected fraud within the current government system, while adding millions more to its rolls and not be forced to reduce quality or ration any of its existing services? That argument is a tough one to sell.
Second, although not mentioned expressly, the majority of the remainder will be funded by increased taxes on Americans. Obama said, “Now, most of these costs will be paid for with money already being spent — but spent badly — in the existing health care system. The plan will not add to our deficit. The middle class will realize greater security, not higher taxes.” What this means is that Obama will increase taxes or reduce deductions for our highest income tax payers. So……even though the top 1% of earners pay about 40% of the entire individual Federal Income Tax Bill, Obama and his liberal cohorts believe they can and should pay more to fund his plan. Exactly what taxes he plans to raise, and by how much has yet to be determined. But since he promised not to raise any taxes on anyone making under 250k, he has a limited scope for increases, and it has to be solely relegated to the top marginal bracket.
To convince his audience that this impending tax increase is not only the right thing to do, but the best thing to do, Obama took a jab at former President George W. Bush with the comments, …”the plan I’m proposing will cost around $900 billion over 10 years, less than we have spent on the Iraq and Afghanistan wars and less than the tax cuts for the wealthiest few Americans that Congress passed at the beginning of the previous administration.” I believe this comment to be another verbal sleight of hand articulated by the cunning but specious President Obama. Whether or not you ascribe to the principles of lowering income taxes to spur growth and promote investment is not the argument here, the argument is whether or not the statement was fairly presented.
Early in President Bush’s first term he lowered Federal individual income tax rates ACROSS THE BOARD. Starting in 2002, lower income individuals saw an up to 5% reduction in tax rates. In 2003, the top marginal tax rate on incomes over $312k was reduced from 39.6% to 35%. 2003 did see a dip in tax revenues, but that was shortly washed out by a steady and steep increase in revenues collected by the Government. For the next 5 years the Government would collect astronomical figures compared to prior years topping out in 2007 at 1.16 Trillion dollars. The conservative argument is that a decrease in tax rates actually jumpstart growth, since people have more of their earned money to use as they wish. The logic is that people will make better use of their own money than the Government will. To somehow try and extrapolate out a certain percentage of the tax revenues collected after the fact, when the initial decrease in tax rates may have been the factor that allowed for the increase in tax revenues in the first place is an argument that is predicated on wishful thinking and liberal ideology. I just dont buy it.
One last point i would like to note. To appease Republicans and most moderate Americans, Obama said that the new bill will specifically omit funding for abortions, will add millions to the healthcare rolls, will increase quality of care, and will provide for free routine checkups and offer complete preventative care. He also said this when referring to why we need to get everyone on a plan, “And it’s why those of us with health insurance are also paying a hidden and growing tax for those without it, about $1,000 per year that pays for somebody else’s emergency room and charitable care.” The simple argument is that people without coverage essentially get free emergency room visits and add to overall costs. But he also explicitly stated that illegals immigrants will not be afforded insurance. So, doesn’t that mean that the estimated 15 million illegal immigrants in this country who will still not be refused emergency care and that add much of the “hidden and growing tax” that Obama mentioned will still be embedded into our own costs? Just something to think about.
It’s clear to most that our health care system is in dire need of changes. Even though over three fourths of Americans are satisfied with their coverage, the spiraling costs, the number without access, and the rampant inefficiencies within the system are hurting too many people. Whether Obama can pull off the impossible and deliver on his many promises regarding a new system is yet to be seen. Until then we should do our best to follow the facts, hold our leaders accountable for their statements, and keep an incredulous eye out for media bias and lawyer written 1000 page documents that can adversely affect all of our lives in the future.