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December 4, 2008
Exclusive: Groundwork for Fiscal Disaster – Health Care 'Reform' would Send Taxes, Debt Soaring
On Capitol Hill, representatives of the incoming Obama Administration and congressional Democrats are earnestly discussing the issue of health-care "reform." These talks involve sums of money that dwarf the size of the automobile, financial-industry and state and local government bailouts now being discussed in Washington. Today, the "infinite horizon" unfunded liability of Medicare alone stands at $85.6 trillion, more than six times the entire output of the U.S. economy today. This means that the federal government (in other words, the taxpayer) has already made promises it can't possibly keep.
Yet all indications are that President-elect Barack Obama, Sen. Edward Kennedy, Senate Finance Committee Chairman Max Baucus and House Ways and Means Committee Chairman Charles Rangel are poised to pile new debt on top of the mess they've already helped create. And if these politicians are able to get away with it, they will leave the American people with some very unpleasant choices, including massive tax increases and reduced Social Security and Medicare benefits and deep cuts in national defense – in wartime, no less.
It is difficult to believe that as recently as 2000, the federal budget, drawn up by a Democrat president and enacted by a Republican Congress, produced a surplus of $236 billion. Over the next seven years, however, the parties went on a bipartisan spending spree. Some of it was for national defense and homeland security, which made sense in the wake of September 11th. But the Bush Administration and a Republican Congress passed a massive new prescription-drug entitlement (which Democrats complained was not generous enough.) And federal nondefense discretionary spending, which includes education, transportation, agriculture and social services) increased by 6.4% annually, while federal receipts grew by just 3.5% a year. By 2008, the deficit reached $410 billion – a swing of -$600 billion. And in the past eight weeks, the Bush Administration and congressional Democrats voted to enact the $700 billion mortgage-bailout bill, and Treasury Secretary Hank Paulson last week announced that the size of the bailout would be increased by another $800 billion to encourage more lending to homebuyers and consumers, putting the taxpayers on the hook for $1.5 trillion in bailouts and counting.
It's hard to believe, but the federal deficit/bailout numbers cited are actually good news compared to the avalanche of debt and deficit spending to come. Today, the unfunded liability of Medicare is $85 trillion: $34.4 trillion from Medicare Part A, which covers hospital stays; Medicare Part B, which pays for doctor visits, is another $34 trillion; and the prescription-drug entitlement (Medicare Part D), which went into effect less than three years ago, adds $17.2 trillion. The unfunded liability for Social Security is $13.6 trillion, for a grand Social Security/Medicare total of $99.2 trillion – seven times the size of the annual gross domestic product of the United States. How much would it cost Americans to pay this bill? Richard Fisher, president and chief executive of the Federal Reserve Bank of Dallas, notes that the math is painful: The per-person payment to the federal Treasury would come to $330,000, or $1.3 million for a family of four. That is more than 25 times the average household's income.
"Clearly, one-and-for-all contributions would be an unbearable burden. Alternatively, we could address the entitlement shortfall through policy changes that would affect ourselves and future generations. For example, a permanent 68% increase in federal income tax revenue – from individual and corporate taxpayers – would suffice to fund our entitlement programs. Or we could instead divert 68% of current income-tax revenues from their intended uses to the entitlement system, which would accomplish the same thing," Fisher says. If we were to try to fully fund our nation's entitlement programs on the spending side, he adds, it would be necessary to cut domestic spending by 97%. That would effectively require taxpayers to virtually eliminate funding for national defense, among other things. Alternatively, Fisher says, we would have to increase federal income-tax-revenue by 68%. How high would rates have to go in order to pay for all of this? And would they have to remain that high forever? What right to we have to pile these massive burdens on our children and grandchildren? Unsurprisingly, the politicians promising massive new benefits won't say.
But by any measure, the combination of tax increases and budget cuts required todeal with the unfunded liability programs for Medicare and Social Security alone would be draconian if not intolerable. So, what are congressional Democrats and the incoming Obama administration prepared to do about this? They are preparing to make the burden much worse. House Ways and Means Committee Chairman Rangel suggests that Congress disregard "pay-go" rules which limit deficit spending in passing health-care legislation. On the Senate side, Baucus wants to expand Medicare to cover people between ages 55 and 64 (given Medicare's abysmal financial condition, this is like selling passenger tickets for the Titanic).
Baucus would also create something called an Independent Health Coverage Council – a panel of government commissars who would tell the American people what benefits they must have. He would require "all but the smallest businesses" to offer health insurance to all of their employees or pay higher taxes. And he would expand government programs, including Medicaid and the State Children's Health Insurance Program – which would almost certainly encourage people to substitute government coverage for private insurance. The Montana Democrat would also establish a government -run health insurance plan to compete with private-sector ones. But taxpayers apparently shouldn't worry, because Baucus insists that any package be revenue-neutral. That's reassuring!
Like Baucus, Obama talks about ensuring that no American be denied health insurance because of pre-existing conditions. In effect, these politicians are saying that if people smoke, become obese, or abuse alcohol or drugs, the government will force private insurers to cover them at the same premium rate offered to responsible, healthy persons. This is a formula for driving private health insurers out of business in favor of government-controlled plans. Meanwhile, the Washington Times has reported that from his sickbed, Sen. Kennedy (who has spent most of his 46 years in the Senate fighting to massively increase the federal role in health care) has been orchestrating closed-door meetings with lobbyists and congressional staffers on a federal health care plan.
Left out of all the discussions is talk of any free-market solutions like health saving accounts or association health plans which permit people to join trade associations or other private organizations operating across state lines to get health insurance. Also omitted is anything about reducing the financial burden caused by providing health care to illegal aliens. Instead, the new Democrat majority is poised to expand access by increasing the tax burden, piling new debt on future generations and imposing new mandates on the private sector.
FamilySecurityMatters.org Contributing Editor Joel Himelfarb is an editorial writer for The Washington Times. The views expressed here are his own.
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