Author: Heritage

On 03.19.10 09:50 AM posted by Dave Mason

Senator Chris Dodd’s monstrous <ahref="http://banking.senate.gov/public/_files/ChairmansMark31510AYO10306_xmlFinancialReformLegis lationBill.pdf">1336-page financial reform draft includes a whopping 217 pages devoted to “improving” over-the-counter derivatives markets. Dodd the derivatives section <ahref="http://banking.senate.gov/public/index.cfm?FuseAction=Newsroom.PressReleases&Conten tRecord_id=68006e3f-cfb7-343d-99c1-11047b96c944&Region_id=&Issue_id=">may be replaced by a yet-to-be-released bipartisan compromise from Senators Jack Reed and Judd Gregg. But the Dodd draft suggests that legislators are focused on bureaucratic imperatives rather than improving markets.

The biggest blind spot in Dodd’s draft is the assumption that only command and control regulation can improve markets. In fact, beginning even before the financial crisis, an international cooperative effort of derivatives market participants led by the <ahref="http://www.newyorkfed.org/newsevents/news/markets/2010/ma100301.html">New York Federal Reserve has led to significant improvements in the market.
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Over the past 18 months, while Washington dithered, <ahref="http://www.heritage.org/Research/Reports/2009/04/Credit-Derivatives-Market-Solutions-to-the-Market-Crisis">derivatives market participants standardized derivatives products, implemented central clearing, began informational reporting to the public and regulators, and are exploring exchange trading. The Dodd draft is written as if none of this ever happened, perhaps for no better reason than that the steps were not mandated from Washington. In fact, Dodd calls on the industry to achieve just these steps six months or a year after his bill is passed (assuming that ever happens).

Having Washington pile on now with more regulations will only disrupt what the markets have already achieved, and freeze progress in late 1998 when the concepts in the Dodd draft were first floated.

Even assuming derivatives require more regulation, Dodd’s second mistake is fixating on who gets the job rather than how it is done. Differing types of derivatives have attributes akin to securities, futures, insurance, and banking products. Derivatives confound jealously-guarded jurisdictional boundaries in existing bureaucracies and, even more disconcertingly for legislators, in Congress.

Dodd proposes a classic Washington compromise: decide not to decide. The Dodd draft solves the jurisdictional conundrum by giving joint jurisdiction over derivatives to two Washington-based agencies: the Securities and Exchange Commission and the Commodity Futures Trading Commission. Disputes between the agencies are to be resolved by a new regulatory council composed of representatives of those two and yet other financial regulatory bodies.

In other words, if two commissions with ten commissioners can’t solve the problem, Congress will call in … even more commissions and agencies.

What’s puzzling is why Dodd ignores the one agency that (a) has experience in regulating derivatives trading and (b) has actually fostered recent major derivatives market improvements: the Federal Reserve Bank of New York.

It’s not as if Dodd is unaware of the New York Fed: his draft proposes to make the Chair of the Bank a Presidential appointee subject to Senate confirmation.

There’s no reason for Congress to add another layer of regulation on to this market. Cranking up regulation could in fact make things worse by disrupting the positive changes already taking place. Bureaucrats will disrupt productive markets self-corrective processes and result in unintended consequences. But if Congress does intervene, any steps should reflect the current state of the derivatives markets, not where they stood two years ago. And Congress should give any regulatory authority to an agency with a proven track record at improving markets, rather than creating a gridlock-prone dual-headed scheme.

http://blog.heritage.org/2010/03/19/…atives-reform/

On 03.19.10 10:37 AM posted by Kathryn Nix

Congressional leaders are gleefully reporting that the Congressional Budget Office score of their health care proposal released yesterday shows that their legislation would reduce the federal deficit by $138 billion in the first ten years.* <ahref="../2010/03/18/obamacare-will-break-the-bank-not-cut-the-deficit/print">Not so fast—consummate professionals though they are, CBO provides a projection based on assumptions about the future conduct of Congress that do not always represent reality.

<ahref="http://www.washingtonpost.com/wp-dyn/content/article/2010/03/18/AR2010031803558_pf.html">Ruth Marcus of the Washington Post, not exactly a supporter of the GOP, puts it this way: “…Democrats will be pointing to this preliminary CBO score as if it is engraved on stone tablets. Republicans will proclaim their respect for the CBO and proceed to argue that its estimates should not be taken too seriously in this instance. This may come as a surprise, but I think the Republican argument is closer to correct. To crow, as did House Speaker Nancy Pelosi, that the package is “a triumph for the American people in terms of deficit reduction” is premature at best, delusional at worst.”<spanid="more-29333"></span>

The reasons to expect wide discrepancies between the actual and projected cost of the bill lie in the gimmicks employed within the language of the bill to make it score as less expensive than it actually is.* Included are the usual suspects we have seen time and again, including:

• Exclusion of the doc fix. The “doc fix,” which repeals a $371 billion Medicare cut for physician fees, is rolled into a separate bill. Lawmakers must remember: just because it’s not included in the official health bill doesn’t mean it doesn’t count as real spending.
• Double-counted savings from the CLASS Act. The CLASS Act included in the bill creates a new entitlement for which beneficiaries would pay premiums upfront for benefits received further down the road.* <ahref="http://www.washingtonpost.com/wp-dyn/content/article/2010/03/18/AR2010031803558_pf.html">Marcus explains: “Of the $138 billion saved in the first 10 years, $70 billion represents premiums collected for a new long-term-care program, money the government will have to pay in benefits later.”* The revenue from the CLASS Act thus represents a false offset to other new spending.
• Dubious savings from Medicare. The bill contains billions in cuts to Medicare to offset other costs.* <ahref="http://www.washingtonpost.com/wp-dyn/content/article/2010/03/18/AR2010031803558_pf.html">As Marcus points out, “The CBO is required to assume that Congress will do what it promises”, making the point that politically unpopular spending cuts are unlikely to ever come to fruition—as best evidenced by the “doc fix” that occurs every year, adding to the deficit.
• A false ten year cost window. CBO scored the first ten years of enactment of the bill, which includes several years of raising revenue and fewer years of expenses.* <ahref="../2010/03/18/obamacare-will-break-the-bank-not-cut-the-deficit/print">According to budget expert James Capretta, “Over a full ten years of implementation, the cost of the new entitlement spending would reach $2.5 trillion, at least, not $1 trillion as advertised by the White House.”

The reconciliation package also includes new gimmicks and questionable sources of revenue:

• Delay of an unpopular tax. Under the reconciliation bill, the excise tax on high cost plans would be implemented in 2018, thus reducing the total ten year revenues from the projected $149 billion under the Senate bill to just $32 billion. More interestingly, the reconciliation bill would index the application of the tax to growth in the Consumer Price Index (general inflation), which means that more and more middle class Americans would be affected by the tax once its collection began in 2018. *Kicking this tax down the road to a future President and Congress portrays the unwillingness of lawmakers to collect it.* <ahref="http://www.washingtonpost.com/wp-dyn/content/article/2010/03/18/AR2010031803558_pf.html">Marcus questions, “Will the tax really be collected…long after many of those voting for it will have left office, long after the benefits it is helping to finance have kicked in?”
• Decreased value of subsidies. <ahref="../2010/03/18/obamacare-will-break-the-bank-not-cut-the-deficit/print">Says Capretta, “to jury-rig “long-term deficit reduction,” the latest plan would first increase the premium assistance subsidies paid to low and moderate wage families above the levels in the Senate-passed bill, but then index their value to something below the growth in premiums to give the appearance of deficit reduction in the decade after 2019.”

Though the White House and congressional leadership continue the charade of fiscal responsibility, the American people and other members of Congress, including Democrats, have long caught on.* <ahref="http://prescriptions.blogs.nytimes.com/2010/03/04/for-many-house-democrats-cost-is-the-concern/?pagemode=print">David Herzenhorn of the New York Times notes that even among Congressional Democrats, the cost impact of the legislation remains a deep and abiding concern:

“But even some lawmakers who voted for the Senate bill have been calling in recent weeks for additional steps to be taken to guarantee that new spending will not spiral out of control. They also want to ensure that Congress will follow through on proposed cuts, especially reductions to slow the growth of Medicare.

Many experts have warned that members Congress may not have the stomach to carry out the proposed cuts in the future. In January, five Democratic senators, including Michael Bennet of Colorado and Mark Warner of Virginia, sent a letter to the Senate majority leader, Harry Reid of Nevada,*<ahref="https://email.heritage.org/exchweb/bin/redir.asp?URL=http://prescriptions.blogs.nytimes.com/2010/01/14/senators-urge-fail-safe-provision-if-savings-dont-appear/" target="_blank">urging him to include a “fail-safe” mechanism in the final bill that would result in cuts if spending were to exceed estimates.”

Blue Dog Democrats’ lingering suspicions regarding this bill’s spending spree are justified. Only in Washington is massive spending incorrectly attributed as the way to control costs. *The American people have shown in <ahref="http://www.realclearpolitics.com/epolls/other/obama_and_democrats_health_care_plan-1130.html">poll after poll that they clearly understand this, even as the ideologically driven Congressional leadership refuses to listen to them.

Vivek Rajasekhar contributed to this post.

http://blog.heritage.org/2010/03/19/…uction-claims/

On 03.19.10 11:27 AM posted by Mike Brownfield

<ahref="http://blog.heritage.org/wp-content/uploads/Obama-symbol-10-03-19.jpg"></p>America stands on the precipice of sweeping liberal health care reform that will radically reshape one-sixth of the U.S. economy, and a 153-page House bill is all that stands between us and a fundamentally changed America.

What will that change look like? <ahref="http://blog.heritage.org/2010/03/10/video-of-the-week-we-have-to-pass-the-bill-so-you-can-find-out-what-is-in-it/">Speaker Nancy Pelosi (D-CA) said, “we have to pass the bill so that you can find out what is in it,” and <ahref="http://online.wsj.com/article/SB10001424052748704207504575130081383279888.html"> President Barack Obama said, “By the time the vote has taken place, not only will I know what’s in it, you’ll know what’s in it.”

In other words, here’s a ticket to ride, get on board, we can’t tell you where it’s going, but you’ll like it once you get there. We promise.

A picture of America’s future under Obamacare can be revealed, though, after peeling away the pages and digging through the dirt. Here’s 10 things you can expect:

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1. A Massively Engorged Government, to the tune of $2.5 trillion in new entitlement spending. According to the Congressional Budget Office (CBO), <ahref="http://blog.heritage.org/2010/03/18/obamacare-will-break-the-bank-not-cut-the-deficit/">new entitlement spending in the plan would cost $216 billion by 2019, then increase by 8 percent every year thereafter.
2. A Cornhusker Kickback for All. No, special deals aren’t removed from Obamacare this time around. Instead, <ahref="http://blog.heritage.org/2010/03/18/a-first-look-at-the-house-health-care-fix-more-bad-news/ ">the House bill extends new federal funding for Medicaid to all states. Incidentally, you’re paying for it.
3. A Freight train of taxes, slamming the American people in 2018. You’ve heard of the “Cadillac” tax on high-cost insurance plans? It will be <ahref="http://blog.heritage.org/2010/03/18/obamacare-will-break-the-bank-not-cut-the-deficit/">pushed back to 2018, and given the way “high-cost” plans will be defined, a large segment of the <ahref="http://blog.heritage.org/2010/03/18/obamacare-will-break-the-bank-not-cut-the-deficit/">middle class would get hit with the tax over time.
4. Beware the shape-shifting tax monster. New taxes <ahref="http://blog.heritage.org/2010/03/18/a-first-look-at-the-house-health-care-fix-more-bad-news/">will take many forms, including taxes on prescription drugs, medical devices (like wheel chairs), and health insurance.
5. Unconstitutional mandates, courtesy of Congress. Don’t want to buy health insurance? <ahref="http://blog.heritage.org/2010/03/18/a-first-look-at-the-house-health-care-fix-more-bad-news/">Congress will penalize you if you don’t, regardless of income.
6. Lock your back door. Higher health care costs will be sneaking in. The plan <ahref="http://blog.heritage.org/2010/03/18/obamacare-will-break-the-bank-not-cut-the-deficit/">gives subsidies to low-to-moderate wage families, but the subsidies will increase at a lower rate than the rate at which premiums increase. In other words, those families will pay more every year.
7. Lights out for small businesses? Companies that hire certain low-income Americans<ahref="http://blog.heritage.org/2010/03/18/the-house-health-fix-even-higher-job-killing-employment-taxes/"> will have to pay $3,000 per employee, per year, even if the company offers insurance.Oh, and if a company employs 50 or more workers, <ahref="http://blog.heritage.org/2010/03/18/the-house-health-fix-even-higher-job-killing-employment-taxes/">they’ll face higher tax penalties to the tune of $2,000 per full-time employee.
   
8. Abortions. You will pay for them, like it or not. The House bill includes <ahref="http://blog.heritage.org/2010/03/18/a-first-look-at-the-house-health-care-fix-more-bad-news/ ">major funding for community health centers with no restrictions on federal taxpayer funding of abortions.
9. Want to play the stock market? Maybe not, after you hear this. The House bill <ahref="http://blog.heritage.org/2010/03/18/the-house-health-fix-even-higher-job-killing-investment-taxes/">slaps a 3.8% tax on investment income.
10. It’s not a federal system, after all. States will have less power. They’ll <ahref="http://blog.heritage.org/2010/03/18/a-first-look-at-the-house-health-care-fix-more-bad-news/">no longer have authority to regulate health care premiums. Instead, the federal government will take on the job. States and local governments won’t be able to control their own employee health plans; they’ll have to abide by new federal regulations.

http://blog.heritage.org/2010/03/19/…-gets-its-way/

On 03.19.10 01:00 PM posted by Dan Ziegler

House Cloakroom: March 22 – 26, 2010

Analysis:

House members are staying in town through the weekend as health care continues to hang over everyone’s heads. *The House Rules Committee is tentatively scheduled to meet tomorrow to consider the now infamous “<atitle="http://blog.heritage.org/2010/03/17/slaughter-solution-still-the-senate-bill/" href="http://blog.heritage.org/2010/03/17/slaughter-solution-still-the-senate-bill/">Slaughter rule” which would deem the Senate bill passed before they move on to the reconciliation bill. *Speaker Pelosi summed up her approval of this measure by saying “I like it, this scenario, because people don’t have to vote on the Senate bill.” On Sunday the House is then expected to meet to pass the Slaughter rule and then immediately proceed to debate and soon after that vote on the House reconciliation package to amend the Senate bill with a previously House passed student loan bill. *It is important to note that the House will be doing this <atitle="http://blog.heritage.org/2010/03/18/obamacare-will-break-the-bank-not-cut-the-deficit/" href="http://blog.heritage.org/2010/03/18/obamacare-will-break-the-bank-not-cut-the-deficit/">without a full economic score of the legislation from the Congressional Budget Office. Additionally, while the Rules Committee is getting ready for the big show on Saturday, the rest of the House will be focusing its attention on a $16.8 billion tax incentive bill targeted at small business and state and local governments.

Major Floor Action:

• Slaughter Rule to deem the Senate bill passed.
• House Reconciliation package (<atitle="http://frwebgate.access.gpo.gov/cgi-bin/getdoc.cgi?dbname=111_cong_bills&docid=f:h4872rh.t xt.pdf" href="http://frwebgate.access.gpo.gov/cgi-bin/getdoc.cgi?dbname=111_cong_bills&docid=f:h4872rh.t xt.pdf">HR 4872) with revised Senate passed health care bill and student loan bill (<atitle="http://frwebgate.access.gpo.gov/cgi-bin/getdoc.cgi?dbname=111_cong_bills&docid=f:h3221rfs. txt.pdf" href="http://frwebgate.access.gpo.gov/cgi-bin/getdoc.cgi?dbname=111_cong_bills&docid=f:h3221rfs. txt.pdf">HR 3221).
• <atitle="http://frwebgate.access.gpo.gov/cgi-bin/getdoc.cgi?dbname=111_cong_bills&docid=f:h4849ih.t xt.pdf" href="http://frwebgate.access.gpo.gov/cgi-bin/getdoc.cgi?dbname=111_cong_bills&docid=f:h4849ih.t xt.pdf">HR 4849 Small Business and Infrastructure Jobs Tax Act of 2010<spanid="more-29358"></span>

Major Committee Action:

• The <atitle="http://resourcescommittee.house.gov/index.php?option=com_jcalpro&Itemid=27&extmode=vie w&extid=329" href="http://resourcescommittee.house.gov/index.php?option=com_jcalpro&Itemid=27&extmode=vie w&extid=329">House Natural Resources Committee Subcommittee on Energy and Mineral Resources will hold an oversight hearing on the fiscal 2011 budget requests for the Mineral Management Services, the Bureau of Land Management, the Office of Surface Mining Reclamation and Enforcement, and the United States Geological Survey. A <atitle="http://blog.heritage.org/2010/02/23/war-on-the-west-ii/" href="http://blog.heritage.org/2010/02/23/war-on-the-west-ii/">recent blog post outlines how these agencies impact the west.
• The <atitle="http://waysandmeans.house.gov/Hearings/hearingDetails.aspx?NewsID=11061" href="http://waysandmeans.house.gov/Hearings/hearingDetails.aspx?NewsID=11061">Ways and Means will hold a hearing on china exchange rate policy. *Derek Scissors, Research Fellow for Asia Economic Policy outlined what won’t work with china and what might <atitle="http://blog.heritage.org/2010/03/15/what-won%e2%80%99t-work-with-china-and-what-might/" href="http://blog.heritage.org/2010/03/15/what-won%e2%80%99t-work-with-china-and-what-might/">here.

Senate Cloakroom: March 22 – 26, 2010

Analysis:

The Senate stands on high alert, prepared for the equivalent of legislative nuclear war.* If the House successfully pulls off the deem-and-pass gimmick on Obamacare, the Senate will deal with a reconciliation measure that raises $155 billion in taxes, cuts sweetheart deals and takes over the student loan industry.* The House process clearly <atitle="http://blog.heritage.org/2010/03/19/morning-bell-this-process-is-undermining-the-rule-of-law/" href="http://blog.heritage.org/2010/03/19/morning-bell-this-process-is-undermining-the-rule-of-law/">undermines the rule of law and the <atitle="http://blog.heritage.org/2010/02/24/obamacare-and-health-care-nuclear-option-violate-first-principles/" href="http://blog.heritage.org/2010/02/24/obamacare-and-health-care-nuclear-option-violate-first-principles/">Senate process gimmicks are clearly undermining the will of the people.* Conservatives in the Senate, and those who respect the rule of law and their constituents, are likely to use <atitle="http://thehill.com/homenews/senate/79423-gop-finds-loophole-in-reconciliation-ploy" href="http://thehill.com/homenews/senate/79423-gop-finds-loophole-in-reconciliation-ploy">every tool at their disposal to prevent the reconciliation measure from going to the President’s desk should the House succeed with deem-and-pass.

Major Floor Action:

• On Monday, the Senate will complete consideration of FAA reauthorization.
• If Speaker Pelosi successfully rams Obamacare through the House, the Senate will spend the remainder of the week debating and amending the reconciliation measure.

Major Committee Action:

Because of the potential for near constant voting that will be required during consideration of Obamacare’s reconciliation measure, major committee action is unlikely.* However, Banking Chairman Chris Dodd (D-CT) has pledged to begin the markup of his <atitle="http://blog.heritage.org/2010/03/15/senator-dodd-and-financial-regulation-new-plan-old-problems/" href="http://blog.heritage.org/2010/03/15/senator-dodd-and-financial-regulation-new-plan-old-problems/">latest problematic bank overhaul plan <atitle="http://banking.senate.gov/public/index.cfm?FuseAction=Hearings.Hearing&Hearing_ID=b 8c4a3bd-db46-4b8d-a759-5024b72204cd" href="http://banking.senate.gov/public/index.cfm?FuseAction=Hearings.Hearing&Hearing_ID=b 8c4a3bd-db46-4b8d-a759-5024b72204cd">Monday afternoon.

http://blog.heritage.org/2010/03/19/…80%93-26-2010/

On 03.19.10 01:11 PM posted by Kisa Smith

Spring has sprung in Washington, DC, and while many buses line the streets packed with students touring the National Monuments, another group of students came to Washington this week for a different purpose: To tell policymakers about the impact that abstinence education has had in their lives.

This year’s annual Abstinence Day on the Hill was of particular significance because of <ahref="http://archpedi.ama-assn.org/cgi/content/abstract/164/2/152?hits=10&RESULTFORMAT=&FIRSTINDEX=0&maxtoshow=& fulltext=abstinence&searchid=1&resourcetype=HWCIT" >recent studies that suggest abstinence education could delay sexual activity in teenagers.

In a <ahref="http://thf_media.s3.amazonaws.com/2010/pdf/bg2372.pdf">study evaluating the effectiveness of abstinence-based programs, researchers found that from a total of 22 studies reviewed, 17 studies reported statistically significant positive results in delaying sexual activity among adolescents.

<spanid="more-29361"></span>Testimonials from students who came to Capitol Hill this week shed light on why abstinence-based programs have been effective. They expressed gratitude for the programs and directly attributed their successes in life thus far to their decision to delay sexual activity with the goal of waiting until marriage.

<ahref="http://www.heritage.org/Research/Reports/2007/08/How-Poor-Are-Americas-Poor-Examining-the-Plague-of-Poverty-in-America">Research has shown that nearly two-thirds of poor children in America live in single-parent homes. Preventing teen pregnancy is not only beneficial to our economy, but also helps young adolescents avoid the emotional distress that often comes along with early sexual activity.

Abstinence education can help avert dependency on welfare. In a <ahref="http://www.heritage.org/Research/Reports/2004/01/Government-Spends-12-on-Safe-Sex-and-Contraceptives-for-Every-1-Spent-on-Abstinence#pgfld-1071650">2004 report analyzing federal spending on abstinence programs, Robert Rector, a Senior Research Fellow at The Heritage Foundation, found that:

Women who begin sexual activity at an early age are far more likely to become pregnant and give birth out of wedlock and to be single mothers. Since single mothers are far more likely to be poor, early sexual activity is linked to higher levels of child and maternal poverty.

In an address to participants of Abstinence Day on the Hill, Congressman Phil Gingrey (R-GA) pointed out that abstinence education not only promotes the importance of being disciplined but also invokes the determination to make wise choices.

Abstinence education is not just about delaying sex. It’s about teaching young adolescents the importance of healthy relationships, building self-confidence, and showing how setting positive goals can significantly improve their future lives.

Teaching the importance of abstinence helps adolescents understand how the consequences of sexual relationships at a young age can greatly alter their future. Robert Rector pointed out that teens who abstain from sexual activity are <ahref="http://www.heritage.org/Research/Reports/2005/10/Teenage-Sexual-Abstinence-and-Academic-Achievement">two times more likely to graduate from college than their counterparts who are sexually active.

It is puzzling as to why some politicians and opponents of abstinence education continue to reject abstinence education, especially since surveys have shown that 80 percent of parents want schools to teach their students to <ahref="http://www.heritage.org/Research/Reports/2010/02/Evidence-on-the-Effectiveness-of-Abstinence-Education-An-Update">“abstain from sexual activity until they are in a committed adult romantic relationship nearing marriage.”

Why should educators promote the use of contraceptives over abstinence, especially since <ahref="http://blog.heritage.org/2010/02/19/science-or-ideology-what-lies-behind-the-abstinence-education-debate/">most parents desire otherwise?

Standing up for abstinence education is not always an easy task, but is clearly of vital importance. We congratulate the students who participated in this year’s Abstinence Day on the Hill, and encourage them and others to continue their leadership in promoting healthy behaviors and showing how abstaining from sexual behavior during adolescent years can have a lasting and positive impact on their lives.

http://blog.heritage.org/2010/03/19/…y-on-the-hill/

On 03.19.10 02:02 PM posted by Richard Sherwood

Throughout the debate over liberals’ health care proposals, it has become clear that *while Americans want health care reform, they reject the direction of the legislation that will be voted on in the House this weekend.* The current health care bill results in a government takeover of the health care system by imposing strict regulations on insurers, mandates on employers and individuals, and an expansion of costly and inefficient entitlements.* States and citizens alike are rebelling against the bill in a bipartisan manner.* State legislators reject the bill because it significantly reduces their authority over health insurance markets and flexibility in <ahref="http://www.heritage.org/research/health care/">managing Medicaid. With only 47 percent believing that it is the federal government’s responsibility to ensure coverage, <ahref="http://www.aei.org/docLib/RoleOfGovernment.pdf">Americans are rightly alarmed by the intrusive nature of the legislation.

Former Congressman Tom Feeney (R-FL) recently worked with the Heritage Foundation to outline a solution that promotes individual freedom in health care markets:* <ahref="http://www.heritage.org/Research/Reports/2010/03/Interstate-Competition-and-Choice-in-Health-Insurance-The-American-Way">interstate commerce contracts among states. Interstate commerce for health insurers would create robust competition, lowering costs for the citizens of the allied states .* It is a step towards reform that states can take without action from Washington.* As Rep. Feeney <ahref="http://www.heritage.org/Research/Reports/2010/03/Interstate-Competition-and-Choice-in-Health-Insurance-The-American-Way">remarks:<spanid="more-29368"></span>

The genius of the American federal system provides a natural set of diverse alternatives to centralized system of planning—which would force 300 million Americans into a collectivist straight jacket where all key decisions will ultimately be made in Washington.

Interstate commerce would go a long ways to better America’s health care system.* Interstate contracts are health insurance exchanges across states that create larger insurance markets and enhance competition among insurers.* By allowing citizens of other states to purchase cost-effective plans across state borders, they promote individual freedom to choose among competing plans that offer the best combination of cost and coverage levels.* Done correctly, interstate commerce will reduce bureaucracy, provide simplified one-stop shopping, allow people to get better and more varied health coverage. The nest step is for Congress to enable people to take their plans from job to job <ahref="http://s3.amazonaws.com/thf_media/2009/pdf/StateHealthReform_Handbook.pdf">without losing the tax benefits of employer-based coverage.

It is important to note that states legislators are currently fully within their constitutional rights to make interstate compacts in the insurance markets.* The Constitution authorizes states to engage in multilateral agreements that support interstate commerce.* It reserves state powers for self governance, including the power to enter into agreement to facilitate interactions between citizens of one state and another.* So long that a state does not restrict commerce in other states, they are not restricted by the commerce clause.* Interstate compacts in health insurance markets expand options outside their jurisdiction.* In health insurance markets, states are the supreme authority.

Health care debate can serve as a catalyst for the rebirth of federalism, and no area is more advantageous for state reform than health care.* States governments and the American people have already voiced their complaints about the perils of the federal *health care legislation.* It is now time for state legislators to take the lead on health care reform.* The best way to do this is by entering into interstate compacts with other states that promote individual freedoms.

Rick Sherwood currently is a member of the Young Leaders Program at the Heritage Foundation. For more information on interning at Heritage, please visit: <ahref="http://www.heritage.org/About/Internships-Young-Leaders/The-Heritage-Foundation-Internship-Program">http://www.heritage.org/About/Intern…rnship-Program

http://blog.heritage.org/2010/03/19/…er-sound-idea/

On 03.19.10 05:22 AM posted by Conn Carroll

This week, NBC News and The Wall Street Journal released <ahref="http://online.wsj.com/public/resources/documents/wsjnbcpoll03162010.pdf">poll results that are disturbing but by no means surprising. The March 11th – 14th poll of 1000 American adults showed that <ahref="http://firstread.msnbc.msn.com/archive/2010/03/16/2230033.aspx">only 17% of respondents approve of the job Congress is doing in Washington. And as bad as that number is, the reason why Congress’ approval rating is so low is even more disturbing: <ahref="http://online.wsj.com/public/resources/documents/wsjnbcpoll03162010.pdf#page=14">a full 76% of Americans simply do not trust the U.S. Congress. This was the lowest level of trust for any representative entity tested by NBC/WSJ.

It is no coincidence that these record low ratings come amid current debate over health care in Congress. Yesterday, former U.S. Attorneys General Edwin Meese III and William P. Barr released the following statement:<spanid="more-29281"></span>

The convoluted and questionable method under discussion by both Houses of Congress for final passage of the long-debated health care legislation raises serious constitutional concerns, which, at best, will lead to protracted and wholly avoidable litigation and continued doubt about the bill’s validity. Members of Congress from both parties have criticized the use of such sleights of hand, and The Washington Post has rightly <ahref="http://www.washingtonpost.com/wp-dyn/content/article/2010/03/15/AR2010031503156.html">editorialized against such “unseemly” and “dodgy” maneuvers for the health care bill. Beyond the obvious practical concerns shared by all citizens, the use of such obscure “rules” for final passage is even harder to justify in light of the real constitutional doubt and the erosion of public confidence in government that it will cause.

Contrary to what President Obama and some congressional leaders have been repeating of late, the American people do care passionately that the process for consideration of health care reform be both constitutional and fair. At a bare minimum, article I, sec. 7, cl. 2 of the U.S. Constitution requires that before it becomes law “(1) a bill containing its exact text was approved by a majority of the Members of the House of Representatives; (2) the Senate approved precisely the same text; and (3) that text was signed into law by the President.” Clinton v. City of New York, 524 U.S. 417, 448 (1998).

The “deem and pass” and similar options under consideration in the House of Representatives plainly violate at least the spirit of the Constitution’s bicameralism and presentment requirements. Those constitutional requirements were intended to ensure democratic transparency with a straightforward up-or-down vote in each House on all bills that become law. More importantly, these requirements were designed to ensure that the new national government actually followed “the consent of the governed,” which the Declaration of Independence had declared to the world was the only basis of legitimate government.

The “deem and pass” options under consideration in the House and the subsequent use of a “reconciliation” process that is reserved for budget issues in acts already signed into law further erode confidence in the rule of law. Some past uses of the “deem and pass” or “self-executing” rules raise similar concerns, but none was as convoluted as the proposed use, and significantly, there may have been no one with legal standing to challenge prior uses in court. Many individuals will have standing to challenge any health reform legislation that restructures one-sixth of the American economy, and the contemplated use of the “deem and pass” maneuver in this instance may be combined with questionable procedural steps in the Senate that render it much more subject to challenge.

There is no need to engage in such procedural machinations, and no asserted reason for doing so exists other than to avoid the traditional legislative safeguards in the Senate and to obscure the appearance that Members of the House actually voted for the Senate bill, which is a prerequisite for genuine reconciliation. The constitutional requirement of bicameralism should not be jettisoned under any circumstances—and certainly not for such trivial and partisan reasons.

Members of Congress take an oath to uphold the Constitution. Members should violate neither the letter nor spirit of the Constitution, especially when there is so much at stake, not only as a policy matter, but when the very legitimacy of the legislative process is in question. Given that many parts of the underlying legislation itself raise substantial constitutional concerns, these “unseemly” and “dodgy” procedures underscore the justified concern the American people have that their elected representatives are blatantly disregarding the Constitution, and as a result, undermining the rule of law.

Quick Hits:

• Bowing to public and private complaints from lawmakers, <ahref=" http://www.washingtonpost.com/wp-dyn/content/article/2010/03/18/AR2010031801808.html">President Barack Obama delayed his trip to Indonesia and Australia to lobby for his health care bill.
• According to <ahref="http://www.gallup.com/poll/126812/Americans-Expect-Health-Bill-Mainly-Help-Poor-Uninsured.aspx">Gallup, pluralities of the American people believe Obamacare will make things worse for middle-income families, hospitals, doctors and “you and your family.”
• According to <ahref="http://www.foxnews.com/politics/2010/03/18/fox-news-poll-oppose-health-care-reform/">Fox News, 55% of Americans oppose the health care reforms being considered in Congress.
• A new analysis by the Joint Economic Committee and the House Ways & Means Committee minority staff estimates up to <ahref="http://www.washingtonexaminer.com/opinion/blogs/beltway-confidential/16500-more-IRS-agents-needed-to-enforce-Obamacare-88458137.html">16,500 new IRS personnel will be needed to collect, examine and audit the new tax information Obamacare requires families and small businesses to provide.
• Sen. Tom Coburn (D-OK) <ahref="http://www.redstate.com/jrichardson/2010/03/18/coburn-promises-to-hold-future-nominations-of-ex-house-democrats/">promised to block any nominations of House Democrats who vote for Obamacare to any Senate-approved federal position.

http://blog.heritage.org/2010/03/19/…e-rule-of-law/

On 03.19.10 07:26 AM posted by Jeffrey Chatterton

</p>Secretary of State Hillary Clinton’s visit to Moscow to speed up the completion of the Strategic Arms Reduction Treaty follow-on agreement with Russia continues to highlight the difficulty of dealing with Moscow even when the two countries ostensibly share common interests. Although Russian Foreign Minister Sergei Lavrov claimed an agreement would be reached before the end of the month, Prime Minister Vladimir Putin greeted Clinton with an <ahref="http://www.nytimes.com/2010/03/19/world/europe/19diplo.html">announcement that the nuclear plant Russia is helping Iran build in Bushehr will begin operations this summer.

Clinton called the decision <ahref="http://www.washingtonpost.com/wp-dyn/content/article/2010/03/18/AR2010031801661.html">“premature.” She <ahref="http://www.washingtonpost.com/wp-dyn/content/article/2010/03/18/AR2010031801661.html">continued: “Iran is entitled to civil nuclear power; it is a nuclear weapons program that it is not entitled to.”<spanid="more-29299"></span>

This is the latest example of Moscow’s steps that undermine the bilateral relationship.

President Obama can press the “reset” button all he wants, but it doesn’t seem to matter because when it comes to arms control and Iran, Russian policy ranges from unhelpful to outright disruptive.

Despite recent hints that Russia is more willing to go along with Iran sanctions, the Administration needs to accept that the Kremlin will not be as cooperative as the U.S. would like them to be in deterring Teheran from acquiring a nuclear weapon. “Powerful Russian special interests–security, nuclear, oil and gas, and the military-industrial complex–are vehemently opposed to any significant reversal of Russian policy toward Iran,” <ahref="http://www.heritage.org/Research/Reports/2010/01/Russias-Iran-Policy-A-Curveball-for-Obama ">argues Heritage Foundation Senior Research Fellow Dr. Ariel Cohen. “Therefore, it is naïve, if not dangerous, to hope that Moscow will provide decisive assistance in the U.N. Security Council or bilaterally vis-à-vis Iran.”

As President Obama has become increasingly involved in the START follow-on negotiations, he has slowly discovered the challenge of concluding a deal. In particular, <ahref="http://blog.newsweek.com/blogs/wealthofnations/archive/2010/03/17/russia-s-diplomatic-obstructionism.aspx">Russia’s insistence on linking arms-control to missile defense has been one of the more recent points of contention.

It turns out that charming Putin and Medvedev into changing their positions on issues of great importance to US national interests is a lot harder than expected.

Jeffrey Chatterton currently is a member of the Young Leaders Program at the Heritage Foundation. For more information on interning at Heritage, please visit: <ahref="http://www.heritage.org/About/Internships-Young-Leaders/The-Heritage-Foundation-Internship-Program">http://www.heritage.org/About/Intern…rnship-Program

http://blog.heritage.org/2010/03/19/…eset-strategy/

On 03.18.10 12:00 PM posted by Terry Miller

The execution last week of a senior economics official in the North Korean government over a botched currency reform reminds us of that no parody of repressive government can fully capture the backwardness and evil of the North Korean regime. If any good can come of such a perversion of morality, it might be in a reminder to economists that their policy prescriptions can be matters of life or death, if not for themselves then most assuredly for the citizens of their countries.

Recent calls by Paul Krugman and others to clamp down on Chinese currency manipulation are vivid examples of politically-motivated and ideologically driven policy prescriptions that would, if implemented, make a significant, if not life and death, difference for some Americans, reducing the prosperity of most while pampering a few politically-connected special interests.

We need to step back and consider the actual impacts of China’s policy to maintain the value of its currency at an artificially low level. The main ones are:

<spanid="more-29221"></span>1. American consumers get a subsidy from the Chinese government because Chinese imports to America are artificially cheap.

2. Chinese consumers pay a higher cost for things they buy from the rest of the world.

3. China exports more than it otherwise would, but its increased market share comes at the expense of other developing countries like Vietnam and Mexico that have similar types of manufacturing capabilities and roughly equivalent cost structures. If China revalued its currency and Chinese prices rose, we might buy less from China and more from other countries, but its highly unlikely that we would import much less in total.

It’s hard to see from those impacts why America should have much interest at all in changing China’s currency regime. On balance, we’re benefiting from it. It may be distorting the market, but the costs of distortion fall primarily on other developing countries and the Chinese themselves.

The advocates for change most often assert that China’s currency manipulation costs Americans jobs. There is little evidence to back such claims. The truth is that U.S. and Chinese manufacturing interests are widely divergent, and there are few areas of direct competition.

Why then, the calls for urgent action, even legislation, to address the issue? One must look away from economics to politics: the desire of some to curry favor with organized labor, the appeal of demagoguery and chauvinism in tough times, and the search for scapegoats by a leadership whose own policies are failing to address the needs and concerns of most Americans.

Thankfully, we won’t be executing our economic policy-makers for their failures. But we shouldn’t console ourselves that bad policy prescriptions do no harm.

http://blog.heritage.org/2010/03/18/…life-or-death/

On 03.18.10 12:30 PM posted by Robert Book, Ph.D.

</p>A <ahref="http://www.urban.org/uploadedpdf/412037.pdf">recent study by the Urban Institute, a prominent liberal think tank, lists “the biggest losers” should congressional health care legislation fail to become law.* Interestingly enough, this is oddly similar to an earlier Heritage Foundation assessment of the “biggest losers”—if the liberal bills* do become law.* Here, we outline how Urban’s biggest losers would actually be worse off under Obamacare than under the current system:<spanid="more-29233"></span>

Self-employed people – Because the self-employed are at a significant disadvantage due to current regulations preventing them from buying group health insurance, one might think the ability to buy at controlled prices through the “exchanges” set up under the Senate bill would be of great benefit.* However, the self-employed would lose many options currently available, such as <ahref="http://www.heritage.org/Research/Reports/2009/11/Government-Run-Health-Care-Even-Without-the-Public-Option">low-priced catastrophic insurance, and health savings accounts paired with high-deductible, low-premium insurance. Furthermore, moderate-income self-employed people who can’t afford the high-priced comprehensive health plans offered through the exchanges and aren’t eligible for subsidies would not only lose their insurance, but would pay a penalty for remaining uninsured.

Workers in small firms, including those offered employer-sponsored insurance (ESI) – <ahref="http://blog.heritage.org/wp-content/uploads/special_health_care_cost_fact_sheet_pdf.pdf">Sever al million workers currently receiving insurance through an employer would lose their coverage under the Senate bill. Faced with increasing insurance premiums, plus the elimination of “no-frills” health plans as “acceptable coverage”, <ahref="http://www.heritage.org/Research/Reports/2009/12/How-the-Senate-Health-Bill-Punishes-Businesses-That-Hire-Low-Income-Workers">many employers will find it cheaper to pay the tax penalty than to provide insurance.* This is especially so for those with less than 50 employees, who will be exempt from the penalty but not from the new regulations on insurance if they choose to provide it.* The result will leave workers with the legal obligation to either buy the government mandated high-premium comprehensive insurance out of their own pockets using after-tax dollars, or pay the new penalty for remaining uninsured.

Non-elderly people working part-time and people working full-time but for only part of the year – Employers of people in these categories will be exempt from providing them insurance, but the people themselves will not be exempt from the requirement to obtain the government-specific comprehensive insurance on their own.* Lower-premium catastrophic insurance will not satisfy the requirement.* Persons in these categories will be required to either buy the government specified high-premium comprehensive insurance out of their own pockets using after-tax dollars, or pay the penalty for remaining uninsured.

People who have or had significant health problems – In order to raise revenue, the Senate health bill includes a tax on medical devices, prescription drugs, and high-cost insurance plans.* Though these taxes are aimed at the companies that provide high-cost medical necessities, as economists know, <ahref="http://www.heritage.org/Research/Reports/2009/10/Adding-Insult-to-Injury-The-Baucus-Health-Plan-Imposes-New-Taxes-on-the-Sick">these taxes would be passed along to the patients, increasing expenses for those with costly illness and the premiums of health plans that cover them.* What is more, the Senate bill, as well as the President’s latest proposal, combines an individual mandate with a guaranteed issue requirement, meaning that companies cannot turn people away from enrollment. The powerful economic incentives that are hardwired into this flawed arrangement <ahref="http://www.heritage.org/Research/Reports/2010/01/How-Health-Care-Reform-Will-Affect-Young-Adults">will encourage the young and healthy to avoid purchasing insurance until they “need” it, paying the “cheaper” mandate penalty instead. There would be even greater risk segmentation in the insurance markets than we have today, as the insurance pools would attract disproportionately larger numbers of older and sicker enrollees. This would further raise premiums for those who need insurance to pay for significant health problems.

Older working-age adults and early retirees – Heritage analysis shows that older working age adults and early retirees, specifically those aged 45-64, will be hit with new taxes despite President Obama’s promise not to raise taxes on households earning less than $250,000 per year. Households headed by individuals aged 45-64 who deduct medical expenses on their 1040 tax form, those who ought to be helped by a health care reform bill, would see a tax increase of about $200 on average. The higher the medical expenses faced by these families the higher the tax increase they would face. While some would face a very small increase, others would be hit with a heavy new penalty for having medical expenses.

People with low incomes – Low-income families are uniquely vulnerable under the Senate health bill.* <ahref="http://www.heritage.org/Research/Reports/2009/12/How-the-Senate-Health-Bill-Punishes-Businesses-That-Hire-Low-Income-Workers">Heritage research shows that the Senate bill creates incentives for employers to avoid hiring members of low-income families.* The employer mandate would require employers with 50 or more employees to offer insurance to all employees or pay a penalty of $750 per worker.* However, if the employer does offer insurance, they would still pay a fine – but only if they hire workers from low-income families!* If the employee’s portion of the cost exceeds 9.8 percent of the employee’s family income, and that employee is eligible to receive a premium subsidy (“affordability credit”), the employer would be slapped with a $3,000 penalty.* This is based on family income, so employers would be better off hiring workers with few dependents or with other sources of income, rather than those with a single source of income and several dependents.* In other words, employers would be punished for hiring the members of society who need jobs the most.

Kathryn Nix and Guinevere Nell contributed to this post.

http://blog.heritage.org/2010/03/18/…iggest-losers/

On 03.18.10 01:38 PM posted by Ernest Istook

<ahref="http://blog.heritage.org/wp-content/uploads/march-madness.jpg"></p>The public doesn’t trust Washington politicians—and those politicians don’t trust each other. Those two truths could doom President Obama’s health care bill even if it weren’t an unaffordable behemoth.

The final health debate merges multiple story lines into one, just as March Madness does for an assortment of college basketball teams. Some of these themes are:

–The Ugliness of Today’s Washington. Trust in elected leaders is collapsing into a hole deeper than Alice ever fell into. It deepens with every disclosure of the process. “Deeming” a bill to pass; avoiding votes to avoid accountability; buying votes with taxpayers’ money, etc. “Louisiana Purchase” and “Cornhusker Kickback” are only visible symptoms of a wayward system that long ago went amok.

<spanid="more-29243"></span>–House vs. Senate Mistrust. Even if the House passed it this weekend, that bill must go back through the Senate. Knowing it could be blocked or changed in that chamber, House members are reluctant to take political risks with no reward. Thanks to the reconciliation process is being used, GOP Senators think they can win parliamentary rulings that automatically strike out <ahref="http://www.politico.com/news/stories/0310/34605.html">multiple parts of the bill. The Senate Budget Chairman predicts the bill definitely would be <ahref="http://www.rollcall.com/news/44356-1.html">changed in the Senate. That would mean a return trip to the House and a repeat of this soap opera—again diverting attention from more pressing issues like fixing the economy.

–Making Health Care Cost More for Individuals. President Obama and Sen. Lamar Alexander (R, TN) publicly sparred over whether the bill would make individual coverage cost less or more than it does already. Eventually, Obama was forced to admit—live on C-SPAN last month—that many Americans indeed would <ahref="http://dailycaller.com/2010/02/25/obama-smacks-down-alexander-thats-not-factually-accurate-video/#ixzz0iYSflRlc">pay 10% to 13% more. This week, an Associated Press fact check article found no truth in Obama’s oft-repeated claim that his proposal will make individuals’ <ahref="http://www.google.com/hostednews/ap/article/ALeqM5iVn9wrhB-3SF-Svo9kZyXd4bHRLAD9EGJJNG0">health insurance more affordable.

–Making Health Care Cost More for Government. The trillion-dollar cost of the bill (over ten years) makes people wonder how spending more would supposedly reduce the deficit. The simple answer is that it creates and raises taxes by more than a trillion dollars, such as new taxes on health insurance and medical devices. As The Heritage Foundation concludes, there are <ahref="http://blog.heritage.org/2010/03/18/six-ways-the-senate-health-care-bill-raises-health-care-costs-kills-jobs-and-weakens-the-economy/">“Six Ways the Senate Health Care Bill Raises Health Care Costs, Kills Jobs, and Weakens the Economy.” The Congressional Budget Office admits its fiscal evaluation is “preliminary,” and others <ahref="http://blogs.investors.com/capitalhill/index.php/home/35-politicsinvesting/1524-five-reasons-the-cbo-figures-are-phony">call the numbers “phony.”

–Creating Doomsday. The chair of Blue Dog Democrats, Rep. Stephanie Herseth-Sandlin (D, SD), predicts the use of “deeming” via the Slaughter Rule, “would poison an already terribly partisan atmosphere and leave the Congress even less able to find bipartisan solutions to fiscal problems that are <ahref="http://thehill.com/blogs/blog-briefing-room/news/87677-top-blue-dog-slaughter-solution-is-poison">on the verge of becoming overwhelming.” Once more, we learn that no situation is so bad that government cannot make it worse.

–Ignoring the Real Problems. As Rep. Jason Altmire (D, PA) told ABC News, “The long-term cost projections are simply unsustainable.” He correctly noted that cost containment is missing. Even if 15% of Americans lack insurance and want it given to them at taxpayer expense, the other 85% who have health insurance want lower premiums. Offering them a government subsidy doesn’t reduce the costs—that money has to be taken from taxpayers before a part would be given back as a subsidy. Yet that is what Obama calls “savings” for consumers. Sleight-of-hand is too kind a term for that process.

–The “All About Me” Approach. Sadly, the White House is pitching the notion that aye votes are needed to save the Obama presidency rather than help the country. As Rep. Jose Serrano (D, NY) described after Obama met with the Congressional Hispanic Caucus, “He was subtle, but that was the underlying theme of the meeting — the importance of passing this for the health of the presidency.” If that means some Democrats in Congress are thrown under the bus and defeated at the polls, it’s an acceptable price to their leaders.

So when Obama calls for Congress to show “courage” by voting on the bill it’s easy for him to say. It’s others who will pay the price—both members of his party and the beleaguered taxpayers of the United States of America.

In basketball, March Madness will end on April 5th. But in politics, the madness promises to continue at least until November.

http://blog.heritage.org/2010/03/18/…march-madness/

On 03.18.10 01:43 PM posted by James Capretta

<ahref="http://blog.heritage.org/wp-content/uploads/doctor_bill0906235.gif"></p>The White House and its congressional allies are trying to suggest that the latest Congressional Budget Office (CBO) <ahref="http://www.cbo.gov/ftpdocs/113xx/doc11355/hr4872.pdf">cost estimate proves that their health-care plan is fiscally responsible.

But, in fact, the latest CBO projections confirm — again — that the President’s health plan would pile more another unfinanced entitlement program on top of the unaffordable ones already on the federal books.

According to CBO, the new entitlement spending in the plan would cost $216 billion by 2019, and then increase by 8 percent every year thereafter. In other words, the President’s plan would stand up another health entitlement program that will grow much faster than the nation’s economy or revenue base. The changes the Democrats would make to the Senate-passed bill would make the entitlement program even more expensive.<spanid="more-29247"></span>

Over a full ten years of implementation, the cost of the new entitlement spending would reach $2.5 trillion, at least, not $1 trillion as advertised by the White House.

The President and his congressional allies have suggested that the offsets they are pushing will more than cover this massive spending increase. But even a modest amount of scrutiny reveals these supposed offsets are nothing more than gimmicks and implausible assumptions.

For starters, the plan doesn’t count $371 billion in spending for physician fees under the Medicare program. The President and Congressional Democrats want to spend this money, for sure. They just don’t want it counted against the health bill. That’s because they want to reserve all of the Medicare cuts in the bill as offsets for another entitlement instead of using them to pay for the problem that everyone knows needs fixing. The President says he shouldn’t have to pay for the “doc fix.” But why not? Never before did congress move to add the cost of a permanent fix to the national debt. But that is exactly what the President now wants to do. When the cost of the “doc fix” is properly included in the accounting, all of the claimed deficit reduction from the President’s health plan vanishes.

Then there’s the “Cadillac” tax on high-cost insurance plans. Because of union pressure, the President pushed the tax back to 2018, well passed the point when he will have left office. But once in place, he now would allow the threshold used to determine “high-cost” to rise only with the CPI, beginning in 2020. That means a very large segment of the middle class would get hit with the tax as the years passed. The President has shown that he is unwilling to actually collect this tax. But he wants us to believe we can count on a huge revenue jump over the long-run because his successors will have more stomach for it than he does.

Similarly, to jury-rig “long-term deficit reduction,” the latest plan would first increase the premium assistance subsidies paid to low and moderate wage families above the levels in the Senate-passed bill, but then index their value to something below the growth in premiums to give the appearance of deficit reduction in the decade after 2019.

There’s no “bending of the cost-curve” here. It’s sleight of hand that, if actually implemented, would force millions of low-income families to pay ever higher premiums every year. The Democrats don’t want to talk about that. They just want to pretend they have been serious with fiscal discipline.

The other gimmicks remain in the plan as well. The double-counting of premiums for a long-term care insurance programs an offset for the health entitlement spending. The assumption that congress will allow Medicare reimbursement rates to fall so low that one in five hospitals and nursing homes might be forced to stop taking Medicare patients. And the expectation that somehow congress can hand out generous new subsidies to those getting insurance through the exchanges, even though many tens of millions of others with the same resources would get no additional help for their job-based coverage.

The bottom line here has been clear for months. The bill being pushed by the President would take what’s already a very bleak budget outlook and make it much, much worse.

Cross-posted at <ahref="http://corner.nationalreview.com/">The Corner.

http://blog.heritage.org/2010/03/18/…t-the-deficit/

On 03.18.10 02:13 PM posted by Nina Owcharenko

In their feverish effort to enact the Senate health bill, the House leadership recently released their <ahref="http://docs.house.gov/rules/hr4872/111_hr4872_amndsub.pdf">153 page bill to fix the underlying <ahref="http://democrats.senate.gov/reform/patient-protection-affordable-care-act-as-passed.pdf">2,409 page Senate legislation through the budget reconciliation process. As a matter of health policy, there is little that is substantively different between the Senate bill and this “fix it” bill. A closer look at the fine print shows that the latest version would only make the massive and unpopular Senate health bill even worse.

Based on a preliminary review of the key provisions, taxpayers should be aware of the following features of the legislation.

More Spending

• The House reconciliation bill increases taxpayer subsidies and lowers cost sharing for individuals receiving a federal subsidy to buy health coverage. This change adds to the overall cost of the bill, while depending on unproven savings and tax hikes to pay for it.
• Instead of removing special deals, the bill extends additional federal funding to all states for Medicaid. This “fix” is supposed to replace the scandalous requirement that federal taxpayers fund the Nebraska Medicaid expansion. In both case, however, the burden is back on the backs of federal taxpayers.<spanid="more-29244"></span>

Raising Taxes on Americans for all Income Brackets

• The reconciliation bill increases the individual mandate penalty for some by requiring the penalty be the greater of two options. This mandate amounts to a new tax on those people who choose not to purchase a government-approved health plan regardless of income.
• The bill also increases taxes on all consumers who use prescription drugs, medical devices or have health insurance.
• The bill also keeps the Cadillac tax, the tax on high value health plans. But by delaying its start date and indexing the application of the tax to general inflation, it will hit more families harder when it goes into affect.
• Finally, the reconciliation bill adds a new Medicare tax on upper income individuals and families that extends to investment earnings as well.

Undercutting Job Creation and the Economy

• The reconciliation bill increases the penalties on businesses for not offering health insurance and continues the penalty on businesses whose employees claim the new health care subsidy.

Moving Backward on Entitlement Reform

• The reconciliation bill makes changes to Medicare and Medicaid that reverse course for reforming these struggling health care programs.
• The bill increases costs to seniors by requiring prescription drug plans in Medicare to offer more coverage and
• The bill also undercuts any reform of Medicare by linking Medicare Advantage payments to the flawed fee for services system and by eliminating demonstration projects that utilize competitive bidding to show how an alternative that would use real market pricing would work in practice.
• Although the sponsors of the House bill claim to address long term costs to Medicare, the bill’s dependence on <ahref="http://healthcare.nationalreview.com/post/?q=OWJlODMyMmFkYzNhYzk4YTY2ZTI5ODM2MTAwZjEwYjg=">t raditional cuts to providers is not fundamental entitlement reform. It’s basically the same, old, tired cuts in hospital and physician payment.
• The bill would add millions of Americans to the already broken Medicaid program. Medicaid remains fiscally unsustainable (for state or federal taxpayers) and it is a notoriously poorly performing program for those who are forced depend on it. Moreover, when new federal funding expires, states will be left with an even heftier cost.

Taking Power Away from the States

• The House reconciliation bill would secure a massive federal take over of the regulation of health insurance. It nullifies state authority in rate regulation of premiums, setting standards for solvency and reserves. It creates, instead, a new federal rate authority in charge of authorizing changes in politically approved premium levels and imposing penalties on health insurance companies.
• The reconciliation bill would undercut the ability of state and local governments to control state and local government employee health plans. As a condition of receiving federal money, state and local governments must abide by the new federal regulations and bureaucracy.

Provides for Taxpayer Funded Abortions

• The House reconciliation bill includes major funding for community health centers with no Hyde Amendment type restrictions on federal taxpayer funding of abortions.
• The bill, of course, does not in any way address the <ahref="http://www.heritage.org/Research/Reports/2010/03/Abortion-Coverage-in-President-Obamas-Health-Care-Reform-Bill">large loopholes for taxpayer funded abortions included in the underlying Senate bill, which it is supposed to “fix”.

Co-authored by Ed Haislmaier and Robert Moffit.

http://blog.heritage.org/2010/03/18/…more-bad-news/

On 03.18.10 04:07 PM posted by Robert Book, Ph.D.

</p>While the House reconciliation bill keeps many of the Senate provisions that will already <ahref="http://www.heritage.org/Research/Reports/2010/03/Mandates-and-Taxes-Reburden-Health-Insurance-Markets">slow economic growth, the reconciliation bill goes even farther in punishing employers who do not offer sufficient health care. These penalties will slow employment growth and given employers a disincentive to hire anyone who purchases subsidized health care.

Punishing Businesses That Hire Low-Income Workers
Businesses that already offer insurance can be affected by the reconciliation bill. Even if the employer does provide health insurance, if any employees qualify for, and accept, a premium subsidy on the basis of their family size and family income, the employer will have to pay a penalty of $3,000 per year for each qualifying employee. Even more businesses are in danger of this penalty since the reconciliation bill ups the subsidy amount, meaning that more workers could take it. This penalty depends not on how much that employer pays,<spanid="more-29265"></span> but on the employees total family income from all jobs held by all family members.* This means employers would have to know the income of each employee’s other family members to know whether they need to pay the tax.* The bill requires that the IRS provide this family information to the employer.

Because qualifications for that taxpayer subsidy depend on the worker’s family size and family income, a worker with more dependents would be more likely to qualify, and one with a working spouse or other family members would be less likely to qualify.

Employers faced with the choice of hiring—for the same job at the same pay—say, a single parent of three, and a parent of two with a working spouse (or a teenager with working parent(s)), the employer could face a $3,000 annual penalty for hiring the single parent—and is therefore <ahref="http://www.heritage.org/Research/Reports/2009/12/How-the-Senate-Health-Bill-Punishes-Businesses-That-Hire-Low-Income-Workers">likely to deny that person the job.

Likewise, if one company lays off an employee with a working spouse, that could generate a $3,000 tax penalty for the other spouse’s employer—unless the other employer lays off the other spouse as well.

If the employer hires two people in different family situations for the same job at the same pay, <ahref="http://www.heritage.org/Research/Reports/2009/12/Employment-Discrimination-in-the-Senate-Health-Care-Bill">they could have vastly different health insurance options based on what their other family members are making. The one with another working family member would have to take a plan from one of their employers and pay up to 40 percent of the cost or face tax penalties; the one with no other working family members could choose either the employer’s plan or any plan in the exchange – in the latter case, with a subsidy paid for by the other workers’ taxes.

Hammering Businesses Employing 50 or More Workers
Businesses with 50 or more workers will now face higher tax penalties, which lawmakers have increased from $750 to $2,000 per full-time employee (FTE) as part of the employer penalty mandate. The $2,000 per FTE penalty will be assessed as soon as one of the FTEs receives a premium tax credit or cost-sharing subsidy to participate in the established state health exchanges.

The penalty will not, however, apply on the first 30 workers. For example,<ahref="http://www.heritage.org/Research/Reports/2009/10/The-Baucus-Plan-Implications-for-Small-and-Medium-Sized-Firms"> if a business expands from 49 to 50 FTEs, then the marginal cost of this expansion will be $2,000 times 20 FTEs, or $40,000. The penalty will impact medium-sized companies as well, where a firm with 75 workers and subject to the employer penalty will have to absorb $90,000 in addition costs (or approximately 6 percent of the average annual payroll for a company with 75 workers).

Last, the employer penalty will negatively impact a significant share of US businesses, and could create a strong disincentive for a large share of companies to not expand firm-level employment.* Using <ahref="http://www.sba.gov/advo/research/data.html%20/%20diff%20/%20http://www.sba.gov/advo/research/data.html#diff">data from the Small Business Administration, there are approximately 190,000 total firms with 50 to 200 workers that could face this penalty.* Moreover, there are 116,000 total firms with 35 to 49 workers that could face the per FTE penalty, if they were to move beyond the 50 worker threshold.* This employer penalty would therefore reach a large number of US companies, and will <ahref="http://www.heritage.org/Research/Reports/2009/10/The-Baucus-Plan-Implications-for-Small-and-Medium-Sized-Firms">dramatically affect these companies’ per-employee costs and their allocation of labor.

Co-authored by John Ligon.

http://blog.heritage.org/2010/03/18/…loyment-taxes/

On 03.18.10 04:33 PM posted by Karen Campbell

<ahref="http://blog.heritage.org/wp-content/uploads/taxes.jpg"></p>It takes investment to get sustainable economic growth. We can’t spend our way to growth. We have to save some of the stuff we make today and use it to create new, higher value, tomorrow. If we produce and consume it all, then our economy lives “hand-to-mouth” and we do not grow.

Investing is risky. There is no guarantee that the investment will pay off. Investors weigh many possible scenarios when determining whether or not to make an investment. If the expected return on an investment does not meet an investor’s next best opportunity for his cash, he will forgo that investment.

The expected rate of return compared is the after-tax rate of return. The higher the tax on returns, the more investments will be foregone. So why is Congress trying to discourage investment at a time when the economy desperately needs investment to start growing again?

Because in order to get a <ahref="http://jct.gov/">deficit neutral score from CBO the legislators needed to find more ways to squeeze revenue from taxpayers.* Unfortunately increasing taxes from things that produce economic growth will cause the deficit to increase in a dynamic economy. Slower economic growth will result in fewer jobs and less tax revenue.<spanid="more-29274"></span>

As revenues fall, the government must either cut spending or borrow more money. As the government borrows more, there is upward pressure on interest rates. Higher interest rates can crowd out private sector investments, which further slows growth..

The downward trajectory, the Senate and Reconciliation bill puts the economy on in the early years to pay for benefits in later years, are too steep to get out of. In just ten years, <ahref="http://www.heritage.org/Research/Reports/2010/03/Mandates-and-Taxes-Reburden-Health-Insurance-Markets">the Senate bill (without the large tax increases on investment), slow the economy enough to lose 690,000 jobs per year and add $755 billion to the debt. The Reconciliation bill then slaps the economy by increasing taxes on high-income individuals’ wages and on their growth producing investment income. A 2.9% tax on investment is estimated to cause interest payments on the debt to be $12.4 billion higher over just ten years and slows the economy<ahref="http://www.heritage.org/Research/Reports/2010/02/The-Presidents-Health-Proposal-Taxing-Investments-Undermines-Economic-Recovery"> further eroding household disposable income by an estimated $17.3 billion dollars per year. The Reconciliation bill is worse; it places an even higher 3.8% tax on investment income thereby increasing the after-tax rate of return threshold on those considering investing. When combined with the expiration of President Bush’s tax cuts, the tax rate on capital will be increased by over 50% for some taxpayers.

With slowing growth and rising deficits, it is no wonder that <ahref="http://online.wsj.com/article/SB10001424052748703701004575113151234368416.html?K EYWORDS=US+credit+rating">Standard and Poor’s is warning the U.S. about down-grading its debt. People who say “all you need is your health” perhaps do not realize how difficult it is to get quality health care in an unhealthy economy.

http://blog.heritage.org/2010/03/18/…estment-taxes/

On 03.18.10 05:58 AM posted by James Phillips

The Obama administration has stumbled into a nasty spat with Israel that is based on incompatible views of how best to advance prospects for peace between Israel and its Arab neighbors. For President Barack Obama, peace is best achieved through patiently engaging adversaries, assuring them that their dignity will be respected, educating them on how best to recognize and advance mutual interests, and promoting negotiations to encourage compromise on every issue. For Israeli Prime Minister Benjamin Netanyahu, who has seen several peace negotiations collapse with disastrous consequences, peace must be built on the bedrock of security in careful negotiations with partners who can and will deliver on their commitments.

Netanyahu’s government knows that there is no Palestinian leader who now is willing and able to deliver peace, while the Obama administration glosses over this inconvenient truth. Even if President Mahmoud Abbas, who refuses to meet Israelis in direct talks, could somehow reach an acceptable final status agreement with Israel, he can not guarantee that it will end the conflict. The Palestinian Islamist extremist Hamas movement is the six hundred pound gorilla that can explode any peace agreement he signs with another round of rocket terrorism. Until Hamas, which controls Gaza, is defeated and discredited, there can be no genuine peace.

Palestinian terrorist attacks, not Israeli settlements, are the chief barriers to peace. Many Israeli settlements are located in areas that eventually could be folded into Israel in exchange for equal amounts of Israeli territory, if and when borders are agreed upon in a final settlement. Yet when the Obama Administration sought to revive the comatose peace process, which has been on American-supplied life support since the collapse of the 2000 Camp David summit, it made a settlement freeze the centerpiece of its strategy. It was extremely unwise for the Obama administration to push for a settlement freeze that no Israeli government could agree to in the absence of rapid movement for a permanent peace settlement that would include ironclad provisions that would ensure Israel’s security against terrorist attacks.

This focus on the settlements guaranteed friction with Israel’s center-right government and hardened the Palestinian negotiating position, because President Abbas could not be seen as less opposed to settlements than the United States. Despite the fact that Palestinians had negotiated for many years without gaining such a settlement freeze, Abbas now has made it a condition for resuming talks. There is likely to be little progress on negotiations in the future because the Palestinians will sit back and let Washington extract concessions for Jerusalem, without feeling any need to reciprocate with concessions of their own.

Netanyahu’s government stands on firm ground, knowing that Israelis are not willing to surrender territory unless they can be assured that it will not be transformed into a base for future terrorism against them, as Gaza was transformed by Hamas after Israel’s 2005 pullout. Given this reality, it was unwise and counterproductive to pick a fight with a close ally on an issue that will do little to advance peace.

As John Bolton wrote in The Wall Street Journal, Obama is “our first post-American President.” His worldview will lead to continued tensions with Israel in the future.

But Israel is not the only ally that has felt let down by the Obama Administration. The administration’s proclivity for putting a higher priority on engaging adversaries than in protecting the security of allies has disappointed Poland, the Czech Republic, and other allies, as Robert Kagan has noted. And there are sure to be even greater strains between the Obama Administration and our allies in the future.

http://blog.heritage.org/2010/03/18/…g-world-views/

On 03.18.10 07:00 AM posted by Jena McNeill

Secretary Napolitano just announced that she would be halting SBInet until she could complete her review of the program. SBInet- inaccurately nicknamed the ‘virtual fence’ is actually a system of cameras and sensors at the border to help border patrol agents catch illegal border-crossers. Thus far, the program has been initially deployed at two areas along the border, but Napolitano’s decision would halt future funding until the completion of her program assessment.

Undoubtedly- taxpayers demand that dollars are spent wisely—and Congress as well as DHS have every responsibility to make sure this is occurring. There is no doubt that SBInet has experienced delays in implementation. But the need for this type of technology is so very apparent at the southern border as drugs, people and guns flow across it and violence increases just over the Rio Grande. As Heritage’s James Carafano pointed out “earlier this month the Texas Department of Public Safety urged ‘spring breakers’ to avoid border towns,“ and the State Department has shut down its consular office in Reynosa because “gun battles in that border town were just too commonplace.”

The fence is done, and the appropriate manpower has been hired. This means that now is the time for technology to finish the process of securing the border and fighting back against this violence. This begs the need for the deployment of technologies that can ensure that border agents are in “the right place, at the right time to thwart creative, innovative, and adaptive criminals.” Secretary Napolitano needs to determine quickly how to get the program moving forward as SBInet can play a key role in this process. This assessment should look at inefficiencies but it should also include an assessment of challenges facing SBInet implementation—like environmental impediments that are certain to slow the progress but that need to be addressed by DHS and Congress, not the private sector.

There is nothing wrong with adequate oversight, but Washington can’t stop border progress in the meantime.

http://blog.heritage.org/2010/03/18/…-stops-sbinet/

On 03.18.10 08:38 AM posted by Lindsey Burke

Certainly one of the most unfortunate provisions in the new Elementary and Secondary Education Act (ESEA) reauthorization “blueprint” is the elimination of school choice and supplemental education services for students trapped in failing schools. The school choice provisions contained within NCLB, while limited, provide an opportunity for children to escape persistently low-performing public schools. The Obama administration’s decision to cut that lifeline for families is symbolic of its educational philosophy in general. Theirs is a philosophy which refuses to acknowledge the virtue of educational choice and continues to see the federal government as the key to raising academic achievement. Education Week reports:

In an important policy shift, schools that failed to meet achievement targets would not be mandated to provide school choice or supplemental educational services, known as SES. … Mr. Duncan’s dislike for the supplemental-services provisions in NCLB is well known.

While the blueprint does suggest expanding access to charter schools and some public school choice, the removal of the provision effectively mandating states to provide children with an exit pass from low-performing public schools is a set back. Low-income parents with children in underperforming public schools will have few options under the administration’s new plan.

School choice and accountability – while far from perfect under NCLB – were the flawed bill’s saving grace. While the accountability measures resulted in some unintended consequences – tests being “watered down” so that states could avoid federal sanctions, for instance – they raised awareness of a lack of academic transparency within many states. And while the school choice provisions were under-utilized, they were under-utilized because of a failure on the part of schools and districts to inform parents of their options – not because school choice lacks merit.

Yet, in attempting to overhaul the bill, the Obama team elevates the provisions that made it problematic while discarding those that were among NCLB’s redeeming qualities.

The Obama administration has consistently promised to do “what works” in education. Yet that same administration has embraced education policies antithetical to their mantra. They are bent on eliminating what is perhaps the most effective federal education program ever devised – the D.C. Opportunity Scholarship Program – while at the same time are expanding federal programs, such as Head Start, that have been empirically proven to have no lasting impact on children’s academic achievement. So the considerable talk about flexibility in the ESEA blueprint should be taken with a grain of salt. Early language indicates that, at least for parents, they’re anything but flexible on school choice.

http://blog.heritage.org/2010/03/18/…tion-overhaul/

On 03.18.10 09:30 AM posted by Chuck Donovan

As the beneficiary of 16 years of Catholic education, eight of them under the tutelage of the Sisters of Charity in Cincinnati, I am inclined by habit to nod in swift concurrence whenever the good sisters speak. Not today.

A letter released yesterday by 60 leaders of Catholic women’s religious orders argues that the Senate-passed version of health care reform does not provide for funding of elective abortion and is thus the “REAL [capitalization in original] pro-life” option. The Catholic bishops, the non-sectarian National Right to Life Committee and, this morning, the Council of Major Superiors of Women Religious strongly disagree.

The dispute has emerged with greater force after it became clear last week that any commitment by the Democratic leadership in Congress to “fix” the Senate bill’s defective abortion limitation language was unenforceable – a piecrust promise. Not only would the Senate’s traditionally stronger corps of anti-Hyde amendment votes ensure defeat of any abortion language fix, but 41 Republican senators signed a letter to oppose any policy-making on the reconciliation bill that would ferry the fix to enactment – a pledge that clearly would include the doomed abortion limitation.

As a consequence, the Senate bill’s multiple pathways to subsidize health plans that include elective abortion or to even fund abortion directly will become law once the House passes the Senate bill and sends it to President Obama. The women religious who have advocated this course are part of a small chorus of Catholic voices who argue that the Senate bill seals off taxpayer participation in abortion, and particularly that the community health services funding in the bill is covered by Department of Health and Human Services regulations that bar their use in any facility or program that provides elective abortion.

But the argument is circular. The regulations cited are based on the Hyde amendment itself, which applies to funds appropriated in the annual spending bill for HHS. The Senate health bill directly appropriates $8.5 billion over five years to HHS for community health centers, and if the Hyde amendment is to be construed as applicable to these funds it is clearly voluntary on HHS’s part. The case is strengthened by the fact that the Senate bill, H.R. 3590, explicitly applies an abortion funding exclusion to other new spending included in the Senate bill, for example, new money for school-based clinics.

The Senate bill contains no parallel exclusion for the community health centers. The White House and HHS officials contend that the existing Hyde Amendment regulations will be applied to these funds. House members inclined to disbelieve this pledge have evidence for their position. Within the past 14 months the Obama Administration has: 1) restored foreign assistance funds to family planning groups that provide and promote abortion overseas; 2) championed and achieved legislation for the District of Columbia to spend local government revenue on abortion even though the funds pass through the U.S. Treasury; and 3) rescinded regulations promulgated under the Bush administration to give teeth to statutory conscience rights that had hitherto lacked regulatory implementation. In short, regulatory interpretations and policies can change – and change overnight.

Moreover, fresh litigation from pro-choice groups over this issue is likely, as on many other provisions of the bill. Of the 17 states that currently provide public money for abortion under state insurance plans, 13 do so as a result of court decision.

The contention that the extant HHS regulations regarding the Hyde Amendment apply — when the Senate bill is silent on the matter, the Obama administration clearly favors the opposite outcome, and the issue is a primary stumbling block to passage of a bill strong majorities of Americans oppose on other grounds as well – is conveniently timed but ultimately unpersuasive, the good sisters notwithstanding.

http://blog.heritage.org/2010/03/18/…m-or-nunsense/

On 03.18.10 09:55 AM posted by Nina Owcharenko

On the eve of the House of Representatives push to jam through the misguided and highly unpopular Senate health care bill, , the President continues to try and convince the American people that the health care bill would reduce cost while showing his commitment to creating jobs and improving the economy. The raw facts make it clear that he cannot keep either of these promises. For example:

• The President claims the health care proposals would reduce health care spending. The reality is health care spending would increase. According to the latest Congressional Budget Office report of the Senate bill, health care spending under the Senate bill would increase by $210 billion over the next 10 years. This is similar to the results found by the President’s Chief Actuary which estimated an increase of $222 billion. While CBO predicts spending would decrease in the second decade, history shows spending rarely, if ever, goes down on government health programs. Medicare is hurtling toward a financial crisis, and Medicaid is breaking state budgets.
• The President claims the health care proposals would reduce premiums. The reality is premiums will go up for many under the Senate bill. The Congressional Budget Office and the Joint Committee on Taxation have estimated premiums in the non-group market would be 10 to 13 percent higher in 2016 than they would be with no bill and cost would likely fall higher on young and healthy families. In addition, this is before the government specifies and locks into place new federal benefit mandates that will no doubt further increase premiums for all Americans. There is little or no experience of government officials reversing these trends.
• The President claims the health care proposals would cost under a trillion. But, that figure excludes major health care provisions – like filling the Medicare “donut hole”, fixing Medicare reimbursement to physicians, and creating a new long-term entitlement program – pushing the price tag to over $2 trillion. Only in Washington does spending more money equal saving money.
• The President claims the health care proposals would reduce the deficit. Unlike CBO’s restricted scope of analysis, the independent analysis by the Lewin Group estimates that when taken in its entirety, which means accounting for the expected $200 billion plus boost in Medicare reimbursement for physicians, the proposal would actually add to the deficit, not reduce it.
• The President claims he is committed to improving jobs and the economy. Based on his own policies, the opposite is true. The Senate bill would result in 620,000 fewer job opportunities and would increase the national debt by $755 billion through its lethal combination of mandates, taxes, and government spending. As Heritage analysts have pointed out, “Because investment is what drives productivity and economic growth, less investment–even if only slightly less–leads to lower productivity, slower economic growth, weaker wages and salaries, and lower household wealth.” Even worse, his own proposal to “fix” the bill adds a new tax on investment income that would result in 115,000 lost job opportunities and disposable income is estimated to be $17.3 billion less per year than it otherwise would be.
• The President claims he will “fix” the bill. Although he promised to ensure no federal funding would be used for abortions and eliminate the repugnant special deals, House passage of the Senate bill would lock these into place, and they could only be undone through a highly uncertain reconciliation process to “fix” the bill in the Senate. *Not only is taxpayer funding of abortion not fixed, it is expanded under the Senate bill. Moreover, the ugly special state deals at the expense of the taxpayers still remain.

http://blog.heritage.org/2010/03/18/…s-the-economy/