Author: Heritage

On 02.26.10 09:07 AM posted by Aleksey Gladyshev

It has been a little over one year since the stimulus package was passed through Congress in order to spur private consumption and to decrease high unemployment, and a recent article published in the Wall Street Journal by Harvard economist Robert Barro discusses the impact the stimulus has had on the economy.

The article argues that the government’s method of mass spending to improve economic conditions is an inefficient way to spend taxpayer money, and that the questions about whether the stimulus moderated the recession are complex – more complex than government organizations and committees might want people to think.

In his article, Barro states that:

[Answers about the impact of the stimulus on the recession] require more than merely counting the quantity of goods and services that the government purchased or the number of people that the government hired. We need to ask whether the government’s spending reduced or enhanced private spending and whether public-sector hiring lowered or raised private hiring… [M]y own analysis makes me skeptical about the numbers they’ve reported about GDP increases and saved jobs.

This statement is a direct challenge to White House reports and government reports that simply state the amount of jobs that were created, and that do not report whether jobs created were in the public or private sectors. It is easy to see and understand how jobs can be created in the public sector when money is handed out for these jobs to be created. The real question is this: will these same jobs last when the money runs out, thus creating a permanent impact on local economies, or will the jobs disappear the same time that the money is no longer available to pay workers their salaries, resulting in only a brief, fleeting jolt of stimulus? According to Barro, the answer to this question is the true benchmark of the effectiveness of the stimulus on spurring our economy.

Barro’s analysis also touches on economic output. For a whole-picture view, we must also consider by how much the $862 billion stimulus outlay will raise future GDP. He uses spending multipliers to estimate this impact. Barro says

[Si]nce the multipliers are less than one, the heightened government outlays reduce other parts of GDP such as personal consumer expenditure, private domestic investment and net exports… When one factors in the typical relationship between tax rates and tax revenue, the multiplier is around minus 1.1. Hence, an increase in taxes by $300 billion lowers GDP the next year by about $330 billion” (emphasis added).

His results might help to explain why the White House’s report on the impact of the stimulus was not a true analysis of policy. What the report did was to simply subtract forecasts from the actual data, and attribute the difference to their policies. The truly analytical approach undertaken by Barro produces unpleasant results, and thus the White House opposed taking this approach.

When analyzing effects of the stimulus bill in Barro’s pragmatic manner, it becomes clear that the bill has created stimulus through borrowing at a higher price for the private sector. Barro comes to this conclusion because “viewed over 5 years, the fiscal stimulus package is a way to get an extra $600 billion of public spending at the cost of $900 billion in private expenditure. This is a bad deal.”

As was stated in Fact Sheet #50, Congress is deliberating yet another multi-billion-dollar stimulus bill that features tax breaks for companies that hire new workers. The Heritage Foundation and Barro both agree that this new stimulus is not a good way to spend taxpayer money. To finish on this note, Barro concludes his article by saying “[t]he fiscal stimulus package of 2009 was a mistake. It follows that an additional stimulus package in 2010 would be another mistake.”

Aleksey Gladyshev currently is a member of the Young Leaders Program at the Heritage Foundation. For more information on interning at Heritage, please visit: http://www.heritage.org/about/departments/ylp.cfm

http://blog.heritage.org/2010/02/26/…s-really-have/

On 02.26.10 10:06 AM posted by Conn Carroll

Yesterday at the Blair House health summit, Rep. Paul Ryan (R-WI) directly challenged the White House’s deficit reduction claims. From the transcript:

Look, we agree on the problem here, and the problem is health inflation is driving us off of a fiscal cliff. Mr. President, you said health care reform is budget reform. You’re right. We agree with that. Medicare right now has a $38 trillion unfunded liability. That’s $38 trillion in empty promises to my parents’ generation, our generation, our kids’ generation. Medicaid is growing at 21 percent this year. It’s suffocating state’s budgets. It’s adding trillions in obligations that we have no means to pay for it.

Now, you’re right to frame the debate on cost and health inflation. And in September when you spoke to us in the well of the House, you basically said — and I totally agree with this — “I will not sign a plan that adds one dime to our deficits either now or in the future.”

Since the Congressional Budget Office can’t score your bill because it doesn’t have sufficient detail, but it tracks very similar to the Senate bill, I want to unpack the Senate score a little bit.

And if you take a look at these CBO analysis, analysis from your chief actuary, I think it’s very revealing. This bill does not control costs. This bill does not reduce deficits. Instead this bill adds a new health care entitlement at a time when we have no idea how to pay for the entitlements we already have.

And let me go through why I say that. The Majority Leader said the bill scores as reducing the deficit $131 billion over the next 10 years. First, a little bit about CBO. I work with them every single day. Very good people, great professionals, they do their jobs well. But their job is to score what is placed in front of them. And what has been placed in front of them is a bill that is full of gimmicks and smoke and mirrors.

Now, what do I mean when I say that? Well, first off, the bill has 10 years of tax increases, about half a trillion dollars, with 10 years of Medicare cuts, about half a trillion dollars, to pay for six years of spending. Now, what’s the true 10-year cost of this bill in 10 years? That’s $2.3 trillion.

It does a couple of other things. It takes $52 billion in higher Social Security tax revenues and counts them as offsets, but that’s really reserved for Social Security. So either we’re double-counting them or we don’t intend on paying those Social Security benefits. It takes $72 billion and claims money from the CLASS Act — that’s the long-term care insurance program. It takes the money from premiums that are designed for that benefit and instead counts them as offsets. The Senate Budget Committee chairman said that this is a Ponzi scheme that would make Bernie Madoff proud.

Now, when you take a look at the Medicare cuts, what this bill essentially does is treats Medicare like a piggy bank. It raids a half a trillion dollars out of Medicare not to shore up Medicare’s solvency but to spend on this new government program.

Now, when you take a look at what this does, it is — according to the chief actuary of Medicare, he’s saying as much of 20 percent of Medicare’s providers will either go out of business or will have to stop seeing Medicare beneficiaries. Millions of seniors who are on — who have chosen Medicare Advantage will lose the coverage that they now enjoy. You can’t say that you’re using this money to either extend Medicare solvency and also offset the cost of this new program. That’s double-counting.

And so when you take a look at all of this, when you strip out the double-counting and what I would call these gimmicks, the full 10-year cost of this bill has a $460 billion deficit. The second 10-year cost of this bill has a $1.4 trillion deficit.

And I think probably the most cynical gimmick in this bill is something that we all probably agree on. We don’t think we should cut doctors 21 percent next year. We’ve stopped those cuts from occurring every year for the last seven years. We all call this here in Washington the “doc fix.” Well, the doc fix, according to your numbers cost $371 billion. It was in the first iteration of all these bills. But because it was a big price tag, and it made the score look bad, made it look like a deficit, that provision was taken out, and it’s been going on as stand-alone legislation. But ignoring these costs does not remove them from the backs of taxpayers. Hiding spending does not reduce spending.

And so when you take a look at all of this, it just doesn’t add up. And so let’s just — I’ll finish with the cost-curve. Are we bending the cost curve down or are we bending the cost curve up? Well, if you look at your own chief actuary at Medicare, we’re bending it up. He’s claiming that we’re going up $222 billion — adding more to the unsustainable fiscal situation we have.

And so when you take a look at this, it’s really deeper than the deficits or the budget gimmicks or the actuarial analysis. There really is a difference between us. And we’ve been talking about how much we agree on different issues, but there really is a difference between us. And it’s basically this: We don’t think the government should be in control of all of this. We want people to be in control. And that, at the end of the day, is the big difference.

Now, we’ve offered lots of ideas all last year, all this year, because we agree the status quo is unsustainable. It’s got to get fixed. It’s bankrupting families. It’s bankrupting our government. It’s hurting families with preexisting conditions. We all want to fix this. But we don’t think that this is the answer to the solution. And all of the analysis we get proves that point.

Now, I will just simply say this — and I respectfully disagree with the Vice President about what the American people are or are not saying, or whether we’re qualified to speak on their behalf. So we are all representatives of the American people. We all do town hall meetings. We all talk to our constituents. And I’ve got to tell you, the American people are engaged. And if you think they want a government takeover of health care, I would respectfully submit you’re not listening to them.

So what we simply want to do is start over, work on a clean sheet of paper, move through these issues step by step, and fix them and bring down health care costs and not raise them. And that’s basically the point.

Ryan’s above numbers are from the Senate bill as it is currently before the House. James Capretta has done his own analysis of the President’s new plan released Monday and found a $2.5 trillion price tag:

The President argues that expeditious enactment of his plan is necessary to provide better services to the uninsured, but none of the key provisions to expand coverage would go into effect until 2014. Meanwhile, many of the spending reductions, such as the cut in Medicare Advantage payment rates, would kick in much earlier, as would the tax increases. Consequently, the President’s plan has 10 years worth of spending and revenue “offsets” paying for only seven years worth of spending.

Looking at these bills over a true 10-year window of full implementation reveals much higher costs. The Senate bill’s provisions–even excluding the “doc fix”–would total $2.3 trillion over the period 2014-2023, with the coverage provisions fully in place.[1]Adding the “doc fix,” the Obama team’s admitted $75 billion add-on, at least $90 billion in non-coverage spending, and $72 billion for the CLASS Act, the true 10-year cost of the President’s plan is almost certainly over $2.5 trillion.

On 02.26.10 10:48 AM posted by Nick Loris

Green jobs have been the foundation to any of President Obama’s jobs speeches. “Building a robust clean energy sector is how we will create the jobs of the future,” he said in a speech last month. We’ve long argued that subsidizing jobs comes at the expense of others and will result in net job losses. Sunil Sharan, director of the Smart Grid Initiative at GE from 2008 to 2009, details in the Washington Post how smart metering will create jobs but destroy many more in the process:

It typically takes a team of two certified electricians half an hour to replace the old, spinning meter. In one day, two people can install about 15 new meters, or about 5,000 in a year. Were a million smart meters to be installed in a year, 400 installation jobs would be created. It follows that the planned U.S. deployment of 20 million smart meters over five years, or 4 million per year, should create 1,600 installation jobs. Unless more meters are added to the annual deployment schedule, this workforce of 1,600 should cover installation needs for the next five years.

Although a surge of new digital meters will be produced, the manufacturing process is highly automated. And with much of it accomplished overseas, net creation in domestic manufacturing jobs is expected to be only in the hundreds. In R&D and IT services, high-paying white-collar jobs are on the horizon, but as with manufacturing, the number of jobs created is forecast to be in the hundreds or low thousands. Now let’s consider job losses. It takes one worker today roughly 15 minutes to read a single meter. So in a day, a meter reader can scan about 30 meters, or about 700 meters a month. Meters are typically read once a month, making it the base period to calculate meter-reading jobs. Reading a million meters every month engages about 1,400 personnel. In five years, 20 million manually read meters are expected to disappear, taking with them some 28,000 meter-reading jobs.”

Job destruction through efficiency improvements isn’t a bad thing, but it is when the government forces it upon us. If new smart metering technologies are economically sensible, the private sector will introduce these technologies to the market. Just as the government shouldn’t attempt to create jobs, it shouldn’t protect jobs from being destroyed, either. Sharan writes, “[I]nstead of creating jobs, smart metering will probably result in net job destruction. This should not be surprising because the main method of making the electrical grid “smart” is by automating its functions. Automation by definition obviates the need for people.” We replaced ditch diggers with mechanized agriculture equipment with the end result being a net gain in productivity and wealth. The process of creative destruction allocates capital and labor to better use, increases gains from productivity and makes us all better off. Using stimulus money for smart metering is unnecessary if it such a good idea.

The other way the government can destroy jobs through a clean energy initiative is to mandate and subsidize labor intensive, inefficient, and expensive power sources. If it takes more labor and capital to produce renewable energy, there is a net drain on the economy. Government spending will create some jobs to build windmills and solar panels and work at biomass plants but this diverts labor, capital and materials from the private sector that could be used more efficiently to create even more jobs

An Institute for Energy Research-commissioned study from King Juan Carlos University in Madrid by Gabriel Calzada found that, for every green job created, 2.2 jobs in other sectors have been destroyed. Furthermore, Spain’s government spent $758,471 to create each green job and used $36 billion in taxpayer money to invest in wind, solar, and mini-hydro from 2000-2008. The country’s unemployment rate is currently at 19.4%.

Losing jobs through increases in efficiency and productivity is a sign of progress. Losing jobs through government mandates and subsidies is a sign of Congress.

http://blog.heritage.org/2010/02/26/…-inefficiency/

On 02.26.10 12:01 PM posted by Bob Moffit

In the wake of the White House’s health care summit, reconciliation is still seen as the likely route that congressional leaders and their liberal allies will take to jam Obamacare through Congress. Congressional Democrats and President Barack Obama already are using the summit as a public relations vehicle to help fast-track the Senate health care bill through a parliamentary process used primarily for budgetary issues.

But beware Plan B — the more “modest” plan. There’s a surer, well-worn path that the Clinton Administration took after the collapse of Hillarycare in 1994: A careful, well-coordinated, step-by-step march to the Left on federal health care policy.

The Republican congressional victory in 1994, even though it reflected public revulsion at the Clinton Administration’s proposed takeover of the private health care system, did not change the fundamental direction of federal health policy. It only changed the degree and velocity of liberal policy success. The Clinton team started taking baby steps to expand federal control over health care financing and delivery, lulling often clueless congressional Republicans into cooperation with long-term consequences for doctors and patients. In some cases, the GOP majority enacted provisions of the Clinton health bill word for word.

In fact, much of today’s health care landscape reflects the enormous policy success the Clinton Administration achieved during the 1990s in the wake of the legislative failure of Hillarycare:

• Unprecedented statutory interference with the doctor-patient relationship — restricting private contracting — in Medicare in 1997
• The frustrating regulatory burden imposed on doctors through the* Health Insurance Portability and Accountability Act in 1996
• The creation of the State Children’s Health Insurance Program (SCHIP), which has now become a roaring entitlement, costing billions more in taxes and crowding out private health coverage as Congress pushes eligibility up the income scale

Through all of this, Republicans in Congress dismissed or ignored the warnings of conservative health policy analysts and economists, and instead cooperated with President Clinton or played an ineffective defense.

Congressional conservatives should ponder liberals’ past incremental health care successes. It may help them prepare for what may lay ahead. Rest assured that Team Obama is keeping options open.

According to the Wall Street Journal, while no final decisions have been made, “the smaller plan’s outlines are in place in case the larger plan fails.” Those smaller bills could include:

• Mandating that insurance companies allow “children” up to 26 years old to be on their parents’ health plans.
• Expanding Medicaid and SCHIP beyond the massive expansions that were enacted in 2009. Medicaid expansion has been a favored coverage form by liberal Democrats.

As Heritage’s Stuart Butler recently noted in the New England Journal of Medicine, small changes to the nation’s $2.5 trillion health-care system can have dramatic results:

History shows that changing even seemingly minor features of legislation or administrative decision making with regard to health care can have major — and sometimes unintended — consequences for the system’s evolution.

Conservatives in Congress have ample policy proposals to expand patient choice and improve market competition. There is no reason why they should carefully develop and implement a grand legislative strategy of incremental conservative reform.

Co-authored by Marguerite Higgins.

http://blog.heritage.org/2010/02/26/…r-obamacare-2/

On 02.26.10 12:45 PM posted by Mike Brownfield

In yesterday’s White House health care summit, Americans heard some talk of “reconciliation” being used to pass health care through Congress, but the true purpose and history of the procedure is likely something of a mystery to most folks, except for a few inside-the-beltway wonks.

In this video, Heritage’s Director of Senate Relations, Brian Darling, explains that reconciliation – otherwise known as “the nuclear option” – is a procedural end-run around the will of the American people.

First developed in the 1970s, reconciliation was intended to be a budgetary tool implemented in the Senate to get around the filibuster, a tactic used to prevent the vote of a proposal by extending debate until it dies. Absent reconciliation, a 60-vote supermajority is needed to stop a filibuster and advance a bill.

Darling says that the use of reconciliation to pass legislation as major as health care reform is unprecedented and offensive for many reasons, particularly because “numerous polls indicate that there’s overwhelming opposition to this ObamaCare proposal with the average American.”

Even Barack Obama decried the use of reconciliation as a procedural tactic. As Darling notes, in 2005, then-Senator Obama said the use of reconciliation would “change the character of the Senate forever” and the result would be that “you essentially have still two chambers – the House and the Senate – but you have simply majoritarian, absolute power on either side, and that’s just not what the Founders intended.”

And Darling says it’s “an unprecedented and remarkable abuse of power.”

Watch his video to learn more.

http://blog.heritage.org/2010/02/26/…of-the-people/

On 02.26.10 01:00 PM posted by Morgan Roach

While candidate Obama spoke out fiercely against genocide in Darfur, President Obama extended a hand to the architects of the killing in Khartoum.* The Administration’s policy review on Sudan, completed late last year, promised a new strategy of engagement with Sudan, spearheaded by Sudanese envoy, General Scott Gration.

For the moment, that policy, Gration claims, is on the verge of yielding positive results. “We have had agreements in the past; most have failed. I think this is different.” Gration’s optimism is powered by the signing by President Omar al-Bashir of a ceasefire deal in Doha with the Justice and Equality Movement (JEM), the largest rebel group in Darfur.

The Doha pact lays out a timetable for negotiations, promises to protect and defend Darfur’s residents from violence and intimidation, and commits Khartoum to establishing fair representation in democratic institutions.* Chad, Sudan’s western neighbor, has also joined in the peace process, lowering tensions between rival neighbors.

While the ceasefire may be a positive sign, Sudan has a long way to go until it reaches stability.* Other Darfur rebel groups have denounced the North’s deal with JEM.* *Additional points of controversy include a proposed referendum in 2011 to determine Darfur’s potential independence, resolution of war crime charges laid against al-Bashir by the International Criminal Court, and the upcoming April presidential elections to be held in most of Sudan, including the non-Arab south.

The Obama Administration is likely to claim a rare foreign policy victory in Darfur. But the U.S. should not get ahead of itself. With an estimated 300,000 people dead and 2.7 million displaced, any movement towards a permanent resolution is welcome. But the negotiations are only one step towards reducing violence in Darfur and must not be used as an excuse to prematurely lift sanctions.* Sudan’s process of recovery has a long way to go and it must be held accountable.

http://blog.heritage.org/2010/02/26/…mism-in-sudan/

On 02.26.10 01:55 PM posted by Conn Carroll

One of the best kept dirty little secrets of Obamacare is that over half of the health insurance expansion obtained by Americans through the bill is accomplished by putting them on the welfare program Medicaid. Rep. Pete Roskam (R-IL) not only made this point yesterday, but also highlighted a great quote from Gov. Brian Schweitzer (D-MT) on why Medicaid is “one of least effective programs in terms of health care in the history of the country.” From the Blair House health summit transcript:

And I think one of the problems, to get to this coverage issue, is that the premise of this bill is that coverage is expanded through Medicaid, welfare. Speaker Pelosi a couple of minutes ago — or a couple of hours ago, actually said that health care reform is entitlement reform.

SPEAKER PELOSI: Yes.

REPRESENTATIVE ROSKAM: Yes. I would put a brighter light on that and say it’s entitlement expansion. Think about what we’re doing. The CBO when they wrote to Harry Reid — wrote to Senator Reid a couple of months ago, they said, look, there’s about 15 million people that are going to be put on Medicaid. And Medicaid is a house of cards. Medicaid is not something that is serving the public very well.

The state controller in Illinois — and we all come from states with real trauma — the state controller in Illinois recently wrote that as bond rating agencies continue to downgrade Illinois rankings to the lowest in the nation, the state can’t afford further jeopardizing.

This bill, section 2001 of the Senate bill, takes away all of the flexibility as it relates to changes in Medicaid. That is making our states I think ultimately hidebound in how they approach these things. This is something that in my view isn’t sustainable.

Governor Brian Schweitzer of Montana said — let me give you a quick quote — “One of the least effective programs in terms of health care in the history of the country is called Medicaid. About 20 percent of America is on a Medicaid program and they would like to shift” — “they” meaning Washington — “would like to shift it and grow it to somewhere around 25 or 30 percent.”

Now, Medicaid is a system that isn’t working. Almost everyone agrees. But what Congress intends to do is to increase the number of people on Medicaid so that they can do it on the cheap. It isn’t working for anybody.

Look, the foundation of the expansion is Medicaid. And in my view, and I think the view of folks in my district and I think many, many people across America, it is a flawed foundation. And we can do much, much better. A Republican proposal that’s out there would reduce the number of uninsured by 3 million people.

So, look, you heard it today in many, many forms — this — you remember the old — in closing, you remember the old game you used to play as a kid, Etch A Sketch, and you’d start out with the Etch A Sketch, that little thing where you try and draw something and you dial the dials and over a period of time the more you dialed the more crazy it looked and then finally you’d say, oh, let’s just go like that and do the Etch A Sketch.

I’ll tell you what, a year’s worth of work and this is what has come up with? The American public, as far as the ones that I have heard from, are vehemently opposed to this. And they say, look, take the Etch A Sketch, go like this, let’s start over, let’s do incremental things where there’s common ground. I yield back.

http://blog.heritage.org/2010/02/26/…lement-reform/

On 02.26.10 06:29 AM posted by Conn Carroll

The day before yesterday’s White House health care summit, Sen. Kent Conrad (D-ND) told reporters: “The only way this works is for the House to pass the Senate bill and then, depending on what the package is, the reconciliation provision that moves first through the House and then comes here.” When Conrad was reminded that Speaker Nancy Pelosi (D-CA) has repeatedly insisted that the House will not pass the Senate bill until the Senate passes a second bill that fixes the first, Conrad replied: <ahref="http://tpmdc.talkingpointsmemo.com/2010/02/conrad-health-care-dead-unless-house-passes-senate-bill-first.php">“Fine, then it’s dead.”

This was the dynamic that President Barack Obama was trying to alter with his eventually-seven-hour meeting. And judging by <ahref="http://abcnews.go.com/WN/HealthCare/obama-mccain-spar-health-care-discussions/story?id=9937080">pretty <ahref="http://content.usatoday.com/communities/theoval/post/2010/02/after-the-summit-still-a-stalemate/1">much <ahref="http://www.cbsnews.com/blogs/2010/02/25/politics/politicalhotsheet/entry6243996.shtml">every <ahref="http://hotair.com/archives/2010/02/25/david-gergen-on-the-summit-republicans-had-their-best-day-in-years/">major <ahref="http://blog.newsweek.com/blogs/thegaggle/archive/2010/02/25/why-this-health-care-summit-won-t-be-a-game-changer.aspx">news <ahref="http://www.time.com/time/politics/article/0,8599,1968248,00.html">outlet, he completely failed. Rep. Jason Altmire (D-PA), who is one of the 39 House Democrats that the White House needs to switch from a “no” the first time around to a “yes” this time, told <ahref="http://www.nytimes.com/2010/02/26/health/policy/26assess.html">The New York Times: “I don’t see very many at all who voted no who are going to switch their votes unless there are substantial changes in the bill.”<spanid="more-27475"></span>

And that reality is already spreading throughout Capitol Hill. <ahref="http://www.politico.com/news/stories/0210/33571.html">Politico reports that while Democrats were hoping to pass Obamacare by Easter, “there were signs Thursday night that the schedule was slipping. One Democratic lawmaker involved in the negotiations, who asked not to be identified to speak candidly of the process, said the party would not, in fact, start down the path of reconciliation next week.”

That is some rare great news for the American people. As Rep. Paul Ryan (R-WI) ably*<ahref="http://www.huffingtonpost.com/2010/02/25/health-care-summit-transc_n_477323.html">explained yesterday, Americans do not want Washington dictating their health care decisions to them, and that is exactly what Obamacare would do:

The difference is this: We don’t think all the answers lie in Washington regulating all of this. … if the National Restaurant Association or the National Federation of Independent Business, on behalf of their members, wants to set up an association health plan, we think they’ll probably do a good job on behalf of their members. Let them decide to do that instead of restricting insurance competition by federalizing the regulation of insurance, and by mandating exactly how it will work, you make it more expensive and you reduce the competition among insurers for people’s business. We want to decentralize the system, give more power to small businesses, more power to individuals, and make insurers compete more. But if you federalize it and standardize it and mandate it, you do not achieve that. And that’s the big difference we have.

President Obama bristled at this analysis,*<ahref="http://www.huffingtonpost.com/2010/02/25/health-care-summit-transc_n_477323.html">responding: “Can I just say that, at this point, any time that a question is phrased as, “Does Washington know better,” I think we’re kind of tipping the scales a little bit there since we all know that everybody is angry at Washington right now.”

The President seems to understand that the American people do not want bureaucrats in Washington controlling their health care decisions, but then he seems completely oblivious to the fact that <ahref="http://blog.heritage.org/2010/02/10/obama-knows-obamacare-increases-government-control-right/">increasing bureaucratic control at the expense of every American’s ability to make their own choices is exactly what his plan does.

The American people know this. That is why support for the President’s health care plan has been steadily declining. That is why the most recent <ahref="http://www.cbsnews.com/blogs/2010/02/24/politics/politicalhotsheet/entry6239942.shtml">CBS News/New York Times Poll shows 53% of Americans say the United States cannot afford to fix health care at this time. It is why 52% of Americans tell <ahref="http://www.gallup.com/poll/126191/Americans-Tilt-Against-Democrats-Plans-Summit-Fails.aspx">Gallup they do not want to see Obamacare pass with only 50 Senators in support (Vice President Joe Biden casting the 51st vote). That is why 59% of registered voters tell <ahref="http://www.foxnews.com/projects/pdf/022510_health_care_web.pdf">Fox News they want the President to start over.

And he should. If the President truly wants to enact historic bipartisan and lasting health care reform, he needs to admit this version of Obamacare is dead. In 2011, when there is likely to be a more centrist Congress in place, then Obama should come back and start again.

Quick Hits:

• Stocks dipped yesterday after government data showed that <ahref="http://www.washingtonpost.com/wp-dyn/content/article/2010/02/25/AR2010022504706.html">jobless claims reached their highest levels since November, renewing concerns about the weak state of the labor market.
• North Dakota, whose unemployment rate is only 4.3%, compared to the nationwide 9.7%, is<ahref="http://online.wsj.com/article/SB10001424052748703795004575087623756596514.html?m od=WSJ_hpp_MIDDLETopStories"> reaping huge economic gains from developing its oil reserves in the Bakken Shale Deposit.
• The Obama administration is planning to use the federal government’s enormous buying power to institute <ahref="http://www.nytimes.com/2010/02/26/business/26procure.html?ref=todayspaper">wage controls.
• The European Union is telling Greece they <ahref=" http://online.wsj.com/article/SB10001424052748704625004575088820766428804.html?m od=WSJ_hpp_LEFTWhatsNewsCollection">most double their deficit reductions efforts if they want more help.
• Secretary of State Hillary Clinton <ahref="http://www.bloomberg.com/apps/news?pid=20601070&sid=abAB.zSg4x.w">told Congress yesterday, “We have to address this deficit and the debt of the U.S. as a matter of national security, not only as a matter of economics.”

http://blog.heritage.org/2010/02/26/…-plan-is-dead/

On 02.26.10 07:00 AM posted by Ernest Istook

<ahref="http://blog.heritage.org/wp-content/uploads/hcrsummit100225-.jpg"></p>President Obama used his health care summit to give his side every advantage possible. Whenever opponents spoke, he got to respond. By appointing himself the moderator, Obama gave himself the first word, the last word, and the most words.

Overall, Obama gave Democrats over twice as much speaking time as Republicans. The 17 GOP’ers attending received a collective 110 minutes. By himself, Obama hogged 119 minutes of microphone time and gave his 21 fellow Democrats an <ahref="http://www.washingtontimes.com/news/2010/feb/26/obama-listens-at-health-summit-but-mostly-hears-fr/">additional 114 minutes. When called to account for this, Obama proclaimed it fair because, <ahref="http://www.politico.com/singletitlevideo.html?bcpid=19407224001&bctid=6862 7667001">“I’m the President.”

Obama exercised free rein to cut off opponents, speak sharply, and pass judgment on whether others’ arguments were legitimate. He wasn’t just a player; he also was the referee.<spanid="more-27484"></span>

Despite giving his side all the advantages, most commentators agree that Republicans held their own or even carried the day. CNN’s David Gergen proclaimed that Republicans <ahref="http://www.realclearpolitics.com/video/2010/02/25/david_gergen_gop_had_their_best_day_in_years.html" >“had their best day in years.”

A key moment was when Obama—arguing passionately with Sen. Lamar Alexander (R-TN)–<ahref="http://www.politico.com/singletitlevideo.html?bcpid=19407224001&bclid=0&bc tid=68624700001">claimed his plan would reduce the cost of private health insurance, and then the President was forced publicly to back down from that claim.

As media such as the <ahref="http://dailycaller.com/2010/02/25/obama-smacks-down-alexander-thats-not-factually-accurate-video/">Daily Caller reported:

Later in the session, after an aide handed the president a note, Obama admitted he had been wrong: ‘What the Congressional Budget Office is saying is, is that if I now have the opportunity to actually buy a decent package inside the exchange, that costs me about 10% to 13% more but is actually real insurance, then there are going to be a bunch of people who take advantage of that. So yes, I’m paying 10% to 13% more because instead of buying an apple, I’m getting an orange.’

It was a crucial point because, for many Americans, the key issue is not whether government provides health care for the uninsured, but whether it lowers costs for the already-insured. Whether the number of uninsured is estimated at 30 million or 46 million (and both <ahref="http://blog.heritage.org/2009/08/31/the-real-story-on-the-uninsured/">numbers are deceptive, it still represents only 10-15% of the population.

Among* the 85-90% of Americans who have insurance, the main concern is affordability, not availability. Obama’s most important health reform promise to them was his oft-repeated pledge to <ahref="http://blogs.wsj.com/health/2008/07/23/parsing-obamas-promise-to-lower-insurance-premiums-by-2500/tab/article/">lower their health insurance costs by $2,500 per year. Being forced to admit on live television that his plan fails to do that—and instead increases premiums—was the low point of the summit for the President.

As Sen. Jon Kyl (R-AZ) noted, “It’s just another example of why because the bill has to raise so much money, it ends up hurting the very people that we want to help.”

Rep. Marsha Blackburn (R-TN) offered Obama a clear chance to embrace a premium-reducing solution. For example, she said, those Californians who face up to 39 percent increases in premiums should be given “the ability to go to Oregon, where they could buy a policy for 25 percent less, or individuals in New Jersey who could go to Pennsylvania and buy a policy and lower their cost 26 percent, or go to Wisconsin and buy one and lower their cost 74 percent.”

The need for a plan that lowers premiums rather than increases them is a major reason why the best course for Congress would be to start over. Lawmakers should take a different approach, rather than try to ram through Obamacare and impose it on a country that does not want it.

http://blog.heritage.org/2010/02/26/…nt-help-obama/

On 02.25.10 11:17 AM posted by Nick Loris

<ahref="http://blog.heritage.org/wp-content/uploads/oil-drill100219.jpg"></p>As recent as last summer an article in The Independent, citing assessment from the lead economist at the International Energy Agency (IEA) <ahref="http://www.independent.co.uk/news/science/warning-oil-supplies-are-running-out-fast-1766585.html">warned that “The world is heading for a catastrophic energy crunch that could cripple a global economic recovery because most of the major oil fields in the world have passed their peak production.” The<ahref="http://www.energyandcapital.com/articles/iea-oil-report/782"> 2008 report urged that we are at a crossroads and we need to transition rapidly to a low carbon fuel economy. It’s certainly not a new argument; it was a consensus in the 1970s that we were running out of oil too. Since oil is a finite resource, as a matter of physics, we will eventually run out of oil <ahref="http://www.pittsburghlive.com/x/pittsburghtrib/opinion/columnists/boudreaux/s_668583.html">says George Mason professor Don Boudreaux. But,

Conventional wisdom, however, often is handicapped by a poor grasp of economics. And among the important lessons of economics is that the supply of resources is less a matter of physics than of, well, economics. First, no mineral, no plant, no geographical location, no anything becomes a resource unless and until human creativity and ingenuity figure out how to put that thing to use in a manner that satisfies human wants. Petroleum was no resource to our ancestors who had yet to grasp the fact that it can be refined and burned in ways that improve the quality of life. In fact, I suspect that whenever that gooey, noxious black stuff appeared in freshwater creeks in pre-Columbian Pennsylvania, natives of that region regarded it as a nuisance.

<spanid="more-27414"></span>

So economically, the Earth’s supply of nonrenewable energy resources was, back then, much smaller than it is today. Human creativity and effort turned a nuisance into a resource. Human creativity and effort also are at work finding not only substitutes for oil, but also new supplies of oil. Each success on this front increases the supply of oil. The reason is that oil deposits that remain unknown are economically nonexistent. The same is true of oil deposits that are known to exist but are currently too costly to tap. Oil in the Earth’s crust that is out of reach with existing technology is no more of a resource today than is oil on Pluto. But if and when human creativity discovers cost-effective techniques for extracting that oil, it then — and only then — becomes a resource. In effect, more of the resource “oil” is created.”

It was new technologies that led us to the discovery of new oil fields beneath the ground. Three decades ago, <ahref="http://www.eia.doe.gov/pub/international/iealf/crudeoilreserves.xls">proven oil reserves were 645 billion barrels; five years ago it was 1.28 trillion and <ahref="http://www.eia.doe.gov/pub/international/iealf/crudeoilreserves.xls">in 2009 it was 1.34 trillion. New, innovative technologies, as well government policies put in place to support them, will help recover that oil and discover more. Unconventional sources could soon become conventional. And if they’re not economically viable, then they’ll stay in the ground and we’ll transition to different sources of energy – perhaps sources of energy we haven’t heard or thought of yet.

Competition bodes well for the American consumers, but the notion that we need the government to force a transition away from oil overnight because we’re sucking the well dry is an absurd one. Congress should implement policies do not discriminate or bias investments in order to allow the most efficient and promising innovations to flourish. The latest, that has promise but also has a lot of help from the government is the Bloom Box, “a silent, refrigerator-sized, fuel-cell power generator that will one day provide energy to your house from your own backyard.”

Generating electricity at eight to ten cents a kilowatt hour (under the national average of eleven cents), the Bloom Box received a significant amount of press in conventional papers and the blogosphere. <ahref="http://www.guardian.co.uk/environment/2010/feb/25/bloom-box-innovation">Hailed as a major breakthrough (more so than the major breakthroughs you forget about a week later), how does the Bloom Box <ahref="http://blogs.forbes.com/energysource/2010/02/24/the-economics-of-bloom-energys-breakthrough-fuel-cell/">fare without generous state and federal subsidies?

“The unsubsidized cost would be 13-14 cents/kWh, with about 9 cents/kWh from the capital costs of the Bloom box and 5 cents/kWh from natural gas costs, according to Luz Research. If natural gas prices rise or fall 50% (gas prices are often volatile), overall price would fluctuate from 11.5-12.5 cents/kWh to 20.5-21.5 cents/kWh. That unsubsidized price is still too high to compete in most markets with retail electricity without subsidy. However, this is the first generation, and if Bloom can bring prices down (and/or natural gas prices are stable/low), there could be a significant market for this fuel cell.”

“Could” is the operative word here. And if there is a market for the Bloom Box, or any other ground-breaking supplier of energy, the market will let it be known. But if it continues to rely on government handouts, like other renewable energy sources, it will be frozen in a perpetual state of mediocrity with no incentive to reduce costs.

http://blog.heritage.org/2010/02/25/running-out-of-oil/

On 02.25.10 11:31 AM posted by Lisa Curtis

<ahref="http://blog.heritage.org/wp-content/uploads/pakistanarmy.jpg"></p>After months of mounting frustration with Pakistan over its unwillingness to crack down on Afghan Taliban leaders finding sanctuary on its soil, Pakistan appears to be coming through with cooperation that could help turn the tide in the war in Afghanistan.

Following <ahref="http://www.heritage.org/Research/AsiaandthePacific/wm2807.cfm">last week’s revelation that the number two Taliban leader, Mullah Baradar, was captured in Pakistan earlier this month, fresh reports indicate that at least three other senior Taliban leaders have also recently been arrested in Pakistan. These include Mullah Abdul Kabir, a deputy prime minister in the former Taliban regime and a member of the Quetta Shura (Taliban leadership Council) as well as two “shadow governors” of provinces in Afghanistan. <spanid="more-27413"></span>

Afghan Interior Minister Hanif Atmar has said he hoped these arrests represent the beginning of a “large-scale” Pakistani operation against the Taliban. Afghan officials have also claimed that Pakistan has agreed to turn over Baradar to Afghan authorities, although Pakistani officials say he will be tried in Pakistan first. If Pakistan does indeed hand over Baradar to the Afghans, that would be a promising sign of new Pakistan-Afghanistan cooperation at a critical time in the Afghanistan war.

U.S. and NATO forces launched a key offensive two weeks ago to oust the Taliban from one of their strongholds in the southern Helmand province. After the area is secured, the U.S. will help the Afghan government establish its writ over the area through an infusion of development aid and assistance with institutional capacity building. The Afghan Taliban leadership based in Pakistan coordinates the insurgency across the border in southern Afghanistan and thus convincing Pakistan to disrupt their sanctuary is critical to coalition forces gaining the upper hand against the insurgents.

It is unclear why Pakistan is stepping up to the plate now on cracking down on the Afghan Taliban. Most observers believe Islamabad may be seeking to ensure it has a role in determining any potential settlement of the conflict. Others say it is partly a response to building U.S. pressure. President Obama appealed directly to the Pakistanis to crack down on the Afghan Taliban through a letter hand-delivered by National Security Advisor Gen. Jones to Pakistani President Zardari last fall. The letter coincided with revelations from the arrest of David C. Headley, a Pakistani-American who worked with the Lashkar-e-Tayyiba in Pakistan to scout sites for the November 2008 attacks in Mumbai. Headley was arrested by U.S. authorities in early October and a former Pakistani Army major was named in the U.S. affidavit as serving as Headley’s handler for the Mumbai terror attacks. Since then, the U.S. has repeatedly made the case to Pakistan that facilitating some terrorist groups while fighting others is counterproductive. It is possible this message is finally beginning to sink in.

But given Pakistan’s long track record of support to militant groups fighting in Afghanistan and India, it is too early to determine whether the most recent arrests signal a permanent reversal of its past policies, or merely a tactical shift to demonstrate its leverage in the region.

http://blog.heritage.org/2010/02/25/…n-afghanistan/

On 02.25.10 12:00 PM posted by Mackenzie Eaglen

<ahref="http://blog.heritage.org/wp-content/uploads/KC-135a.jpg"></p>This week, the U.S. Air Force presented its revised request for proposals for the new KC-X tanker aircraft. *Industry now has 60 days to submit bids, and the contract for the new tankers should be awarded sometime this summer.

A new tanker is long overdue after a much-delayed and mismanaged process.

An <atitle="http://www.aolnews.com/nation/article/air-forces-ancient-tankers-limp-along-as-bidding-for-new-35-billion-fleet-looms/19364619" href="http://www.aolnews.com/nation/article/air-forces-ancient-tankers-limp-along-as-bidding-for-new-35-billion-fleet-looms/19364619">AOL News story from earlier this week paints an alarming picture of the decrepit tanker fleet. *The KC-135 Stratotanker planes the Air Force flies today were built during the Eisenhower administration, and many are more than 50 years old. *AOL News describes how they often need to be grounded with leaks or broken parts, sometimes for weeks on end as Air Force engineers cannibalize old tankers in the “Boneyard” near Davis-Monthan Base in Arizona for spare parts or recreate them from scratch.<spanid="more-27404"></span>

Under President Obama’s current budget plans, the Air Force will have to fly some KC-135 tankers until they are over 80 years old. *Dr. Loren Thompson of the Lexington Institute warns that nobody knows whether this is feasible or safe, and AOL News cautions that “structural fatigue and corrosion pose the greatest threat.” *The risk of structural damage is rising as demanding wartime missions cause additional wear and tear.

The flying clunkers are also becoming a drain on resources. *Half-century old tankers burn an exorbitant amount of fuel and cost a great deal to maintain and repair.

Why does this all matter?* Tankers are indispensable to military success on the battlefield and maintaining operations around the world.

They provide aerial refueling for military aircraft and also serve as cargo carriers and medical transport aircraft when needed, flying wounded troops from Afghanistan to military hospitals in Germany, for example. “Without tankers, fighters aren’t going anywhere. If you lose the air bridge, you lose your ability to keep airplanes up,” an Air Force general told AOL News. “They are absolutely critical to every combat operation in the ability to project power.”

It is not only essential the Pentagon develop new tankers quickly, but also that its leaders do so in a way that encourages innovation and reaps the benefits of competition. <atitle="http://www.dodbuzz.com/2010/02/22/gates-very-hopeful-of-two-tanker-bids/" href="http://www.dodbuzz.com/2010/02/22/gates-very-hopeful-of-two-tanker-bids/">Defense Secretary Robert Gates said on Monday that he was “very hopeful” the RFP would include bids from two competitors—both Boeing and Northrop Grumman. *But this is not assured.

As Heritage has repeatedly warned, <atitle="http://www.heritage.org/Research/NationalSecurity/wm2478.cfm" href="http://www.heritage.org/Research/NationalSecurity/wm2478.cfm">our bomber pilots and carrier aircraft pilots may soon find themselves in a similar predicament, unless Congress works to increase the emphasis on recapitalization as the defense budget bills move this spring. *The bottom line remains that the military needs a new tanker yesterday and no one should tolerate any further delays in fielding this critical platform as quickly as possible.

http://blog.heritage.org/2010/02/25/…ace-of-danger/

On 02.25.10 12:43 PM posted by Curtis Dubay

President Obama keeps rolling out the tax hikes. In his budget released earlier this month, excluding the tax hikes he assumed to pay for health care, he called for <ahref="http://www.heritage.org/Research/Taxes/wm2790.cfm">$1.3 trillion in higher taxes over the next decade. Now in his recently released health reform plan, he calls for even more tax increases. Today, the Joint Committee on Taxation (JCT) released their <ahref="http://www.jct.gov/publications.html?func=startdown&id=3641">analysis of the tax increases in the President’s plan. According to the JCT, the plan will raise taxes by another $414 billion between 2010 and 2019. The taxes the President Obama proposed hiking are as follows (the year the tax kicks in and the amount the tax will raise between 2010 and 2019 are in parentheses):

• Require information reporting on payments to corporations (2011 – $17.1 billion)
• Exclusion of unprocessed fuels from the cellulosic biofuel produce credit (immediately upon passage – $23.9 billion)
• Codify economic substance doctrine and impose penalties for underpayments (immediately upon passage – $4.9 billion)
• Increase Hospital Insurance portion of the payroll tax and apply it to investment income for families earning more than $250,000 a year ($200,000 for single filers) (2012 – $183.6)
• *Excise tax on “Cadillac” insurance plans valued at more than $10,200 for individuals and $27,500 for families (2018 – $32.7 billion)*
• Impose annual fee on manufacturers and importers of branded drugs (2011 – $33.4 billion)*
• Impose excise tax on manufacturers and importers of medical devices (2012 – $20 billion)*
• Impose annual fee on health insurance companies (2014 – $59.5 billion)*
• Excise tax on indoor tanning services (2010 – $2.7 billion)*
• Limit Health Savings Accounts (HSA) (2011 – $5.0 billion)*
• Increase taxes on unqualified distributions from HSAs (2011 – $1.4 billion)*
• Limit Flexible Spending Accounts (FSA) (2014 – $11.4 billion)*
• Eliminate deduction of expenses allocable to Medicare Part D subsidy (2012 – $2.6 billion)*
• Limit deductions for medical expenses (2013 – $15.2 billion)*
• Higher taxes on compensation above $500,000 paid to officers, employees, directors and service providers of covered health insurance providers (2013 – $0.6 billion)
• Higher taxes on certain health organizations (2010 – $0.4 billion)*

<spanid="more-27446"></span>The taxes with the (*) will directly apply, or will be passed on to, families earning less than $250,000 a year. This is a contradiction of President Obama’s campaign pledge not to raise taxes on these families.

Almost all of these taxes came out of the separate bills passed by the House of Representatives and the Senate. The only new tax the President proposed is applying the Hospital Insurance (HI) portion of the payroll tax to investment income for the first time. This would be a <ahref="http://blog.heritage.org/2010/02/23/obama%e2%80%99s-health-plan-has-dangerous-new-taxes/">dangerous break with past precedent and would <ahref="http://blog.heritage.org/2010/02/24/obama%e2%80%99s-health-plan-taxes-taxes-everywhere/">slow economic growth at the worst time.

The President’s plan assumes raising $24 billion by excluding paper companies from taking the celluslosic biofuel producer credit. This credit was only supposed to apply to producers of biofuels, but a technicality in the law allowed paper companies to qualify. The Senate already laid claim to this exclusion in their recently passed “jobs” bill. It that becomes law, policy and germaneness aside, the President will have to conjure up some more new taxes or spending cuts to pay for his new plan.

The hefty tax increases are a heavy blow to a struggling economy, but they do not come close to covering the full cost of the President’s plan which will cost <ahref="http://www.heritage.org/Research/HealthCare/wm2816.cfm">more than $1 trillion over ten years. The President has repeatedly insisted that his plan will not increase the deficit. If that is so, he needs to explain how he will fill the $600 billion shortfall. The gap could mean even more tax increases are on the way. Unfortunately, such calls are now commonplace for the President.

http://blog.heritage.org/2010/02/25/…eep-on-coming/

On 02.25.10 01:00 PM posted by Michael Powell

</p>As noted before at the Foundry, the free expression that we take for granted in the United States <ahref="../2010/01/29/what-did-president-obama-learn-about-cuba-in-2009/">is unknown to those living under the Castro regime. In a chilling reminder of the cold authoritarian repression that still exists only 90 miles from the American mainland, Orlando Zapata Tamayo, a Cuban political prisoner, <ahref="http://edition.cnn.com/2010/WORLD/americas/02/23/cuba.dissident/">died Tuesday. His death came after he had initiated an 80-day hunger strike aimed at improving his conditions.

Raul Castro <ahref="http://www.latimes.com/news/nation-and-world/la-fg-cuba25-2010feb25,0,1560294.story">made a rare motion of “lamenting” over the death of Zapata. In a depressingly predictable move, however, Castro managed to somehow lay the death of Zapata at the feet of the United States, inferring that tortures and executions only occur in Cuba at the Guantanamo Bay military base, which is of course controlled by the U.S.<spanid="more-27429"></span>

Zapata’s mother, Raina Luisa Tamayo Dangier, has not minced words in her response to her son’s death, stating in a testimony, “I think my son’s death was a premeditated murder. My son was tortured throughout his incarceration.” She also compared her son’s death to the death of <ahref="http://www.cadal.org/english/nota.asp?id_nota=1007">Pedro Boitel, a Cuban poet opposed to the Castro regime who died during a hunger strike in 1972, before calling on “the world to demand the freedom of the other prisoners and brothers unfairly.”
Spanish Prime Minister Jose Zapatero was <ahref="http://www.etaiwannews.com/etn/news_content.php?id=1189233&lang=eng_news">surpris ingly forthcoming on the issue. Speaking before the Spanish parliament, Zapatero declared that “we must demand that the Cuban regime restore the freedom of prisoners of conscience and respect human rights.”

If Prime Minister Zapatero, a socialist who has worked to have the European Union remove sanctions toward Cuba, is willing to issue a clear condemnation of Cuba’s state repression of dissidents, there may be room for optimism.

http://blog.heritage.org/2010/02/25/…gainst-castro/

On 02.25.10 02:00 PM posted by Kathryn Nix

<ahref="http://blog.heritage.org/wp-content/uploads/doctor_bill0906231.gif"></p>In preparation for today’s <ahref="../2010/02/25/heritages-ongoing-analysis-of-health-care-summit">bipartisan Health Care Summit, President Obama released his own version of health care reform earlier this week.* The President’s proposal includes several high-ticket provisions for expanding coverage.* Since he has promised time and again not to raise taxes on the middle-class in order to pay for health care reform, the President’s bill imposes a Medicare tax on the investment income of high-individuals to off-set some of the cost of expanding Medicaid and* financing other provisions of his health agenda.

But, <ahref="http://www.heritage.org/Research/HealthCare/wm2817.cfm">as Heritage analysts Karen Campbell and Guinevere Nell explain in a recent paper, these new taxes would have widespread adverse effects for all Americans, not just the wealthy that they target. *This is partially due to the very nature of a tax:<spanid="more-27439"></span>

<ahref="http://www.heritage.org/Research/HealthCare/wm2817.cfm">“A well-established economic regularity is that if you tax something, you get less of it. For example, policymakers in the Senate recently proposed a tax on “Cadillac” health insurance plans. The justification was that it would not only generate revenue to help pay for subsidized insurance but also reduce demand for high-priced premiums, putting downward pressure on all health insurance premiums.”

The Cadillac health insurance plan tax is intended to reduce the usage of high-cost insurance plans.* Similarly, the President’s proposal’s tax on tanning beds discourages their use; the same is the case with cigarette taxes.* In several instances, taxes are imposed as punitive measures.* So why on earth would the President impose a tax that would discourage investment, delaying recovery from the current economic downturn?

Moreover, Campbell and Nell lay out several ways in which this tax would hit average American households hard.* First, the tax would reduce overall household wealth of American families by $274 billion per year.* <ahref="http://www.heritage.org/Research/HealthCare/wm2817.cfm">“The value of the investment portfolios of many households–not just the high-income households that directly pay the tax–are reduced by the tax on investment income.”

Second, reducing investment would decrease capital in the U.S. economy, which would reduce potential for economical growth.* This affects not only the rate of job creation and wage increase:* it would have a dramatic effect on the ability of the federal government to borrow money.* <ahref="http://www.heritage.org/Research/HealthCare/wm2817.cfm">According to Campbell and Nell, “A lower U.S. economic potential also harms the ability of the government to borrow, because investors lend to the U.S. based on the expected potential of the U.S. economy. Thus a lower potential economy puts upward pressure on government interest rates in order to attract financing for the nation’s deficit.” *Raising government interest rates will add further to the financial burden on taxpayers.

<ahref="http://www.heritage.org/Research/HealthCare/wm2817.cfm">“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. How much less depends on the underlying supply and demand for investment.”

President Obama’s health care proposal would expand health coverage—but is the detriment to the U.S. economy and the burden on the taxpayer worth the cost?

http://blog.heritage.org/2010/02/25/…stment-income/

On 02.25.10 02:30 PM posted by Bob Moffit

<ahref="http://blog.heritage.org/wp-content/uploads/hcrsummit100225-.jpg"></p>Following the President’s health care summit, several Heritage scholars provided immediate analysis of the day’s discussion.

<ahref="http://blog.heritage.org/author/bmoffit/">Bob Moffit: The President’s Health Care Summit was an exercise in public education; it was enlightening. Particularly noteworthy was the threat of rising deficits to the nation’s future articulated by Representative Paul Ryan (R-WI).

Congressional Democrats and Republicans often used similar language in describing their broad objectives: lowering the cost of care, improving the treatment of patients, and expanding coverage to more Americans.* Representatives on both sides also made it clear that they have sharply different methods of achieving these objectives. The polarization at Blair House reflected the polarization in the nation at large. But the Congressional Republicans can take solace in knowing that on the specific issue of the House and Senate health bills that they alone stand with the vast majority of their fellow Americans in opposition to these measures.<spanid="more-27457"></span>

While the President and Congressional Democrats would place more control over Americans’ health care in the hands of government officials, Congressional Republicans made it clear that they are seeking to sharply expand patients’ control over their own health care, not only in decision-making but in control of the flow of dollars in the system. Moreover, the summit showcased the President’s insistence that on advancing *the same prescription for federal control enacted in the House and Senate by the Congressional leadership. The President’s own proposal, for example, builds off of the Senate bill. Thus, a number of features that many, if not most, of Americans find objectionable would be retained, including mandates on individuals and employers to buy insurance, and heavy federal control of private benefits and premiums. Congressional Democrats kept insisting on the need to impose an individual mandate on Americans to buy a government approved level of health benefits. It was also instructive that the President made some key factual errors in his exchanges with Congressional Republicans, such as the extent of the range of benefit mandates; in certain cases, he recognized these errors and corrected himself; an example was on the extent of the increase in health insurance premiums embodied in the Senate bill.

Since the inception of the debate, it should be noted that the President insisted that his health policy agenda did not constitute a federal takeover of the health care system. In fact, it is very much a federal takeover of American health care. In the outline of his own proposal, released on Monday, the President would add to the federal powers embodied in the Senate bill. The most important would be a new Federal Health Insurance Rate Authority, which would provide federal “assistance and oversight” to the states conducting reviews of “unreasonable rate increases” and “unfair practices” of health insurance plans. This, of course, establishes for the first time a legislative basis for the imposition of price controls on health insurance. If government can control both health benefits and health care pricing, that’s the proverbial ball game. Private health care would be “private” in name only.

<ahref="http://blog.heritage.org/author/ehaislmaier/">Ed Haislmaier: The overriding reality behind this summit is that both the public and the politicians come to the table divided not over the details but rather over the basic approach to health reform. In his comments, Sen. Lamar Alexander (R-TN) highlighted three of those major divisions — comprehensive legislation versus incremental legislation, starting over versus pressing ahead with the bills passed in House and Senate in December, and a decentralized approach versus a centralized federal solution.* Today’s debate showed few indications of a willingness by the President or the Congressional leadership to alter their basic approach.* Though the summit served to highlight the fact that both parties are in favor of reform, differing only in their opinions on how to achieve it, the direction of the health care debate is unlikely to deviate from the course it has taken for the past year as a result of today’s discussion.

*

<ahref="http://blog.heritage.org/author/nowcharenko/">Nina Owcharenko: In order for the summit to have been successful, Democrats should have scrapped the House and Senate bills, along with the President’s proposal, all to which the American people have shown clear opposition. *Simply adjusting the magnitude of these proposals or adding new “conservative” provisions as suggested in the President’s latest proposal does not change their fundamental direction.

<ahref="http://corner.nationalreview.com/post/?q=MDY3ZjZjNDU1ZTcwNzRhNWFhN2JhZmFkYTI2MWY0OGQ">As Yuval Levin has explained, the crucial differences between Congress and the nation at large are not differences in degree; they are differences in policy direction. *Most Americans want problems in the health insurance markets fixed, but they do not want a federal takeover of the health care sector of the economy. Regrettably, the cornerstone elements of these proposals would put more power in the hands of Washington bureaucrats and politicians. Instead, Congress and the Administration should pursue bipartisan reforms that give Americans greater personal control of their health care decisions.* If the President and Congress were sincere about achieving bipartisanship, they should have set aside these highly unpopular proposals and shifted direction by taking an incremental approach to health care reform: one that puts health care reform on a path toward empowering individuals and families to control more of the financing and delivery of health care.

<ahref="http://blog.heritage.org/author/James%20Capretta/">James Capretta: The White House was hoping their summit meeting would create momentum among Democrats to push their bill through the Congress.* That momentum almost certainly does not exist.

Nothing fundamental changed today.* A strong majority of Americans is dead set against enactment of the bills Congress has been developing. *They are rightfully concerned about the risks that a large and expensive new entitlement program will pose for future tax rates and deficits.* They want Congress to go much more slowly and make sure that whatever is done improves matters and doesn’t make things worse.

At various points, participants admitted there is a fundamental difference between the sides on solutions.* But they didn’t particularly describe the competing ideas very well.* What it comes down to is this:* what process can be put in place to improve the efficiency of the health sector.* The Democrats believe in governmental management of costs.* Republicans believe in a functioning marketplace.* That’s why the summit is not very likely to produce much in securing common ground.

<ahref="http://dailycaller.com/2010/02/25/heritage-foundation-responds-to-the-health-care-summit/">Cross-posted at <ahref="http://dailycaller.com/">The Daily Caller

http://blog.heritage.org/2010/02/25/…ummit-wrap-up/

On 02.25.10 06:37 AM posted by Conn Carroll

Today’s White House-sponsored health care summit is an insult to the intelligence of every honest American. President Barack Obama’s communications minions are still trying sell his plan as an <ahref="http://news.yahoo.com/s/nm/20100222/pl_nm/us_usa_healthcare">“opening bid” in the health care debate. But as Washington Post columnist Ruth Marcus <ahref="http://www.washingtonpost.com/wp-dyn/content/article/2010/02/23/AR2010022303785.html">asks: “With whom is he bidding? The public dance is with Republicans, but this is hardly serious. The White House does not enter Thursday’s summit expecting Republicans to make a deal.” In fact, <ahref="http://blog.heritage.org/2010/02/22/morning-bell-the-white-house-learned-nothing-from-massachusetts/">the President’s recently-unveiled plan is specifically designed to be passed without a single Republican vote. That is why the Washington Post reports this morning:

Although Obama is billing the White House gathering as an opportunity for Republicans to air their ideas for reform, Democrats do not expect it to reveal much common ground and are showing little willingness to abandon the basic outline of legislation that the House and Senate have approved.

The real target of today’s summit are the 38 Democrats in the House who voted against Obamacare the first time. While Obamacare passed the House 220-215, Speaker Nancy Pelosi (D-CA) told reporters yesterday <ahref="http://www.politico.com/news/stories/0210/33399.html">she is not sure if she has the votes this time around. The passing of Rep. John Murtha (D-PA) and the retirements of Reps. Robert Wexler (D-FL) and Neil Abercrombie (D-HI) have cost her three votes, and the inclusion of taxpayer-funded abortions in the Senate and White House plans will cost the vote of the only Republican to vote for the plan the first time around, Rep. Joseph Cao (R-LA), as well as Rep. Bart Stupak (D-MI) and 15 to 20 additional pro-life Democrats.<spanid="more-27345"></span>

That means the White House must convince a sizeable chunk of conservative Democrats to switch their votes. Brown University political scientist James Monroe <ahref="http://www.politico.com/news/stories/0210/33399.html">says that is the true purpose of today’s event: “House Democrats have told Obama, ‘Move the needle on public opinion,’ and that’s what this is about.” So how does President Obama plan to “move the needle” on the public’s view of his plan? By pushing the same old tired talking points he has been trying to sell them for over a year now. But the public’s opinion of President Obama’s plan <ahref="http://www.pollster.com/polls/us/healthplan.php">has steadily declined as they have learned more about it. That’s for good reason: they intuitively know his claims cannot be true. Specifically, the President says his plan will “make insurance more affordable,” “set up a new competitive health insurance market,” and “put our budget and economy on a more stable path by reducing the deficit.”

But as Heritage fellow Bob Moffit <ahref="http://blog.heritage.org/2010/02/24/the-presidents-health-summit-proposal-rhetoric-vs-reality/">amply details, each of these claims are demonstrably false. The Senate bill actually increases health insurance premiums and raises taxes on the middle class by $629 billion over ten years. It destroys what little there is left of a real competitive health insurance marketplace by instituting new price controls and standard benefit packages that will turn health insurance companies into public utilities. And the plan is so riddled with deceptive budget gimmicks that the White House’s non-CBO scored $950 billion price tag actually comes to <ahref="http://blog.heritage.org/2010/02/24/the-presidents-health-proposal-further-jacking-up-the-cost-of-care/">$2.5 trillion once an honest accounting has been applied.

The stakes for today’s summit are high. According to a <ahref="http://www.gallup.com/poll/126191/Americans-Tilt-Against-Democrats-Plans-Summit-Fails.aspx">new Gallup poll, if President Obama fails to win any conservative support, Americans by a 49% to 42% margin will oppose rather than support Congress passing a health care bill. And what if President Obama decides to go it alone and pass major social welfare legislation with a bare majority? By an even larger 52% to 39% margin, Americans oppose passage of Obamacare with only 50 Senators in support (Vice President Joe Biden casting the 51st vote). And those opposed are more likely to feel strongly about their opinion than those in favor, 25% to 11%.

Back in 2005, then- Sen. Barack Obama said: “You know, the Founders designed this system, as frustrating it is, to make sure that there’s a broad consensus before the country moves forward.” Let’s hope the President heeds his own advice, and after today’s summit fails, he <ahref="http://www.heritage.org/Research/HealthCare/bg2377.cfm">starts over.

Quick Hits:

• A <ahref=" http://www.rasmussenreports.com/public_content/politics/current_events/healthcare/february_2010/51_fear_government_more_than_private_health_insure rs">new Rasmussen Reports poll finds that 51% fear the federal government most when it comes to health care decisions, while only 39% fear private insurance companies more.
• According to inspection data from the Office of Compliance, <ahref="http://thehill.com/homenews/house/83311-over-70-percent-of-offices-violate-osha-standards">more than 70 percent of congressional offices violate OSHA safety standards that they force private companies to comply with.
• Thirty-one of the House Democrats who attacked Toyota during congressional hearings this week <ahref="http://www.examiner.com/examiner/x-12977-Cars-Examiner~y2010m2d24-Thirtyone-House-Dems-quizzing-Toyota-execs-got-UAW-campaign-cash">received campaign cash from the United Auto Workers, a union that owns competing car company Chrysler.
• Favorable views of labor unions have plummeted since 2007, with <ahref="http://people-press.org/report/591/">a new Pew poll now showing that more Americans (42%) view unions unfavorably compared to only 41% of Americans who have a favorable impression of big labor’s purpose and power.
• President Obama told members of the Business Roundtable – a consortium of CEOs from the nation’s top companies – to stop equating his policy agenda with <ahref="http://www.washingtontimes.com/news/2010/feb/25/obama-tells-corporate-chiefs-to-cut-rhetoric/">socialism.

http://blog.heritage.org/2010/02/25/…ham-of-a-bill/

On 02.25.10 06:45 AM posted by Conn Carroll

President Obama’s health care summit is set to begin at 10 AM and end at 4 PM. Throughout the summit, Heritage experts will provide their analysis. We will keep this post at the top of the Foundry, so check back often for our latest reaction to the summit.

1:00 – The President just got his facts wrong again on the insurance regulation issue. When Rep. Cantor pointed out that the Sec. of HHS would define the minimum benefit package for health insurance, the President responded that those provisions would only apply to coverage in the exchange. Not true. The House and Senate bills would impose those minimum benefit standards on all plans, including self-insured employer and union plans. – Ed Haislmaier

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12:35 – All sides of the debate are interested in reducing cost and expanding coverage. Many of Obama’s proposals use government policies to force companies to reduce price, which is not the same as reducing costs. Obama wants to <ahref="http://www.economist.com/world/united-states/displaystory.cfm?story_id=15570434&source=features _box2?sa_campaign=facebook">mandate companies to provide government-approved insurance, and mandate that individuals buy insurance, and <ahref="http://blog.heritage.org/2010/02/25/the-presidents-health-proposal-bringing-back-price-controls/">controls the price at which they can provide it; in other words, government has created a “market” by forcing the buyer to buy and the seller to sell, and has set the price. If real costs fall, and competition is expanded, prices will fall too. On the other hand, if the market is replaced by a government controlled exchange costs will only rise but prices will be fixed low. Like any price control this will mean shortages – and waiting lists. At that point the government will be forced to introduce rationing and targets to direct health care providers that have no interest in serving their customers. The <ahref="http://www.timesonline.co.uk/tol/life_and_style/health/article7039285.ece">NHS in the England provides clear evidence of what happens when you go down this road. – Guinevere Nell

12:25 – Whoa! The President just shot himself in foot on the mandated benefit issue — repeatedly! He said the reason that coverage would be more expensive under the bill is because the coverage would offer more benefits. That is true. But then he almost (but not quite) said that people could still choose something else if they wanted too. He stopped mid-sentence probably because he realized what he was about to say wasn’t true. He then pivoted to state that the coverage Congress has includes a minimum benefit package and doesn’t have high-deductible plans. Both of those things are untrue.

The Federal Employee Benefits Program that covers federal workers (including Congressmen) does not have a minimum benefit package but it does offer high-deductible HSA plans. A little while later he said you could keep you existing “grandfathered” coverage, only to have Sen. Kyl immediately correct him by pointing out that the legislation only allows for “grandfathered’ plans for a limited time, and imposes new requirements on those plans as well. – Ed Haislmaier.

12:19 – Chuck Schumer argued that “we should reward doctors for quality not quantity” – but <ahref="http://www.timesonline.co.uk/tol/life_and_style/health/article7039285.ece">this is exactly the same struggle that the NHS has with trying to guide doctors, hospital administrators, and other health care providers. It is impossible for the government to guide any supplier of goods and services to serve the customer – they can <ahref="http://www.telegraph.co.uk/health/healthnews/5008935/NHS-targets-may-have-led-to-1200-deaths-in-Mid-Staffordshire.html">only provide targets, price controls, mandates and other regulations on behavior. Profit and loss, in conjunction with competition, is the system that can ensure an enterprise serves its customers. This is why it is so important to introduce competition back into the health care industry, rather than adding new regulations, targets and controls in hopes of making insurance companies serve customers better. – Guinevere Nell

11:56 – According to a <ahref="http://www.jct.gov/publications.html?func=startdown&id=3649">report released today by the Joint Committee on Taxation (JCT), President Obama’s health care plan will raise taxes by $414 billion between 2010 and 2019. But, as James Capretta pointed out yesterday, the President’s proposal would cost over <ahref="http://www.heritage.org/Research/HealthCare/wm2816.cfm">$1 trillion over the next ten years. That leaves a deficit of over $600 billion. The President has said repeatedly that his plan would not add one dollar to the deficit. If that is so, where does the remaining $600 billion come from to make the plan revenue-neutral?

The biggest revenue raisers in the Obama plan are the excise tax on “Cadillac” insurance plans costing more than $10,200 for individuals and $27,500 for families and a wrong-headed increase of the Hospital Insurance (HI) portion of the payroll tax for taxpayers earning more than $250,000. Together they account for more than half of all the revenue increases in the President’s plan. The President’s plan would also for the first time apply the HI tax to investment income, breaking long-held policy and setting a <ahref="http://blog.heritage.org/2010/02/23/obama%E2%80%99s-health-plan-has-dangerous-new-taxes/">dangerous and economically harmful new precedent. Combined, these proposals cover less than half the cost of the bill. Perhaps there are spending cuts in the plan nobody has found yet. We’ll keep looking. – Curtis Dubay

11:51 – Here’s another example of how the two sides have completely different approaches. Democrats are touting how their bills have provisions to crackdown on waste and fraud in government programs and noting that Republicans agree with those provisions. From the Republican side Sen. Coburn points out that fraud in private insurance is around one percent while fraud in government programs is estimated at 15%. So by inference, the better way to eliminate fraud would be by giving Medicare and Medicaid beneficiaries the money and let them pick the private plan of their choice. – Ed Haislmaier

11:27: – Will health insurance premiums increase from the Senate bill? As usual the president is playing fast and loose with the facts. The Congressional Budget Office (CBO) says that premiums would go down in the individual market from the Senate bill for the kinds of insurance offered today. The problem is that the President’s bill also makes it impossible for people to get that kind of insurance. They would be forced into more expensive plans, with higher premiums. <ahref="http://cbo.gov/ftpdocs/107xx/doc10781/11-30-Premiums.pdf#page=9">27% to 30% higher according to the CBO report because of the mandates. And so, overall, premiums in the individual market would go up, not down.

Moreover, there are several studies showing why CBO is wrong about premiums declining for current policies.

Here’s one. Oliver Wyman Inc., a respected actuarial firm, did <ahref="http://www.bcbs.com/news/bcbsa/new-actuarial-analysis-shows-senate-bill-would-significantly-raise-premiums.html">a careful study for the Blue-Cross Blue Shield Association. They found that premiums in the individual market would be 54 percent higher in five years’ time if the Senate bill were enacted, and 20 percent higher for those insured through small businesses.

Why the difference with CBO? The reason is that CBO thinks the individual mandate will be effective in bring people into the market. That is not at all the view of many, many experts who understand the insurance business. Almost uniformly, they say the mandate in the Senate bill is too weak and won’t work. Consequently, the risk pool will become much less healthy over time, thus driving up premiums.

So, no, Senator Alexander should not at all concede the point. He’s right. If the Obama plan were enacted, premiums in the individual market would go up, a lot. – James Capretta

10:49 – The overriding reality behind this summit is that both the public and the politicians come to the table divided not over the details but rather over the basic approach to health reform. The things to look for today are any indications of a willingness by the President or the Congressional leadership to alter their basic approach. In his comments Sen. Lamar Alexander highlighted three of those major divisions — comprehensive legislation versus incremental legislation, starting over versus pressing ahead with the bills passed in House and Senate in December, and a decentralized approach versus a centralized federal solution. – Ed Haislmaier

10:40 – Lamar Alexander said that if you took all the profits from insurance companies it would only cover 2 days worth of the costs of health care. What he could have added if he had more time, was that if you take away the profits of a business, it will have no incentive to produce, and no ability to invest and expand. This is important because many of the provisions of the Senate health care bill aim to curb profit in the health care industry, rather than introduce more competition. Liberals in Congress often blame the profit motive for the ills they see in the industry, for example for insurance denials, high prices, lack of insurance for those with pre-existing conditions, and so forth. But these ills are <ahref="http://www.heritage.org/research/healthcare/bg929.cfm">more likely caused by government mandates, protections, subsidies and price controls that kill competition and socialize loss, distorting the behavior of insurance companies, so that they act like monopolies and no longer serve their customers. – Guinevere Nell

10:18 – President says his plan sets up exchange that brings “choice and competition” to health care. His plan does no such thing. Heritage fellow Bob Moffit <ahref="http://blog.heritage.org/2010/02/24/the-presidents-health-summit-proposal-rhetoric-vs-reality/">explained yesterday: “The Health Exchanges in Congress’ health bills and the President’s proposals are not structured to serve as a real competitive marketplace for insurance, in the sense of anything that would resemble real free market competition; rather these institutions would primarily serve as the federally designed mechanism to impose strict federal regulation on private insurers. By contrast, in the FEHBP, the federal government does not standardize the health benefits of private health plans for its employees. For federal employees and retirees, there are a wide variety of health benefit offerings and combinations of benefit packages, ranging in price from expensive health plans (like the Blues Standard Option) to low cost plans (like the Mail handler’s Value Plan, a union plan), and a variety of health plan types, ranging from comprehensive plans to health savings accounts and high deductible plans, plus a wide range of premiums and co-payments.” – Conn Carroll

http://blog.heritage.org/2010/02/25/…h-care-summit/

On 02.25.10 09:00 AM posted by James Sherk

<ahref="http://blog.heritage.org/wp-content/uploads/Obama-SEIU100225.jpg"></p>Was the stimulus (A) a job creation bill or, (B) a liberal spending wish list? A new <ahref="http://www.gao.gov/highlights/d10383high.pdf">Government Accountability Office (GAO) study suggests that option B is closer to the truth. Small wonder it did not bring unemployment down.

Obama publicly argued that America needed the $862 billion bill to create jobs and singled out “green job” spending as the key to an economic recovery. The stimulus itself, however, looked a lot like not letting “a good crisis go to waste” and pouring public money at liberal special interests.

Remember all the green jobs weatherizing homes that Obama said the stimulus would fund? Obama would not waive regulations that benefit unions the Department of Energy has weatherized just 1 out of every 65 homes they planned to.<spanid="more-27363"></span>

The Davis-Bacon Act (DBA) requires contractors on all federal construction projects to pay “prevailing wages.” In theory, those prevailing wages are supposed to be market wages. In practice, the Department of Labor uses <atitle="blocked::http://www.heritage.org/research/labor/bg2111.cfm" href="http://www.heritage.org/research/labor/bg2111.cfm">slow, error-ridden, and unscientific methods to estimate them. As a result Davis-Bacon rates typically echo union wage scales: <atitle="blocked::http://www.beaconhill.org/BHIStudies/PrevWage08/DavisBaconPrevWage080207Final.pdf" href="http://www.beaconhill.org/BHIStudies/PrevWage08/DavisBaconPrevWage080207Final.pdf">an average of 22 percent above market wages. By law the government hires four construction workers for the price of five.

Unions love this. No one can charge taxpayers less than they do. Jobs that would otherwise go to nonunion workers instead go to them at wages no one else would pay.

Obama’s stimulus spent billions on home weatherizing and then required contractors to pay Davis-Bacon wages. That meant that the Department of Labor first had to estimate Davis-Bacon rates for home weatherizing. It took them until September to do it. Then state and local governments had to train their staff to comply with the Act’s paperwork, which meant more delays. The GAO found that these delays caused the Department of Energy to weatherize just 9,100 of the 593,000 homes it intended to last year.

President Obama could have cut through this red tape with the stroke of a pen. The law allows the President suspend the Davis-Bacon Act. Doing so would have allowed his “green jobs” programs to go forward immediately. The savings from paying market wages would have also funded more infrastructure projects and <atitle="blocked::http://www.heritage.org/research/labor/wm2782.cfm" href="http://www.heritage.org/research/labor/wm2782.cfm">an additional 160,000 construction jobs.

But those jobs would not go primarily to union members, as they will under Davis-Bacon restrictions. So Obama kept Davis-Bacon restrictions in place. He chose to wait and to create fewer jobs in order to ensure that the stimulus spending benefited primarily union members. Which sort of answers the question of whether the stimulus was about economic recovery or spending on liberal interest groups.

http://blog.heritage.org/2010/02/25/…-the-stimulus/

On 02.25.10 09:02 AM posted by Kathryn Nix

In preparation for the Health Care Summit, President Obama unveiled his <ahref="../2010/02/22/a-first-look-at-the-president%e2%80%99s-health-summit-proposal-liberal-proposal-number-three/">first official health care proposal. It is intended to reconcile the differences between the *highly unpopular House and Senate bills. Curiously, President Obama’s latest iteration of the liberal health policy agenda includes more federal power: the power to control “private” health plan premiums.

Price Controls. <ahref="http://www.whitehouse.gov/health-care-meeting/proposal">According to the President’s proposal, a new “Health Insurance Rate Authority” would oversee rate review for private insurers, so that “if a rate increase is unreasonable and unjustified, health insurers must lower premiums, provide rebates, or take other actions to make premiums affordable.”* On the face of it, this means price controls on health insurance.

The President knows the unhappy history of price controls, and the genuine misery- shortages, mainly- that such a policy guarantees. Think of the *long, hot gasoline lines of the 1970s, courtesy of the Carter Administration.<spanid="more-27384"></span>

Getting it Wrong. The underlying assumption – a big one- is that federal officials will set the right premium price. Not likely. *If they don’t, we pay too much for insurance. Or, we don’t pay enough to cover the real insurance costs. In the meantime, whether insurance premiums are “unreasonable” or “unjustified” would reflect the reigning mental or political impulses that drive federal officials.

Health insurance industry profits are marginal, between two and three percent. But much of the rationale for creating this federal power is rooted in the <ahref="http://www.latimes.com/features/health/la-fi-anthem-obama9-2010feb09,0,995910,print.story">recent premium increases in plans offered by Anthem Blue Cross in California.* Secretary of Health and Human Services (HHS) Kathleen Sebelius asked Anthem to justify the increases, which <ahref="http://healthcare.nationaljournal.com/2010/02/premium-hikes-and-profits.php?print=true">experts attribute to increases in provider rates, new state mandated benefits, and the current economic climate. The recession has encouraged younger and healthier people to drop coverage, leaving sicker and more costly persons in insurance risk pools.* Under such circumstances, insurers have little choice but to increase premiums if they wish to stay in business and pay claims.

No Happy Ending. But price controls on premium rates would make sure that there is no happy ending to this movie. Either the insurers will comply with the government controls and crack down on physician and hospital reimbursement for medical services, making those services less available, ie. Rationing. Big cost to patients. Or, insurers, running deficits, will do what the automakers and the bankers have done who are “Too Big To Fail” and run to Congress and get their a bail-out. Big cost to taxpayers.

<ahref="http://www.heritage.org/Research/HealthCare/bg929.cfm">Heritage’s Ed Haislmaier further lays out the shortcomings of price controls in health care: “Price controls would not work in health care because they attack the symptoms of runaway costs, not the cause. Medical costs today are soaring because consumers are largely insulated from them…and because the tax system discourages consumers from seeking good value for money in health care”.

Because price controls do not attack the <ahref="http://www.heritage.org/Research/HealthCare/bg2369.cfm">root of increased health care spending, they would be more likely to exacerbate the problem than to fix it.* Haislmaier <ahref="http://www.heritage.org/Research/HealthCare/bg929.cfm">lists the unintended consequences of price controls: shortages of goods, reduction in the quality of goods, and diversion of economic activity and investments.* Furthermore, price controls can result in queuing, rations, and bribes as a way to allocate services, since inflexible pricing cannot address the normal fluctuations in supply and demand.

In the case of President Obama’s agenda, <ahref="../2010/02/22/a-first-look-at-the-president%e2%80%99s-health-summit-proposal-liberal-proposal-number-three/">other provisions of the President’s proposal would make insurance costs even worse. His proposal would increase costs for insurers, while limiting their ability to offer different levels of coverage.* For example, a requirement for insurers to cover any and all applicants, regardless of pre-existing conditions, would encourage persons to put off buying insurance until they are sick. The Obama tax penalty, to enforce his proposed individual mandate to buy coverage, would be cheaper than the Obama specified health insurance premiums.* The potential result: even more uninsured.

<ahref="http://www.heritage.org/Research/HealthCare/bg929.cfm">According to Haislmaier, “Most policy makers who favor health care price controls view them as a way to curb rapid medical inflation. But most of the blame for that same inflation can be traced directly to previous government health care policies that they support or maintain. Health care price controls also are attractive to Members of Congress because they provide a benefit (cheaper medical care) to a favored constituency (health care consumers) at the expense of less favored constituencies (doctors, hospitals, pharmaceutical manufacturers, and insurance companies). This is why some Members of Congress are so quick to blame the health care industry for escalating medical costs, when in fact it is largely government laws, regulations, and policies that are responsible.”

Rather than bring back the old Nixon-era price controls for the insurance industry, the President should address <ahref="http://www.heritage.org/Research/HealthCare/bg2369.cfm">causation behind increased premiums. His proposal *would only make the insurance market problems worse.

http://blog.heritage.org/2010/02/25/…rice-controls/