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Posts Tagged ‘Obamacare’

I periodically try to explain that there’s a big difference between being pro-market and pro-business.

Simply stated, policy makers shouldn’t try to penalize businesses with taxes, mandates, and regulations.

But neither should politicians seek to subsidize businesses. That’s why I’m against bailouts, subsidies, and other distortions that provide special favors for politically connected companies.

I have nothing against companies earning money, to be sure, but I want them to earn their profits in the marketplace rather than lining their pockets by using the coercive power of government to rig the rules of the game.

But I don’t just have disdain for companies that stick their snouts in the public trough. I also have little regard for the politicians that enable this sordid type of business by trading campaign cash for corporate welfare.

I realize that’s a strong assertion, but I can’t think of any legitimate reason to support handouts for big companies. And I get especially angry when giveaways are facilitated by politicians who claim to support free markets.

Let’s look at two examples, the Export-Import Bank and the Obamacare bailout for big insurance corporations.

I’ve previously argued that the Export-Import Bank is a squalid example of corruption and I’ve shared a video that explains why it’s economically foolish to subsidize a handful of big exporters.

To augment those arguments, here’s some of what Professor Jeffrey Dorfman of the University Georgia recently wrote in a column for Real Clear Markets. He correctly warns that certain GOP politicians are to blame if the Export-Import Bank stays alive.

The Export-Import Bank is everything that Republicans should stand against. It is crony capitalism at its worst. It is corporate welfare, taxing American families to boost corporate profits. It ever forces firms to potentially subsidize a competitor. There is simply no need for this government agency. Republicans in Congress should make a stand and show voters that Republicans believe in free markets and small government, even if some big businesses complain. The Ex-Im Bank should not be reauthorized. …Over the last decade or so, the Democrats have increasingly become the party of big business, stealing that crown away from Republicans because of the Democrats’ willingness to engage in crony capitalism and actively pick winners and losers in our economy. While Republicans are still thought of as the pro-business party, and other actions by the Democrats are clearly anti-business (Obamacare, environmental over-regulation), large multinational corporations like Boeing and GE have donated money to Democrats and generally profited from their political alliances with them. If Republicans want to make gains among (lower) middle-class voters, one of the things that could help is to convince voters that they are on the side of the people and not big corporations. The Ex-Im Bank reauthorization is a perfect opportunity to do just that. …Income redistribution is wrong especially when the money is going to big and profitable companies.

Ryan Ellis of Americans for Tax Reform agrees. Writing for Forbes, he looks at both the policy and politics of Export-Import Bank handouts.

The ExIm bank is an export subsidy program, giving money to certain companies…in the hopes that gives them a leg up in international trade.  It’s been criticized for decades by free traders and those who simply oppose corporate welfare spending out of Washington. …the ExIm bank will sunset on its own on September 30th.  All Congress has to do is let nature take its course, and this corporate welfare program simply goes away forever.

Sounds like we should have a guaranteed victory from free markets over intervention, right?

Don’t count your chickens before they hatch.  Ryan explains that Republicans may shoot themselves in the foot by trying to rescue this reprehensible example of cronyism.

Charging in at the last minute to save ExIm only makes the House GOP look beholden to K Street.  It also looks like they are flip-flopping from where they were back in the summer.  …ExIm reauthorization…is likely to take a GOP grassroots focused on President Obama’s failures and full of midterm election intensity, and turn them inward toward criticism of the House GOP leadership instead. If things go badly with this CR gambit, the House GOP will have given themselves a self inflicted wound just as they are trying to get out of town and not screw up what should be a good year for their candidates.

How nauseating.

I realize that the Export-Import Bank is a relatively minor issue and that I should mostly care about whether politicians do the right think on big topics such as entitlement reform. After all, that’s what really counts if we want to avoid fiscal catastrophe.

But I can’t stop myself from foaming at the mouth when self-proclaimed supporters of free markets undermine the argument for economic liberty with cronyist deals.

Obamacare is another example of big business being against free markets. We already know that the big pharmaceutical firms cut a special deal with the Obama White House.

The big insurance companies also had their snouts in the trough. Not only did they get legislation that mandated the purchase of their products, but they also got language that provides bailouts if they aren’t able to profit from Obamacare.

What’s really amazing, though, is that some Republicans are willing to go along with Obamacare bailouts for those major companies.

The good news is that Florida Senator Marco Rubio is in the right side. Here’s some of what he wrote about bailouts for health insurance companies for Fox News.

 …section 1342 of the ObamaCare law…established so-called “risk corridors”. According to this provision, taxpayers will make up the difference for health insurance companies whose plans lose money under ObamaCare. Last November, as it became clearer what this section of the law actually meant, I introduced legislation repealing it and protecting taxpayers from being forced to cover insurers’ ObamaCare losses. …In recent weeks, the public has learned that senior White House officials have been working closely with insurers behind the scenes to make sure that their earlier bailout deal, which helped assure ObamaCare’s passage in 2010, would stand and that a taxpayer-funded bailout was still, in fact, on the table. …On this ObamaCare bailout, as with so many issues, Washington politicians are misleading average Americans and planning to stick them with the bill. This is government favoritism and corporate cronyism at its worst. …It’s time to repeal and replace it, but at the very least, we should make it the law of the land that health insurers won’t be bailed out by taxpayers.

I’ll also add a moral argument.

As far as I’m concerned, I want the health insurance companies to suffer major losses. I want the business community to see that it’s a mistake to get in bed with big government.

Though I guess I’m actually making a practical argument. I may be motivated by morality, but the companies hopefully will do a cost-benefit analysis and decide that it’s too risky to strike deals with the political class.

By the way, Republicans often do the wrong thing because they’re afraid that voters favor the statist agenda of dependency.

But that’s not the case for Obamacare bailouts for health insurances companies. Here’s some polling data on the issue that showed up on my Twitter feed.

Let’s close by sharing some of what the editors at National Review wrote about both the Obamacare bailout and Export-Import Bank subsidies.

Congressional Republicans keep saying they oppose Obamacare. Yet they’re refusing to take the simplest and easiest action against it. …Some Republicans say that the insurance companies should not be penalized for the defects of the law. Why not? They have freely chosen to participate in the exchanges, and they should bear the risks of that decision — which include the risk that Congress might decide not to shovel tax dollars at them. The alternative, after all, is to punish taxpayers. …The debate over the Export-Import Bank is one test of Republican sincerity about ending corporate welfare. These taxpayer subsidies are another: If Republicans can’t take on corporate welfare when doing so advances one of their party’s most popular and basic commitments, when will they?

Amen. Both of these issues are tests for the GOP.

Actually, they should get added to a long list of issues that tell us whether Republicans have any sincerity (or brains) in the fight against statism.

o No tax increases, since more money for Washington will encourage a bigger burden of government and undermine prosperity.

o To stop bailouts for Europe’s decrepit welfare states, no more money for the International Monetary Fund.

o Reform the biased number-crunching methodology at the Congressional Budget Office and Joint Committee on Taxation.

o No more money from American taxpayers to subsidize the left-wing bureaucrats at the Paris-based Organization for Economic Cooperation and Development.

P.S. If you’re in the mood for some dark humor, here’s the federal government’s satirical bailout application form.

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Many of you probably heard about the “Halbig” decision, in which a federal court struck a blow against Obamacare by ruling that the IRS was wrong to arbitrarily grant subsidies for health insurance policies purchased through a federal exchange.

And why did the judges rule against the IRS? Well, for the simple reason that the Obamacare legislation specifically says that subsidies are only available for policies purchased through exchanges set up by state governments. My Cato colleague Michael Cannon explains:

The PPACA authorizes the IRS to issue health-insurance tax credits only to taxpayers who purchase coverage “through an Exchange established by the State under section 1311 of the Patient Protection and Affordable Care Act.” The tax-credit eligibility rules repeat this restriction, without deviation, nine times. The undisputed plain meaning of these rules is that when states decline to establish an Exchange and thereby opt for a federal Exchange — as 34 states accounting for two-thirds of the U.S. population have done — the IRS cannot issue tax credits in those states.

The legal fight isn’t over, of course, and it’s quite likely that the Supreme Court will make the ultimate ruling (which is worrisome since Chief Justice Roberts already has demonstrated that he’s sometimes guided by politics rather than the law).

But that’s an issue for another day.

Our topic today is humor. Or maybe it’s hypocrisy. Or perhaps it’s duplicity. Heck, it’s all of those things and more. Why? Because a leading supporter of Obamacare (who often conveniently forgets to disclose that he got $400,000 of our tax dollars to help draft and promote the law) has been caught with his pants down.

As you can see in this video, Professor Gruber is now pretending the Halbig decision was wrong even though he repeatedly acknowledged in the past that states would have to set up exchanges in order for their citizens to get subsidies.

Wow.

I’ve never seen a more brutal video. And it’s effective because Gruber is hoisted on his own petard.

Heck, this puts him in the same category as Paul Krugman, who also has been caught changing his views (he used to admit that unemployment benefits increase joblessness, but more recently made the opposite argument to boost Obama’s agenda).

Though I should admit that hypocrisy and duplicity aren’t limited to the left. I’ve criticized Republicans, after all, for occasionally justifying their anti-tax views by citing the Keynesian analysis of the Congressional Budget Office.

But let’s not digress. Instead, let’s simply enjoy the emasculation of a statist.

And because the video is so enjoyable, I guess I’ll put it in the humor category.

And if you like humorous Obamacare-related videos, here are some other examples from the archives.

*Creepy Uncle Sam wants to conduct an OB/GYN exam.

*The head of the National Socialist Workers Party finds out he can’t keep his health plan.

*Young people discover that they’re screwed by Obamacare.

*The wrong circus comes to town.

*Remy of Reason TV sings about the joy of part-time work.

*A cartoon video imagines a world where buying coffee is like buying government-run healthcare.

*One of the biggest statists of the 20th century is angry that the Obamacare exchanges don’t work.

Let’s close with a pair of cartoons, both of which are related to the Halbig decision, at least in that we have an Administration that doesn’t seem to care about the rule of law.

We’ll start with Michael Ramirez.

Here’s Chip Bok’s contribution.

P.S. On a different topic, the battle over the Export-Import Bank is getting more heated. You probably won’t be surprised to learn that President Obama supports this corrupt example of corporate welfare (even though he said he was opposed back in 2008).

This is a rare issue where some honest leftists are on the correct side. That’s because, as illustrated by this Venn diagram (h/t: Charles Murray), some of them are willing to side with libertarians in the fight to makes sure big government and big business don’t get to conspire against taxpayers.

Sadly, too many DC leftists are hypocrites, happy to line the pockets of big companies if such policies also expand the power of government.

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Last September, I shared a disconcerting video showing an unfortunate young woman getting her OB/GYN exam from a very creepy version of Uncle Sam.

Well, you’ll be pleased to know that “Creepy Uncle Sam” does not discriminate. In this video, a young man faces the unpleasant experience of getting his prostate checked.

Kudos to Generation Opportunity for putting together such clever videos.

But I think their most recent video is a true masterpiece. It manages to showcase almost all the bad features of Obamacare in a short, amusing, pithy form.

And if you like videos that make fun of Obamacare, here are some other examples from the archives.

*The head of the National Socialist Workers Party finds out he can’t keep his health plan.

*Young people discover that they’re screwed by Obamacare.

*Remy of Reason TV sings about the joy of part-time work.

*A cartoon video imagines a world where buying coffee is like buying government-run healthcare.

*One of the biggest statists of the 20th century is angry that the Obamacare exchanges don’t work.

Let’s close with a good cartoon from Ken Catalino.

And whatever the government says Obamacare costs, you can feel confident (albeit depressed) that the real cost will be higher. Especially if you’re also counting non-fiscal costs such as fewer jobs.

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I thought TARP was the sleaziest-ever example of cronyism and corruption in Washington.

The Wall Street bailout rewarded politically well-connected companies, encouraged moral hazard, and ripped off taxpayers. Heck, it was so bad that it makes the sleaze at the Export-Import Bank seem almost angelic by comparison.

But I may have to reassess my views.

One of the provisions of Obamacare allows the White House to give bailouts to big health insurance companies. You’re probably wondering why these big firms would need bailouts. After all, didn’t Obamacare coerce millions of people into becoming involuntary customers of these companies? That should give them lots of unearned profits, right?

But here’s the catch. The President wasn’t being honest when he repeatedly promised that Obamacare would reduce premiums for health insurance. And since the Democrats don’t want consumers to get angry about rising costs (particularly before the 2014 elections), they want health insurance companies to under-charge.

Avik Roy of Forbes explains in greater detail how the White House is coercing health insurance companies to limit premium increases before the mid-term elections. Here are some excerpts.

Hidden in the midst of a 436 page regulatory update, and written in pure bureaucratese, the Department of Health and Human Services asked that insurance companies limit the looming premium increases for 2015 health plans. But don’t worry, HHS hinted: we’ll bail you out on the taxpayer’s dime if you lose money. …The White House is playing politics with Americans’ health care—and they’re bribing health insurance companies to play along. The administration’s intention is clear: Salvage the 2014 midterm elections. …Technically, the regulations don’t force health insurance companies to tamp down their premium spikes. But the White House isn’t asking nicely. …Under Obamacare, insurers are so heavily regulated that they have to play nice with the bureaucrats who call the shots. …If insurance companies don’t give in, regulators have powerful ways to make life hard for them. A shrewd CEO doesn’t need to look far to see what might happen if his company opts out.

But before you feel sorry for Big Insurance, remember that these corrupt companies supported Obamacare and fully expect to get bailed out by taxpayers. Here are some blurbs from an article last month in the Weekly Standard.

Most Americans don’t think it’s their job to bail out insurance companies who lose money under Obamacare, but that’s exactly what’s poised to happen. Obamacare’s risk-corridor program — which President Obama has been using as a slush fund to placate his insurance allies and keep them quiet about his lawlessness — shifts financial risk from insurers to taxpayers. According to the House Oversight Committee, health insurers expect Obamacare’s risk corridors to net them nearly $1 billion, at taxpayer expense, this year alone. …It was a win-win that would boost Obamacare in its early days — to the benefit of those who’ve gained extraordinary power at the expense of Americans’ liberty, and of those whose product has become mandatory for Americans to purchase.

In other words, we have a stereotypical example of Mitchell’s Law. Government screws up something, and then uses that mess as an excuse to impose more bad policy!

This Lisa Benson cartoon is a perfect summary of what’s happening.

P.S. If you’re in the mood for some dark humor, here’s the federal government’s satirical bailout application form.

P.P.S. Switching to a different topic, it’s time for me to rectify a mistake. When I first created the Moocher Hall of Fame last year, I didn’t include the “Octo-moocher” as a charter member. After all, having 14 kids while living on the dole didn’t seem particularly noteworthy.

But now we’ve discovered that she could afford her kids. She just wanted other people to pick up the tab.

Octomom Nadya Suleman pleaded no contest Monday to a single count of misdemeanor welfare fraud for failing to disclose income she was receiving from videos and personal appearances while collecting more than $26,000 in public assistance funds to care for her 14 children.

This may not be as impressive as the deadbeat who got handouts while living on a $1.2 million yacht, but still worthy of membership.

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I wrote a few weeks ago about the hidden economic damage of Obamacare, particularly the harm to the job market.

Today, let’s get further depressed by looking at the ever-worsening fiscal damage of the law.

Here’s some of what Chuck Blahous of Mercatus wrote about this costly new entitlement.

The ACA was enacted in 2010 with the promise of reducing the federal budget deficit while expanding health insurance coverage. Nearly lost amid the recent press cheerleading over ACA enrollment figures is that this promise has disintegrated, and now no one…can say how much fiscal damage the ACA will ultimately cause. …CBO currently estimates that the ACA’s coverage provisions will cost the federal government $92 billion a year by FY2015. This is roughly 0.5 percent of projected U.S. economic output for 2015, well exceeding the relative costs of Social Security and Medicaid at similar points in their histories. (The amount falls just short of the proportion of GDP absorbed by all of early Medicare.) Worse, the federal fiscal position was far weaker when the ACA was passed than when Social Security, Medicare, and Medicaid were created.

That’s bad news, but things will get even worse in coming years.

Troubling though the ACA’s startup costs are, they represent only the tip of the fiscal iceberg that will be the fully phased-in law. CBO projects that its annual costs will hit $200 billion by FY2020, or nearly 0.9 percent of GDP. Yet this assumes that lawmakers will be content to allow the ACA’s health insurance subsidies to grow more slowly than low-income beneficiaries’ health care costs, as the law now stipulates. Thus there is every reason to believe that the ACA’s eventual costs will far exceed initial estimates, as happened with Social Security, Medicare, and Medicaid. …Also unclear is whether the ACA’s reinsurance and “risk corridor” provisions will produce unexpected federal budget costs; these provisions were included in the ACA to protect insurers… the Obama administration continues to promise both participating health insurers and taxpayers that they will each be protected from loss under the risk corridor provisions.

The potential bailout for insurance companies is bad news for taxpayers, but it’s even more upsetting for moral and practical reasons.

The big insurance companies got into bed with the White House, figuring it was a good idea for the federal government to coerce Americans into buying their product. As far as I’m concerned, they should swallow heavy losses.

But in Washington, there’s rarely a downside for doing the wrong thing. Instead, this could be like TARP. A reward for bad behavior.

By the way, it’s not just policy wonks who are concerned about the fiscal burden of Obamacare. According to Roll Call, the Congressional Budget Office has – for all intents and purposes – given up trying to estimate the fiscal burden of the legislation.

For Democratic lawmakers who were hesitant to sign onto the sweeping 2010 health care law, one of the most powerful selling points was that the Affordable Care Act would actually reduce the federal budget deficit…the answer to that question has become something of a mystery. In its latest report on the law, the Congressional Budget Office said it is no longer possible to assess the overall fiscal impact of the law. That conclusion came as a surprise to some fiscal experts in Washington and is drawing concern. …In a little-noticed footnote to a report issued in April, “Updated Estimates of the Effects of the Insurance Coverage Provisions of the Affordable Care Act,” the CBO wrote that it and the Joint Committee on Taxation “can no longer determine exactly how the provisions of the ACA that are not related to the expansion of health insurance coverage have affected their projections of direct spending and revenues.”

Translated into plain English, Obamacare is a budgetary black hole.

If only somebody could have predicted that this would happen. But actually, many people did. The history of entitlement programs is that they are bad news in theory and even worse news in reality.

Indeed, even I warned that Obamacare was going to be a bigger fiscal nightmare than originally predicted, as seen in this video.

This Eric Allie cartoon doesn’t focus on the fiscal problems of Obamacare, but it’s worth sharing because the entire law is a mess.

Too bad the American people are the guinea pigs for this experiment in statism.

Wouldn’t it be nice if instead we had the freedom to experiment with market-based healthcare?

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Obamacare resulted in big increases in the fiscal burden of government (ironically, it would be even worse if Obama hadn’t unilaterally suspended parts of the law).

The legislation increased government spending, mostly for expanded Medicaid and big subsidies for private insurance.

There were also several tax hikes, with targeted levies on medical device makers and tanning beds, as well as some soak-the-rich taxes on upper-income taxpayers.

These various policies are bad news for economic performance, but the damage of Obamacare goes well beyond these provisions.

Writing for Real Clear Markets, Professor Casey Mulligan of the University of Chicago explains that Obamacare contains huge implicit tax hikes on work and other forms of productive behavior.

…can we begin to take seriously the idea that the fiscal policies and regulations hidden in the Affordable Care Act are shrinking our economy? …Politicians and journalists use the term tax more narrowly than economists do, but the economic definition is needed to understand the economic effects of the ACA. …Withholding benefits from people who work or earn is hardly different than telling them to pay a tax. For this reason, economists refer to benefits withheld as “implicit taxes.” What really matters for labor market performance is the reward to working inclusive of implicit taxes, and not the amount of revenue delivered to the government treasury… The ACA…is full of implicit taxes. Many of them have remained hidden in the “fog of controversy” surrounding the law and their effects excluded from economic analyses of it.

In other words, his basic message is that the government reduces incentives to be more productive and earn more money when it provides handouts that are based on people earning less money.

Indeed, click here to see a remarkable chart showing how redistribution programs discourage work.

And speaking of charts, here’s one from Professor Mulligan’s article, and it shows the nation’s largest tax hikes based on what happened to the marginal tax rate on working.

Wow. No wonder we’re suffering from a very anemic recovery.

Professor Mulligan elaborates.

During a period that included more than a dozen tax increases, the ACA is arguably the largest as a single piece of legislation, adding about six percentage points to the marginal tax rate faced, on average, by workers in the economy. The only way to cite larger marginal tax increases would be to combine multiple coincident laws, such as the Revenue Acts of 1950 and 1951 and the new payroll tax rate that went into effect in 1950. Even with these adjustments, the ACA is still the third largest marginal tax rate hike during the seventy years. …Let’s not be surprised that, as we implement a new law that taxes jobs and incomes, we are ending up with fewer jobs and less income.

By the way, other academics also have found that Obamacare will lure many people out of the workforce and into government dependency.

The White House actually wants us to believe this is a good thing, as humorously depicted by this Glenn McCoy cartoon.

But rational people understand that our economic output is a function of how much labor and capital are being productively utilized.

In other words, Obamacare is a mess. It’s hurting the economy and should be repealed as the first step in a long journey back to market-based healthcare.

P.S. Mulligan’s chart also re-confirms that unemployment benefits increase unemployment. Heck, that’s such a simple and obvious concept that it’s easily explained in this Wizard-of-Id parody and this Michael Ramirez cartoon.

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What’s the worst economic development during Obama’s reign?

Some would say it’s the higher tax burden.

Some would say it’s the wasteful faux stimulus.

Others would say it’s the fiscal nightmare of Obamacare.

And others would say it’s the loss of millions of workers from the labor force.

I suppose there’s no objective way to pick the most ill-conceived policy, but if you think the biggest problem is either Obamacare or falling labor force participation, then I have some very grim news that will confirm your fears.

According to new research, it appears Obamacare will drive many more people from the labor force. More specifically, the Medicaid expansion will alter – in a very destructive way – the tradeoff between labor and leisure.

Researchers Laura Dague, Thomas DeLeire, and Lindsay Leininger argue in a National Bureau of Economic Research working paper that Medicaid enrollment will lead to significant and lasting reductions in employment among childless adults. …Dague and her colleagues conclude that if the Medicaid expansion enrolls about 21 million additional adults, anywhere from 511,000 to 2.2 million fewer people will be employed. Furthermore, they argue that the Medicaid expansion will knock almost a full point off of today’s labor force participation rate — or share of the civilian population that is working — a measure of economic health that is already at its lowest point since 1977. …This research provides strong evidence for the contention that enrolling in Medicaid traps people in poverty and makes it harder for them to make their way into the middle class. Furthermore, it links the Medicaid expansion to the weakening of our nation’s economy.

By way of background, Medicaid is the federal government’s healthcare entitlement for (supposedly) poor people, while Medicare is the entitlement for old people. And, as part of Obamacare, the eligibility rules for Medicaid were dramatically weakened.

But the new research cited above shows that if you give people “free” health care, that makes them less likely to work.

Particularly when you combine that freebie with food stamps, housing subsidies, welfare, and other handouts.

That’s obviously bad news for taxpayers, who bear the direct cost of a bloated welfare state.

Welfare CliffBut it’s also bad for the less fortunate. They get trapped in a web of dependency, both because handouts reduce the incentive to work (humorously depicted here and here), band also because they face very high implicit marginal tax rates if they actually try to escape government dependency.

But Obama and other leftists probably see this as a feature, not a bug.

After all, those who are lured into being dependent on government presumably have an incentive to vote for those who give them the most goodies.

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