Written by Vincent Gioia
By Vincent Gioia
In the finest tradition of the car salesman who says “Here is my final offer but you have to take it right now,” House and Senate Democrats at the urging of President Obama want to push through legislation by the end of August that will transform Americans’ health care, probably irreversibly. Imagine; a complete overhaul of medical care in the United States, said to be about one-sixth of the total US economy, to be rushed through congress with virtually no review, analysis or deliberation by the Senate and House.
More time is likely spent on mundane things like national recognition of one or the other organization or person than on something as important as enacting a system that will change how Americans receive medical care in the future or, indeed, whether or not they will receive any healthcare at all.
Until now opposition has focused almost entirely on the cost of the Democrat/Obama healthcare plans. Although the cost is a legitimate issue to consider, there are far worse things in store for Americans if the Democrats are successful. [This will be addressed in a future article,]
At an estimated cost of $1.5 trillion, there is no doubt that Americans will be required to shoulder enormous tax burdens. However the purported cost estimate is specious; the actual cost will like be twice or more this estimate. Add the cost of the healthcare program to already-incurred other costs of the no stimulus “Stimulus Bill and other spending for the budget deficit, TARP, et al, and you have a total expenditure and deficit which is unimaginable even in modern times.
President Obama has made clear he plans to repeal the Bush tax cuts on schedule in 2011; this would mean hiking the top marginal capital gains tax rate from 15 percent to 25.4 percent--much higher than Obama promised during his march to the presidency, and near the 28 percent rate existing before the Republican-inspired1997 Bill Clinton tax cuts. However, the tax increase on capital gains would pale compared to the new top rate on ordinary income, already scheduled to go from 35% to 39.6 percent in 2011, but now pushed up to 45 percent with the new surtax, and actually substantially higher than that as a percentage of taxable income because the new 5.4 percent surtax is applied to adjusted gross income (AGI).
As bad as this is, it actually gets a lot worse. Employers would also be mandated to provide health insurance under the bill, and the cost of health insurance would likely skyrocket because of new regulations called guaranteed issue and community rating. The only alternative, which many companies would either be forced into by cost considerations or choose for simplicity, would be to pay a payroll tax of as much as 8 percent. That's on top of the existing 15.3 percent payroll tax for Social Security and Medicare, creating a new total payroll tax of 23.3 percent.
There would also be a new tax on individuals who don't have health insurance, despite President Obama's campaign promise not to require people to be insured or to impose taxes on those making less than $250,000. That tax would be another 2.5 percent of AGI.
Add to these tax figures state and local taxes, (which are also rising in most of the country) and Americans who work to support those that don’t will be taking home much less than half of the money they earn.
It’s not “rocket science,” as they say; it's actually pretty simple economics. The government does not create anything by spending; it simply moves money around. Every dollar the government spends has to come from somewhere, but there are only three options and all make people poorer. Higher taxes take money out of people's pockets and deny them the freedom to spend, save, or invest that money according to their own wishes. Merely printing money is inflationary and destroys the value of every American's savings, slams people on fixed incomes, usually the elderly, with higher prices, and creates a huge hurdle to new investment.
The only other option, which we have relied on to the tune of over a trillion dollars already this year, is to borrow. But borrowing is no panacea either; every dollar borrowed by the government is a dollar no longer available for private investment. Moreover, we and future generations have to pay back all the money we've borrowed, with interest. It also will become increasingly difficult to borrow the huge sums required to support our deficits as other countries and wealth funds become skittish about the American economy. Furthermore if some like China, Russia and India succeed in having the world replace the dollar as a global currency, the aftermath will be additionally devastating. Therefore in the long-run the only two practical options are huge tax hikes or skyrocketing inflation.
It is impossible for government spending to make us richer when every way the government can raise money makes us poorer. We can't afford another stimulus, a government takeover of health care, the cap-and-trade energy takeover, or any other radical big government policy. We already have a six-month deficit of over a trillion dollars, how much will the deficit be after 12 months?
Congress must take time to really consider what they are about to do. Don’t give us the car salesman treatment. Conscientious members of the House and Senate must step up and stop the head long rush to economic and healthcare oblivion.