Monday, September 24, 2012

Talking Points on Obamacare

Talking Points on Obamacare

Michael Cannon, the director of health policy studies at the Cato Institute and former domestic policy analyst for the U.S. Senate Republican Policy Committee, has done extensive research on Obamacare and has been watching its implementation. The following talking points are adapted from his various articles, papers, and a Capitol Hill briefing, cited below:

  • The Patient Protection and Affordable Care Act, popularly known as Obamacare, is like a stool that stands on four legs: the pre-existing condition provision, the individual mandate, the premium assistance tax credit, and the Medicaid expansion provision.
  • According to section 1311 of Obamacare, states "shall" create exchanges in order to receive the tax credits for low to moderate income people. The law restricts the tax credits to those exchanges created by the states because the credits were meant as an incentive for the states to create the exchanges.
  • According to section 1321 of Obamacare, in a state that refuses to set up an exchange, the federal government creates an exchange for the state; however, the law states 6 times that the tax credits are only for those exchanges created by the states.
  • Several states have been adamant about not creating the health care exchanges, namely Texas, Louisiana, Michigan, South Carolina, and Florida. New Jersey Governor Chris Christie vetoed setting up an exchange in his state in May of this year, and Governor John Lynch of New Hampshire (a Democrat) also vetoed the initiative in his state. Check to see how your state is handling Obamacare's exchange provision here.
  • Employers who fail to provide what the federal government defines as "essential coverage" to employees are liable to a tax as high as $3,000 per employee. However, if a state refuses to set up an exchange and the federal government sets one up for that state instead, according to the letter of the law, the employer does not incur the tax. States that do not set up an exchange are not subjecting their employers to the tax.
  • In order to close this state-exchange loophole in the law, the IRS disregarded Obamacare's statutory language on May 18, 2012, by declaring that the tax credit will apply to the federally created exchanges. This is an illegal action by the IRS that will increase deficit spending tremendously.
  • After the Supreme Court's decision in June upholding Obamacare, the law can be overturned by administrative action or by the Congressional Review Act.  
  • The Supreme Court decision upheld the Individual Mandate under Congress' taxing power.  According to Chief Justice John Roberts, the government can not only tax you on what you do, but it can also tax you for what you don't do. 
  • Contact your Governor today and urge him or her not to create an exchange in your state!

To learn more about the illegal IRS action concerning state exchanges under Obamacare, watch Michael Cannon's presentation on Capitol Hill last week -  (45 min)

Obama's War on Women

1).  800,000 more women are in poverty since Obama took office.

2).  Obama's bleak economy has caused educational opportunities to vanish and strained the family budget.

3).  Four times more men than women are getting jobs.

4).  Hispanic women are the fastest and largest growing poverty group in America.

5).  7.5 million women are in severe poverty.

6).  Sandra Flock does not represent the independent woman. Women who wish to be independent, have achieved success, and who are in the workforce do not need free contraceptives. They can afford it themselves. They don't believe government has to support their sex lives.

Paul Ryan's Plan -  "Path to Prosperity"   (in simple terms)

The Path to Prosperity presents a meaningful alternative to Obama's massive spending and borrowing policy.  It gives voters a choice between futures.  Do we want a future where the United States and Americans are constrained by debt and important programs are increasingly undermined, or do we want a future where we are free from debt and our programs such as Social Security and Medicare are safe. 

        The Pat to Prosperity cuts $6.2 trillion in spending from the president's budget over the next 10 years, reduces the debt as a percentage of the economy, and puts the nation on a path to actually pay off our national debt. Our proposal brings federal spending to below 20% of gross domestic product (GDP), consistent with the postwar average, and reduces deficits by $4.4 trillion.

        A study just released by the Heritage Center for Data Analysis projects that The Path to Prosperity will help create nearly one million new private-sector jobs next year, bring the unemployment rate down to 4% by 2015, and result in 2.5 million additional private-sector jobs in the last year of the decade. It spurs economic growth, with $1.5 trillion in additional real GDP over the decade. According to Heritage's analysis, it would result in $1.1 trillion in higher wages and an average of $1,000 in additional family income each year.

Here are its major components:

 Statement of Revenue and Debt:  The biggest driver of revenue to the federal government isn't higher tax rates....  it's economic growth.  Growth is the key to fiscal sustainability. And low tax rates are the key to growth. 

       Our current level of national debt (US debt held as a share of the economy) poses a fundamental challenge to our American way of life. When Obama took office, the national debt was $10 trillion. It has now surpassed $16 trillion. As a result of the conduct of all prior administrations, the debt grew to $10 trillion.  In just 4 years under Obama alone, he has added $6 trillion. Since Election Day 2008, US debt has increased by 70%.  Our national credit rating has been downgraded not once but twice.  There is talk of another downgrade.  Never before in our nation's history has our credit rating been anything but stellar. If our current path of government spending continues, the debt trajectory (as compared to economy) will increase exponentially and we will face economic collapse.  Our current path is not sustainable.

      Obama's budget proposal calls for spending increases of $1.5 trillion and tax increases totaling $1.9 trillion (over 10 years), with cuts primarily hitting our national defense.

 Lifting the Crushing Burden of Debt:  A nation's indebtedness put simply is the amount it owes relative to the amount it makes (or takes in). Last year, our national debt (the money the government owes to others)  surpassed the entire US economy. If left on the course proposed by Obama's current budget plan, the ever-rising debt will trigger an inevitable crisis that will be extremely difficult, if not impossible, to reverse once it takes hold and impacts our economy.  Financial institutions (creditors) and foreign governments, like China, are financing our debt. Foreigners now own roughly half of all US debt. Ten years ago, foreigners owned just 5%. This makes our nation vulnerable to other nations.  If the government fails to prevent the coming crisis (which is preventable at this point), it will rank among history's most infamous instances of political malpractice. Many of the great empire declines have resulted because of crushing government debt.

      Warning signs of financial crisis would include the following: rising inflation, stagnant economy, high interest rates on mortgages, car loans, credit cards, etc, and a world decline in the dollar (the world's reserve currency).  Obama's budget plan increases our national debt to the point where we won't be able to begin paying down our debt in the foreseeable future.

       Under the Ryan plan, and predicated on the restoration of spending discipline in Washington, government spending will fall from its current elevated level of 24% of the economy to below 20% by 2015. Spending will be cut by more than $5 trillion over the next decade. Debt as a share of the economy will be cut by roughly 15% over the next decade. (The CBO estimates that this budget will produce annual surpluses by 2040 and the government can begin paying down its debt after that).

 Restoring Economic Freedom:  The economic crisis of 2008 resulted from bad lending policies from Fannie Mae and Freddie Mac.  The federal take-over of Fannie Mae and Freddie Mac continues to be the most costly taxpayer bailout to result from that crisis. So far, they have received over $185 billion in bailouts.

         On one hand Obama urges: "No challenge is more urgent. No debate is more important. We can either settle for a country where a shrinking number of people do really well, while a growing number of Americans barely get by. Or we can restore an economy where everyone gets a fair shot, everyone does their fair share, and everyone plays by the same set of rules."  But on the other hand, his administration plays crony politics and is in the business of picking winners and losers with bailouts and over-regulation, thereby frustrating economic freedom.  (healthcare, energy, Freddie Mac and Fannie Mae, TARP, corporate welfare, redistribution of wealth)

        Ryan's plan will repeal Obamacare and will eliminate provisions in financial-reform regulations to make it much harder to allow future Wall Street bailouts.  It will put an end (will privatize) to the practice of corporate welfare and taxpayer bailouts in housing finance and will eliminate Freddie Mac and Fannie Mae.  The government will no longer guarantee or subsidize mortgages.  Other elements of Ryan's plan include:

--  The government will no longer provide subsidies for "green" energy companies.

--  The government will open up the US soil for further oil/coal/etc exploration. (Ex. the Keystone XL Pipeline)

--  Scale back the EPA

--  There will be a pay freeze on all federal employees until 2015.  There will also be a 10% cut of the (federal) workforce, as well as a renegotiation of federal benefits (fed employees will have to contribute more to their retirement benefits).

--  There will be an increase in the budget for anti-fraud division.

--  There will be a fire sale of federal assets. This includes millions of acres of federal land, federal buildings, federal cars etc...

 Washington's Culture of Spending:  Washington has refused to adhere to the federal budget process, which has allowed government to spend recklessly and to put us further into a fiscal crisis. The Democrats have not put forth a budget plan. Obama recently proposed a plan, although it received no Congressional support. 

The Ryan plan will effect Washington's culture of spending in the following ways:

-- Replace the discretionary sequester (automatic spending cut) in FY2013 (fiscal year 2013 budget) with a new cap, and maintain enforceable discretionary caps on spending throughout the next decade

-- Establish a binding cap on total spending as a percentage of the economy (GDP)

--  Cap the total size of government, enforced by a sequester

-- Create safeguards that would check Congress' appetite for spending on entitlement programs

-- Reform the budget 'baseline' to remove automatic inflation increases

-- Budget for the long-term by establish binding caps for major categories of spending

-- Require Congress to review long-term budget trends every 5 years in order to keep Congressional spending on a sustainable path

-- Authorize reconciliation of long-term savings up to 75 years for Social Security, Medicare, and Medicaid

-- Require CBO long-term estimates

-- Enact reforms to incorporate fair-value accounting principles

 Defense Spending:  Currently, defense constitutes 20% of total federal spending. This is actually lower than under previous administrations (25%).  Obama's budget proposal slashes defense spending by nearly $500 billion (= a 10% cut) over the next 10 years in order to focus on the costs of growing entitlement services. National Defense is being penalized and sacrificed b/c of the unstoppable spending of Congress, even though defense has not added to the debt crisis. A look at the numbers in Obama's budget proposal reveals that American taxpayers and the Defense Department are being asked to bear the ENTIRE burden of deficit reduction. Government risks not being able to provide for the safety and security of the American people and our military forces overseas - the government's first priority.

       Sec. of Defense Leon Panetta has acknowledged that the defense cuts would come at a time when there are ongoing global threats to the US and to Americans as well, including increasing nuclear threats from Iran, Korea, and other unstable totalitarian regimes.

       Ryan's Path to Prosperity will fund our defense at levels to provide for a robust nation defense, in order to keep America safe.  It will provide $554 billion for the next fiscal year and $6.2 trillion over the next decade, which meets military goals and strategies. Will restore most of the cuts made by Obama.

 Repairing the Social Safety Net:  Poverty is growing in this country. Programs that were created to sustain Americans in difficult times (safety net) and help them get out of poverty and out of the inner cities have become generational entitlement programs. Entitlement programs foster dependence (and encourage fraud), and in our current spending-driven debt crisis, they  put lower-income Americans at greatest risk because of the threat to the longevity and integrity of such programs.  From a monetary perspective, these programs are growing at an unsustainable rate. The recent economic downturn has greatly increased the eligibility and the demand for government assistance programs.  Yet even prior to the 2008 financial crisis, there has been a dramatic increase in federal spending on public assistance programs. The two programs most directed to lower-income recipients are Medicaid and Food Stamps (Supplemental Nutrition Assistance Program, or SNAP). Medicaid spending has grown on the average of 9% each year (far faster than the growth of the overall economy) and federal spending on food stamps has quadrupled over the past ten years. Enrollment practically doubled from 2008 to the present ($26 million to $47 billion). and spending has more than doubled.  The government cannot provide proper oversight of these programs (compare to the massive oversight provision in the Obamacare, where the government wants to make sure individuals pay their premiums; it doesn't seem to care when people improperly benefit from free services). 

       Another safety net is education and job training. The current dilemma is this: college students want federal financial aid and grants but they also want a job when they graduate.  Obama has made financial aid and grants available but has taken away their opportunity to find employment or to be compensated accordingly for a job. Unfortunately, studies show that increased federal financial aid is really just another wealth redistribution scheme.  Increased federal financial aid is simply being absorbed by tuition increases. While financial aid is intended to make college more affordable, there is growing evidence that it has had the opposite effect.  Decisions by colleges and universities to raise their prices would have been constrained if the federal government had not stepped in so often to subsidize rising tuitions. (in other words, why not raise tuition, the government is paying for it anyway?)  In 2010, the government went from primarily guaranteeing student loans to lending 100% of its student-loan money directly thru the Dept. of Education, turning the agency into one of the largest lending banks in the country. These student loans have to be borrowed from global credit markets at an average of at least $100 billion per year, adding to our already dangerous national debt levels.  Even more problematic is the fact that these extremely risky loans are listed as "profit-making investments" tending to encourage the government to want to offer more loans.

      The unsustainable increase in cost of both Medicaid and the Food Stamp program is the result of a flawed federal state funding program that has fueled unsustainable growth. State governments receive federal dollars in proportion to the number of people they enroll in these programs, which gives them an incentive to add more individuals to the rolls. Like Medicaid, the states administer the SNAP program, but unlike Medicaid, the entire cost of benefits under the SNAP program is born by the US taxpayer.  So with SNAP, state governments have little incentive to make sure that recipients are working, looking for work, or enrolled in job training programs, which leads to a high degree of waste, fraud, and abuse.  Actually, both programs are rife fraud, and abuse.

       Obama's budget plan is to provide for increases in entitlement programs (while slashing our national defense).  Because the Medicaid system is broken yet continues to take on millions of more recipients each year (it is expected to more than double over the next 10 years), Americans will have to pay higher taxes to keep it going.  Because Medicaid's reimbursement rates have been decreased to below-market levels, the quality of care that Medicaid recipients receive is declining below standard.  At the same time, Obama wants the States to expand Medicaid to include more recipients.  His plan proposes no change for SNAP and no change for the student loan program.  


Ryan's plan will secure Medicaid benefits by:
 --  Converting the federal share of Medicaid spending into a block grant that is indexed for inflation and population growth.  This reform will end the failed one-size-fits-all approach that has tied the hands of many state governments and required them to follow strict program requirements and enrollment criteria. States will have the freedom and flexibility to tailor their own Medicaid programs to fit the needs of their populations and taking into account their unique resources.

--  Giving states the ability to offer their Medicaid beneficiaries more options and better access to care (where recipients can chose their own doctors and be involved in healthcare decisions)

--  Constraining Medicaid's growing costs by $810 billion over 10 years

Ryan's plan will secure the Food Stamps program as follows:

--  Convert the SNAP program into a block grant where states can have the freedom and flexibility to tailor their own programs to fit the needs of their low-income populations

--  Aid will be contingent on work or job training

Ryan's plan will reform the federal college loan program as follows:

--  reform the Credit Reform Act

--  give Pell grants to those low-income students who truly need it

 Welfare Reform:  Obama's budget plan is to provide for increases in entitlement programs (while slashing our national defense).  His plan encourages greater dependency, frustrates upward mobility, perpetuates poverty, encourages envy, and entrenches an entitlement mentality.

Ryan's budget plan will strengthen and improve welfare programs for those who need them and eliminate welfare for those who don't.  It will build upon the historic welfare reforms of the late 1990s by:

--  imposing work requirements and time limits

--  transforming the system into a need-based safety-net program

--  incorporating education programs (with accountability requirements) and job-training programs to get people into the work force as quickly as possible

--  granting the states will be greater flexibility to design their own welfare systems

 Healthcare:  With regard to healthcare, Obama has elevated it almost to a "fundamental right" and made it our newest entitlement.  Obamacare will force an additional 20 million Americans by 2014 into a system that can hardly handle its current enrollment. Without an increase in physicians, the engorged system will be a nightmare, with long wait times, and limited resources.  Ryan's plan requires that the healthcare reform bill (the Patient Protection & Affordable Care Act) be repealed.

 Health and Retirement Security: Absent a budget plan and spending reform, Social Security and Medicare/Medicaid will soon grow to consume every dollar of revenue that the government brings in through taxation.  When Social Security was enacted in 1935, there were about 42 working-age Americans for each retiree. the average life expectancy was 60 years for men and 64 for women. Workers and employees each paid a 1% payroll tax.  Today, the life expectancy for a man is 76 years and 80.6 years for a woman, and both workers and employees pay a 6.2% payroll tax. In 1945, the age of retirement was 69 years and now it is 63 years. Social Security was not designed to make good on its promise under current (expectancy and retirement) conditions.  A Congressional report shows that Social Security's trust funds will be exhausted by 2036. Harry Reid said he is not willing to look at the problem now.  When asked when the Democrats would put forward a plan to fix Social Security, Nancy Pelosi responded: "Never. Is never good enough for you?" Similarly, Medicare is threatened.  Unless government acts, Medicare and Social Security will remain threatened for current seniors and will not be there for younger families when they reach retirement age and need the security.

      Under the new healthcare law, healthcare decisions for the elderly will be made by bureaucrats and not physicians. The law creates an unaccountable board of 15 unelected bureaucrats - the Independent Payment Advisory Board (IPAB) - empowered to make decisions that will cut costs.  In other words, it will help cut Medicare costs by rationing care (denying and restricting healthcare access and options) for seniors.  

      Under Obama's proposed plan, funding for Medicare will continue to increase.  Eventually it will reach unsustainable spending levels and the system will be jeopardized for future generations. Obama's solution is to increase marginal tax rates. Furthermore, there is a 3.8% Medicare surtax included in Obamacare. Obama claims to be committed to Medicare yet he took $760 billion from Medicare to help fund Obamacare. He provided no mechanism or plan to pay the money back.  He simply raided Medicare to help fund his new entitlement plan.  Obama's plan for Social Security is to ignore it and deny there is a problem. The Obama policy of "raid, ration, raise taxes, and deny the problem" will mean painful benefits cuts for current seniors and huge tax increases on younger working families, robbing them of the opportunity to save for their own retirements.

      Ryan's budget reforms will protect health and retirement security. It will not increase taxation. Paul Ryan believes that the nation cannot fix its retirement security system by leaving young families with less to save. His plan starts with saving Medicare and getting rid of the IPAB (aka, "death panels"). In fact, it calls for the repeal of the entire healthcare reform bill.

        Starting in 2023, under Ryan's plan, new Medicare beneficiaries will be enrolled in the same kind of health-care program that members of Congress enjoy. Future Medicare recipients will be able to choose a plan that works best for them from a list of guaranteed coverage options, including a traditional fee-for-service option.  It is not a voucher program but rather a premium-support model. A Medicare premium-support payment would be paid, by Medicare, to the plan chosen by the beneficiary, subsidizing its cost.

        In addition, Medicare will provide increased assistance for lower- income beneficiaries and those with greater health risks. Reform that empowers individuals—with more help for the poor and the sick—will guarantee that Medicare can fulfill the promise of health security for America's seniors.

       Under the Ryan plan, Social Security will be reformed to prevent severe cuts to future benefits. This budget forces policy makers to work together to enact common-sense reforms. Leaders in both the US House and Senate will be required to submit a plan to reform Social Security.  Furthermore, it will establish a requirement that in the event Social Security goes bankrupt, the President, in conjunction with the Board of Trustees, must submit a plan for restoring a sufficient balance to the fund. The goal of this proposal is to save Social Security for current retirees and strengthen it for future generations by building upon ideas offered by the president's bipartisan fiscal commission.

 Tax Reform: .When the tax code was established in 1913, it contained about 400 pages of laws and regulations.  Now it includes over 70,000 pages. In the past 10 years alone, more than 4,400 changes were made (more than one change per day). Many of the major changes over the years involved carving out special preferences, exceptions, exclusions, or deductions for various activities or groups. These special tax breaks and preferences add up to more than $1 trillion per year. They also add to the code's unfairness. For example, the top 1% of taxpayers reap about 3x as much benefit from special tax credits and deductions than middle-income earners and 13x as much benefit than the lowest income earners. The special tax breaks and deductions narrow the tax base by roughly 50%.  The special carve-outs and deductions necessitates the high tax rate that concerns taxpayers and which undermines US competitiveness in business. Furthermore, the tax code is so complex that 80% of Americans can't understand it or fear it and therefore don't prepare their tax returns themselves.  The average fee for preparation is $230 an individual/couple and about $600 for small businesses.

       The high corporate tax rate (the US has the highest in the world), in addition to the stifling effects of Obamacare, is severely hampering job creation. Obama's budget plan calls for $1.9 trillion in higher taxes on American families and businesses. He would increase the top two tax brackets from 33% to 36% and from 35% to 39.6%, respectively, starting in 2013. His plan would also phase out personal exemptions and itemized deductions for these income groups and limit the value of deductions against income. Combined with the 3.8% Medicare surtax included in Obamacare, the President's proposed plan would raise the top marginal tax rate to 44.8%.  Obama's plan would also increase the tax rate on capital gains from 15% to 20% for households making over $250,000 ($200,000 individuals) and would tax dividends at ordinary tax rates (as high as 39.6%) - raising taxes on investments at a time when new business investment is critical for sustaining the weak economic recovery.  His plan would add to the complexity of the tax code by adding new credits and deductions and new tax increases (such as the Buffett Rule, in honor of Warren Buffett).

       The biggest driver of revenue to the federal government isn't higher tax rates....  it's economic growth.  Growth is the key to fiscal sustainability. And low tax rates are the key to growth. Empirical studies suggest that a reduction in corporate tax rate, for example, could lead to significant economic benefits, including a boost in GDP growth. The Ryan budget plan acknowledges that Washington doesn't have a revenue problem. It's problem isn't that people aren't paying enough in taxes.  Washington has a spending problem, and the plan primarily addresses the spending problem. First, with respect to tax reform, the Ryan plan would focus on growth by reforming the nation's outdated tax code, consolidating brackets, lowering tax rates, and assuming top individual and corporate rates of 25%.  Specifically, the plan will:

--  Reject any plan to increase taxes

--  Consolidate the current six individual income tax brackets into just two brackets of 10% and 25%.

--  Reduce the corporate tax rate from 35%-40% to 25%

--  Eliminate loopholes for upper-income individuals in order to provide fairness and broaden the tax base

--  Shift from a "worldwide" system of taxation to a "territorial" system which will encourage companies to bring their foreign earnings into the US for investment purposes.

This is America's moment to advance a plan for prosperity. The Ryan budget offers the nation a model of government that is guided by the timeless principles of the American idea: free-market democracy, open competition, a robust private sector bound by rules of honesty and fairness, a secure safety net, and equal opportunity for all under a limited constitutional government of popular consent.

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