Lee Bias for Congress Blog

By:Robert J. Samuelson

Looking back, we may all remember April 15, 2010, as the day we got off cheaply. Why a growing deficit and increased spending on health care and Social Security nearly guarantee higher tax bills in our future.

Almost nobody likes tax day, but people may look back nostalgically on tax day 2010 and those of earlier years because, almost certainly, taxes are going up in the future, and they may go up a lot. With hindsight, tax day 2010 may seem almost dreamy.

Why? For starters, almost half of U.S. households aren't paying any income taxes on their 2009 earnings. The exact figure is 47 percent, says the Tax Policy Center of the Urban Institute and Brookings Institution, two think tanks. Among elderly households, 55 percent pay no income tax; among all households with children (including those headed by single parents), the nonpaying share is 54 percent. By contrast, only 38 percent of married couples filing jointly don't pay. (Of course, this doesn't mean people pay no federal taxes; about three quarters of households pay more in Social Security payroll taxes than in income taxes.)

The personal exemption and standard deduction, combined with the child tax credit and the Earned Income Tax Credit, shield many poor and middle-class families from the income tax. In 2009 they got extra protection from President Obama's Making Work Pay tax credit, which was $400 for single workers (phasing out at $75,000 of income) and $800 for a couple (phasing out at $150,000 of income). Without that credit, probably only 40 percent of households or less wouldn't have paid income taxes. President Obama has proposed that the credit be renewed for 2011. But given the massive federal budget deficits, there's a good chance that the credit will someday expire.

So that's one pressure for higher taxes. But it's peanuts compared to the real threat: an aging America. As almost everyone knows, the huge baby-boom generation is edging—or collapsing—into retirement. Its first members, born in 1946, turn 65 in 2011, when they will qualify for Medicare. Some have already taken Social Security as early as 62 at a reduced rate. Boomers collecting benefits, combined with uncontrolled health costs, are the underlying engine for rising federal spending and endless budget deficits.

To which there's at least one obvious solution: raise taxes. By all estimates, the budget outlook is daunting. The latest projections of the Congressional Budget Office reckon the cumulative deficits under President Obama's policies to be $12.7 trillion from 2009 to 2020. In 2020 the estimated annual deficit will be $1.25 trillion, or 5.6 percent of the economy (gross domestic product), despite assumed "full employment" of 5 percent. And the deficits get larger with every succeeding year. Given unavoidable uncertainties, these precise projections are likely to prove wrong. But their basic message seems incontestable: there's a large and growing gap between the government's promises and the existing tax base.

How big a tax increase would be needed to close the gap? Well, huge. To put things in perspective, all federal taxes (income, payroll, and excise) averaged 18.1 percent of GDP from 1970 to 2009. Under CBO's assumptions about Obama's policies, taxes in 2020 would already be slightly higher, at 19.6 percent of GDP. But on top of that, there'd need to be a further tax boost approaching a third to balance the budget, because spending is projected at 25.2 percent of GDP. Needless to say, this would be the largest tax burden in U.S. history, even including World War II.

A recent study by Rosanne Altshuler, Katherine Lim, and Roberton Williams of the Tax Policy Center shows what this would mean for income tax rates. Their study uses earlier and somewhat more optimistic CBO projections. Moreover, the study assumes only that the budget deficit is cut to 2 percent of GDP—not that it's balanced. Still, income tax rates would have to rise sharply to reach even this goal. If all income tax rates were increased proportionately, today's lowest rate of 10 percent would go to 15 percent and the highest rate of 35 percent would go to 52 percent. If only today's top two tax rates of 33 percent and 35 percent were raised, the new top rates would be 86 percent and 91 percent. At those astronomical levels, the study says, the well-off and wealthy would work less and pursue aggressive tax avoidance. Tax revenues would suffer.

These bleak estimates demonstrate why politicians of both parties have avoided confronting the government's long-term budget deficits. Anything they might do—raising taxes or cutting retirement benefits such as Social Security and Medicare—risks a public backlash. Some experts urge new taxes, such as a value-added tax or energy taxes. Others talk of "broadening" the income-tax base by eliminating or reducing tax breaks (deductions, credits, or exemptions). But of course, none of these steps would be popular. Hardly anyone wants to pay higher taxes, and most big tax breaks (the home-mortgage interest deduction, credits for college tuition, the charitable deduction) benefit major constituencies.

Almost all the pressures on taxes are in the same direction: up. It will be hard for President Obama to keep his promise not to raise taxes on households with incomes below $200,000 (for singles) and $250,000 (for couples). It will be hard for economic conservatives or the tea party to achieve meaningful tax reductions. Just about everyone will be tempted to deplore federal budget deficits—and do nothing about them. But this escape route may close; many economists warn that endlessly large deficits risk big jumps in interest rates. Someday, higher taxes may be unavoidable.

So, the lesson for tax day 2010 is simple: enjoy it while you can. It's not going to get any easier.

Newsweek

 

By Simon Heffer

It is a universal political truth that administrations do not begin to fragment when things are going well: it only happens when they go badly, and those who think they know better begin to attack those who manifestly do not. The descent of Barack Obama's regime, characterised now by factionalism in the Democratic Party and talk of his being set to emulate Jimmy Carter as a one-term president, has been swift and precipitate. It was just 16 months ago that weeping men and women celebrated his victory over John McCain in the American presidential election. If they weep now, a year and six weeks into his rule, it is for different reasons.

Despite the efforts of some sections of opinion to talk the place up, America is mired in unhappiness, all the worse for the height from which Obamania has fallen. The economy remains troublesome. There is growth – a good last quarter suggested an annual rate of as high as six per cent, but that figure is probably not reliable – and the latest unemployment figures, last Friday, showed a levelling off. Yet 15 million Americans, or 9.7 per cent of the workforce, have no job. Many millions more are reduced to working part-time. Whole areas of the country, notably in the north and on the eastern seaboard, are industrial wastelands. The once mighty motor city of Detroit appears slowly to be being abandoned, becoming a Jurassic Park of the mid-20th century; unemployment among black people in Mr Obama's own city of Chicago is estimated at between 20 and 25 per cent. One senior black politician – a Democrat and a supporter of the President – told me of the wrath in his community that a black president appeared to be unable to solve the economic problem among his own people. Cities in the east such as Newark and Baltimore now have drug-dealing as their principal commercial activity: The Wire is only just fictional.

Last Thursday the House of Representatives passed a jobs Bill, costing $15 billion, which would give tax breaks to firms hiring new staff and, through state sponsorship of construction projects, create thousands of jobs too. The Senate is trying to approve a Bill that would provide a further $150 billion of tax incentives to employers. Yet there is a sense of desperation in the Administration, a sense that nothing can be as efficacious at the moment as a sticking plaster. Edward B Montgomery, deputy labour secretary in the Clinton administration, now spends his time on day trips to decaying towns that used to have a car industry, not so much advising them on how to do something else as facilitating those communities' access to federal funds. For a land without a welfare state, America starts to do an effective impersonation of a country with one. This massive state spending gives rise to accusations by Republicans, and people too angry even to be Republicans, that America is now controlled by "Leftists" and being turned into a socialist state.

"Obama's big problem," a senior Democrat told me, "is that four times as many people watch Fox News as watch CNN." The Fox network is a remarkable cultural phenomenon which almost shocks those of us from a country where a technical rule of impartiality is applied in the broadcast media. With little rest, it pours out rage 24 hours a day: its message is of the construction of the socialist state, the hijacking of America by "progressives" who now dominate institutions, the indoctrination of children, the undermining of religion and the expropriation of public money for these nefarious projects. The public loves it, and it is manifestly stirring up political activism against Mr Obama, and also against those in the Republican Party who are not deemed conservatives. However, it is arguable whether the now-reorganising Right is half as effective in its assault on the President as some of Mr Obama's own party are.

Mr Obama benefited in his campaign from an idiotic level of idolatry, in which most of the media participated with an astonishing suspension of cynicism. The sound of the squealing of brakes is now audible all over the American press; but the attack is being directed not at the leader himself, but at those around him. There was much unconditional love a year or so ago of Rahm Emanuel, Mr Obama's Chief of Staff; oleaginous profiles of this Chicago political hack, a veteran of that unlovely team that polluted the Clinton White House, appeared in otherwise respectable journals, praising the combination of his religious devotion, his family-man image, his ruthless operating technique and his command of the vocabulary of profanity. Now, supporters of the President are blaming Mr Emanuel for the failure of the Obama project, not least for his inability to construct a deal on health care.

This went down badly with friends of Mr Emanuel, notably with Mr Emanuel himself. His partisans, apparently taking dictation from him, have filled newspaper columns and blogs with uplifting accounts of the Wonder of Rahm: as one of them put it, "Emanuel is the only person preventing Obama from becoming Jimmy Carter". They attack other Obama "sycophants", such as David Axelrod, his campaign guru, and Valerie Jarret, a long-time friend of Mrs Obama and a fixer from the office of Mayor Daley of Chicago who now manages – or tries to manage – the President's image. These "sycophants" have, they argue, tried to keep the President above politics, letting Congress run away with the agenda, and gainsaying Mr Emanuel's advice to Mr Obama to get tough with his internal opponents. This naïve act of manipulation has brought its own counter-counterattack, with an anti-Emanuel pundit drawing a comparison with our own Prime Minister and ridiculing the idea that Mr Obama should start bullying people too.

The root of the problem seems to be the management of expectations. The magnificent campaign created the notion that Mr Obama could walk on water. Oddly enough, he can't. That was more Mr Axelrod's fault than Mr Emanuel's. And, to be fair to Mr Emanuel, any advice he has been giving the President to impose his will on Congress is probably well founded. The $783 billion stimulus package of a year ago was used to further the re-election prospects of many congressmen, not to do good for the country. America's politics remain corrupt, populated by nonentities whose main concern once elected is to stay elected; it seems to be the same the whole world over. Even this self-interested use of the stimulus package appears to have failed, however. Every day, it seems, another Democrat congressman announces that he will not be fighting the mid-term elections scheduled for November 2. The health care Bill, apparently so humane in intent, is being "scrubbed" (to use the terminology of one Republican) by its opponents, to the joy of millions of middle Americans who see it as a means to waste more public money and entrench socialism. For the moment, this is a country vibrant with anger.

A thrashing of the Democrats in the mid-terms would not necessarily be the beginning of the end for Mr Obama: Bill Clinton was re-elected two years after the Republicans swept the House and the Senate in November 1994. But Mr Clinton was an operator in a way Mr Obama patently is not. His lack of experience, his dependence on rhetoric rather than action, his disconnection from the lives of many millions of Americans all handicap him heavily. It is not about whose advice he is taking: it is about him grasping what is wrong with America, and finding the will to put it right. That wasted first year, however, is another boulder hanging from his neck: what is wrong needs time to put right. The country's multi-trillion dollar debt is barely being addressed; and a country engaged in costly foreign wars has a President who seems obsessed with anything but foreign policy – as a disregarded Britain is beginning to realise.

There are lessons from the stumbling of Mr Obama for our own country as we approach a general election. Vacuous promises of change are hostages to fortune if they cannot be delivered upon to improve the living conditions of a people. The slickness of campaigning that comes from a combination of heavy funding and public relations expertise does not inevitably translate into an ability to govern. There is no point a nation's having the audacity of hope unless it also has the sophistication and the will to turn it into action. As things stand, Barack Obama and America under his leadership do not.

Telegaph.Co.UK

February 21 2010

By Dana Milbank

Let us now praise Rahm Emanuel.

No, seriously.

February 20th 2010

By Rich Lowry

Remember back in June, in President Obama’s major address to the AMA, when he said the following? “No matter how we reform health care, we will keep this promise. . . . If you like your health-care plan, you will be able to keep your health care plan. Period. No one will take it away. No matter what.” In the six months since, there seems to have been a change.

Obamacare would require Americans to buy government-approved health insurance. It would make it illegal to offer choices in insurance plans beyond the handful of very similar ones that the government would allow. It would become illegal to offer new and innovative plans. Under any of the government-approved plans, it would become illegal to pay your doctor directly for more than a certain percentage of your care. Higher deductible, consumer-driven plans would be severely altered or eliminated. By law, a greater percentage of money would have to be paid in insurance premiums, rather than directly for care. Competition and choice would diminish tremendously. One-size-fits-all conformity would rule the day.

At its core, what Obamacare really means is a loss of freedom.

Obamacare would significantly diminish Americans' freedom to control the fruits of their own labors and to spend them as they choose and as they think best. The Congressional Budget Office (CBO) reports that American taxpayers would be on the hook for approximately $2.5 trillion for Obamacare in its real first ten years in operation (2014 to 2023) — about triple the false number of $871 billion that the Democrats are spreading. As the CBO conveys, $871 billion only covers the cost of insurance coverage expansions, which is only a portion of the bill. Furthermore, less than 2 percent of the costs for what the Democrats are calling the bill's "first-ten-year costs" would hit prior to the fifth year of that period. So the Democrats are really giving the six-year costs — for insurance coverage expansions alone — and calling them the ten-year costs for the whole bill. Either the Democrats know this and are being deliberately deceitful, or else they don't understand their own bill and are in over their heads even more than it appears.

In exchange for our significantly reduced freedom to contract with others in the manner of our own choosing, and our significantly reduced freedom to control the fruits of our own labor, one would hope that we would at least enjoy a corresponding drop in health-care costs. Instead, the Office of the Chief Actuary at the Centers for Medicare and Medicaid Services (CMS) says that health-care costs under Obamacare would rise in relation to current law, becoming 21 percent of the gross domestic product (GDP) by the end of 2019 in comparison to 17 percent today. Remember when President Obama said that we couldn't continue spending 17 percent of our GDP on health care? For that matter, remember when President Obama talked about the crucial need to bend the health-care cost-curve down, vowing flatly that he wouldn't sign a bill that did otherwise? The CMS Chief Actuary confirms that both the House and Senate versions of Obamacare would bend the cost-curve up.

The CBO also reports that, in its real first twelve years in operation (2014 to 2025), Obamacare would transfer $1.0 trillion from American taxpayers to private insurance companies. Ever wonder why insurers back Obamacare — even though they would no longer be free to control their own product-line? The answer is plain: Obamacare would mandate that Americans buy insurers' product. And to make that mandate more feasible, it would transfer a trillion dollars of Americans' earnings to insurers over a dozen years. That trillion dollars would be funneled through the government and used to help individual people comply with the mandate, but the money would be required to be spent on insurance, and it would therefore end up in the hands of insurers.

The Democrats are not only making disingenuous claims about the costs of their proposal, they are making similarly disingenuous claims about its effects on the deficit. Democrats claim that this massive expansion of government would somehow reduce the deficit. But the CBO says otherwise. The CBO says that unless Democrats follow through and cut doctors' pay under Medicare by 21 percent next year and never raise it back up, the bill would increase the deficit by over $200 billion in its real first decade. How many people think that the Democrats would really cut doctors' payments by a fifth? Certainly the Democrats know that they won't, and yet they are shameless enough to pitch Obamacare as deficit-neutral, despite the CBO’s plain findings to the contrary.

And yet this is just the beginning of the increased deficits. According to the CBO, the Democrats would siphon over $1 trillion out of Medicare and related federal programs in the real first decade of their health-care overhaul. Simply put, they would siphon $1 trillion out of Medicare and spend it on Obamacare. Across the last year, the White House's own budget director, Peter Orszag, has repeatedly and rightly emphasized that Medicare and Medicaid (the latter of which would be expanded dramatically under Obamacare) are already barely-solvent, that their effects on future budget deficits will "swamp" the effects of all other federal programs combined, and that the key to being able to afford them in the future is to bend the health-care cost-curve down. Now the administration is pulling out all stops to try to pass a health bill that would bend the cost-curve up, and is planning to pay for it, in large part, by looting $1 trillion out of a Medicare program that its own Budget Director has made clear is the last place that we should be looking for money to spend elsewhere. Not surprisingly, the CBO openly mentions the possibility that Obamacare could “reduce access to care or diminish the quality of care” for Medicare beneficiaries.

When a "health-care reform" bill would deplete Medicare funds, drive up health costs, and dramatically reduce choice, competition, and personal freedom in health care — while funneling $1 trillion from American taxpayers to insurers (who would now be almost entirely under government control) — one starts to suspect that the motivation is something other than health-care reform. It is. The motivation is to replace millions of private choices with a command-and-control model in which health-care decisions and health-care resources are centrally administered and allocated by the federal government — under the ultimate command, at least initially, of Barack Obama. The motivation is simple and can be reduced to one word: power. And it doubtless has the American Founders, who dedicated their lives to securing liberty, spinning in their graves.

National Review