Strengthening Constitutional Self-Government

No Left Turns


The Lay of The Land

Here is a longish but well worth reading summary of Obamacare's likely impact.  It goes well with Avik Roy's explanation of how the mandates and rules making process created by Obamacare gives the government the authority to quietly strangle the private insurance market.  One thing that strikes me is that health care policy is a long-term battle of position within a constantly changing environment.  Liberals have managed to shape the environment in such a way that if conservatives are not winning policy victories, they are losing - if only slowly. 

The NCPA report makes it clear that Obamacare will speed up the unraveling of our system of employer-provided health insurance, increase the number of people on government-provided insurance, mandate participation in a destructive and irrational system of comprehensive health care prepayment, and make the middle-class dependent on government health care subsidies within an environment of sharply rising premiums.  Obamacare is, in and of itself, a big step toward government-run health care, and in the years to come, it will slowly shift the political battlefield ever more in favor of ever more government control.

Republicans holding office won't stop these changes.  If Republicans win control of Congress in 2010 and Obama vetoes Republican attempts at repeal (assuming the Republicans can even beat a Democrat filibuster in the Senate), nothing changes and we stay on our path to government-run health care.  As Obamacare changes our health care market and health care politics, a policy of simple repeal will (by itself) become less and less the basis of a winning politics. 

The old Republican policy of "tort reform plus not much" won't get it done.  There is nothing wrong with tort reform, but is doesn't address enough problems to become the basis for a winning politics of health care.  Tort reform has mostly functioned as a kind of conversation stopper for conservatives who didn't really want to talk or think much about health care.  Oh, the Senate Democrats are filibustering tort reform?  That just means they aren't serious.  Let's talk about cutting taxes.

A "get government (or even just the federal government) out of health care" rhetoric is of course a kind of self-marginalizing literary politics. There will be significant government involvement in the provision of health care (if only in the form of tax subsidies and provision for the destitute) under any realistic scenario. I hear this line of argument on talk radio every once in a while and it is just another conversation stopper.  It is even worse than that.  It doesn't so much stop the health care conversation so much as it leaves the conversation to be dominated by liberals.

Ryan Roadmap-type tax change that produces a leap into individually-owned insurance is probably too big a step to win majority support.  It would seem to leave people and their families naked in the health care market with only a (insufficient seeming) tax credit for help.  This problem becomes worse as  premiums rise and people feel even more vulnerable and afraid of being on their own. 

A winning conservative politics of health care will mean assembling and relentlessly pushing a set of incremental policies that do two things.  First, they would have to be able to win not only majority support among the public, they will have to be consequential enough that voters will consider voting for those policies a high salience issue.  This means a set of policies that neither do too little to motivate enough voters (tort reform plus nothing), nor do so much that those voters freak out (the Ryan Roadmap.)  Second, the policies, once enacted, must shape the political environment in a way that future market-driven health care reforms become both easier and more popular. 

Those are some very narrow needles to thread.  There are some obviously wrong answers, but the right answers are much less clear.  I don't think there is any one right answer, but there are pieces of a potential right answer lying around waiting to be assembled (and somewhat changed) into a winning platform by a center-right party that is serious about winning the long and grinding health care battle.   

Categories > Politics

Discussions - 4 Comments

Once started, it'll never be dismantled completely. That's why they spent everything they had on it.

I agree with a lot of your points Pete, but mostly I agree with anonymous at Avik Roy. I would also say that I know a lot of talk radio folks who would call this center-right party "socialism lite". To make things worse I also am beginning to think that Obama Care is worse than single payer.

That is any system that includes both medicare and private insurance is the worst of both worlds.

I think I disagree with Avik Roy on the assumption that medicare patients should only be 50% more fact they should be probably closer to 140% more expensive but helped along in part by the fact that medicare doesn't pay corporate taxes.

With medicare and private insurance, private insurance just cherry picks(you can't blame them it is best business practice to sort out the healthiest)

Medicare gets stuck with the dregs, older patients with various levels of sanity needing both types of Nursing home care(the most intensive costing three times as much...thus questioning the ability to simply put a 50% assumption as plausible). Add to this the costs for the disabled such as those with schizophrenia, HIV/AIDS etc, who are disproportionally in Medicaid and the fact that overall Medicaid beneficiaries are of drastically poorer health, in part because capitalism works and insurance companies are good at picking winners and getting rid of loosers.

Two liberal democratic countries that appear to be on the right fiscal path generally include Germany and Canada. Germany still has private insurance but this is supplemental, and both the Canadians and germans manage to spend less on health care(except that with the devaluation of the Euro the germans spend less, while the increasing value of the Canadian dollar means the Canadians are spending considerably more in dollar terms but I digress...

The cost per covered life under an expanded medicare/Obamacare will go down or not go up as quickly. The growth rate used by the CBO and refferenced by Avik Roy is pre Obamacare. Naturally by expanding the base and picking up less severely needy people cost per covered life goes down.

I also think Avik Roy is wrong about the numerous studies that show that health care costs don't go down when people live healthier lives. Talking about those studies and examining them may be worthwhile.

Also I think Avik Roy is wrong about this: "One of the depressing aspects of the Obamacare debate is that there is an obvious solution to this problem that was explicitly rejected by the President: ending the tax subsidy for employer-sponsored health insurance."

Ending the tax subsidy for employer-sponsored health insurance would be disasterous. In fact any talk of ending tax subsidies for anything many employers typically provide to employees during a time when the costs for employers of employing a worker are near all times highs and a jobless recovery is occuring is disastrous!

Look, unemployment wise we are staying put at no lower than 9% by 2012(my opinion, contra the fed 7.4%), ending the tax credit for employers would simply keep them from hiring.

Right now the tax base is skewed against hiring workers, and therefore this is inflating a bubble in capital investment for streamlining the workforce. Look at some stocks near 52 week highs(, see that P.E, multiple? overvalued, nope just registering in advance the new normal) they reflect the general consensus that industry and employers are and will continue to make long term substitution of human capital in favor of technology, automation and infrastructure(see Cummins stock), this is actually decent for productivity gains long term, but it is horrible for aggregate demand(if this is to come from the consumer and not the government)

I think we should raise the corporate tax, but provide all employers a tax credit for the full measure of employee salaries.(after all the employees will then be paying income tax, and off government stabilizers/welfare). In other words we should do the opposite of ending a tax subsidy for employer provided health care, we should create a tax credit for employer provided jobs equal to the full salary of the employee.

This is a policy favoring human capital. Worried that small business that do hiring won't hire because of taxes, give them a tax credit equal to the wages of their employees. When it comes time for taxes they can figure out how much they owe, and either pay it to the government or distribute it to employees as a bonus, or look forward to this tax burden and use it to hire more employees.

If you want to prevent this tax credit from simply resulting in massive bonuses for upper level managers and owner employees cap the potential credit at say $150,000 per employee.

I don't know if the CBO or IRC/IRS would be happy about this, but we could remove a lot of other tax credits and just keep this new $150,000 per employee tax credit.

Heck put in this massive employee tax credit and I don't care if you get rid of the tax subsidy for employer sponsored health insurance.

You say you are a small business that creates jobs but are strangled by high taxes....impossible! You hire enough workers and pay them enough you will never pay a dime in corporate taxes.

Otherwise you have basically these ridiculous companies like Jimmy John's that never hire full time workers, often times schedule them for 1hour increments, and pay folks that have worked there for over a year minimum wage without providing health insurance, while booking 30% ROE on stores open over 2 years, while these poor credit workers pay 20% interest rates at pay day loans on a diet of cheetoes and natural light and end up clogging up emergency rooms.

Today on this Labor Day these decided to form a Union...but look a union is unecessary overhead, a simple change to the tax code and these Jimmy John sandwich makers will be making 40k-50k a year with bennefits. They won't be getting food stamps or living lifestyles that land them in prison or on medicaid in old age.

This essentially eliminates corporate income taxes even when they are increased. Now the government to raise money will come after the pay checks of this new working middle class in the form of income tax...and this will become a republican voting block for cutting back on government spending.

Just a rather crazy rant of how I would off the cuff tackle our current and non-foreseably ameliorating unemployment problem.

Obama will not be re-elected in 2012 - this will be because of Obamacare. It will be repealed by the next president.

I don't know who the republicans will run in 2012 that might beat him, but if I am right about 9% unemployment they should have a shot. Then again republicans could somehow manage to win both the house(they will win this) and senate(unlikely but possible) and this would be potentially bad for Obama blame in 2012, especially if some sort of republican sounding idea was tried, and failled. Never fear democrats the logic of Obama is actually fairly decent. Check out the piece by Robert Reich in Salon that I actually agree with:

"Cutting corporate taxes would be as good for the economy as Botox is for someone with a heart condition "

"Republicans and corporate lobbyists have been demanding tax cuts on corporate investments for one reason: Big corporations are investing in automated equipment, robotics, numerically-controlled machine tools, and software. These investments are designed to boost profits by permanently replacing workers and cutting payrolls. The tax breaks Obama is proposing would make such investments all the more profitable."

So maybe the gains I was ironically seeing in advance of labor day, in all these plays tied to a "jobless recovery" was related to a advance warning of what Obama would propose.

The thing is we already prop up demand for capital via the tax code, and this would just be more of the same, and it would do exactly what Robert Reich says it would do: "These investments are designed to boost profits by permanently replacing workers and cutting payrolls. The tax breaks Obama is proposing would make such investments all the more profitable"

I know my idea above is probably more "left" than "right" especially as Robert Reich says this: (2) will subsidize companies to cut even more jobs; and (3) will cost $130 billion — money that could better be spent helping states and locales avoid laying off thousands of teachers, fire fighters, and police."

"More troubling, Obama’s whopping proposed corporate tax cuts help legitimize the supply-side dogma that the economy’s biggest obstacle to growth is the cost of capital, rather than the plight of ordinary working people." (On and around Labor day it is okay to quote Reich)

So Obama is actually going to propose something, that he knows won't create jobs. Robert Reich thinks he is being cynical in his manuvering.

I think Obama actually wants to be able to say that he tried "republican" policy/stimulus and it didn't work.

My idea above appart from being what I consider blatantly socialist, and potentially unconstitutional(but unlikely to be judged so) would work terrifically to create jobs.

I would actually put the Federal Reserve Chairman in charge of moving the corporate tax rate up or down and make tax policy serve an agenda it already serves in a confused way. I mention it because it is the last bullet I can think of and actually a sort of tax credit that makes sense at least for fighting off job losses in a recession.

You put a large non-refundable tax credit out there per worker, but eliminate the deduction...then you move the corporate tax rate up till you reach NAIRU (on the theory that corporations will hire and raise wages so as to maximize the 150k per tax credit and avoid paying corporate tax)

I don't know Pete, I think healthcare is less of an issue for the right and easier to sell on free market grounds if people have jobs and are working, and if aggregate demand is comming from the consumer rather than government.

In order to make it work for the policy of fighting unemployment, all other tax credits and exemptions and most above the line deductions should be eliminated and replaced with this one tax credit.

As it is I find it politically interesting that Obama is comming out with this corporate tax cut to stimulate and reward substituting out of human capital and into new tech. It has got to be a trap for republicans, so that blame can be shared for 9% unemployment going into 2012.

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