The VAT: coming to America

I know I've been on an ObamaCare kick for the past few months, and I wouldn't blame you if you are tired of it by now.  I wish I could abandon it for some other topic -- any other topic, in fact.  But, alas, I cannot.  Why? Because I see this new law as the greatest single threat to our continued prosperity in my lifetime.

Those on the left think that conservatives are exaggerating the potential impact of this law.  Paul Krugman, no doubt the dumbest Nobel Prize winner in history, was on ABC's "This Week" on Sunday and talked of the the health care reform law as "a minor change", and is certain that it will both be cost and care effective in improving the nation's medical system.  Indeed, this is the talking point for the Democrats, who want to focus on all the "good" things in the law and act as if the economic sleight-of-hand implicit in the law's assumptions are trivial.  Of course, it's all trivial when you are saving the lives of women, children and the infirm (well, most children, anyhow -- we won't mention the baby killing public abortion funding in the law -- I know the left doesn't like to talk about that part).

And herein lies the problem: the left is touting the benefits, while hiding the costs.  And the costs are a killer -- a path to insolvency for this country.  Why?  Because the numbers just don't add up.  As Alan Reynolds of the Cato Institute points out in today's Wall Street Journal, Obama's plan is to tax "the rich" to pay for all this entitlement spending:

President Barack Obama's new health-care legislation aims to raise $210 billion over 10 years to pay for the extensive new entitlements. How? By slapping a 3.8% "Medicare tax" on interest and rental income, dividends and capital gains of couples earning more than $250,000, or singles with more than $200,000.

The president also hopes to raise $364 billion over 10 years from the same taxpayers by raising the top two tax rates to 36%-39.6% from 33%-35%, plus another $105 billion by raising the tax on dividends and capital gains to 20% from 15%, and another $500 billion by capping and phasing out exemptions and deductions.

Add it up and the government is counting on squeezing an extra $1.2 trillion over 10 years from a tiny sliver of taxpayers who already pay more than half of all individual taxes.

It won't work. It never works.

How do we know it won't work?  Because we've tried it before -- in California, in fact.  A burgeoning entitlement and public employee pension system paid for by a tiny percentage of tax payers.  I've written about it before here and here.  California has relied on its top earners to the point where too much of the budget relies on too few tax payers.  And now it has squeezed them to the point that there is no more blood in the rock.  There just isn't any more marginal revenue to gain from raising taxes further, and the "brain drain" to other states has only made the situation worse.

We are now about to embark on a similar experience nationally -- and the numbers won't work any differently there than they have in California.  As Reynolds makes clear, higher marginal tax rates will ultimately lead to LESS revenue, not more.  It's the same lesson that Regan taught us -- that the left refuses to learn: incentives matter:

In short, the belief that higher tax rates on the rich could eventually raise significant sums over the next decade is a dangerous delusion, because it means the already horrific estimates of long-term deficits are seriously understated. The cost of new health-insurance subsidies and Medicaid enrollees are projected to grow by at least 7% a year, which means the cost doubles every decade—to $432 billion a year by 2029, $864 billion by 2039, and more than $1.72 trillion by 2049.

If anyone thinks taxing the rich will cover any significant portion of such expenses, think again.

The federal government has embarked on an unprecedented spending spree, granting new entitlements in the guise of refundable tax credits while drawing false comfort from phantom revenue projections that will never materialize.

At the end of this train comes Nancy Pelosi's big dream: the Value Added Tax (VAT).  The VAT is a tax on goods at every stage of production -- hence the "value added" after each stage (production, assembly, packaging, distribution, etc.)  It's a stealth tax because they don't add it at the cash register -- it's already baked in.  And it's high -- in the UK, for example, that VAT is 17.5%.  And it is in addition to the income, property, capital gains and local sales taxes you pay.

Remember this fact: every nation with a nationalized health care system has at VAT.  It is the only way that the high costs of national health care can be paid for.  Nancy Pelosi is on record as favoring a VAT; she told Charlie Rose in October, 2009:

"Somewhere along the way, a value-added tax plays into this," she said. "Of course, we want to take down the health-care cost, that's one part of it. But in the scheme of things, I think it's fair to look at a value-added tax as well."

The Wall Street Journal has outlined the desires of Pelosi and other Democrats for a VAT on numerous occasions as well:

Mrs. Pelosi is the second prominent Democrat to call for a VAT in recent weeks. John Podesta, an adviser to President Obama and president of the very liberal Center for American Progress, called in September for a "small and more progressive" VAT. Mrs. Pelosi and Mr. Podesta argue a new tax is necessary to address the nation's exploding financial liabilities, as if those liabilities exploded on their own. Of course, VATs always start "small" and get bigger. The bills for the Democratic spending blowout are coming due even sooner than advertised, and the middle class will pay, whatever Mr. Obama's campaign promises. 

So, here's the dirty little secret of ObamaCare: the left knows the numbers are wrong and that the program will lead to massive deficits.  They know it will happen and it is by design: the only way to fully re-make America in Europe's vision is to have a VAT that will support the welfare state.

It is a key part of the leftist game plan.

You heard it here first:  The VAT is coming to America, and sooner than you think.

Repeal Obamacare

The only sane response to Obamacare is to replace the Congress and repeal the bill, says John Andrews in the March round of Head On TV debates. But Susan Barnes-Gelt lauds the new law as a medical, social, and economic boon. John on the right, Susan on the left, also go at it this month over Israel, teacher unions, and the Colorado contests for governor and senator. Head On has been a daily feature on Colorado Public Television since 1997. Here are all five scripts for March: 1. OBAMACARE BECOMES LAW

Susan: Health care reform means people can change jobs and start new businesses without losing their health insurance if they have pre-existing conditions. Insurance companies won't be able to cap coverage or discriminate. 30 million previously uninsured will be covered. It's great for Americans and the economy.

John: Great for the economy? Like a noose is great for your neck. Obamacare means a government takeover of one-sixth of everything this country produces. Medical costs will rise and quality will decline. Americans know that, which is why polling on this corrupt and dishonest bill has been so negative.

Susan: The healthcare bill is more about insurance reform than healthcare reform and private insurance companies will control the market - not the government. Universal access to quality care will emphasize prevention, improve productivity and relieve local and state taxpayers of the huge burden of uncompensated, emergency room care.

John: Obamacare tramples freedom and shreds the constitution by forcing individuals to buy something against their will. Obamacare worsens the deficit, raises taxes, puts insurance companies under government control, pushes doctors out their profession, and degrades the entire health system. We should replace the Congress and repeal the bill.

2. GOVERNOR’S RACE

John: Colorado has not been well governed under Bill Ritter, and voters know it. That’s why he’s not running again. Ritter and the Democrats let spending and taxes get badly out of balance. They brutalized an important industry, oil and gas. Fellow Democrat John Hickenlooper admits it. Republican Scott McInnis is a better bet.

Susan: McInnis better have a more compelling message than tax and spend to beat Hickenlooper. Coloradans want a problem solver, not a grenade lobber. Legislative antics on both sides are reaching new lows. Hick has the smarts and the disposition to bring people together.

John: After taking the governor’s office with Colorado in good shape, Democrats failed to keep it that way. Ritter increased spending even as revenues were falling. He became anti-business just when jobs were needed. He handed over state workers to the unions. To fix it we need a Republican, not another Democrat.

Susan: We've learned from partisan antics in Congress Colorado's bickering legislature that partisan incivility doesn't solve problems. Hickenlooper is a businessman, social moderate, fiscal conservative. His experience, finding common ground and working with diverse interests on multiple issues is what Colorado needs.

3. U.S. ANGRY WITH ISRAEL

John: America’s most important ally in the Middle East is Israel. It has an exemplary democracy, a dynamic free economy, and it’s the cradle of our Judeo-Christian heritage. It has shown heroic fortitude and amazing restraint against 60 years of unrelenting Muslim efforts to destroy it. Obama’s hostility to Israel is totally wrong.

Susan: Israel violated a 10-month moratorium and slapped the US by announcing West Bank settlements the day V.P. Biden arrived in Israel. Suggesting East Jerusalem isn't part of the west bank is nonsense and if Netanyahu wants peace he'd better start exercising better judgment.

John: Obama and Biden and Hillary Clinton are all dangerously confused about how to protect America’s national interest in the boiling cauldron of Islamic hatred and violence that is the Middle East. It starts with standing strong for Israel, our brave democratic ally, and against Iran, the looming nuclear menace.

Susan: Netanyahu leads a fragile coalition government - if he loses the support of the super-conservatives, he loses his government. A two state solution is the only answer for lasting mideast peace. Confusing that with standing firm against the Iranian nuclear threat, is simplistic. Clinton made that clear in her remarks.

4. EDUCATION ON WRONG TRACK

John: The US Education Secretary flew in the other day. He was here to take sides in the Democratic Senate primary and to dangle $400 million in front of lawmakers to change the way Colorado educates its kids. That’s what government schools have come to – arm-twisting from Obama and borrowed money from China.

Susan: Investing my federal tax dollars in Colorado's k-12 school is a great idea. Public education in this state reached a new low with the peevish fighting among Denver school board members and the watered down plan submitted to the feds for Race to the Top dollars.

John: The root of the problem is teacher unions. Government schools in our state and across the country are run more for the benefit of their employees than for students in the classroom. Unions dominate the school boards, the Ritter administration, the legislature, and the Congress. It’s a scandal.

Susan: The issue is accountability. It's too easy to blame unions for inexperienced school boards, entrenched administrative bureaucracies, disengaged parents, obsolete schools and equipment and poorly trained teachers. Obama's race to the top program is a good start at rewarding practices that work and bringing them to scale.

5. SENATE PRIMARIES

Susan: The caucuses reflected badly on frontrunners Bennet and Norton, though you could hardly say the 2-percent turnout was representative. Republican activists are far more conservative than mainstream R's and will never field a candidate acceptable to Colorado moderates. And voters don't have a clue about Senator Bennet.

John: Both parties often have a different favorite at the spring caucus from the big vote-getter who wins the summer primary. In 2004 it was Republican Bob Schaffer and Democrat Mike Miles, only to be overtaken in August by Pete Coors and eventual winner Ken Salazar. In 2010 I foresee a GOP Senate winner.

Susan: It's a throw the rascals out year - incumbents across the country are at risk. Bennet is further disadvantaged - he's an incumbent without a base. Romanoff is the stronger Democrat. Norton is burdened by weak party infrastructure in the State and her both sides of every issue track record.

John: Michael Bennet has been an embarrassment in the Senate. He voted for all those corrupt health care deals. Andrew Romanoff is part owner of the Bill Ritter budget mess. Republicans have tax-fighter Tom Wiens, crime-fighter Ken Buck, and popular conservative Jane Norton. She may become Colorado’s first woman senator.

Give'em 219 pink slips

On Sunday, 219 of our supposed Congressional "representatives" approved Obamacare. This so-called health-reform bill, costing nearly a trillion dollars, commits us to a yet more devastating deficit. Cobbled together with undisclosed, unintegrated special-interest deals, the only people whose wishes it does not address are thetax-payers. You and I just get to pay.

Worse, America lost. This administration flouts the precious principle of representative government, fundamental to our republic. Monstrous deficits undermine our economy, inflating costs and decreasing jobs. No longer a beacon of freedom, our government becomes just another corrupt, deal-ridden, coercive mire.

"Leaders" ought to serve as both public servants and exemplars. That outrageous shenanigans and skullduggery were deployed to compel Obamacare votes is wrong for America.

But the November election is less than eight months away. Now we know precisely who puts party politics and petty deals ahead of our interest. Now we can issue 219 pink slips.

Responsibility Might Have Saved Us from Govt.-run Healthcare

We don't know yet whether Washington politicians will be able to force complete take-over of our health care delivery system or not.  One day the media slants toward a collapse of Obama's plans to transform our current system and the next day, word of the ongoing back room deals and arm-twisting in spite of our will hint that a massive change in how, when and where we receive health care services is inevitable.  As Congress and the Oval Office continue their political posturing and theater, as individuals, some of us may have been able to prevent what may be coming our way.  Just before the '08 election, an acquaintance of mine told me she was voting for Obama.  This woman has always vowed allegiance to the Republican Party and conservative values.  She told me the reason she was voting for him was because of his health care reform platform.  She and her husband retired  several years ago and they have selected a health insurance policy that requires a $2000  annual deductible, per insured, which allows them a lower cost premium schedule.  In the year leading up to the '08 election, this woman found herself in need of 2 biopsies, several ultrasound exams, 2 different mammography exams and several visits to a number of physicians because of a suspicion of breast cancer.   Happily she did not have breast cancer.   Her out of pocket expenses included the $2000 deductible, and 20% of other costs, per her insurance coverage.  She noted that she was able to negotiate a portion of that 20% with the different providers and in the end, she probably only paid between 12 and 15% of her share.  This is a person that enjoys a comfortable lifestyle, has money to travel extensively, drives a new luxury vehicle every 2-3 years and would, from all appearances, be a person able to bear some cost for her treatment during this incident.  Thinking she would be so grateful and relieved at her benign diagnosis, I asked why her story translated into support for the government to impose the public option.  She explained that she does not believe it should cost her anything to access and receive health care services.  During that conversation in August '08, she was completely serious in telling me that she lives in the richest country in the world, has paid taxes all her life and in exchange, she should not have to spend any of her retirement income on doctors and hospitals.  It is her right to receive the best care possible  on demand.  To this day, she believes she is entitled to a system that is completely cost free to her.  I recently pointed out to her that we are quickly moving away from being the richest country in the world.    I further explained that we will all experience a reduction in services and will be forced to start paying for the proposed plan years before a single person realizes a benefit.  I told her that when she is moved into the government system, the HHS Secretary will actually determine whether or not, at her age, if it's a good investment to allow my friend those 2 biopsies, several ultrasounds and many office visits, or if such an intensive diagnostic plan is simply too expensive for the system.  She thinks I'm ill-informed on the issue.

Another friend of mine is an ER nurse in California with nearly 40 years experience in her field.  She recently did an intake evaluation on a man presenting with a minor stab wound.  A Spanish interpreter was called in as he could not speak English.  As his story unfolded, she learned that he had entered California illegally several years ago, had been able to get a Social Security number although he added he had done so without ever having completed immigration paperwork.  He has a long history of drug addiction and heavy alcohol use along with serving some time off and on in California prisons.  As his medical and social history continued to emerge, he smiled broadly at my friend when he relayed to the interpreter that he has enjoyed all of the 'goodies America has to offer him'.  The 'goodies' he was referring to were assistance with housing, the WIC program for his 2 girlfriends and the children he has with them, food stamps, and of course, free health care anytime he so requires.

In our family, we have a number of elderly relatives in their mid to late 80's.  One in particular is a person that consumes health care services as a way to socialize and reach out for human contact.  This individual lives alone and rather than volunteer at the local schools, churches, library, hospitals or nursing homes, she chooses instead to visit several different doctors on a regular basis as a way to interact with people and have someone inquire as to how she is doing.  Every twinge or slightest pain sends her to a doctor.  A mild case of dermatitis caused by dry winter air doesn't prompt her to try an over the counter cream that her pharmacist believes will solve the problem.  She sees her primary care physician and insists on a referral to a dermatologist.  And so it goes.  Each visit to each physician amounts to a claim filed with Medicare and her supplemental insurance carrier.  After each entity has processed her claim, she ends up paying a few dollars of the many hundreds of dollars that each imagined medical crisis costs.  This individual is also a person that if means testing were put in place, it would be determined that she certainly could cover a greater load of the costs she imposes each month on our system.  The assistance she receives as a result of Pres. Bush's drug benefit legislation for seniors, along with Medicare and other supplemental coverage keeps her out of pocket expenses  for drugs, testing and office visits to about $1000 per year, which is a bargain compared to the 10's of thousands charged and written off under her specific coverage plans.  In her mind, she, too is entitled to no-cost health care after contributing to society for years as a taxpayer.  At the same time, as a taxpayer she also feels as most of us do that our taxes should also pay for good schools, nice smooth roads, safe bridges, ample police and fire protection and other civil services.  She hears the news and knows there are budget deficits across the entire spectrum of government and that cuts must be made.  She believes, however, that cuts should affect every one but her and she has no qualms about piling on debt that her grandchildren and great-grandchildren will soon inherit.  Along the same mindset, another aging relative decided he needed a cane just in case at some point he had some difficulty walking.  He priced out the canes available at his local pharmacy and didn't want to pay $25, so instead, he scheduled a visit to his primary care doctor and asked for a prescription for a cane.  The doctor questioned why it was needed, but after the patient persisted, the script was written and filled by a medical supply facility at a cost to the Medicare system of over $100.   Again, this person is also financially able to buy the cane for himself rather than shift the cost to our bankrupt government system and those that will bear the debt for decades to come.

I believe our president and his Democrat controlled Congress will impose health care reform on our country, of one form or another.  Can a cleaning of the House and Senate in November be enough for us to turn it back?  We don't know that as yet.  One thing is for certain, however.  If individual Americans along the way toward this end had taken some personal responsibility and used some common sense in their individual utilization of health care, our costs would be lower today. 

As a society, many Americans have lost sight of their own individual contribution to sky rocketing health care costs.  For each person that receives an entitlement, others must bear the cost.  It's been easy to ignore that fact.  We forget that when an insurance company or Medicare or Medicaid "writes off" a charge, that dollar amount simply doesn't just go away.  It must be paid and that happens by passing along those costs to insurance companies and their clients and private payers.  There will always be citizens that cannot afford to pay for health care, and as a benevolent nation we've done a fairly decent job in caring for those people.   Others that do have the financial means to care for themselves have decided free and reduced cost care would allow them more money for other luxuries.  Persons here illegally have also been able to come to the trough and get care, often without paying anything. 

Many have climbed aboard the train, demanding a window seat and first class accommodations.  There are too many passengers stuffed into fewer and fewer cars and the train is now so overburdened, it is slowing to a stop.  There is no longer enough money to shovel into the engine to carry the huge load.  If some of us had jumped off along the way, making room for our legal citizens that truly needed subsidized care, maybe government-run, unfunded, limited access healthcare wouldn't be headed toward us now at light rail speed.

The free market fix for health care

You might remember last year when Whole Foods CEO John Mackey sparked a furor among progressives for having the temerity to exercise his First Amendment rights and pen an Op-Ed in the Wall Street Journal that proposed an alternative to the big government takeover of health care that Obama/Pelosi and Reid have been pursuing.  Mackey had the gall to point out a central truth that the left seems to ignore time and time again: incentives matter.  If you continue to shield patients from the true cost of care through an overly regulated, overly complex system,  while insisting that they not be financially responsible for all but a tiny fraction of their treatment, you will get abuse of the so-called "health care dollar".  It's a pretty basic concept for those who understand (and accept) that human behavior is sensitive to incentives: when things are perceived as "free" or when someone else is paying, consumption goes up.  When people have "skin in the game" they require more information, look harder at choices and tend to make better (more cost-effective) decisions. Businessmen like Mackey at Whole Foods and Steven Burd, the CEO of Safeway, understand this much better than do the politicians in Washington.  Of course, Mackey and Burd view the health care issue as a problem in search of a rational solution, rather than as an opportunity for government to achieve its ideological goals while taking over one-seventh of our economy.  They both instinctively know that doubling down on government entitlement programs like Medicare and Social Security are not the answer. Burd, in particular, has written a number of outstanding op-eds on how Safeway has used incentives to drive down the cost of their company's health care programs, principally by rewarding healthy behavior and making employees financially responsible for a portion of their out-of-pocket health care costs.  As Burd notes, what Safeway has done has been successful beyond dispute:

As a self-insured employer, Safeway designed just such a plan in 2005 and has made continuous improvements each year. The results have been remarkable. During this four-year period, we have kept our per capita health-care costs flat (that includes both the employee and the employer portion), while most American companies' costs have increased 38% over the same four years.

It is clear to me after watching the recent "Health Care Summit" that neither Obama, Pelosi, Reid or their fellow ideologues on the left are really interested in solving the health care cost problem.  If they were, they would be looking at the real world examples where market-based solutions have worked.

And its not just in the private sector.  Indiana Governor Mitch Daniels -- who has been getting a lot of positive attention recently for his handling of Indiana's fiscal house during the recession -- has penned an opinion piece today that takes the Safeway model and expands it for government workers.  The foundation of Daniels' program are Health Savings Accounts (HSA) that put tax-free cash into accounts for patients to use for their own health care.  It's the kind of market-based innovation that promises to create incentives for patients to ask questions about how much things cost and about how effective a given treatment is (not surprisingly, ObamaCare eliminates the use of HSA's altogether -- all the better to keep patients out of their own health care decisions.)  Daniels describes this as "individually owned and directed health care coverage" -- a description that big government progressives will undoubtedly dislike, since it actually puts power in the hands of people.  But the Indiana experience shows that in health care plans where the patient has "skin in the game" the use of medical care is more judicious and effectively applied.  Indiana state employees enrolled in the plan will save some $8 million in 2010 compared to their co-workers enrolled in the old-fashioned PPO system where the employee pays nothing more than a co-pay.

It should be no surprise that the real solution to rising health care costs is to let the free market work: empower consumers with more information, give them a stake in the process and then let dollars flow to the most efficient, effective providers.  Health care has an example it can look at today in the area of cosmetic surgery -- a fee-for-service market place that is highly competitive.  Patients shop for the best combination of quality and price because they are generally paying out of pocket for the service; the result is a true market where providers actually compete for business.  Its the best way to enforce the twin goals of quality and cost.

One can only hope that Pelosi and her band of merry socialists fail to jam through Obamacare now, and that a new Republican majority in November will enact a series of market-based solutions that will work to make care both more accessible and affordable.