Often those who even read my memos will not read down so this is very worth repeating and should be read , if even for the second time. (see 1 below.)
Sen. Coburn, who is leaving explains what a rational health care bill could look like and why it needs to supplant Obamacare. (See 2 below.)
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1) Obama's Address Mixes Sound and Foolish Proposals, Laced With Demogoguery
By Peter Morici
Promising to address inequality and strengthen the middle class, President Obama's State of the Union address combined sound and foolish proposals, laced with good old-fashioned demagoguery.
Despite nearly five years of economic recovery, the fortunes of working Americans have decidedly worsened. The president's policies should carry considerable culpability and bear correction.
Instead, he pronounced upward mobility has stalled — when non-partisan economic studies show that's not true — and insists the wealthy should pay to balance the accounts.
Thanks to the president's free-trade policies, multinational corporations and talented Americans have achieved huge income gains selling knowhow and services around the globe. Meanwhile, the stuff ordinary Americans make is increasingly shut out of the fastest-growing overseas markets.
GM boasts some of the best-selling cars in China, but high tariffs, regulations and an artificially cheap currency keep out U.S.-made vehicles. The president refuses to effectively confront protectionism throughout Asia, denying Americans good-paying
Obamacare is driving up
No surprise, some 20 million Americans can't find full-time work, and the inflation-adjusted wages of ordinary workers are falling. Factoring in higher state and local taxes, most families are much worse off than they were five years ago, and record numbers of Americans depend on
Now Obama wants to double down on failed initiatives. Instead of asking Congress to suspend the mandate that all Americans obtain excessive and expensive health insurance, he is launching an aggressive campaign to persuade young Americans to buy overpriced policies.
Presidential initiatives to build a national network of manufacturing innovation centers, strengthen infrastructure, federal job training and research and development and rapidly expand industrial use of clean natural gas have great merit. Yet, no matter how strong the products and productive their workers, America's factories need more customers at home and abroad to succeed, grow and raise wages.
Unfortunately, the president proposes to push forward with new trade agreements in Asia that will further open U.S. markets to foreign competition without getting enforceable enough concessions on discriminatory regulations and currency manipulation that keep out American products and impoverish once-proud U.S. blue-collar workers.
He wants Congress to approve a $10.10 an hour minimum wage. That's a 39 percent jump, and hardly justified by the 9 percent inflation since the federal floor was set in July 2009. Such an increase would compel McDonald's to aggressively implement methods to cut employees. Smaller restaurants, whose customers simply cannot afford to pay another $2 for lunch, would close, and the same would repeat in other industries.
Comprehensive immigration reform would help. Bringing undocumented workers out of the shadows would raise the wages they command, and those of citizens competing with them.
Republicans in Congress want a deal that really secures our borders from another surge of illegal immigrants. However, given the president's poor record of sticking to his word in budget negotiations, critical members like Sen. Marco Rubio, R-Fla., are reluctant to trust him.
All this illustrates the central reason for Washington's inaction on crucial issues.
The president dodges responsibility for the failures of his ideologically motivated agenda by asking Congress to tax the "1 percent" for simply exploiting conditions he created.
Americans judge the president by their own deteriorating conditions, and his credibility on economic issues is falling precipitously.
Members of Congress simply don't trust him to address problems as the facts require and keep his word when it counts.
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2) Tom Coburn is leaving the Senate early with a proposal to save private insurance from the ravages of ObamaCare.
Tom Coburn stood for Congress in 1994 as a political tenderfoot for two main reasons: As an obstetrician he thought government was impinging too much on his medical practice, and the nine-term House Democrat who held his Oklahoma district's seat favored the Clinton national health plan then under consideration. Another reason Dr. Coburn entered the race, he says, was that "the cowardice of career politicians governing to win the next election above all else made me sick." Twenty years later, he finds himself amid another health-care scrimmage—and in a similar political climate.
By Joseph Rago
Tom Coburn stood for Congress in 1994 as a political tenderfoot for two main reasons: As an obstetrician he thought government was impinging too much on his medical practice, and the nine-term House Democrat who held his Oklahoma district's seat favored the Clinton national health plan then under consideration. Another reason Dr. Coburn entered the race, he says, was that "the cowardice of career politicians governing to win the next election above all else made me sick." Twenty years later, he finds himself amid another health-care scrimmage—and in a similar political climate.
"It's no better today. It's still here. It's worse," says the junior senator from Oklahoma, sitting in a wing chair in his Capitol Hill office earlier this week. His prairie timbre is flecked with the contempt of overfamiliarity.
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Editorial board member Joe Rago on the politics of a new Republican plan to deregulate the nation's health-care market. Photo: Getty Images
"I don't think Washington can fix Washington," Dr. Coburn explains. "You're always going to have this built-in conflict of getting re-elected. Parochial interests will trump the best interests of the nation, and the actors will do what's expedient to be popular. It doesn't have to be that way. There's hundreds of thousands if not millions of people who could do these jobs well. All it requires is common sense and courage."
Those qualities will be appreciably diminished in Washington when Dr. Coburn retires at year's end. He is among Washington's few true conviction politicians—unalterably against federal debt, government waste and the abuse of power. He genuinely doesn't seem to care about being popular, or endearing himself to anyone; lately he has even grown a night-of-the-wolfman beard that is decidedly out of Beltway fashion.
Dr. Coburn was recently diagnosed with a recurrence of prostate cancer, which is why he is leaving before his term officially expires in 2016, but he still has work to do. Even if he has failed to change a political culture of self-interest and careerism, the doctor from Muskogee can still challenge his nominal party, the Republicans. This week, he and two colleagues released an ObamaCare replacement plan that offers innovative—and consequential—pro-market health-care reforms, intellectually akin to Paul Ryan's 2011 Medicare proposal.
Ken Fallin
"Everybody in the country knows what Republicans are against," Dr. Coburn says—namely, ObamaCare. "No, what we have to do is make sure Americans know what we're for. The whole idea is to empower patients, not bureaucracies, and to empower markets, not rely on market manipulation and mandates."
Few conservatives would disagree, but the GOP has been notably diffident and risk-averse on substance. Dr. Coburn observes that "nearly all the economists agree" that a source of America's long-running health-care dysfunctions is the tax exclusion for employer-sponsored insurance only. Like the company store, this open-ended subsidy makes it cheaper for businesses to compensate workers with in-kind benefits rather than with taxable higher cash wages.
Patients are thus insulated from choices about prices and value, but as a result price signals are suppressed and consumers end up paying more. And because this inefficient and regressive subsidy costs $250 billion a year in foregone revenue but doesn't flow to the individual market, it's scandalously unfair to people who don't get coverage through their jobs.
So far, so economically conventional. But politically, touching the insurance exclusion for businesses is dicey, as Republicans witnessed when John McCain was brutalized in 2008 for proposing to convert the exclusion into a universal flat tax credit for individuals, regardless of age, income or employment status. Such a reform could lead to disruptions as businesses shed coverage, and the Obama campaign savaged the McCain plan as a middle-class tax increase. Republicans in Washington have also followed the ObamaCare rollout and concluded (correctly) that voters don't like losing their insurance and doctors, especially amid false promises they could keep both.
The Republican majority, eager to oppose ObamaCare but wary of political tiger pits, has relied on championing "repeal and replace," details to come. Or pretending that U.S. health care was a free-market Shangri-La until the Affordable Care Act came along. Or resorting to self-destructive stunts like shutting down the government in the name of "defunding" ObamaCare.
In other words, the Republicans were baloney avoiding the meat grinder.
"I'd rather limit the damage and prevent future damage to the health-care system," Dr. Coburn says. "I'm worried. You don't really have insurance anymore, you have government-funded health care with no spreading of risk. You've eliminated the market. The Republicans want this to fail, but the consequence could be we have a meltdown in the insurance industry and you're left with nothing." At that point, with the health plans bankrupt or "nothing but bill payers, service agents," he says, Congress could cut out the middlemen and impose "the fallback of a government-run single payer system."
So Dr. Coburn approached his Senate friends Richard Burr of North Carolina and later Orrin Hatch of Utah. They consulted with experts and concluded that the goal should be more realistic and modest than either ObamaCare's grand ambitions or an equally grand market reconstruction. Instead, try to make the system better and cheaper for more people and preserve existing insurance arrangements as much as possible—while also introducing the market incentives for a more rational, more competitive system.
Dr. Coburn says Democrats passed ObamaCare by "working on emotions without facts. What we want to do is work on facts and be empathetic while we do it." He calls it "reform in an incremental fashion."
The Coburn-Burr-Hatch proposal would thus start to equalize the tax treatment of health insurance. The employer tax preference would be capped at 65% of the cost of the most high-end plans. People who prefer gold-plated benefits with first-dollar coverage would be exposed to some of the true cost of those plans, while most would see few changes.
Dr. Coburn & Co. would then redistribute this federal subsidy (instead of other people's incomes) to workers who don't have an insurance offer from their bosses. These subsidies would be refundable tax credits to low- and middle-income Americans and vary by age and income, and would be high enough to finance at least catastrophic coverage.
To start to repair and strengthen the insurance market, the plan would repeal the larger apparatus of ObamaCare—the exchanges, the individual and employer mandates, the taxes on industry and investment, and the central planning that requires health plans to overprice their products. Repealing ObamaCare becomes more of an evolving deregulatory project over time than a on-off switch.
"We've not had the creativity that could really come about in insurance," Dr. Coburn says. "All kinds of things could happen if you had a vigorous market that's truly competitive and you had everybody purchasing." People who maintained continuous coverage would be protected from premium spikes, if they developed a medical condition, though a "guaranteed renewability" rule.
Dr. Coburn's plan represents important intellectual progress, not least because it disowns perfection that is unattainable in any case. A new study by Doug Holtz-Eakin's Center for Health Economy economic-modelling group concludes that the Coburn plan will lower premiums by as much as 11% relative to ObamaCare and cover almost the same number of people. With the imprimatur of the Senate Finance Committee—which Mr. Hatch will likely chair if the GOP retakes the Senate this fall—the Coburn plan is the de facto ObamaCare alternative.
Dr. Coburn says the reaction among his colleagues has been "pretty good" so far, even if some conservative activists are trashing the plan as ObamaCare Lite. But the more telling reaction has been from liberals. Sometime Obama health adviser Ezekiel Emanuel took to the New York Times NYT -2.68% to trash the plan—misleadingly—while outfits like the Center for American Progress are working overtime on junkyard duty. They know that a credible, politically salable reform amid ObamaCare's convulsions is a threat to their own political control of the health markets.
What Dr. Coburn is really suggesting is a center-right governing vision for health-care reform—and politics at large. He calls it "a paradox about my political career" that his indifference to Washington popularity has made him more popular in Oklahoma. The double paradox is that his indifference to politics has tended to advance his political goals.
His convictions are so intense that he'll accept small or marginal gains so long as they constitute tangible progress. In an era of purported conservative purity but divided government that will last for at least three years and perhaps over several elections, Dr. Coburn's politics of pragmatic conviction may be the better option.
In 2000, Dr. Coburn kept his campaign promise to limit himself to three terms in the House and retired. He returned in 2005, disgusted by the George W. Bush spending binge and especially the Medicare prescription-drug benefit. He promptly made himself a senator non grata by exposing vanity-project spending like the $223 million "bridge to nowhere" in Alaska. Dr. Coburn suggested spending the money on a New Orleans bridge damaged by Hurricane Katrina. Eighty-two senators voted against him.
His colleagues retaliated by trying to prevent Dr. Coburn from practicing medicine. In the House, he was in the habit of flying home to Muskogee on weekends and seeing patients Monday mornings, and he was allowed by Senate rules to charge his patients enough to cover his expenses. But in 2005, the Senate Ethics Committee ruled that the arrangement would be a conflict of interest. "Somebody's going to come to me for a Pap smear to influence my vote?" he says. "I mean, give me a break."
So Dr. Coburn offered his services free of charge. Two years ago he stopped, when the yearly $40,000 to $80,000 payments for malpractice insurance became too much of a financial drain.
Such affronts explain why Dr. Coburn is leaving the Senate for reasons beyond his health. "I know myself well enough to know my patience has worn thin, of continuing to push boulders up an iceflow," he says. "Just take the wastebook for example."
That's Dr. Coburn's annual compendium of his staff's audits and quality control on federal spending, which has exposed abuses such as government-funded volumizing shampoo for dogs and the $35 million that Medicare paid out to fake clinics set up by the Armenian mob. "Why aren't there 535 wastebooks put out every year?" he says, incredulous about his fellow lawmakers' lack of interest. "Why I am I the only one digging? That's a question people ought to ask. The only reason it's novel is because nobody else is doing it."
He adds that "I think my biggest failing in the Senate is my inability to communicate effectively to change people's minds. I'm bringing them the facts." Perhaps the problem is them, not him.
The larger lesson he draws about modern government is that the natural tendency of the political class to accumulate power has exceeded the Constitution's boundaries, despite occasional spasms of reform that disrupt the inertia. The key, he says, is to put new limits on federal power, devolve responsibility to the states and change the institutional incentives.
"I don't think you fix this place until you have a convention of the states," Dr. Coburn says. "Only America can change Washington. I'm a big believer in term limits. I think it causes a different kind of person to want to come up here."
Even though he has blistered the current denizens of Capitol Hill, he admits to a bit of hedging: "Most of what I want to say I can't say, because then it will be printed and then I won't have any relationships left up here."
If Dr. Coburn is right about how easy it would be for Congress to be replaced a hundred-thousandfold, then he's the exception that proves the rule.
Mr. Rago is a member of the Journal's editorial board.
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