IPI PolicyBytes

• $260 million for the presidential election fund. After singing the praises of government-financed elections, President Obama refused to take federal money because it would limit what he could raise. Eliminating this program would mean all presidential elections would be funded by private contributions.

• $600 million for taxpayer subsidized union activities. Read More...
  
  

The Senate version of the health care reform bill that the House is supposed to vote on this week—um, let me correct. Despite weeks of Democrats calling for an “up or down vote,” the House isn’t actually going to vote on the bill. It’s going to vote on amendments to the bill and, if they pass, the Senate version will be “deemed” to have passed—without an actual vote on the bill.

Anyway, in the Senate bill is the “Cadillac tax” that makes employer-provided health insurance subject to taxation above a certain level. That means that employees with high-cost health insurance will, at some point after 2018, start paying more taxes—including Social Security taxes.

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• How he plans to get control of the $1.4 trillion federal deficit, more than three times the deficit Obama was so critical of under George Bush.

• And how he intends to pay for all the Democrats’ new federal spending. Yes, he could raise taxes, but he already has several new taxes in his health care bill.

• And maybe the president can explain why his much-boasted stimulus bill has had little impact on creating new jobs.

Fate of the Union

• He wants to chop $106 billion from the disproportionate share hospital program. Actually, cutting the “DSH” program is reasonable. It’s federal money that reimburses certain hospitals that treat a “disproportionate” number of uninsured. If nearly everyone has coverage—and that’s a big IF—then reducing DSH payments makes sense.

• The president also wants to cut $110 billion by making “productivity adjustments” to Medicare providers. Read More...
  
  

• Like spending $1.8 million for swine odor and manure management research in Iowa.

• And $4.5 million for wood utilization research.

Pork Barrel

When God gets tossed around in politics, Americans usually think of conservative evangelicals pushing hot-button issues like restrictions on abortion. But a December interfaith gathering of Metro Detroiters made it clear that the Almighty gets carried across all ideological lines.

Former Detroit Cardinal Adam Maida gathered 11 congregations in Detroit -- Jewish and Muslim as well as Christian -- to promote passage of the then-pending auto industry bailout bill in Congress. Representing a parts supplier, James Settles asked congregants at a Detroit church "to continue your prayers, so we can see a miracle.”…

“Sweeping, historic, welfare reforms were enacted in 1996, led by the Republican congressional majorities at the time, with strong, bipartisan support. The reforms involved the old Aid to Families with Dependent Children program (AFDC), originally adopted during the New Deal. The federal funds for the program were sent back to each state with the funds to be used for a new welfare program designed by each state based on mandatory work for the able bodied…”

“There are roughly 8 million people in America without health insurance, who are not illegal immigrants, already eligible for coverage under Medicaid or other government health programs, or in families earning over twice the poverty level. This is out of a total U.S. population of over 300 million (less than 3%).

But not to worry. The federal government is going to fix that problem by taking over and running the entire U.S. health insurance market. In the process, the government will tell you what health insurance you must buy, and send you the bill, to be paid on your income taxes. Read More...

“Now what we have is not only a stimulus bill that will not work. What we have is a fraudulent bill that is not even focused on stimulus at all, but on runaway spending for liberal, big government spending programs, meaning more welfare, overgrown bureaucracy, pork, political payoffs, and waste.”

“…We don't need a lot of new ideas here. Our substantive agenda is intellectually well developed and sound. And a lot of the supposed new ideas for conservatives we are hearing about these days are not good.

The fundamental theme for conservatives is freedom and prosperity, including the freedom for those who believe in traditional religious and moral values to live their lives in accordance with those values. For long-term political success, the emphasis needs to be on economic growth, because that is what moves conservative political support from the mid-40s toward 60%, enough for a governing majority.
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• The bottom 40 percent of workers—that’s four out of every 10 workers—will pay only 3 percent of all federal taxes.

• The next 40 percent—that’s the middle class—will pay a little more than 25 percent.

• And those in the top 20 percent of earners will pay nearly 70 percent of all federal taxes.

Tax Brackets

Ferrara writes:

“The issue of judicial philosophy has been mostly overlooked in this campaign, but the differences between the two candidates are stark: Obama has the most left-wing position of any presidential candidate in U.S. history.

Obama has said he would appoint Supreme Court justices like Ruth Bader Ginsburg and David Souter, two of the most liberal judges ever to serve on the Court. (Before her appointment, Ginsburg had served as general counsel of the American Civil Liberties Union, and as a member of the ACLU Board of Directors.) He openly criticized Justice Clarence Thomas. He said he would never appoint someone like Justice Antonin Scalia. Read More...

1. I admit that I have become powerless over spending taxpayers’ money—and so my political promises have become meaningless.
2. I have come to believe that only a power greater than myself—the U.S. Constitution, and maybe voter rebellion—can restore me to sanity.
3. I have made a decision to turn my life over to the guidance of sound economic and fiscal principles. Read More...
   
   

"With one bold masterstroke, everything that was so wrong with American politics has been made right. It is as if Frodo just dropped the Ring of Power in the lake of fire at Mount Doom, and, as the third book of The Lord of the Rings reports, "There was a roar and a great confusion of noise...Towers fell and mountains slid, walls crumbled and melted, crashing down....Then all the Captains of the West cried aloud, for their hearts were filled with a new hope in the midst of the darkness."
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In 1984, Walter Mondale ran for President promising to raise taxes if elected. He consequently made it to the dustbin of history even before the Soviets, averting a 50 state shutout by just 1,200 votes in his home state of Minnesota.

The recently released details of Barack Obama's tax plan, published on his campaign website, along with an article by his top economic advisers in the Wall Street Journal, confirm that Obama makes Mondale look like a moderate. For Obama pledges not just to raise taxes. He proposes to raise every major federal tax. The recently released details confirm that:
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An excerpt:

“…BUT I WANT TO FOCUS here on Obama's answer to the question about why he wants to be President and what motivated him to go into politics. He referenced the biblical injunction from Jesus Christ in the Book of Matthew, saying, "Whatever you do to the least of these you do unto me." Obama expressed his concern that America is not doing enough for the least among us, the poor, the sick, the old. He wants to be President most of all to lead the government to do more for these most vulnerable and weakest of citizens, and ensure that they are cared for adequately.

This sentiment is what motivates most grassroots Democrats, who hold the vague and uninformed notion that America is not doing nearly enough to combat widespread poverty. Read More...

"There is nothing that's off the table. I have my positions, and I'll articulate them. But nothing's off the table," McCain said. "I don't want tax increases. But that doesn't mean that anything is off the table."

“Ross Douthat and Reihan Salam argue for restoring the Republican Party through a new activist government agenda focused on addressing the problems and concerns of the working class. The failure to decisively win over the working class is what has prevented Republicans from winning a true governing majority, they argue. The new agenda, they say, should include subsidies and policies to strengthen marriage and the family, and promote having children.
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"For all his talk of a new politics of change and unity across partisan lines, Barack Obama said last week that as President he would deny working people the freedom to choose a better deal for Social Security. No real change for that program, adopted over 70 years ago, following the model adopted by German Chancellor Otto von Bismarck in 1889.

Indeed, Obama even voted against legislation to stop the longstanding raid on the Social Security trust funds. The supposedly old and stodgy John McCain, however, voted for the legislation to stop the raid, and supports allowing each worker the freedom to make their own choice regarding personal accounts.

This reveals yet again the sad truth about Barack Obama. Read More...

“Universal health care can be guaranteed to all while making government smaller rather than bigger. This arose out of the best thinking from conservative health care policy analysts as far back as the enormous debate and victory over the Hillary health care plan in 1993-1994. The public does demand a social safety net that does not let anyone suffer without essential health care. Read More...

"Current official U.S. government projections show that without fundamental reforms, federal spending will soar over the next three decades from 20% of GDP today, where it has been relatively stable for over 50 years now, to close to 40% of GDP. The major drivers of this spending explosion are precisely the major entitlement programs -- Social Security, Medicare, and Medicaid.

If anything even close to that happens, limited government conservatives will have been completely routed. Add in state and local spending, and total government spending in America will be over 50% of GDP. Read More...

They said it couldn’t be done. But Congressman Paul Ryan (R., Wis.) has just done it.

Ryan is the ranking Republican on the House Budget Committee, and a member of the House Ways and Means Committee. This morning, Ryan will introduce legislation providing for a package of comprehensive reforms to Social Security, Medicare, and Medicaid that will completely eliminate the long-term entitlement crisis, without tax increases.

Since the early 1950s, federal spending has been relatively stable at around 20 percent of GDP. But official projections now show that over the next 35 years, this will soar to close to 40 percent, primarily due to the big three entitlement programs. Read More...

I had a little argument with David Frum about taxes almost two years ago in a series of blog exchanges. He had argued that to pay for abolishing the Alternative Minimum Tax (AMT) we should adopt a carbon tax of equivalent size. The AMT had been adopted in the 1960s as a way of ensuring that a couple of dozen millionaires exploiting loopholes so furiously that they avoided any income tax liability altogether would be forced to pay some reasonable amount of tax.

But the AMT had never been indexed for inflation. So now, 40 years later, the AMT threatens millions of Americans with a punitive tax that would raise close to a trillion dollars over 10 years. It threatens in particular those in higher tax, Democrat states, as the deductions for state and local taxes are disallowed under the AMT. Read More...

Probably the most substantive exchange of the Presidential campaign took place within the past two weeks. But it wasn't between Barack Obama and Hillary Clinton, or between John McCain and either of those two. It was between Barack Obama and Newt Gingrich.
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Barack Obama and Hillary Clinton are both campaigning on economic policy platforms promising enormous, unprecedented, historic increases in runaway government spending, to be financed with huge, record setting, historic tax increases. Is this what our economy needs, just when it may be tipping into recession, and facing the stiffest world competition in decades?
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“The stimulus package just signed into law seems to be carefully crafted--to achieve little or nothing. The billions in cash rebates are based on old-fashioned Keynesian economics, which were discredited 30 years ago. The government will first be taking those billions out of the economy by borrowing it. Read More...

…In an article last October in BARRON’S Magazine, Peter J. Ferrara, of the new Supply Side Institute and the Institute for Policy Innovation, offers a better way. The solution, he argues, is to think outside the box of our current entitlement structures, and seek to reform these programs from the bottom up. By modernizing the programs to rely primarily on modern capital and labor markets, rather than old-fashioned, 19th Century, tax-and-spend redistribution, we actually can serve the beneficiaries of these programs far b Read More...

"How important is it for the president and Congress to address the issue of Social Security in the next few years?" When recently polled on this question, a shocking 96% of the American people said it was important, with 86% saying very important. Only 2% said it was not important. Just about everyone in Washington is completely out of touch with the American people on this issue.
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• Social Security faces a shortfall over the indefinite future of $13.6 trillion in present-value terms.
• Delaying changes to Social Security reduces the number of cohorts over which the burden of reform can be spread. Not taking action is thus unfair to future generations. This is a significant cost of delay.
• By itself, faster economic growth will not solve Social Security’s financial imbalance—realistically, there is no way to “grow out of the problem.”

• Social Security can be made permanently solvent only by reducing the present value of scheduled benefits and/or increasing the present value of scheduled tax revenues. Read More...
  
  

We will not get personal retirement accounts through tax increases, or cuts in future promised benefits. Quite the contrary, it was including these options on the table that actually killed the campaign for personal accounts. So it is those would-be reformers who misled the President down this pain caucus highway who should be held responsible for any future tax increases that will result due to the failure of reform now.

The only way to achieve personal accounts is to go back to the positive, populist reform model on which George Bush was elected. Read More...

“Raising revenue from some tax increase or another to cover the supposed losses from making the Bush tax cuts permanent does not make the cuts permanent, but effectively repeals them.

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According to the Social Security Trustees, in the first year of the program’s cash deficit - 2017 - the shortfall is estimated to be $11 billion (in today’s dollars). Using the current cost (FY06) of government programs, we’d have enough money to make up this shortfall if we eliminated Head Start ($6 billion), the State Children’s Health Insurance Program ($4.4), and the Food and Drug Administration ($0.5 billion).

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• The Washington State think tank the Evergreen Freedom Foundation recently wrote, “In the last five years, Washington has seen its unfunded liability for pensions increase dramatically. According to the June 2006 Comprehensive Annual Financial Report, the total unfunded actuarial liability has seen an eight-fold increase from $778 million to $6.4 billion.”

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The current debate among conservatives on Social Security reform is a perfect reprise of a debate that occurred in the late 1970s over tax and budget policy. Back then, the conservative Republican orthodoxy became known as the “pain caucus”; budget deficits and unfunded liabilities were of greater concern to these politicians than the total level of taxes and spending. Indeed, it was this concern that led orthodox conservatives to oppose the Kennedy tax cuts of the early 1960s, a politically unpopular position. As tax collectors for the welfare state, the old Republican guard bore the political negative of trying to pay for Democrat promises, while the Democrats kept riding to victory on the political positives of such promises.

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SAN FRANCISCO - Now that Rep. Pete Stark, D-Fremont, is chairman, once again, of the House Ways and Means Committee’s Subcommittee on Health, what he believes about the health care system matters — especially if he’s wrong. Which he surely is when he talks about Medicare.

Stark has already announced that he would like to expand Medicare to cover all Americans. Such proponents of a single-payer, government-run health care system assert that if the U.S. would put everyone in Medicare, or something similar, Medicare’s efficiency would save so much money that the country could provide health insurance coverage for everyone, including the 46 million uninsured, for what it is currently spending. Read More...

WASHINGTON (Reuters), Feb. 2, 2007 — U.S. Treasury Secretary Henry Paulson on Friday conceded that chances were slim for agreeing on a way to reform Social Security financing but said he would keep trying to find bipartisan support for it.

“‘There’s not a high degree of likelihood. I’m not naïve, given how politically contentious this is that we’ll get this done.’ Paulson said in an interview on CNBC Television.

“Paulson said it was important to try to ‘get people together and come to the table without preconditions’ but, if it doesn’t work, at le Read More...

It's now confirmed — Social Security reform is off the table for this year and perhaps for the rest of President Bush's term of office. Treasury Secretary Paulson said as much in a statement last week. This is how it happened.

Shortly before delivering this year's State of the Union address, President Bush removed language from it calling on Democrats to negotiate on reforming Social Security with all options on the table. Read More...

These successful candidates didn’t say we need to cut future benefits, or raise taxes, or lift the retirement age. They said workers would get a better deal through personal accounts, and even contrasted this approach with the bad alternatives of tax increases and benefit cuts. Read More...

To keep this economy strong we must take on the challenge of entitlements. Social Security, Medicare and Medicaid are commitments of conscience, and so it is our duty to keep them permanently sound. Yet we’re failing in that duty. And this failure will one day leave our children with three bad options: huge tax increases, huge deficits or huge and immediate cuts in benefits. Read More...

The president devoted one paragraph to his call for reining in the unsustainable growth in spending for big social programs -- Social Security, Medicare and Medicaid -- a cause that had been a major feature of his past two State of the Union speeches. But absent was the demand for Social Security private accounts, or even last year's proposal for a bipartisan entitlements commission to tackle the problem.

"The Institute for Policy Innovation, a conservative organization espousing free-market ideas, gave Mr. Bush credit for continuing to raise th Read More...

“[T]o keep this economy strong we must take on the challenge of entitlements. Social Security, Medicare, and Medicaid are commitments of conscience, and so it is our duty to keep them permanently sound. Yet, we’re failing in that duty. And this failure will one day leave our children with three bad options: huge tax increases, huge deficits, or huge and immediate cuts in benefits. Everyone in this chamber knows this to be true – yet somehow we have not found it in ourselves to act. So let us work together and do it now. With enough good sense and good will, you and I can fix Medicare and Medicaid – and save Social Security.”

“But no Democrat, not even Lieberman, is willing to accept that. Democrats refuse to talk with Republicans about personal accounts “carved out” of the present system. Indeed, a “carve out” is now a dead letter. New personal retirement accounts could be passed only as an “add on”….

Workers who do not pay Social Security taxes on income over the limit -- often referred to as "the cap" -- also do not receive benefits for income over the limit, reminds Peter Ferrara, director of entitlement reform at the Institute for Policy Innovation and a senior fellow at the Free Enterprise Fund.

Thus, "If the taxable limit is raised, more income will be counted toward future benefits as well, leaving little net gain over the long run," he wrote recently for National Review Online. Read More...

A Social Security reform that raises the tax share on upper income Americans hovers like a cloud over the GOP. Not only is President Bush refusing to rule out such a tax increase but Treasury Secretary Henry Paulson has been actively considering such a politically volatile provision. On top of all his other troubles, President Bush could finally lose his base on this issue and split the party.

“The trouble is that Ferrara’s plan increases the cost of the current system for the first 75 years and promises reduced costs only afterward. Take the year 2035, when Social Security’s actuary says that paying benefits will eat up 17.4 percent of wages. The actuary’s most favorable estimate for Ferrara’s plan has the total cost of funding personal accounts and paying traditional benefits that year at 19.3 percent of wages.”

• The system needs to be fundamentally transformed into a true system of prefunded savings, not transfer payments.
• Debt is a perfectly legitimate way to finance the transition to a savings-based Social Security system. We should not fear increased debt. It simply recognizes the reality of the system's obligations and is the least-harmful way to recognize this liability and turn it into something that markets can easily deal with.
• No Social Security deal is worth an increase in the tax burden, which will slow the economy and excerbate Social Security's problems.
• Obsessing over the solvency of the system will lead to a horrible "solution" that is worse than the problem.
• Playing games with cutting Social Security benefits will not substantially solve the problem and will only make it a worse deal for workers.

“The chief actuary of Social Security has officially scored at least five different personal-account reform plans as achieving full solvency in Social Security, without anybenefit cuts or tax increases…Republicans would make a big mistake in hiding from the personal accounts. Because of the enormous benefits they provide for working people, they are in fact a populist, positive idea at the grassroots.”

Importantly, we are not pushing a comprehensive personal accounts solution now. We think that would be useless in the current political environment. Instead, our efforts are focused on preventing a terrible deal that makes Social Security an even worse deal for workers than it is now, and that ruins any future possiblity of a comprehensive, personal accounts based solution.

Third, the taxes that fund Social Security could be made more progressive. There is a cap on the amount of wages that is subject to the payroll tax. Read More...

The present political obsession with Social Security’s solvency parallels the obsession with eliminating the budget deficit. Balanced budgets and trust funds in actuarial balance are only good things when overall spending is restricted. In its most recent long-range fiscal policy brief, the Congressional Budget Office projected that government will consume between 38 and 55 percent of the economy by 2050, largely because of entitlements. If that is allowed to happen, and especially if taxes are raised to fully fund those obligations, government will place a crushing burden on the U.S. economy.


Fortunately, this is a crisis with a solution. Read More...

Ferrara's claims are basically lies.

Ferrara is promoting an agenda of too-good-to-be-true solutions -- such as the budget-busting fantasy of funding personal accounts from general revenues. Read More...

Conservatives are right to distrust a fatally wounded and flailing White House. Washington Post columnist Sebastian Mallaby reveals why in his op-ed yesterday (“A Fix for Social Security,” November 27, 2006). Read More...

BUSH'S TAX PERIL

November 28, 2006 -- THE Bush administration seems set to push for a huge hike in Social Security taxes and a major cut in future promised benefits. Worse, the plan doesn't include the personal accounts that President Bush discussed while campaigning in 2000 and 2004. As a result, it doesn't truly save Social Security.

The president's staff is negotiating with Congress's new Democratic majority now. My sources on Capitol Hill say the White House has already sold most Senate Republicans on this political loser. Read More...

. . . politicians may come up with different names for cuts and taxes in order to make them sound innocuous. One proposal, for example, is indexing lifetime earnings to prices instead of wages, which would make the system solvent indefinitely. It sounds like a harmless accounting trick, but it is actually an enormous benefit cut. Since Social Security's inception, wages have generally grown at a faster rate than prices.

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An expensive welfare state also tends to reduce the size of the workforce . . . . the more secure the safety net, the less likely people are to have children.

Governments have largely nationalised the traditional functions of the family . . .

“Such replies worry me, because they underscore how poorly many Republicans and conservatives grasp what happened last Tuesday.”

"The federal government today consumes about 20% of national income.

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Architect of Social Security Plan Perseveres
Blahous, Who Convinced Bush of Need for Benefit Cuts, Works Behind Scenes to Sway Skeptics

By Jackie Calmes, The Wall Street Journal, 1417 words
Apr 22, 2005

Washington -- FOR CHARLES P. "Chuck" Blahous III, the self-described geek behind President Bush's foundering plan to revamp Social Security, not all days have been bad lately. On April Fool's Day, a Friday, he took a day off to get married. He was back at work on Monday.

It was a rare break for the 41-year-old baseball and board-game fanatic who, as the architect of President Bush's top domestic priority, is working behind the scenes on arguments to sway skeptical lawmakers and voters, and formulas to cushion low-income Americans from future benefit cuts.

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Social Security Breakout
December 1, 2003

With Medicare legislation out of the way, for better or probably worse, at least President Bush can now turn his political attention to fulfilling his promise to modernize Social Security. The scope of his opportunity will be evident with the release today of an official budget score of one of the more energetic reform proposals.

As Peter Ferrara details nearby, the big news is that a transition to even large personal Social Security investment accounts can be financed without cutting benefits or raising taxes. Read More...