Thursday, October 29, 2009

Harry’s Shell Game

By Ellen Sauerbrey

After months of work by Senate Committees, Senate Majority Leader Harry Reid stepped up to the microphone and pronounced that in his opinion ““the best way to move forward is to include a public option with the opt-out provision for states.” Though there is little understanding of how an opt-out provision would work, it resurrected the seemingly dead government plan that, if enacted, will eventually destroy the private insurance market.

The inclusion of a public option in the Senate bill was a double cross that immediately resulted in Maine Senator Olympia Snowe, the only Republican who was lending a “bipartisan fig leaf” to any of the Democrat’s health care plans, withdrawing her support. Liberal Democrat Chuck Shumer lauded Senator Reid who, he said, “showed just how deep his commitment is” to the public option.

Reid knows that without the illusion of a bipartisan plan, he is likely to lose several middle of the road Democrats, especially those who must face the voters next year. Senator Joe Lieberman signaled weeks ago his concern that Obama was trying to do too much too fast in a weak economy and has now said he is likely to join a Republican fillibuster.

The likelihood of Reid getting the needed sixty votes to pass a bill out of the Senate with a public option, with or without the new gimmick of a “state opt- out” remains murky at best. So what is his motivation?

The Senate leader is facing a very difficult re-election campaign with polls showing him running behind Republican contenders. His liberal base, in and out of the Senate, demands a public option. The opt- out provision may be a meaningless gimmick but it allows Reid to appear strong with Democrat activist groups back home and perhaps gives cover to worried Democrats.

No one knows the language of the Senate bill, but it is certain that the public option will draw the greatest attention and debate. Even if Reid can’t get the votes for what will become, in reality, a government health care system, he will be credited by his leftist supporters in the Senate, as well as back home for having given it his best. He can then offer up Senator Snowe’s trigger, regain “bipartisan support”, and attract nervous Democrats.

All the while, with the media focusing on the fight over “public option”, “opt-out”, and “trigger” provisions, other equally destructive parts of the bill will be overshadowed.

As Harry’s shell game is played in Congress, voters need to keep an eye on the ball. The problems with this “reform” go far beyond the issue of a public option. With or without the public option, it will be at minimum a trillion dollar proposal with a new “Health Choices Commissioner dictating health insurance plans.

With or without a public option, it forces everyone to buy a government dictated health insurance plan, imposes new job-killing taxes on employers, slashes Medicare for seniors, underpays doctors and hospitals, limits the deductibility of medical expenses on income taxes, imposes billions in new fees on manufacturers of life saving medical devices, creates taxpayer subsidies for abortion and illegal aliens, and leaves millions uninsured.

Harry’s shell game is about his tough re-election prospects in Nevada. Many think he is misreading his state. Unless the people of Nevada really want this new dependency on government, they are about to bury him in “you are fired” pink slips for attempting to destroy the finest health care system in the world.

Wednesday, October 21, 2009


By Ellen Sauerbrey

Bookies are making bets on whether some version of Obamacare will pass this year, but with five bills floating around, there is no betting on what it will look like.

The threat of a “public option” has generated the hottest protest with voters understanding that the unfair competition of a government plan will quickly destroy the private health insurance system. By contrast some conservatives have expressed support for Senate Finance Committee proposal requiring that everyone must purchase insurance. After all, they reason, isn’t it just a matter of fairness to expect everyone to bear responsibility for their own care?

In reality this is a Trojan horse that will give the government as much power to control the health care system as the “public option”. It is also unconstitutional. But then there is nothing in the text of the constitution that gives the Congress any authority to regulate health care. However, this mandate breaks new ground.

For the first time, the federal government would be ordering Americans to buy a product or service they do not voluntarily choose to purchase. They would be required to purchase health care insurance acceptable to the Health Choices Administrator. This is quite different than government regulation of an activity that individuals have chosen to undertake. Failure to comply with the mandate would result in a tax collected by the IRS but the mandate is itself a hidden tax.

A government bureaucrat would be empowered to determine what coverage a policy must have to comply with the law. Many would be required to purchase health insurance that they cannot afford or that does not best meet their individual needs. For example, many healthy young people need nothing more than a high deductible catastrophic policy. They can afford to pay the doctor for their flu shot or to sprained ankle. For them, insurance is protection against the really big stuff.

What would compulsory insurance look like? Candidate Obama described his idea of “meaningful coverage” as being at least as good as the Federal Employees Health Benefits Program. One thing that can be assured is that lobbying would be intense to include dozens of mandated benefits in the plan. For decades health care provider groups have demonstrated their effectiveness in expanding mandates at the state level. These mandates have helped to drive the cost of insurance through the roof in many states, forcing consumers to buy a Cadillac plan when all they may want or need is a basic stripped down Model T Ford.

This is precisely the problem that Massachusetts experienced after the passage of the Romney compulsory insurance plan. Lobbyists convinced legislators to make the mandatory insurance more and comprehensive and more and more expensive. Legislators have proposed requirements for over seventy additional coverages. A federal plan will experience the same political pressures to require consumers to buy increasingly comprehensive insurance and will effectively eliminate low cost and catastrophic plans.

One of the few innovations that has given consumers the incentive to utilize health care more carefully is the Health Savings Account. (HSAs) These plans have a higher deductible but allow families to save what they do not need to use annually. As would be the case with a large majority of plans currently offered by employers, HSAs would not comply with the dictates of the Health Choices Czar.

If the Massachusetts experience tells us anything, it is that compulsory insurance premiums will drive up costs, humongous government subsidies to fund insurance for those who cannot afford it will follow, and the bureaucracy will resort to price controls and rationed care as government expenditures skyrocket well beyond projections.

Sadly much of the insurance industry bought in to the compulsory coverage scheme when it seemed to guarantee them tens of millions of new captive customers. However when it became apparent that the fine for non-compliance had to be lowered to make it politically acceptable, insurers were faced with the prospect that many individuals would pay the fine and buy insurance only when faced with serious medical costs.

Now the insurance industry has turned on the plan and issued a report that the Senate Finance Committee bill will increase insurance rates. Angry Democrats are threatening repeal of the McCarran-Ferguson Act that defines insurance as a state controlled activity.

Industry attempts at appeasement, in hopes that the alligator won’t eat them first, usually backfire. Government compulsion in the market place will gobble up insurers first and then leave consumers as the ultimate victims.

Friday, October 9, 2009


By Jim Pettit

There is nothing new about a president having different opinions with his generals during war, yet how the commander-in-chief addresses these issues openly tests his character and determines a place in history like no other matter. President Obama’s problem with Gen. Stanley McChrystal is all style, not substance. And it’s the president himself who created the very problem that the White House is now complaining about. Obama has stumbled badly on this.

The administration has not answered the call from McChrystal, the top U.S. and NATO commander in Afghanistan, who very publicly called for an increase of 40,000 troops. McChrystal is directly responsible for these soldiers’ lives, more so than the president, the Secretary of Defense and the Chairman of the Joint Chiefs of Staff. With that burden comes an obligation the rest of us can only imagine.

As a candidate, Obama campaigned on refocusing the war from Iraq to Afghanistan, and as president, he removed the last commander replacing him with McChrystal after having called for a new strategy. Since the president does not yet know how to address the substance of the general’s blueprint for victory, administration officials are denouncing the style in which his recommendations are made. Just today, the administration let it be known that McChrystal need not attend a high-level strategy briefing on Afghanistan, the latest petty maneuver of an orchestrated campaign to marginalize him.

The administration is trying to change the subject to a debate about the military chain of command protocol by saying McChrystal is out of line to get through the next several press cycles. To buy time after that, the administration is going to great lengths to portray a systematic, deliberative decision making process where troop levels is just one among a range of options for going forward in Afghanistan. Picking up on this, Sen. John McCain told the president following McChrystal’s remarks that deciding troop levels should not be conducted at a “leisurely pace.”

According to press reports, unnamed White House advisers were "shocked and angered" by the bluntness of McChrystal's London speech in which he outlined a solution for winning the war. On the Sunday talk shows, Defense Secretary Robert Gates and National Security Advisor James Jones were dispatched to say, in essence, that military advice should be kept private.

When asked by a reporter whether the president is pushing the general aside if he doesn’t listen to advice about increasing troop levels, here is what Press Secretary Robert Gibbs said on October 6:

“I'm not going to get into hypotheticals. I appreciate that you fast-forwarded through the decision-making process. But we're going to focus on that process and getting it right. I'm just not going to get into hypotheticals.”

This situation is not hypothetical. The general stated what he thinks the key to victory is and the White House is dithering while casualties mount.

In the largest loss of U.S. soldiers in a single battle in more than a year, some 200 insurgents stormed an Army base comprised of some 140 American and Afghan forces near the Pakistan border. Eight U.S. soldiers were killed October 3. For months prior to this attack, this base was slated to be closed in the thinly populated area but wasn’t due to delays in getting helicopters in for an airlift. You’re either in or you’re not. Half measures are deadly, and that’s what the U.S. effort is right now.

When Winston Churchill appointed a new admiral of the navy to institute sweeping changes in the British fleet, he said at the time he wanted a “live wire.” Obama appears to have one in McChrystal, but he probably doesn’t know that because he spoke with his general just once since his promotion before these events unfolded.

Looking back at American history, it’s clear that presidents have a high threshold to reach to avoid the political and military fallout that comes from reducing the stature of battlefield commanders. First among presidents who had to deal with wartime generals is Abraham Lincoln, who was frustrated at the slow, wandering pace of the Civil War. Gen. George McClellan lectured the president on how to wage war with the South, yet failed to wage aggressive campaigns required for victory. He was subsequently fired.

Harry Truman sacked Gen. Douglas MacArthur for not following Administration policy on the Korean War. After Truman let him go, he later said it was because MacArthur didn’t respect the authority of the president. Respect for the authority of the president in this case meant not speechmaking, but provoking China which would have drastically widened the war.

Lecturing the general on his style of going public aboard Air Force One for a half hour in Copenhagen to sell Chicago to the Olympics committee does not inspire confidence. The Administration cannot focus on Afghanistan, health care and energy regulation, a last minute trip to see the Olympics committee and a host of other issues all at the same time. When everything is a priority, then nothing is. So for now, its politics as usual: attack the general in the press, exclude him from key meetings and change the subject.

In Obama, we don’t see any qualities even remotely resembling either Lincoln or Truman, who had to endure acute and sustained challenges with their generals on fundamental differences of policy. Lincoln and Truman fired their generals with substantive examples that justified their actions in the long run.

Obama knows he can’t fire McChrsytal – not yet anyway. The fallback approach is a cheap political effort to marginalize the general, and it comes at the added cost of the lives of U.S. troops. This is not leadership.

Wednesday, October 7, 2009


The pending Unemployment Tax increase is certain to make matters worse.

Ellen Sauerbrey for Maryland Business for Responsive Govenment

With many businesses struggling to survive the current recession, a significant increase in Unemployment Insurance (UI) taxes is a potentially ruinous prospect. Higher taxes in a recessionary climate will pressure employers to delay hiring/or increase the number of layoffs. The irony is that the hefty employer tax increase scheduled to begin in January 2010 is required to replenish the Unemployment Compensation fund which has been depleted by layoffs. Employers who have experienced more layoffs, and presumably are under the greatest stress, are also the ones who will pay the highest tax increase.

In January, Maryland employers will be assigned Unemployment Contribution rates using “Table F,” which is the maximum level for the mandated “contributions” or taxes used to cover employees for Unemployment Insurance. Employers will pay taxes that range between 2.2% and 13.5% of annual taxable wages of all their employees or the first $8,500 in wages paid to each employee. Depending on an employer’s underlying “experience rate,” the actual dollars amount will range from $187 to $1,147.50 per employee earning $8,500 or more per year. A company with no layoffs in the past three years will have the lowest rates increases.

This should not come as a surprise because the formula that mandates this increase was enacted in 2005 with support from the business community. In addition, some of the business community supported extending benefits to part time workers, significantly driving up the number of applicants.

This is an excellent example of how seemingly good public policy can result in adverse unintended consequences.

What is the purpose of the Unemployment Insurance Law in Maryland? The statute (8-102) indicates that the purpose is “to prevent the spread of involuntary unemployment and to lighten its burden…” Before we raise the UI tax on employers to the highest level, perhaps we should ask ourselves whether this will force employers to lay off more people.

Anyone who paid attention in Economics 101 knows the answer is yes. However, if we do not increase these taxes, the UI Trust Fund for Maryland may be depleted and forced to borrow from the federal government. Let’s look at the alternatives before we passively accept the higher fees.

Option I Do Nothing - Allow the increases to take affect and risk the possibility that many businesses will reduce payrolls or move production to other states or out of the country altogether.

Option II Limited Increase - Reduce the required increase (50% or more) and monitor the Trust Fund balance to see what, if any additional increases are needed.

Option III No Increase – Eliminating the increase in UI Tax and allow the Maryland Trust Fund to borrow from the federal government if necessary.

UI Trust Fund balances earn interest; however, unlike other forms of deposit, these amounts are not available for investment in the local economy for job creation. Balances in state UI Trust Funds are used to offset the Federal Deficit, which is an important reason why the federal government encourages states to impose higher taxes and maintain larger balances.

What happens if Maryland borrows from the federal government? Any money that Maryland borrows must be repaid with interest. Absent specific legislation to charge employers, the interest expense in question would be payable from the state’s general fund.

Which is better: impose higher UI taxes without borrowing or lower UI taxes and possibly need to borrow? The answer depends on what you value more – jobs or the UI Trust Fund.

Saturday, October 3, 2009


By Ellen Sauerbrey

The Obama administration is moving with lightning speed to destroy the private sector and create a new kind of citizen that must look to the government to meet ever more basic needs. Government takeovers started in earnest a year ago with the seizure of Fannie Mae and Freddie Mac. This was followed by the takeover of banks and the car makers. And currently the battle is being fought over the attempted takeover of health care and student loans.

If President Obama and liberal Democrats in Congress have their way, for the first time in history, American citizens will be dependent on bureaucrats in Washington for their home mortgages, their children’s college loans, and their health care. That equates to a dangerous new level of dependency on government for middle America.

The Washington Post reported September 7 that the federal government is now guaranteeing 86 percent of all new home mortgages, up from 30% four years ago. So for most American families, the American dream of home ownership now rests with a federal bureaucracy. This is the same bureaucracy that encouraged people to buy homes they could not afford and stuck the taxpayers with billions in defaulted loans.

In mid September, the House voted for an education-financing measure that would oust private lenders from the student loan business and make the government the sole provider of student loans under federal programs. Should parents be left with no choice but a Washington bureaucracy from which to borrow money for their children’s college education?

As the Wall Street Journal reported, “Loans directly from the feds have been available for decades, but the government's poor customer service has resulted in most borrowers choosing private lenders. We are told that we need a “public option” to ensure competition in health care, yet when it comes to student loans the government wants to crush competition.

If the Senate passes the measure, the U.S. Department of Education will move from its current 20% share of the student-loan origination market to 80% on July 1, 2010, when private lenders will be barred from making government-guaranteed loans. The remaining 20% of the market is likely to be crowded out by regulations Congress created last year.

Critics argue it is wrong to put the government in near-total control of student lending; that it expands the federal balance sheet by another trillion dollars over the next decade, and can inject politics into loan issuance and loan defaults.

Do American families really want their ability to buy a home or send their children to college dependent on a government bureaucracy? If the Democrats also succeed in their quest to grab control of the American health care system, the mechanism will be in place to control the most intimate aspects of our lives.

Meeting with Uighur leader Rebiya Kadeer

Visiting Iraqi refugees at Jordanian girls' school.