A recipe for higher taxes and bigger deficits
Dionysus
[A LENGTHY READ THAT WILL APPEAL ONLY TO THE INTELLIGENT HERE]
HEAD: The dangerous secret to the Baucus health bill
LEAD: Hidden in the Senate's health-care bill are huge incentives for
corporate America to stop covering their workers. If that happens, the
deficit could skyrocket.
Now that the Congressional Budget Office has concluded that the health-care
bill proposed by Sen. Max Baucus will shrink the federal deficit over the
next ten years, its champions are heralding the legislation as a model of
fiscal responsibility.
But the CBO's comforting analysis relies on a big assumption that's highly
questionable, an assumption that virtually no one on either side of the
debate -- politicians, pundits, even economists -- is even challenging.
The assumption is that America's employers will keep providing coverage for
their workers. But, in fact, the Baucus bill severely undermines the
employer rationale for offering insurance. Economist Michael Tanner of the
conservative Cato Institute points out two main reasons.
First, the Baucus bill would substantially increase the costs of coverage,
for example by requiring rich benefits packages and coverage for Americans
with pre-existing conditions at far less than their actual expense. At some
point, employers will decide that the appeal of offering insurance as a tool
for recruiting and retaining employees no longer compensates for its soaring
cost.
Second, the bill is based on perverse incentives that no one is even
discussing. The subsidies it offers to citizens are so rich that if
companies were to drop their plans, the majority of workers would get the
same lavish coverage, and extra cash in their paychecks to boot. "Those two
factors will change the equilibrium," says Tanner. "With the government
providing huge credits, employers will feel a lot less guilty about dumping
their plans."
In fact, the Baucus bill is practically inviting employers to do just that:
It imposes a fine of just $400 per employee on companies that shed their
plans.
So what happens if corporate America exits the health-care field? The
foundation of the Baucus bill would pretty much collapse. Upper-middle-class
earners, who today make $65,000 and up, would suffer the equivalent of a
huge tax increase. And the extra revenue the government would collect from
those families wouldn't remotely pay for the millions of relatively low
earners who would absorb big subsidies in lieu of the premiums their
employers now pay.
The corporate exodus from health care would mean that the Baucus plan, far
from reducing the deficit, would actually increase it, perhaps sharply.
To understand how the math works, let's examine two typical families of
three, the average household size in the U.S. The Smiths earn $43,000 a
year, around the U.S. median, and the Joneses make $80,000. As we'll see,
the Smiths far outnumber the Joneses, and the extra taxes the Joneses pay
won't come close to paying for the lavish tax credits the Baucus bill
promises the Smiths.
Here's how the Smiths fare when employer, Acme Enterprises, drops Bob
Smith's plan. Say Bob gets insurance worth $13,000, and pays $3,000 himself,
with Acme covering $10,000. Since the $3,000 is tax deductible, Bob earns
$40,450 a year after paying his share for a lavish plan. Call that $40,450
the "benchmark."
When Acme drops its coverage, his pay should rise by $10,000, less the $400
penalty, or $9,600. That's what Acme needs to pay to stay competitive, even
in this weak labor market. Bob is in a 15% tax bracket, so he takes home an
extra $8,160 to pay for insurance.
Here's what really counts: Under the Baucus bill, his health-care costs are
capped at around $6,000, with the government paying the rest for the
coverage Bob will now buy from a private insurer through the exchange
envisaged in the Baucus bill.
So Bob gets an effective raise of over $2,100, plus the $2,550 he used to
pay out of his own pocket. So he effectively pockets a pay increase of
$4,700 -- or 12% -- and keeps his premium plan.
The regime that brought the Smiths good fortune is a disaster for the Jones
family. The main reason is that at $80,000, Mike Jones earns too much at
Acme to merit a health-care subsidy. Indeed, Mike gets his $9,600 raise, but
after paying taxes on it in a higher bracket (30%), he doesn't have nearly
enough left over to buy a $13,000 family plan. In fact, he's $4,200 worse
off after paying for coverage. That's an effective pay hit of over 5%.
The big tax on people like the Jones family is only the first of the two
problems. The second is the lacerating effect on spending and the deficit.
The Smiths do pay higher taxes than before, around $1,800 more, in fact. But
they're also getting $7,000 in subsidies, so they're imposing a net cost on
the system of over $5,000.
By contrast, the Joneses are paying around $2,700 extra in taxes, plus
they're absorbing the $400 penalty that Acme pays when it drops their
policy. So the Joneses are contributing around $3,000 to to help pay for the
Smiths.
Around two-thirds of America's workers earn less than $65,000 a year, and
it's those employees who are getting far more in subsidies than they're
paying in taxes.
So let's imagine the worst: that all 40 million employees covered by
expensive corporate plans (that's over 120 million people, including their
dependents), lose their coverage. By my calculations, the two-thirds who
earn less than $65,000 would cost around $5,000 per family, for a total of
$135 billion. The families earning over that number would contribute around
$30 billion, and the government would collect another $16 billion from the
$400 fine, bringing the extra revenues to $46 billion.
Hence, the extra subsidies, minus the additional tax receipts, would run
about $90 billion a year. That would double the figure that the CBO is
projecting to around $180 billion, a number big enough to totally erase the
shrinkage in the deficit. In fact, it would immensely swell both the
spending and the deficit in the years beyond 2019.
It gets worse. Middle-class earners will never tolerate a 5% tax hike. They,
too, will demand big subsidies, and Congress is likely to oblige. A new
middle-class bailout will quickly swamp all the current budget projections.
Even if employers simply accelerate what they're doing already, in many
cases dropping their plans or scaling them back, it's a recipe for higher
taxes and bigger deficits. The mystery is why the Baucus plan offers
corporate America such a tempting, if not irresistible, invitation to get
out.
*********************
Why, indeed.
"MMM...MMM...MMM, BARACK HUSSEIN OBAMA, MMM...MMM...MMM" --Young, innocent,
brainwashed grade school children in New Jersey
"It's not a Trojan horse, it's just right there! I'm telling you, we're
going to get there." --Jacob Hacker (chief hack-Socialist Doctors For
America) on government takeover of the medical system
"The American dream is not an entitlement." --Author Unknown
Dionysus
Michael Coburn
> FROM FORTUNE MAGAZINE
>
> [A LENGTHY READ THAT WILL APPEAL ONLY TO THE INTELLIGENT HERE]
>
> HEAD: The dangerous secret to the Baucus health bill
>
> LEAD: Hidden in the Senate's health-care bill are huge incentives for
> corporate America to stop covering their workers. If that happens, the
> deficit could skyrocket.
Ever notice that the stuff that the Republicans are selling is "hidden"
in the legislation. It is primarily because you have to misinterpret the
legislation in order to read it the way the Republicans want you to read
it.
> Now that the Congressional Budget Office has concluded that the
> health-care bill proposed by Sen. Max Baucus will shrink the federal
> deficit over the next ten years, its champions are heralding the
> legislation as a model of fiscal responsibility.
The Republicans got what they wanted again. They will have moved the
costs of the program to the states where the taxation will have to be
increased. And then they will sing about unfunded mandates. There was
nothing wrong with the Hr 3200 and the CBO was as full of shit then as it
is now.
> But the CBO's comforting analysis relies on a big assumption that's
> highly questionable, an assumption that virtually no one on either side
> of the debate -- politicians, pundits, even economists -- is even
> challenging.
Wait!!! Let me fasten my seat belt and roll up my pants legs.
OK.... Lets see what the lying pigs have cooked up this time.
> The assumption is that America's employers will keep providing coverage
> for their workers. But, in fact, the Baucus bill severely undermines the
> employer rationale for offering insurance. Economist Michael Tanner of
> the conservative Cato Institute points out two main reasons.
Cato institute??
BWAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHA
The employer "rationale" for offering health insurance is that it
dramatically reduces "take this job and shove it" worker mobility. And it
is government subsidized. It is a giant hook in the butt of the
employees.
> First, the Baucus bill would substantially increase the costs of
> coverage, for example by requiring rich benefits packages and coverage
> for Americans with pre-existing conditions at far less than their actual
> expense.
A proposition and an opinion not supported by any evidence whatsoever and
entirely typical of the Cato stink tank.
> At some point, employers will decide that the appeal of
> offering insurance as a tool for recruiting and retaining employees no
> longer compensates for its soaring cost.
Well, I am sure that every person with a brain realizes that if there is
less advantage to group insurance wherein your wife is going to be
covered regardless of her pre-exsiting conditions then there is less
benefit in such coverage and less to actually be offered by the employer
group plans. We also realize that insurance companies will try to
increase rates because insurance companies will see an opportunity to do
so. In the current system the premiums are inflated to cover the
inflated cost of medical services that exist due to the non insured and
Medicare price controls. The indirect coverage for these services comes
from increased premiums resulting from higher fees passed by the
providers for providing services to the people who are unable to secure
insurance directly or are in Medicare. But the fact that these costs
will be diminished in that more people are covered will not magically
find its way to the employers or employees. The providers will still
overcharge and the insurance companies will still overpay unless there is
a NEW competitor to keep this from happening. And that is why the public
option is so important.
> Second, the bill is based on perverse incentives that no one is even
> discussing. The subsidies it offers to citizens are so rich that if
> companies were to drop their plans, the majority of workers would get
> the same lavish coverage, and extra cash in their paychecks to boot.
Yet another outlandish unsupported opinion devoid of any factual data or
proof whatsoever. Cato has been cherry picking data and making shit up
for so long they don't even know what valid statistics might be.
> "Those two factors will change the equilibrium," says Tanner. "With the
> government providing huge credits, employers will feel a lot less guilty
> about dumping their plans."
The only problem with this horse shit claim is that the companies will
face a fine if they drop the insurance. Guilty or not, they will not be
rushing to eliminate that big hook they have in the employee's shorts.
> In fact, the Baucus bill is practically inviting employers to do just
> that: It imposes a fine of just $400 per employee on companies that shed
> their plans.
What a reversal!!!!!!! The rightards move from carping about fines to
claiming that fines are inadequate. Inconsistency is the true mark of
fascism and of fascist style communism as in the novel "1984".
> So what happens if corporate America exits the health-care field? The
> foundation of the Baucus bill would pretty much collapse.
So.....
> Upper-middle-class earners, who today make $65,000 and up, would suffer
> the equivalent of a huge tax increase.
We note the non existence of even so much as a rationale to support this
pig shit claim. But it is typical Cato.
> And the extra revenue the
> government would collect from those families wouldn't remotely pay for
> the millions of relatively low earners who would absorb big subsidies in
> lieu of the premiums their employers now pay.
What extra revenue???? What increase caused by the health care
overhaul? Next the Cato liars will claim that the Martians are coming to
eat the kids because the Democrats want to overhaul the health insurance
system.
> The corporate exodus from health care would mean that the Baucus plan,
> far from reducing the deficit, would actually increase it, perhaps
> sharply.
SUUUUUUUUUUUUUUUUUUUUUUUUUUUUUURRRRRRRRRRRREEEEEEEEEEEEEEEE!!!!!!!!!!
> To understand how the math works, let's examine two typical families of
> three, the average household size in the U.S. The Smiths earn $43,000 a
> year, around the U.S. median, and the Joneses make $80,000. As we'll
> see, the Smiths far outnumber the Joneses, and the extra taxes the
> Joneses pay won't come close to paying for the lavish tax credits the
> Baucus bill promises the Smiths.
The only problem with this crap is that there is no tax increase on
either of these two families.
> Here's how the Smiths fare when employer, Acme Enterprises, drops Bob
> Smith's plan. Say Bob gets insurance worth $13,000, and pays $3,000
> himself, with Acme covering $10,000. Since the $3,000 is tax deductible,
> Bob earns $40,450 a year after paying his share for a lavish plan. Call
> that $40,450 the "benchmark."
>
> When Acme drops its coverage, his pay should rise by $10,000, less the
> $400 penalty, or $9,600. That's what Acme needs to pay to stay
> competitive, even in this weak labor market. Bob is in a 15% tax
> bracket, so he takes home an extra $8,160 to pay for insurance.
>
> Here's what really counts: Under the Baucus bill, his health-care costs
> are capped at around $6,000, with the government paying the rest for the
> coverage Bob will now buy from a private insurer through the exchange
> envisaged in the Baucus bill.
>
> So Bob gets an effective raise of over $2,100, plus the $2,550 he used
> to pay out of his own pocket. So he effectively pockets a pay increase
> of $4,700 -- or 12% -- and keeps his premium plan.
>
> The regime that brought the Smiths good fortune is a disaster for the
> Jones family. The main reason is that at $80,000, Mike Jones earns too
> much at Acme to merit a health-care subsidy.
More made up bullshit from the Cato lie machine. There may, in fact,
exist a few companies that do this split health insurance deal, but most
do it to provide superior coverage for the higher ups. So the amount of
the subsidy is higher and so too the pass down and so too the raise if
there is a difference.
> Indeed, Mike gets his
> $9,600 raise,
But you are getting confused with your lies!!! You said that he didn't
qualify for the subsidy and now you say he did and will receive that as a
raise.
> but after paying taxes on it in a higher bracket (30%), he
> doesn't have nearly enough left over to buy a $13,000 family plan. In
> fact, he's $4,200 worse off after paying for coverage. That's an
> effective pay hit of over 5%.
There MAY be a small hit on taxation here in that the brackets MAY BE
DIFFERENT. Mike's taxable income with a wage of $80k and a wife and 2
kids is less than $70k and the marginal rate is still 15%. If that isn't
the case then the next bracket is 25% until we reach $137k where it goes
to 28%.
THE LYING NEVER STOPS FROM CATO. NEVER.
<<<<<<<<<<<<< Remaining pig shit deleted >>>>>>>>>>>>>>>>>>>.
The Baucus bill sucks when compared with HR 3200 complete with a public
option. But the lying from the rightarded stink tanks will occur no
matter what.
--
"Those are my opinions and you can't have em" -- Bart Simpson