The GOP Payroll Tax Cut/UI Extension Proposal

“will they finally hold the line on their own promises this time, or will they pass all the extensions without the reforms, riders, and spending offsets? This package must be the final offer.”

Earlier today, House Republican leaders unveiled their package deal to extend the payroll tax and unemployment benefits for another year and to continue Medicare ‘doc fix’ for another two years.

While bipartisan passage of the payroll tax cut and doc fix were a forgone conclusion, the real issues for conservatives were the UI extension and the spending cuts.  Unfortunately, they are acquiescing to another extension, albeit with some reforms.
The major reforms include mandatory drug testing and participation in reemployment services as a condition for receiving benefits.  Those receiving the 99 weeks of UI will gradually be reduced to 79, and then finally 59 weeks.  Also, states would be authorized to use some of the funds for job training programs.  The UI component of the bill falls short of transformational reform, but at least it precludes 99 weeks from becoming the standard duration of payments.

In order to ameliorate yet another welfare extension for conservative members, two more sweeteners were added: 1) A law to force Obama’s hand on the Keystone Pipeline 2) A provision that would keep illegal immigrants from receiving the refundable portion of the Child Tax Credit, by requiring that recipients provide a valid SSN.  This would save $10 billion over 10 years, according the GOP sources [more background on that issue here].  The bill also has a provision to reduce Clean Air Act regulations for industrial boilers.

The proposal, which includes the aforementioned three extensions, will cost about $200 billion.  Republicans say they will pay for it with the following reforms, many of which were adopted from the Senate Republican proposal:

Senator Coburn: The Agony of a Pragmatic Conservative Amidst Inflexible Liberals

Senator Tom Coburn released a report, Subsidies of the Rich and Famous, detailing a list of subsidies, transfers, and “tax breaks,” that are paid to individuals with Adjusted Gross Income (AGI) of over $1 million.  The report found that millionaires have received at least $9.5 billion in “government payments” since 2003 and $113.7 billion in “tax breaks” since 2006.  Accordingly, Coburn concludes that many of these tax deductions should be eliminated, while benefits for the rich should be means-tested or reduced.

As our debt approaches $15 trillion, Coburn’s heart is undoubtedly in the right place; however, many of his proposals are misguided.  While some of the deductions enumerated in this report should be eliminated immediately, most of the savings will come from revoking universal tax deductions from those who already have the highest tax burden.  Additionally, while some of the subsidies, such as the farm and green handouts, should be abolished, most of Coburn’s savings on government benefits would come from reducing Social Security payments to the rich.  Social Security payments, unlike welfare and other subsidy programs, represent real money that was paid into the system through payroll taxes.  Any effort to deny those payments from the rich would engender further redistribution of a program that was not conceived for redistribution.  Also, it would ostensibly be a 12.4% tax increase on those high-income earners, as they would pay the tax without receiving the retirement checks.

Let’s drill through the numbers of the report.  Here is a list of government payments that Senator Coburn has identified as subsidies for the rich:

Telling the Truth About Medicare

We must end the vicious cycle of third-party payer and rising healthcare costs

By far, our largest unfunded liabilities are Social Security and Medicare.  According to recent actuarial reports, Medicare faces a $25 trillion liability and Social Security has an unfunded liability of $21 trillion.  And those numbers are regarded as low-ball figures, due to their unrealistic accounting for cost-cutting measures.  They already represent the largest expenditures of the federal government, with Social Security and Medicare consuming 20.2% and 14.6% of the budget respectively.  Those numbers are slated to skyrocket as the retirement population doubles over the next three decades.  Hence, any meaningful discussion of balanced budgets must include a plan to fix these two entitlement behemoths – brought to you by previous Democrat presidents.

The first step to entitlement reform must include an acknowledgement of the dichotomy between the two largest programs.  Social Security and Medicare are very different programs.  Consequently, they face divergent problems and require dissimilar solutions.

Last week, healthcare expert Christopher Conover posted an analysis at the American Enterprise Institute, illustrating the differences between Social Security and Medicare.  He found that while most people (except low-income earners) receive Social Security benefits that are roughly commensurate to their contributions from the 12.4% payroll tax, the same cannot be said of Medicare benefits.  The average Medicare recipient, according to Conover, received $2-$6 per every dollar paid into the system via the 2.9% Medicare tax.  Moreover, the only people who earn all of their Medicare benefits are those earning an average of $130,000 a year over their entire career – the very people who will see a payroll tax increase under Obamacare.

Romneycare: A Microcosm of Obamacare, According to Conservative Study

Does government have the right to take over the healthcare sector, thereby infringing on liberty, killing jobs, reducing income, destroying investment, and driving up costs to consumers?  Well, as long as it is promulgated by state government, Mitt Romney thinks there is nothing wrong.

The conservative Beacon Hill Institute at Suffolk University has done a comprehensive study surveying the devastation of Romneycare – and it’s not pretty.  The study, which was obtained by the Boston Herald, analyzed trends in healthcare costs and employment data before and after passage of this unconstitutional behemoth.  Here are some of the key findings of the Romneycare devastation:

• cost the Bay State 18,313 jobs;

• drove up total health insurance costs in Massachusetts by $4.311 billion;

• slowed the growth of disposable income per person by $376; and

• reduced investment in Massachusetts by $25.06 million.

Additionally, the study found that much of the higher costs were subsidized by the federal government (national taxpayers) through a Medicaid waiver program.  A previous Beacon Hill study found that Romneycare cost Medicaid $2.4 billion and Medicare $1.4 billion.  It is these very costly state programs that are causing federal Medicaid expenditures to rise from its current level of $280 billion to $574 billion in 2020.  It is these very state mandates that have spiked the cost of private health insurance for years.

The Entitlement Leviathan in Numbers

We need bold free-market, liberty-promoting solutions from our POTUS candidates.

Immediately prior to breaking for the August recess, Congress passed a bipartisan agreement to cut spending.  Well, sort of.

Leaders in both parties got together to do something evil and stupid; they agreed to the largest increase in the debt ceiling, without solving our debt problem.  They cut discretionary spending by $6.67 billion for FY 2012, from $1.0497 trillion to $1.043 trillion.  That's a bit more than half a percentage point.  Worse, discretionary spending (budget authority) only accounts for roughly 28% of our projected $3.7 trillion in outlays for FY 2011.  So we cut about 0.6% of 28% of our federal budget for next year!

But, fear not; the best is yet to come.  The mandatory entitlement spending reforms will be tackled by the super committee.  The only problem is that a committee with such luminaries as John Kerry, Patty Murray, and James Clyburn – will never cut a dime from mandatory spending.

Where does this leave us?

Here is a brief overview of our giant entitlement/dependency/welfare state, which if left unreformed, will lead to insolvency, engendering public riots to the degree that we have seen in Europe this year.

60 Plus Association TV Ad Defending Ryan's Medicare Reform Plan

It's quite arduous to articulate the problems and solutions for medicare in a 30-second TV ad.  It is much easier to demagogue the issue with fallacious bromides about throwing granny off the cliff.  Nonetheless, the good folks at 60 Plus are trying: