health bill and higher taxes
Charles Krauthammer: Washington, D.C.
Health bill brings higher taxes
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As the night follows the day, the value-added tax cometh.
With the passage of Obamacare, creating a vast new middle-class entitlement, a national sales tax of the kind near-universal in Europe is inevitable.
We are now $8 trillion in debt. The Congressional Budget Office projects that another $12 trillion will be added over the next decade. Obamacare, when stripped of its budgetary gimmicks -- the unfunded $200 billion-plus doctor fix, the double counting of Medicare cuts, the 10-6 sleight-of-hand [[counting 10 years of revenue and only 6 years of outflows) -- is at minimum a $2 trillion new entitlement.
It will vastly increase the debt. But even if it were revenue-neutral, the health care bill pre-empts and appropriates for itself the best and easiest means of reducing the existing deficit. The bill's $500 billion of cuts in Medicare and $600 billion in tax hikes are no longer available for deficit reduction. They are siphoned off for the new entitlement of insuring the uninsured.
This is fiscally disastrous because, as President Obama himself explained last year, our unsustainable fiscal path requires control of entitlement spending, the most ruinous of which is out-of-control health care costs.
Obamacare was sold on the premise that, as Nancy Pelosi put it, "health care reform is entitlement reform. Our budget cannot take this upward spiral of cost." But the bill enacted accelerates the spiral: It radically expands Medicaid [[adding 15 million new recipients/dependents) and shamelessly raids Medicare by spending on a new entitlement the $500 billion in cuts and the yield from the Medicare tax hikes.
Obama knows that the debt bomb is looming, that Moody's is warning that the Treasury's AAA rating is in jeopardy, that we are headed for a run on the dollar and/or hyperinflation if nothing is done.
Hence his deficit reduction commission. It will report -- surprise! -- after the November elections.
What will it recommend? What can it recommend? Sure, Social Security can be trimmed by raising the retirement age, introducing means testing and changing the indexing formula from wage growth to price inflation.
But this won't be nearly enough. As Obama has repeatedly insisted, the real money is in health care costs, which are now locked in place by the new mandates.
That's where the value-added tax comes in.
For the politician, it has the virtue of expediency: People are used to sales taxes, and this one produces a river of revenue. Every 1 percent of VAT would yield up to $1 trillion a decade [[depending on what is excluded -- if food is exempted, for example, the yield would be more like $900 billion).
It's the ultimate cash cow. Obama will need it. By introducing universal health care, he has pulled off the largest expansion of the welfare state in four decades. And the most expensive. Which is why all of the European Union has the VAT. Huge VATs. Germany: 19 percent. France and Italy: 20 percent. Most of Scandinavia: 25 percent.
American liberals have long complained that ours is the only advanced industrial country without universal health care. Well, now we shall have it. And as we approach European levels of entitlements, we will need European levels of taxation.
Obama set out to be a consequential president, on the order of Ronald Reagan. With the VAT, his triumph will be complete. He will have succeeded in reversing Reaganism. Liberals have long complained that Reagan's strategy was to starve the [[governmental) beast to shrink it: First, cut taxes then ultimately you have to reduce government spending.
Obama's strategy is exactly the opposite: Expand the beast, and then feed it. Spend first, which then forces taxation. Now, with the institution of universal health care, the beast will have to be fed.
And the value-added tax is the only trough in creation large enough.
As a substitute for the income tax, the VAT would be a splendid idea. Taxing consumption makes infinitely more sense than taxing work.
But to feed coming expenditures, the VAT must be added on top of the income tax.
Ultimately, even that won't be enough. As the population ages and health care becomes increasingly expensive, the only way to avoid fiscal ruin [[as Britain, for example, has discovered) is health care rationing.
It will take a while to break the American populace to that idea.
In the meantime, get ready for the VAT. Or start fighting it.
Happy Days are Here Again!
Well sorta...
Supporting the feel good idea that the economy is really getting back on it's feet is an article from MSNBC Economy is perking up, Ford sales are way up, and domestic rail traffic is up.
If we can overlook
-this year's federal debt being 10% of GDP. Even Bernanke, who contributed to this, says that anything above and beyond 4-7% is unsustainable. "Cutting the deficit ultimately will mean choosing between cutting those entitlements, which will soar as baby boomers retire, raising taxes, or other spending cuts." link
-Paul Volker says he thinks that the OMB's projections for the health care plan are incorrect and that if he is right, the result will be 'disaster'. He is advocating a VAT as are some Democrats.
-businesses as well as state and local governments have been hit with new health care expenses to make magical health care numbers work.
-unemployment, which we were told would not exceed 8% if Porkulus was passed, is still at 9.7%. It takes 300,000 new jobs a month to just keep up with population growth. That hasn't happened.
-" In the U.S. mortgage market, one-in-10 householders are at least one payment behind [[Q3 2009), up from one-in-14 [[Q3 2008). If foreclosures [[now at 4.47 % up from 2.97% one year ago) are included, then one-in-seven mortgagors are in some form of housing distress. " link
-33 states have exhausted their unemployment compensation kittys as the federal government has stopped providing extentions.
-California's state pension fund is $500M in the hole and it's general budget deficit is $20B.
-Social Security is now drawing from the federal budget instead of contributing to it. This happened 10 years before expected.
-although the housing market hasn't turned around despite $8,000 incentives, interests rates are starting to edge upward.
-commercial real estate is about to collapse.
-we are still involved in expensive wars.
-China will allow it's currency to rise which will raise the costs of its products, make imported oil and other commodities more expensive, and make China less willing to buy US Treasuries. If we lose our treasury customers, interests rates will rise here, making recovery more difficult.
- the recent Treasury auction was already anemic indicating higher interest rates.
-oil prices are already climbing.
-and all the numbers at http://www.usdebtclock.org/ .
What we are seeing is the effect of the printing press. If I had a printing press in my basement, I could have a new car in my driveway and the neighbors would think I was doing better too. Keeping in mind that $1T equals $6,000 per US taxpayer, under Bush/Obama the banks have recieved $14T from combined Congressional, Treasury, and Federal Reserve sources [[source Mother Jones), and $7T of new money has been issued. "The nonpartisan Congressional Budget Office [[CBO) says that President Obama’s budget and deficit projections are too low. The president’s budget will incur $9.3 trillion in federal deficits between 2010 and 2019 --$2.3 trillion higher than Obama had originally claimed." link There is overlap in those figures but whatever slight uptick or levelling off of the economy might be related to those numbers which only postpone, and make worse, the inevitable.
"The real economy remains fragile. Government actions, such as fiscal stimulus and special industry support schemes [[cash for clunkers; investment incentives, trade credit subsidies), have boosted demand and industrial activity in the short term. As Wells Fargo CEO John Stumpf told The Wall Street Journal on September 19, 2009: “If it’s not a government program, it’s basically not getting done.” Private demand remains somnolent. The problem remains as government incentives encourage current consumption and investment but ultimately “steal” from future demand." link