Eye On The Ball

Jillian Bandes
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Posted: Jul 16, 2009 9:53 AM
As Meredith noted yesterday, House Democrats passed $1.2 trillion health care bill while everyone else was watching our favorite racially-appropriate nominee in the House Judiciary batting cages. It's a much bigger deal than hearings that will, barring an armageddon, confirm the Mayor De Soto, but that's a deliberate tactic from the Dems, who need every distraction they can to make us pay for more massive spending programs.

The bill probably won't make it past the Senate in it's final form -- and might have a tough time making it past the House, given Blue Dog Democrats' reservations about its price tag. But it's interesting to look at the first iteration of the bill and contemplate what it would mean in terms of health care and economic policy. This first draft includes the controversial public plan provision, and some plain crazy proposals as to how we're supposed to pay for it all. In fact, the "how we pay for it" addendums were so crazy that The Washington Post even came out against them.

The Post's reasoning is flawed as to why the Dems plan won't work, but their end conclusion about the effectiveness of taxing the rich is on-point. That demonstrates to me at least a feeble cohesion in liberal and conservative arguments against why this bill should go nowhere fast.

Flawed reasoning:
The traditional argument against sharp increases in the marginal tax rates of a very narrow band of Americans is that it could distort their economic behavior -- most likely by encouraging them to put more of their money into tax shelters as opposed to productive investments....The deeper issue, though, is whether it is wise to pay for a far-reaching new federal social program by tapping a revenue source that would surely need to be tapped if and when Congress and the Obama administration get serious about the long-term federal deficit.
On-point conclusion:
...A far better way to pay for health care would be to end the tax break for employer-provided health benefits, a subsidy that not only artificially pumps up demand for expensive treatments but also disproportionately benefits upper-income earners. Eliminating or, at least, capping it would be good health-care policy as well as good tax and budget policy. Pretending that "the rich" alone can fund government, let alone the kind of activist government that the president and Congress envision, is bad policy any way you look at it.
I hone in on the bolded text to point out the Post's rationale for lower taxes. They don't come down very hard on the idea that tax evasion occurs much more as the rich are taxed more; their bigger complaint is that it's simply not the right situation to increase taxes on the rich.

Even if I grant them that taxes do need to be raised (i.e. we haven't yet reached the ceiling of where high-income earners would stop bringing the government more revenue and simply encourage them to evade taxes) there is utterly no reason they should be paying more for a massive increase in government programs instead of paying off debt. Huge new domestic entitlement expansions serve only to reverse the cause of debt reduction, which is what The Post is championing. Furthermore, the health care spending bill is so massive that this increase in taxes won't even be enough to pay for it: the Post says that it would potentially bring in $540 billion over 10 years, "about half the projected cost of health-care reform."

Of course, I don't grant them that taxes need to be raised, but it's important to point out that even when liberals are arguing against tax increases it's sometimes just a smokescreen for bad underlying economic policy. Again, though, anti-tax arguments from the left are few and far between, so you might as well latch on to what you can get.