The Four Most Dangerous Words in Washington

More than three decades ago, Ronald Reagan rightly characterized the nine most terrifying words in the English language: “I’m from the government, and I’m here to help.” In Washington, a quartet of four words rank close behind Reagan’s nine in their ability to terrify: What are you for?

Countless people in official Washington, from leadership staff to reporters to liberals to lobbyists, use these four words, or some variation thereof, to try to get conservatives to endorse bad policy. Their words carry with them an implicit argument: You have to be for something, rather than just opposing bad policy.

Reagan would find that reasoning nonsensical. Why do you have to be for something when all the available options undermine conservative principles—because you’re from the government and you’re here to help? It’s a lazy straw-man argument, which might explain why so many people in Washington use it, but it’s a premise that conservatives should reject.

Example 1: Drug Price Legislation

On Monday, House Republican leaders released their alternative to House Speaker Nancy Pelosi’s prescription drug legislation. Their very first bullet in the summary of the legislation said that the bill includes “350 pages” of provisions. (Technically, the bill has 352 pages of content, while by contrast, the Rules Committee print of Democrats’ prescription drug legislation weighs in at 275 pages.)

Republicans quite rightly criticized Pelosi almost a decade ago for the awful process she used to enact Obamacare. Remember the speaker’s infamous quote about the legislation in March 2010, which House Republicans still have on their YouTube page:

Yet including the bill’s size as the first bullet point in their summary suggests Republican leadership considers it a feature, not a bug: “Look at how substantive we are—our bill is 350 pages long!” Granted, the House Republican package consists of a grab-bag of provisions related to drug pricing, most of which existed well before this week. Some of them doubtless contain good ideas, and ideas I have previously endorsed.

But think about what went into creating this “new,” 350-page bill. A bunch of leadership staffers sat around a big desk in the Capitol, decided what bills and provisions to include in the package—and, by extension, which bills to exclude from it. I know, because I’ve sat in those types of meetings. They released the legislation on Monday, and Congress likely will vote on it late Wednesday night (early Thursday at the latest).

Republican Members of Congress won’t have time to read all 352 pages of the House Republican bill. Some of them may not have time to read even the four-page summary of the bill. And their staff, who are currently overwhelmed by the litany of issues on Congress’ December agenda, from impeachment to a massive defense policy bill to another massive spending bill to the prescription drug debate, have neither the time nor the bandwidth to provide thoughtful advice and counsel.

But most if not all Republican members of Congress will vote for this drug price alternative they have not read and many do not fully understand. Why? Because most think they need to “be for something.” Because they believe that (false) premise, they will have effectively handed their voting card to unelected leadership staffers—who may or may not actually know what they are doing—to define what Republicans are “for.” It’s no way to run a railroad, let alone the country.

Example 2: Entitlements

My article last week about Democratic presidential candidate Pete Buttigieg’s proposed long-term care entitlement prompted an e-mail from a colleague. The e-mail asked a polite variation of the question noted above: If you don’t like Buttigieg’s approach to long-term care, what would you do instead?

My response in a nutshell: Nope. As I pointed out in the original post, our country faces $23 trillion—that’s $23,000,000,000,000—in debt—and rising. We can’t afford the entitlements and government programs we have now. To even talk about creating new programs (which would face their own solvency and sustainability concerns) only gives lawmakers and the American public a permission structure to avoid the hard decisions Congress should have made years ago to right-size our entitlements.

Example 3: ‘Surprise Billing’ Legislation

On Sunday, several members of key committees announced an agreement in principle on federal legislation regarding “surprise billing,” which arises when physicians and medical providers seek to recover charges when patients obtain care out-of-network during emergencies, or when patients inadvertently see an out-of-network physician (e.g., an anesthesiologist) at an in-network hospital.

(Disclosure: I have consulted with various firms about the potential outcomes and implications of this legislation. However, these firms have not asked me for my personal policy positions on the legislation, nor have they asked me to advocate for a position on it—as my positions, as always, are mine alone.)

I wrote back in July that this issue largely represented a solution in search of a problem, for multiple reasons. First, a relatively small number of hospitals and providers impose most of the “surprise” bills. Second, states have the power to fix this issue on their own by regulating providers, even if federal law makes it difficult for states to regulate all the insurers in their state.

So why do Republicans feel the need to sign off on federal legislation addressing a problem that states can decide to fix (or not to fix) themselves? Again, because lawmakers feel the need to “be for something.” That again brings to mind Reagan’s axiom about the nine most terrifying words, and the proposition that “I’m from the government and I’m here to help” often leads to unintended consequences.

No, Don’t Just ‘Do Something’

Perhaps by this point, some observers might have come up with an obvious question: How can you win elections if you don’t try to “do something?” The question has two simple answers.

First, citizens quite obviously do not vote solely based on a candidate’s ability to “do something,” such as expand the regulatory state, the welfare state, and government in general. If conservatives want to run campaigns based on giving voters “free stuff,” but just slightly less “free stuff” than Democrats, guess how many elections the conservative would win?

Second, as noted above, the “What are you for?” question has an obvious four-word response: “We can’t afford it.” That retort sadly has the feature of truth about it, as our country cannot sustain its current levels of government spending.

Any responsible parent knows that, no matter how often his child asks, letting that child eat ice cream three times a day does not represent good parenting. Congress long since should have imposed some of that sense of discipline on itself, and the American people.

Given our current fiscal situation, many policy proposals, no matter how popular, are not fiscally sustainable. The “What are you for?” question cleverly tries to elide that debate, in ways that will only undermine conservative principles, and our country’s solvency.

I’ll end by noting my strong support for the First Amendment: “Congress shall make no law.” (What, you thought it contains some other words too?) If Congress spent the majority of its time stopping bad laws and policies—particularly policies considered only slightly less bad than the original proposals—maybe our country wouldn’t face the prospect of paying off a growing mountain of debt.

This post was originally published at The Federalist.

The Tax Increase Joe Biden’s Tax Plan “Forgot” to Mention Affects His Pocketbook

The details of Joe Biden’s tax plan emerged on Thursday—“emerged” because the campaign has yet to release a plan on its website. Instead, Bloomberg News obtained and published details of the tax proposal.

Most news coverage of the plan has to date focused on two issues. First, Biden’s plan proposes raising a relatively modest amount of revenue—“only” $3.2 trillion over a decade, compared to $20-30 trillion for the likes of Sens. Elizabeth Warren (D-MA) and Bernie Sanders (I-VT). As an additional point of comparison, the 2017 tax cut, which Biden called “the dumbest thing in the world,” reduced revenues by $1.46 trillion over 10 years—less than half the fiscal impact of Biden’s tax increase. (Biden has said he wants to repeal those tax cuts, most of which are not included in his $3.2 trillion tax increase proposal.)

Second, stories have centered around the fact that Biden’s proposed revenue raisers would hit corporations and the affluent, while sparing the middle class. But few if any stories on Biden’s tax plan have mentioned one tax he has not proposed increasing—the one he failed to pay himself.

The List of Tax Increases

The Bloomberg story listed ten tax increases included in Biden’s $3.2 trillion plan:

  1. Taxing capital gains as ordinary income for individuals making more than $1 million ($800 billion revenue increase over ten years);
  2. Increasing the corporate income tax rate back up to 28% ($730 billion);
  3. Ending the “stepped-up basis” of taxation, under which the cost basis of inherited property (e.g., stocks, real estate, etc.) for determining capital gains tax liability is the value of the property at the time of the inheritance, rather than the value of the property when the deceased individual purchased the asset ($440 billion);
  4. Imposing a 15% minimum tax on all corporations with net income over $100 million, but who paid no federal income taxes ($400 billion);
  5. Doubling the rate of tax on profits generated overseas to 21% ($340 billion);
  6. Limiting the value of deductions for the wealthy to 28%, a proposal included in several Obama administration budgets ($310 billion);
  7. Raising the top rate of tax back up to 39.6% ($90 billion);
  8. Imposing sanctions on countries that “facilitate illegal corporate tax avoidance” ($200 billion);
  9. Eliminating real estate tax loopholes ($70 billion); and
  10. Ending fossil fuel subsidies ($40 billion).

Among that list of revenue raises, Biden did not incorporate a proposal submitted by the Obama administration in its budgets. That proposal, which would have raised taxes by an estimated $271.7 billion as of February 2016, attempted to end the practice of individuals funneling their profits through S corporations, to avoid paying self-employment taxes on their earnings.

The omission might come because, as previously reported, Biden and his wife used this loophole Obama wanted to close. In taking more than $13 million in book and speech earnings as income from their corporation, rather than wages, Joe and Jill Biden avoided paying as much as $500,000 in taxes—taxes used to fund Obamacare and Medicare. Experts interviewed by the Wall Street Journal over the summer called the maneuver “pretty aggressive” and a “pretty cut and dried” abuse of the system, because the Bidens’ speech and book income clearly came from their own intellectual property, rather than as a result of a corporate creation (e.g., profits from a restaurant, a car business, etc.).

Colluding Reporters?

As noted above, Bloomberg News broke the story of Biden’s tax plan. Its story mentioned not a word about how Biden’s plan omitted the Obama proposal on self-employment taxes, or Biden’s history of questionable tax maneuvers. The silence comes as Bloomberg said it would not conduct investigative reporting into declared candidate, and Bloomberg News owner, Michael Bloomberg’s rivals for the Democratic presidential nomination—but would continue to investigate President Trump.

At some point, reporters should stop colluding with each other to avoid investigations into Joe Biden’s sordid tax history. And they should start asking why a candidate who has campaigned on preserving and building upon Obamacare didn’t want to pay the taxes that fund it.

This post was originally published at The Federalist.

Warren’s Prescription the Wrong One

In an October analysis the Urban Institute concluded that a single-payer plan, similar to Sen. Warren’s, which eliminates virtually all patient cost-sharing, would raise national health spending by more than 20%, or $719.7 billion a year. In the researchers’ view, the additional demand stimulated by making health care “free” to consumers would overwhelm any potential savings from paying doctors and hospitals government-dictated rates. This higher demand would also raise the cost of single-payer well beyond Sen. Warren’s estimates, meaning middle-class families would face massive tax increases to pay for this spending.

That Prof. Johnson would cite the Urban Institute to argue that Sen. Warren’s plan would lower health-care costs, while ignoring the fact that the institute itself reached the opposite conclusion, speaks to the cherry-picked nature of the proposal, which has drawn derision from liberals and conservatives alike.

This post was originally published at the Wall Street Journal.

“Ponzi Pete” Buttigieg Proposes More Unsustainable Entitlements

On the campaign trail for the Democratic presidential nomination, South Bend Mayor Pete Buttigieg tries to portray himself as a moderate politician. By running ads against implementing a single-payer health system, Buttigieg would have voters believe he rejects the radical leftism of socialist Sen. Bernie Sanders.

Don’t you believe it. Buttigieg recently released an aging and retirement plan that proposed massive amounts of new entitlement spending, with very little in the way of specifics to pay for all his ideas. It’s but the latest example of Democrats’ government giveaway train run amok.

CLASS Act ‘Ponzi Scheme’

The first part of Buttigieg’s paper talks about an “historic” new program, Long-Term Care America. The mayor claims this plan would provide aid to seniors “who require assistance with two or more activities of daily living….Benefits would be worth $90 per day for as long as [seniors] need care, and kick in after an income-related waiting period.”

But Title VIII of Obamacare contained language establishing the Community Living Assistance Services and Supports (CLASS) program. Moderate Democrats attacked the proposal as unsustainable. Prior to Obamacare’s enactment, Sen. Kent Conrad (D-N.D.), then the chairman of the Senate Budget Committee, called CLASS a “Ponzi scheme of the first order, the kind of thing Bernie Madoff would have been proud of.” Those concerns ultimately proved correct, as the Obama administration had to shelve the program as unworkable before it ever collected a dime in premiums.

As a Senate staffer conducting oversight on CLASS, and later as a member of the Commission on Long-Term Care tasked with examining possible replacements, I examined the program’s failure in minute detail. But at bottom, the program suffered from the same problem facing the Obamacare exchanges: Too many sick people signing up for benefits, driving up premiums, and therefore driving away healthy individuals.

Obamacare required individuals to pay into the CLASS program for only five years to qualify for benefits. Actuaries believed that people would sign up, pay a few thousand dollars in premiums over five years, and then collect benefits totaling tens of thousands of dollars or more. Just as Obamacare’s pre-existing condition provisions have priced millions of people out of coverage—because individuals can sign up for “insurance” after they develop a pre-existing condition—so too would CLASS have attracted people already suffering from disabilities, who by definition don’t need insurance so much as they need care.

The exchanges have remained somewhat sustainable only because of massive amounts of federal spending on subsidies and bailouts. However, Obamacare forced CLASS to become self-sustaining, without relying on federally subsidized premiums or a bailout. The Obama administration in October 2011 conceded that it could not meet these statutory requirements, and therefore shelved the program. (Congress later repealed CLASS outright in the “fiscal cliff” deal in January 2013.)

Buttigieg’s plan acknowledges none of this history, and makes no mention of solvency or sustainability when talking about his proposed new program. Perhaps limiting it to only those over age 65, and imposing a waiting period for people to receive benefits, as his proposal outlines, will make it more financially sustainable (or less unsustainable). But Buttigieg also proposes a $90 daily benefit, 80 percent richer than the CLASS Act’s $50 per day benefit, exacerbating solvency concerns.

Costly Promises

Buttigieg’s promise of a long-term care benefit says nothing about whether this new federal spending would increase the deficit, your taxes, or both. In that respect, it represents but one of the many costly promises in his retirement plan, including:

  • An end to the two-year waiting period currently required for individuals receiving Social Security disability benefits to qualify for Medicare coverage;
  • An increase in the minimum wage to $15 an hour, and new staffing requirements for nursing homes, all of which will raise costs to the Medicaid program; and
  • An expansion of Social Security benefits—including a new minimum benefit and credit for caregivers—funded entirely by higher taxes on “the rich.”

At present, our federal government faces $23 trillion in debt, and trillion-dollar deficits as far as the eye can see. To put it bluntly, we can’t pay for the government we have now, let alone the new programs Buttigieg and his fellow presidential candidates have proposed.

Buttigieg can try to hide himself in the cloak of the “moderate” mantra all he likes. But his laundry lists of new and unsustainable entitlements represent nothing more than big-government liberalism.

UPDATE: This post was edited after publication, to clarify the nature of Buttigieg’s proposal as compared to Obamacare’s CLASS Act.

This post was originally published at The Federalist.

Elizabeth Warren’s Health Plan and the Limits of “Experts”

By one count, Sen. Elizabeth Warren used 9,275 words in her health care plan (that is, her original health care plan, not the one she released two weeks later, to overcome the political obstacles she created in the first version). Of that lengthy verbiage, one word stands out: “Expert” appears no fewer than 18 times in the document.

According to Warren, “the experts conclude” that her plan would cost $20.5 trillion over a decade; other “top experts…examine[d] options” to pay for that new federal spending. She cited experts in triplicate for emphasis, noting “the conclusions of expert after expert after expert” that a single-payer health care system can cover all Americans while lowering costs. Warren even pledged that “no for-profit insurance company should be able to stop anyone from seeing the expert…they need.”

Therein lies her biggest problem: In farming out every policy issue for “experts” to solve, Warren effectively insults the intelligence of American voters—telling them they’re not smart enough to solve their own problems, or even to understand the details of her proposed solutions.

‘Experts’ Couldn’t Even Build a Website

The Massachusetts senator’s reliance on experts jives with her campaign’s unofficial slogan. No matter the issue, Warren has a plan for that—blessed by the experts—to enact her agenda. But as Mike Tyson once said, “Everyone has a plan until they get punched in the mouth.” For reasons both practical and philosophical, Warren and her technocratic ilk might benefit from some humility as they seek to remake the health care system—and the nation.

Six years ago this fall, the failure of healthcare.gov provided a searing example of the limits of expertise. After years of planning and countless federal dollars, what Health and Human Services Secretary Kathleen Sebelius called a “debacle” played out in slow-motion on national television. Half a century on from Halberstam’s best and brightest, Barack Obama had to concede that government was “generally not very efficient” at procurement and technology.

Another politician who invoked “experts” regarding health policy, Max Baucus, did so in August 2010. Then the chairman of the Senate Finance Committee, Baucus said he did not bother to read the Obamacare legislation he helped to draft because “It takes a real expert to know what the heck it is. We hire experts.”

Nearly four years later, one of those experts—Yvette Fontenot, who worked on Baucus’ staff during the Obamacare debate—admitted that when drafting the law’s employer mandate, “we didn’t have a very good handle on how difficult operationalizing the provision would be at that time.” Here again, remaking a health system approaching $4 trillion in size brings unintended consequences lurking at every corner.

Yet Warren and her “experts” see no such reason for caution. One of the authors of her health care paper, former Obama administration official Donald Berwick, once said, “I want to see that in the city of San Diego or Seattle there are exactly as many MRI units as needed when operating at full capacity. Not less and not more.” Implicit in his statement: Federal officials, sitting at desks in Washington, or at Medicare’s headquarters in Baltimore, can quantify and assess the “right” number of machines, facilities, and personnel in every community across the land.

Liberals Act Like Voters Are Stupid

A belief that administrators should, let alone can, effectively micromanage an entire health system requires no small amount of hubris. Indeed, Berwick said in a 2008 speech that “I cannot believe that the individual health care consumer can enforce through choice the proper configurations of a system as massive and complex as health care. That is for leaders to do.”

In this vein, Berwick echoed his Obama administration colleague Peter Orszag, who in advocating for an unelected board to make recommendations reducing health spending—a change included in Obamacare, but repealed by Congress last yearargued that “we might be a healthier democracy if we were slightly less democratic.”

From the 2004 work “What’s the Matter with Kansas?” to the post-mortems after the last presidential election, liberals continue to question why some households vote against their supposed financial interests. The “expert” mentality—as Orszag wrote, “relying more on…depoliticized commissions for certain policy decisions”—likely plays a role, as by its very nature and through its soft paternalism it disenfranchises Americans.

For instance, studies suggest most low-income individuals do not particularly value Medicaid coverage, yet neither Warren nor others on the left spend much time debating whether expanding health insurance represents the best way to help the poor. As Reagan would note, they’re from the government, and they’re here to help.

Warren thinks that to win the presidency, she must convince voters she has a plan for everything. In reality, her campaign’s hopes may rest instead on developing a plan to narrow the growing gap between the rulers—her beloved “experts”—and the ruled.

This post was originally published at The Federalist.

The “Other” Election Debate about Single-Payer Health Care

Stop me if you’ve heard this one before: There’s a national election going on, and single-payer health care is one of the prime points of contention. It’s not what you think.

Voters in Great Britain head to the polls on Dec. 12 in the country’s third general election in just more than four years. The ongoing Brexit debate, about whether or how Britain will leave the European Union, necessitated the early election. With his Brexit agreement with the European Union bogged down in Parliament, Conservative Prime Minister Boris Johnson felt the need to go to the country, to obtain a mandate to push the deal through.

But health care has also taken a prime place in the campaign. The Labour Party, led by Jeremy Corbyn, have raised the specter of the Conservatives “putting the National Health Service up for sale” to reach a post-Brexit trade agreement with the United States.

The issue of the NHS’s status in a U.S.-U.K. trade agreement came up during President Trump’s state visit to Britain in June. In a press conference with then-Prime Minister Theresa May, Trump originally said “everything with a trade deal is on the table,” only to walk those comments back one day later. With the president due back in London on Tuesday for a NATO summit, and Labour trailing in the polls only a week before election day, Corbyn will doubtless make the issue a focal point of Trump’s visit.

Drug Pricing Issues

Last week, a series of government documents leaked that summarized preliminary trade discussions between American and British negotiators. Corbyn waved around heavily edited versions of the documents at his first debate with Johnson earlier this month. Government officials had redacted large swathes of the documents, to preserve the sensitive nature of the trade talks, but those discussions escaped into public view via the unauthorized leak.

The leaked documents confirm that drug pricing remains a prime point of contention regarding a U.S.-U.K. trade deal. One document, summarizing a series of meetings held in July, includes a lengthy section entitled “Intellectual Property: Patents and Pharmaceuticals.”

Britain’s Channel Four reported in October that two linked issues drive the talks. First, American negotiators prefer the United States’s longer period of data exclusivity as part of any Anglo-American trade agreement. This policy would seek to preserve incentives for innovation, allowing manufacturers to maintain their exclusive intellectual property for longer periods of time.

Britain Wants to Keep Rationing Health Care

Second, the American side “want[s] to remove the UK’s ability to block American drugs not deemed ‘value for money.’” The BBC notes that Britain’s National Health Service relies on the National Institute for Health and Care Excellence (NICE) “on what offers the best benefits for patients balanced against value for money:”

The NICE regime, introduced 20 years ago, is seen as a great success in helping the NHS strike realistic pricing deals. A recent deal for the cystic fibrosis drug Orkambi was hailed by health leaders in England as a big win for the system, with the American manufacturer Vertex, having initially refused to bring down its price, eventually signing up.

However, the BBC neglected to mention that, as part of its “negotiations” with the manufacturer Vertex, NICE denied thousands of British patients access to Orkambi for more than three years, because the drug exceeded cost limits set by the government body.

It seems somewhat ironic that in October, a spokesman for Britain’s Department for International Trade told Channel Four that the British government “could not agree to any proposals on medicines pricing” that would “reduce clinician and patient choice.” For the past three years, patients had no choice for accessing Orkambi—bureaucrats called the drug too expensive, therefore British cystic fibrosis patients could not receive it.

End Foreign Freeloading

Britain’s drug pricing policies cost American and British patients alike. British patients pay when they cannot get access to treatments the government deems too expensive, and their health suffers as a result. And American patients pay when Britain, like other European nations, free rides on American innovation—allowing U.S. consumers to pay far more for pharmaceuticals, absorbing a disproportionate share of drugs’ research and development costs.

U.S. House Speaker Pelosi and others have suggested importing socialist-style price controls to the United States to “solve” the free-rider problem—a variation of the “If you can’t beat them, join them” approach. But a better solution would involve American negotiators taking up the issue of foreign freeloading with other governments as part of trade talks—the exact policy pursued as part of the U.S.-U.K. discussions.

Trump’s visit to London so close to Britain’s election has prompted speculation about its political ramifications. Johnson has warned Trump not to endorse his re-election bid, fearing it may only encourage Britons to vote for his Labour opponents instead.

But on policy, the United States absolutely should work to stop foreign free-riding over pharmaceutical prices. Moreover, we would do the British people no small favor if, in the process of ending that free-riding, we could stop that country’s health care system from denying patients access to life-saving treatments that a government board deems too costly.

This post was originally published at The Federalist.