Sen. DeMint Letter to AARP on Payroll Tax and Trust Funds

Sen. DeMint has sent a letter to AARP today regarding the organization’s position on the payroll tax holiday.  Press reports from last week indicate that AARP opposes extending the payroll tax holiday because “the group simply does not want to sacrifice the Social Security Trust Fund” to do it.  Officials from AARP claimed an extension would cut short a revenue stream that will be “depleted within the next 25 years….Social Security is a separate, off-budget program, with a dedicated funding source—messing with the formula shouldn’t even be a part of the budget debate.”

As a reminder, Obamacare took a dedicated funding stream for Medicare – the Medicare payroll tax – and used it to finance the new government entitlements created by Obamacare.  That’s why the non-partisan CBO said that the Medicare reductions in Obamacare “will not enhance the ability of the government to pay for future Medicare benefits” – because those savings will be used to fund other unsustainable entitlements.

Experts agree that Medicare is in MUCH worse financial shape than Social Security – the program will become insolvent much sooner, has been running cash-flow deficits since 2008, and according to current projections, the program will NEVER come back into balance.  (See, for instance, the chart below.)  Yet AARP opposes the payroll tax “raid” on the Social Security payroll tax – even as it supports Obamacare’s “raid” on the Medicare payroll tax.


Mr. Barry Rand

Chief Executive Officer


601 E Street NW

Washington, DC 20049

Dear Mr. Rand:

I write regarding your October 18, 2012 letter to me and my Congressional colleagues regarding AARP’s opposition to an extension of the payroll tax holiday. Specifically, I am perplexed by AARP’s claim that diverting payroll tax revenue “would undermine confidence in Social Security and put at risk the program’s dedicated funding stream.”

AARP’s position ostensibly protecting Social Security’s “dedicated funding stream” stands in direct opposition to its endorsement of Obamacare – which diverted funding streams away from Medicare. As you know, Obamacare diverted funds from the payroll taxes used to finance Medicare for the first time ever. These funds were used not to improve Medicare’s solvency, but instead to finance Obamacare’s new entitlements. That is why the non-partisan Congressional Budget Office stated that Obamacare “will not enhance the ability of the government to pay for future Medicare benefits” – claims from AARP and the Administration notwithstanding.

As you know, budget experts agree that Medicare stands in a much more precarious financial position than Social Security. Medicare spending has consistently outgrown Social Security spending for decades, such that the Congressional Budget Office predicts spending on Medicare will exceed Social Security outlays within the next 25 years. Medicare also faces solvency concerns much more urgent than Social Security: Part A has run cash-flow deficits in the tens of billions of dollars since 2008, and according to the Administration’s own reports, these deficits will continue as far as the eye can see.

Even though Medicare stands in worse financial shape than Social Security, AARP appears focused on protecting the latter to the exclusion of the former. David Certner, your organization’s legislative policy director, claimed that AARP does not want to divert payroll tax revenues from a Social Security program that “will be depleted within the next 25 years.” Yet AARP endorsed Obamacare’s diversion of the Medicare payroll tax – despite the fact that Medicare could become insolvent as soon as 2016.

One simply cannot reconcile these two positions – opposing diversion of Social Security taxes, yet supporting diversion of Medicare taxes – as ideologically consistent. I am therefore concerned that AARP’s positions on these matters are being determined by partisan or economic considerations. As my recent report, “Profits Before Principles,” noted, AARP’s lucrative Medigap business stands to benefit financially from Obamacare’s cuts to Medicare Advantage. And recently released documents reveal AARP staff acting in an apparently non-partisan manner; for instance, one of your senior executives e-mailed the White House’s Deputy Chief of Staff in March 2010 hailing “the new AARP-WH/Hill-LeaMond/Messina relationship.”

Given your organization’s claims that your members’ interests – and not economic or partisan considerations – are at the root of your policy positions, I – and I imagine many of your members – would like to receive a greater explanation and justification of how AARP can reconcile its position opposing the diversion of Social Security payroll tax revenue, while supporting the diversion of Medicare payroll tax revenue as part of Obamacare.

I look forward to receiving AARP’s response on these issues within two weeks. If you have any questions, feel free to contact Alec Aramanda or Chris Jacobs of my staff. Thank you for your time, and I look forward to your reply.

More Misinformation from the Obama Campaign

The President’s campaign is releasing a booklet this morning featuring the President’s re-election “plans.”  Unfortunately, many of them involve funny money and fuzzy math.  Take for instance the section on retirement security, which claims that Obamacare “strengthened Medicare by cutting overpayments to insurance companies and cracking down on billions in health care waste, fraud and abuse.  The President added eight years to the Medicare Trust Fund.”

There’s just one problem with these assertions – they aren’t true.  Take the claims about “waste, fraud, and abuse.”  First, Obamacare’s $300 billion in cuts to Medicare Advantage will reduce the program’s enrollment by half and plan choices by two-thirds.  Moreover, the non-partisan Medicare actuary said that Obamacare would have a direct impact on beneficiaries in traditional Medicare as well.  He has concluded that over the long-term, up to 40 percent of providers would become unprofitable due to Obamacare, and could “have to withdraw from providing services to Medicare beneficiaries.”  Earlier this month, an Alabama hospital took a different course – it decided to shut down entirely, due to the impact of Obamacare on its business model.

As to the claims that Obamacare extends the life of the Medicare trust fund, the Congressional Budget Office takes a dim view toward such statements.  The non-partisan CBO said that the Medicare reductions in Obamacare “will not enhance the ability of the government to pay for future Medicare benefits” – because those savings will be used to fund other unsustainable entitlements.  If the President wants to use the Medicare savings provisions to extend the life of the Medicare trust fund – and not to fund the new entitlements created by the law – the Congressional Budget Office previously estimated what the fiscal impact would be:  “A net increase in federal deficits of $260 billion” through 2019.

In 2010, President Obama himself admitted in an interview that Obamacare could not rely on double counting, when he stated that “You can’t say that you are saving on Medicare and then spending the money twice.”  The fact that the President is now reversing his own earlier claims shows how badly Obamacare has failed, and how desperate the President is to win re-election.

Barack Obama’s Tax Cuts — For Insurance Companies

The President’s campaign flyer includes some interesting claims on health care.  It also includes some curious language on taxes: “The President has provided new tax cuts to help the middle class afford higher education and health care.”  We’ve debunked this myth in its entirety here.  But it’s worth reiterating the key point: The President’s claims to the contrary, the law and record are very clear about the fact that this massive new entitlement will go straight into the pockets of the insurance industry:

  • Section 1412(c)(2)(A) of the law provides that “The Secretary of the Treasury shall make the advance payment under this section of any premium tax credit allowed under section 36B of the Internal Revenue Code of 1986 to the issuer of a qualified health plan on a monthly basis.”
  • Page 37 of the report on the Finance Committee bill states: “The Committee Bill provides a refundable tax credit for eligible individuals and families who purchase health insurance through the state exchanges.  The premium tax credit, which is refundable and payable in advance directly to the insurer, subsidizes the purchase of certain health insurance plans through the state exchanges.”

Even liberal professor Jonathan Gruber – a paid Obamacare consultantadmitted in an interview that “Most households will never actually get their hands on the credits, so their existing tax liabilities won’t actually change.  In most cases, credits will go straight to insurance companies, to pay for health benefits.”  And according to CBO’s updated estimates, Obamacare will now provide over $1 trillion in spending on subsidies, which will go directly into the pockets of insurance companies.

Of course, candidate Obama opposed sending subsidies straight to insurance companies when he ran for President, only to flip-flop on this issue when he signed Obamacare.  An Obama campaign ad derided Senator McCain’s proposal to subsidize insurance through tax credits: “That tax credit?  McCain’s own Web site said it goes straight to the insurance companies, not to you, leaving you on your own…”  Likewise, in a campaign speech, candidate Obama vilified Senator McCain for this policy: “But the new tax credit [McCain’s] proposing?  That wouldn’t go to you.  It would go directly to your insurance company – not your bank account.”

Presidential flip-flops and insurance company giveaways are real signs of change – but they’re certainly not hope and change, and they’re not the true reform our health sector needs.

Does Obamacare Cover “Obamnesia?”

During a campaign speech on Friday, President Obama went on a riff about “Romnesia,” which according to the President is a disease symptomized by frequent reversals of position.  Of course, that diagnosis comes from someone particularly expert at switching positions when it comes to health care.  As the saying goes, let’s go to the videotape:

Barack Obama, February 5, 2008: “If a mandate was the solution, we could try that to solve homelessness by mandating everyone buy a house.”

Barack Obama, January 31, 2008: “I think that it is important for us to recognize that if in fact you’re going to mandate the purchase of insurance and it’s not affordable, then there’s going to have to be some enforcement mechanism that the government uses.   And they may charge people who already don’t have health care fines, or have to take it out of their paychecks.  And that I don’t think is helping those without health insurance.”

Barack Obama, September 20, 2009: “For us to say that you’ve got to take a responsibility to get health insurance is absolutely not a tax increase….The fact that you looked up Merriam’s Dictionary, the definition of tax increase, indicates to me that you’re stretching a little bit right now.”

Barack Obama, September 12, 2008: “I can make a firm pledge: Under my plan, no family making less than $250,000 a year will see any form of tax increase.  Not your income tax, not your payroll tax, not your capital gains taxes, not any of your taxes.”

Obama 2008 campaign ad: “[Senator] McCain would make you pay income tax on your health insurance benefits – taxing health benefits for the first time ever….Taxing health care instead of fixing it?  We can’t afford John McCain.”

Barack Obama, September 3, 2007: “It’s a plan that will cover every American and cut the cost of a typical family’s premiums by $2,500 a year.”

Barack Obama, July 21, 2008: “What we will do is, we’ll have the [health care] negotiations televised on C-SPAN, so that people can see who is making arguments on behalf of their constituents, and who are making arguments on behalf of the drug companies or the insurance companies.”

Obama 2008 campaign ad: “And that tax credit?  [Senator] McCain’s own website says it would go straight to the insurance companies – not to you.”

The President claimed that Obamacare covers pre-existing conditions like “Romnesia.”  But before making those comments, the President first should have declared his own interest.  Because based on the above, it looks for all the world that President Obama wanted to ram through Obamacare so that his own “Obamnesia” would be covered.

Obamacare’s “Pro-Choice” Agenda

During a campaign event yesterday in New Hampshire, the President made some interesting remarks about choice in health care.  Here’s what he said:

I also believe women should make their own health care decisions.  (Applause.)  I know you’ve got — and it’s not just Washington that sometimes deals with this issue.  You’ve got a state legislature up here that sometimes acts like it knows better than women when it comes to women’s own health care decisions.  My opponent has got the same approach….Do you think, like, your boss, or your insurance company, or some politician in Concord or Washington should get control of your health care choices?…The health care law we passed puts those choices in your hands where they belong.

Some may find the President’s comments slightly ironic – because Obamacare actually takes choices away from individuals and gives them to politicians and bureaucrats.  Under Obamacare’s unprecedented mandate, individuals will have to purchase a “bureaucrat-approved” health insurance policy – or be subjected to billions of dollars in new taxes that will hit the middle class hard.  And thanks to Obamacare, unelected bureaucrats in the District of Columbia have proposed outlawing the private market for health insurance entirely – forcing all individuals to go to a government-run Exchange to purchase coverage.

So to bring it all back to where we started, yes, under Obamacare, you can choose any type of health insurance you like – as long as the President and unelected bureaucrats in Washington approve.

Fact Check: College Affordability

President Obama just discussed efforts to make college more affordable.  The problem is, Obamacare made that problem worse.  As the Congressional Budget Office noted in its score of the final legislation, Obamacare took tens of billions of dollars in higher education funding and re-directed it to pay for Obamacare.  That’s not “reform” – and it won’t help make education more affordable either.


The President also just claimed that he took $60 billion from banks participating in the student loan program and gave it to students.  There’s just one detail he left out: The Obama Administration raided those funds by billions of dollars to pay for new health spending as part of Obamacare.  Don’t believe me?  Look at pages 35 and 36 of the Congressional Budget Office score of the bill.  Those graphs illustrate the billions in spending diverted from students to fund Obamacare’s massive new programs.

Fact Check: Obamacare Costing Jobs

Governor Romney just mentioned the idea of Obamacare as a job-killer.  And indeed it has been: Just last week, one prominent restaurant chain said it was testing the idea of limiting worker hours – so their workers wouldn’t trigger new tax penalties created by Obamacare.  Darden restaurants specifically claimed that it was lowering hours “as one of the many things we are evaluating to help us address the cost implications [Obamacare] will have on our business.”

Fact Check: Middle Class Tax Relief

President Obama just talked about tax relief for the middle class.  He’s right: The middle class DOES need tax relief – relief from the higher taxes included in Obamacare.  To give just one example of Obamacare’s hundreds of billions in new middle-class taxes, the Congressional Budget Office recently noted that at least 4.7 million people with incomes UNDER the five times the federal poverty level – that’s $75,650 for a family of two in 2012 – would pay higher taxes due to Obamacare’s mandate that all individuals buy health insurance or pay a tax.

Fact Check: Delivering on Promises

The President just went through a whole list of promises he supposedly kept.  But there’s one promise he didn’t mention – it’s the promise he made repeatedly that his health plan would CUT premiums by an average of $2,500 per family.  The Obama campaign also promised that that those reductions would occur within Obama’s first term.  But as the below graph shows, while candidate Obama promised premiums would fall by $2,500 on average, premiums have risen by $3,065 since Barack Obama was elected PresidentJust last week, the New York Times noted that “in the 2008 campaign, Mr. Obama often told voters that he would lower premiums by $2,500 a year per family ‘by the end of my first term as president.’  It has not happened…”

The American people can’t trust the Obama Administration to lower their premiums, and given the record of Obamacare – which raised taxes on the middle class – they shouldn’t trust this Administration to cut taxes either.