Retiring Congressman Brian Baird’s announcement on March 21 that he would vote for the health care bill became a national news flash. Defying credulity, he maintained (as reported in The Columbian) that a 20-minute conversation with the director of the Office of Management and Budget (OMB) was sufficient to get a point-by-point explanation of potential problems with the 2074-page bill.
His statement contended that without this bill, the status quo would “lead to the bankruptcy of the nation as health care entitlement costs continue to grow.”
Baird’s statement should be turned around. The status quo could have been improved through market-oriented improvements in our health care system offered by Republicans. It is the passage of the bill Baird favored that more certainly risks national financial meltdown.
Many national polls taken immediately prior to the historic vote confirmed that Americans are skeptical of Congress’s financial scoring of the health care legislation, with good reason. Completed hastily just in time for the March 20 hurry-up debate, OMB’s analysis scored the bill’s cost at $940 billion. Supporters claimed the results showed it would “save money.” But savings depended primarily on several key inputs into the model that most analysts agree are political non-starters: a future tax increase on union health plans and large cuts in Medicare reimbursement to the already scarce supply of doctors.
If these inputs were plugged numbers, how many other inputs to the model were tailored to prove the unlikely case that you can promise health benefits to 32 million people while cutting costs? So we really don’t know what health reform will cost over time.
Bond ratings at risk
One of the biggest future budget busters is unforeseen federal borrowing. Since 1949, the U.S. has benefited from a AAA bond rating; lenders incur little risk and offer an equivalently low cost to borrow funds. Not coincidentally, the day after health care reform was approved in the House, bond markets rated U.S. bonds as more risky than private bonds. Moody’s Investor’s Services then issued a carefully worded warning, stating that the U.S. has moved “substantially” closer to losing its AAA rating. As explained in the New York Times, “the bigger risk would be to the country’s ability to keep borrowing money on extremely favorable terms, and therefore to keep spending more money than it takes in from tax revenue.”
So we’re at serious risk of ballooning borrowing costs just when we’re shouldering costs of an unprecedented new health care entitlement. Even worse, over time, states will bear the cost of millions of new Medicaid recipients. Many states (California, New York, and Michigan among the worst) are already near default. If U.S. bonds are de-rated while states default, what will our options be? Will our children and grandchildren experience social unrest as a result?
Another looming financial danger from the new government-managed health care system is contracting private-sector employment. Starting now, small business owners and entrepreneurs will likely avoid hiring because the new law punishes employment growth. Employers with 50 or more workers will pay $2,000 per worker if they don’t offer health insurance. The small business tax credit intended superficially to assuage that hapless sector will likely require expensive compliance procedures that will scare many owners away. Some already on the brink will cease operations.
Most chilling to potential employers is the role of the newly empowered IRS as Big Brother enforcing new health care rules with 16,000 new agents. IRS powers include the ability to issue liens, seize tax refunds, assess penalties and verify if taxpayers’ health insurance coverage is “acceptable” to the government.
Correction: On March 11, the state Legislature was finalizing the supplemental budget for the current 2009-2011 budget, not for 2011-2013, as my column that day erroneously stated.
Ann Donnelly, a Vancouver businesswoman, is a former chair of the Clark County Republican Party. E-mail: adonnelly7@comcast.net.
