Healthcare, Budgeting, and Student Loans – Time for Common SenseEconomics & Law, Politics — By Dustin R. Steeve on March 18, 2010 at 12:01 am
The President, his economists, and the CBO defy common sense when they discuss the costs of the 2010 Budget and new entitlement programs such as health care reform and the federalizing of the student loan process. A recent story in the Washington Post exemplifies the point; reporting on remarks by CBO director Dougles Elmendorf, Lori Montgomery summarized Elmendorf’s statements saying:
“Other policy changes, such as Obama’s signature health-care initiative and a plan to dramatically expand the federal student loan program, would have significant effects on the budget, Elmendorf wrote, but they generally would be paid for and therefore would not drive deficits higher.”
Yet, according to Montgomery, Elmendorf also argued:
“Obama’s tax-cutting agenda is by far the biggest contributor to those budget gaps, the CBO said. As part of his campaign pledge to protect families making less than $250,000 a year from new taxes, the president is proposing to prevent the alternative minimum tax from expanding to ensnare millions of additional taxpayers. He also wants to make permanent a series of tax cuts enacted during the Bush administration, which are scheduled to expire at the end of this year.”
According to the President and CBO, Americans are not to blame the forthcoming debt on increased government spending on existing programs and new entitlement programs. Americans are to ignore deficits resulting from the government’s plan to: assume control and responsibility for 1/6th of the economy through healthcare, “dramatically” expand and control the student loan process, and pass a budget which will lead to economy killing deficits if not fixed by a newly appointed government commissions to be begun after the passage of the failed budget. Instead we are to blame the looming deficits on ourselves for our unwillingness to pay more taxes. Why? Because Natoma Canfield needs insurance, the President’s healthcare plan will reduce the deficit, big banks are bad for little people, and the President feels that a lack of courage is the reason that congress hasn’t passed the combination budget/student loan/healthcare initiative.
Common sense tells us that in times of economic turmoil, spending must decrease otherwise debt will increase. However, Elmendorf is saying that spending need not decrease, but revenue must increase. Elmendorf, and the President, can make these shocking claims because the federal government has the power to force an increase in revenue by raising taxes. Make no mistake, that is what they plan to do. After all, Natoma Canfield needs insurance and the Congress needs courage.
Let’s take a moment to push-back on the notion that the President’s healthcare initiative and student loan program will not drive deficits higher. Let’s also examine the President’s current budget.
Regarding the healthcare initiative, there are good reasons to doubt the numbers and the demand. First, at the recent Healthcare Summit, Representative Paul Ryan leveled his devastating critique of the system in place to “pay” for healthcare. According to Ryan and other Republicans, the President and congressional Democrats are using legislative gimmicks to hide costs, relying on “10 years of tax increases and Medicare cuts to pay for six years of spending,” and implementing stringent federal regulations that would prohibit doctors and hospitals from making necessary spending cuts. Second, to cover the cost of the bill the new plan would impose a Medicare tax on investments which studies say will lead to 115,000 lost job opportunities per year, a lose of $1.37 in GDP for every additional dollar of revenue collected, and a reduction of household disposable income by $17.3 billion per year, among other things. Third, the plan operates counter to the wisdom of the internet age. In an age of open source (read free market) decentralized, problem solving and innovation, the President wants to eliminate private sector innovation, federalize decision making, and centralize and bureaucratize one of our nation’s biggest problems. Finally, the bill is highly controversial and the American people do not like it. Why else would House Speaker Nancy Pelosi think it a good idea to attempt to pass the wildly unpopular Senate bill through the house without the House voting on it? Only those blinded by unrequited loyalty could see the maneuver as anything other than shady, un-American political slight of hand, perhaps even unconstitutional.
Regarding the student loan program, it is an unpopular and costly idea. Student loans directly from the federal government have been available for decades, but poor customer service has lead the vast majority of students preferring loans from private institutions. Furthermore, loan season is quickly approaching and students (as well as educational institutions) fear that the government will not be able to get a system in place in time to handle all the loans that they’d need to process for the upcoming Fall semester. More importantly, a government takeover of student loans is costly and Congress, as well as the President, refuse to acknowledge the true costs. According to the Wall Street Journal,
“[I]n a remarkable letter to Senator Judd Gregg, CBO Director Douglas Elmendorf admits that government accounting is bogus. He writes that the statutory methodology ‘does not include the cost to the government stemming from the risk that the cash flows may be less than the amount projected (that is, that defaults could be higher than projected).’ Mr. Elmendorf further notes that the government’s accounting system is specifically skewed to make direct loans from the government appear to cost much less than guaranteed loans made by private lenders. He says the real ‘savings’ are only $47 billion, even though, in a deception that would be criminal fraud if it weren’t mandated by Congress, the official estimate remains at $80 billion.”
Not only will this takeover be financially costly, Matt Lewis at Big Government argues that it will also cost us thousands of private sector jobs. At a time when only 1 available job exists for every 6 unemployed Americans, Congress cannot pass job killing legislation.
Regarding the budget, even the President acknowledges that it is broken and will bankrupt the nation unless fixed. Common sense, and Republicans, argue that we should make fixes now and approve a future budget that will not bankrupt the nation. The President argues that we should pass the bankrupting budget now then appoint a commission which will examine the budget and propose fixes. His is an idea that would only make sense near the end of a long beer summit. What is so broken about the budget? First, even operating on its “optimistic projections” concerning GDP and interest rates, the budget is “unsustainable.” In a recent exchange in Congress, California representative John Campbell pressured Dr. Peter Orzag, President Obama’s Director of the Office of Management and Budget, to flesh this point out in greater detail. Orzag acknowledges that he, and the President, know the budget is broken, but insists that it is better than what was had prior, so the American people should be grateful. Second, it would raise taxes for 3.2 million small businesses and upper-income taxpayers by an average of $300,000 over the next decade; in other words, it would place a heavy burden on job creators and innovators. Finally, it would create an insurmountable mountain of debt:
- By 2020, the CBO estimates debt held by the public would reach $20.3 trillion, or 90% of GDP. That’s up from 53% of GDP in 2009.
- The federal government would add an estimated $9.8 trillion to the country’s accrued debt over the next 10 years- $5.6 trillion would be in interest alone.
- It would borrow 42 cents for each dollar spent in 2010.
And the list goes on.
Common sense tells us that spending, and not the unwillingness of the American people to pay higher and more taxes, is to blame for the coming debt. The President is acting in defiance of common sense and wants Congressional Democrats to have the “courage” to do likewise.
It’s time that President Obama got his priorities in line: reduce spending, control the debt, ease the tax burden on the private sector, eliminate wasteful spending projects like the high-speed railway from Los Angeles to Las Vegas, and give us, the people responsible for the future of this country, time to read through and decide on important pieces of legislation that could potentially result in significant debt increases. Don’t make us pass the bill in order to find out what’s in it, the idea defies common sense! The President should stop defying common sense and give us good reason to hope for some change in our pockets upon the completion of his presidency.
**Author’s Note: If you want to take action, here’s one form, 30 seconds, click here to e-mail your elected representative and Blue Dog Democrats – tell them to use common sense and stop this bill.** ‘