Sunday, March 28, 2010

Card Check By Fiat?

From Investors Business Daily:

Card Check By Fiat?

Unions: Republican senators have warned the president not to appoint Craig Becker to the National Labor Relations Board while Congress is in recess. But he will — and American workers and consumers will be worse off for it.

There’s good reason to oppose Becker sitting on the NLRB, the five-member federal agency that administers the National Labor Relations Act governing relations between unions and private-sector employers.

It’s not so much because Becker is a lawyer for the AFL-CIO and the Service Employees International Union and would be the first NLRB member to come straight from the legal staff of organized labor, though that’s a concern. As disagreeable as they might be to some, those affiliations by themselves aren’t enough to disqualify him.

It’s also reasonable for a labor relations agency to have a union representative on its board. If Becker doesn’t get the post because of his links to organized labor, the White House will simply nominate another candidate with a similar background.

And we’re not even going to criticize President Obama for making a recess appointment during the two-week Easter break that begins Monday, though in doing so he would be skirting the constitutional process that calls for the Senate to confirm presidential nominees.

What we and many others have a problem with is Becker’s sitting on a board from where he could leverage his influence over its decisions — specifically the elimination, via regulation rather than legislation, of the secret ballot traditionally used to form a union at a workplace.

Becker for years has been making the argument that labor rules favoring unions that can’t gain congressional approval can nonetheless “be achieved with almost no alteration of the statutory framework.” His desire to usurp Congress’ authority to make law hasn’t gone unnoticed by Sen. Ben Nelson. The Nebraska Democrat thinks Becker’s record strongly indicates that he would “pursue a personal agenda” at the board “rather than that of the administration.”

The unions don’t even make a secret of their plans to bypass the legislative process if they can’t get what they want from Congress. As Stewart Acuff, chief of staff and assistant to the president of the Utility Workers Union of America, wrote last month in the Huffington Post:

“If we aren’t able to pass the Employee Free Choice Act, we will work with President Obama and Vice President Biden and their appointees to the National Labor Relations Board to change the rules governing forming a union through administrative action.”

Becker, of course, is one of those appointees.

Deere (And Others) In The Headlights

Health Reform: As major businesses lay out the impact of ObamaCare in dollars and jobs, two things are clear: the costs will be enormous, and the president’s vow to focus on “jobs, jobs, jobs” can no longer be believed.

Early returns on ObamaCare are coming in, and they belie proponents’ claims of job creation and cost reduction. The costs will increase. They are merely being shifted to the states and to America’s businesses, large and small.

AT&T, the country’s largest telephone company, announced Friday it will take a $1 billion first-quarter charge related to the new health care law. The noncash charge has been triggered by a change in the tax treatment of Medicare subsidies.

Bloomberg reports that health care charges may shave as much as $14 billion from U.S. corporate profits, according to an estimate by benefits consulting firm Towers Walton. That’s $14 billion that will not be available for expansion, research and development, or the hiring of new employees.

On Thursday, Deere & Co. announced that the Patient Protection and Affordable Care Act will adversely impact its expenses for fiscal 2010. As a result of the legislation, expenses for the farm equipment manufacturer are expected to be about $150 million higher on an after-tax basis, mainly in the second quarter.

At issue is the new tax the health care bill imposes on subsidies paid to corporations for 28% of their retiree prescription costs under a 2003 Medicare bill.

“The 2003 legislation encouraged companies to stay in the game and continue to fund their retirees’ prescriptions,” Deere spokesman Ken Golden said. “Otherwise, the retirees would go onto the Medicare prescription program, which would cost the government more money.”

Now they’re being punished for doing what the government asked them to do.

In a letter to Senate Majority Leader Harry Reid, D-Nev., and House Speaker Nancy Pelosi, D-Calif., last Dec. 11, Deere and other signatories said the health care reform then under consideration “would negatively impact both retirees and companies.”

Nobody was listening.

“For months, the American Benefits Council, along with several employers and labor unions, warned that the retiree drug subsidy tax in the health care legislation would impose an enormous hit on company financial statements as soon as the bill was signed into law,” said James Klein, president of the American Benefits Council in a statement on Friday.

Besides Deere, the letter was signed by Boeing, Con-Way Freight Exelon, Navistar, Verizon, Caterpillar, MetLife, Public Service Enterprise Group and Xerox.

Meanwhile, Caterpillar confirmed on Wednesday our report that it will take a $100 million charge to earnings this quarter to reflect additional taxes stemming from this legislation. As we’ve said, the other tax shoes of ObamaCare are beginning to drop.

In an e-mail titled “President Obama Signs Health Care Legislation” sent to all employees last Tuesday night, telecom giant Verizon warned that “we expect that Verizon’s costs will increase in the short term.” This is just one effect of one new tax.

Medical device maker Medtronic has warned that new taxes on its products could force it to lay off 1,000 workers. The tax on medical devices will hurt businesses such as Zoll Medical Corp., which is situated in the Massachusetts of Sen. Scott Brown and employs 1,600 people in the U.S.

“We believe that the tax will cost us somewhere between $5 million and $10 million a year,” Richard Packer, Zoll’s chairman and chief executive officer, told Byron York of the Washington Examiner. “Our profit in 2009 was $9.5 million.”

Senate Majority Whip Dick Durbin, D-Ill., was asked by MSNBC’s Joe Scarborough about the possible effects of Medicare taxes on investment income for the first time for earners above $200,000.

The 3.8% “Medicare tax” alone is supposed to bring in $210 billion over 10 years, none of it going to support the solvency of Medicare.

Durbin’s response was: “Yes, if you’re making over $200,000 a year, you’re going to pay slightly more in taxes. It’s the cost, I think of having the kind of America we want to have.”

The kind of America that Durbin and the administration, as well as Pelosi and Reid, seem to want is one of higher unemployment and greater government dependence — and one where risk takers, entrepreneurs and job creators are punished for their success.
Article courtesy of Investors Business Daily

Sunday, March 21, 2010

Truth Is A Casualty Of The Final Push

Investors Business Daily
Health Reform: Not since the heyday of Bill Clinton have we had a leader play so fast and loose with the facts as President Obama. And as the health care debate reaches a crescendo, he’s been especially reckless.

Tired of waiting for the major media to take note, here’s a small sampling of whoppers we took from the president’s speeches last week in Ohio and Virginia, plus his interview with Fox News’ Bret Baier:

V “We have incorporated the best ideas from Democrats and from Republicans.” Far from it. Some of the biggest omissions include tort reform, health savings accounts, portable insurance, expanding consumer access to plans across state lines and posting provider prices for services so patients can shop around.

Republicans were almost completely shut out from the process and at the early stages last summer, were not even permitted to read the bill. In an atmosphere like this, it’s little wonder the bill isn’t drawing a single vote of support from Republicans of either house. It’s fully a creature of the Democratic Party.

V (“This is not a) government takeover of health care.” How is it that government can dictate to private insurance companies what they can offer, to whom, under what circumstances and at what prices, and yet still not own it? Every basic business decision a private company can make has effectively been expropriated.

Even as Obama denied his health care plan was a government takeover, his vice president, Joe Biden, laid out the real deal: “You know we’re going to control the insurance companies.” We’ll take him at his word.

V “If you like your doctor, you can keep your doctor.” That’s if your doctor chooses to remain in the profession. Unfortunately, our own IBD/TIPP Poll found that up to 45% would consider quitting if they’re going to be dictated to by unaccountable bureaucrats who couldn’t get into medical school.

Price controls will slash doctor salaries and raise workloads, mandating that doctors make up for losses with volume. Bureaucrats will crack the whip on costs by lowering payments and penalizing doctors who refer patients to specialists. All this, and zero tort reform relief, will drive many doctors out of the profession just as 32 million new patients enter the market.

V “Our proposal is paid for . . . our cost-cutting measures would reduce most people’s premiums and bring down our deficit by more than $1 trillion over the next two decades.” Government programs always cost more than projected. Medicare, which has $86 trillion in unfunded liabilities, was supposed to cost $10 billion within 25 years of its implementation. It actually cost $107 billion.

The real cost of the Democrats’ reform plan, according to the Cato Institute, which isn’t handcuffed in its estimates like the Congressional Budget Office, is $2.5 trillion over the first decade.

V “If this vote fails, then insurance companies will continue to run amok.” They’re not exactly wildcatting as it is. Health plan providers boast a profit margin of 3.4% — placing them 88th of 215 industries in Morningstar rankings. More than 2,000 state mandates dictate what coverages they provide.

V “By the time the vote has taken place . . . you’ll know what’s in it because it’s going to be posted and everybody’s going to be able to evaluate it on the merits.” The final bill wouldn’t available to the public until Saturday morning, the day before the vote, congressional sources told us Friday. So in fact, nobody would have time to digest the 2,500-page leviathan.

V “We’re not transforming one-sixth of the economy in one fell swoop.” Yes, Obama wants to take over the health care sector, but in pieces. In 2007, he said that “economically it is better for us to start getting a system in place, a universal health care system, signed into law by the end of my first term as president.” Canada, he noted, “did not start off immediately with a single-payer system, they had a similar transition step.” He’s been on record since at least 2003 as a “proponent of single-payer, universal health care.”

V “(This will be) the largest middle-class tax cut in the history of the country.” Tax cut? New taxes on prescription drug sales, medical devices, tanning services and an annual tax on health insurers for being health insurers will all end up on middle-class shoulders.

Then for families earning $250,000 there are taxes of 0.9% for hospital insurance, 2.9% on “unearned income,” plus a tax on high-premium policies. The “middle-class tax cut,” in the president's misleading words, amounts to “tax credits to help you afford” the more expensive insurance of the new (also misleadingly named) “competitive marketplace.”

V “$3,000 your employer doesn’t have to pay . . . maybe she can afford to give you a raise.” Premiums will not go down, but way, way up. The Associated Press last week found that $3,000 to misrepresent a Business Roundtable analysis last year that “didn’t consider specific legislation.”

Larry Levitt of the Kaiser Family Foundation told the AP “it would be miraculous” if premiums went down under the legislation set to be passed. Using the HIS/Global Insight U.S. Macroeconomic model, a Heritage Foundation analysis found that with the new government-regulated exchanges “crowding out the employer-sponsored market,” there will be “an overall increase in the absolute amount of health spending on premiums.”

V “Small business owners . . . can purchase more affordable coverage in a competitive marketplace.” In fact, small businesses will be slapped with new taxes — including a penalty if they don’t provide the level of health coverage Washington dictates. As owners of modest-sized firms cope with the new burdens, their employees may find themselves with substantially reduced coverage — or with pink slips.

As to the promised financial assistance for new employer mandates, it remains unknown what “small business” will mean under ObamaCare. Will the definition apply only to micro-businesses of a couple dozen workers?

V (The reform legislation is) “about the character of our country.”

Let’s hope not. Never in American history have politicians sunk to lower depths than in the push to thrust this massive expansion of government down an unwilling America’s throat.

From the unconstitutional “Slaughter solution” that would pass it without a vote of the people’s representatives, to the taxpayerfunded bribery of the “Cornhusker kickback” and “Louisiana Purchase,” to the pretense of passing it as a budget item bypassing Senate filibusters, Democratic leaders have shown they will stop at nothing to set us on the road to European socialized medicine.

Health Overhaul’s Assault On Business

Investors Business Daily:

Health Overhaul’s Assault On Business

Taxes: If ObamaCare becomes permanent, no one will suffer more than U.S. businesses. They’ll face higher taxes, more regulations and a higher cost of capital. But don’t take our word for it. Go ask Caterpillar.

The heavy-equipment giant reckons its insurance costs will go up 20%, or $100 million, the first year after the health care system is overhauled, and may go even higher. Multiply that by literally tens of thousands of companies nationwide, large and small, and you can see how costs will soar. “We can ill-afford cost increases that place us at a disadvantage versus our global competitors,” said Greg Folley, a Caterpillar vice president. “We are disappointed that efforts at reform have not addressed the cost concerns we’ve raised throughout the year.” If you don’t care how this affects businesses, you should. Some 15 million people in this country don’t have jobs — and another 12 million work part-time but want full-time positions. If America’s major employers are hit with huge, government-mandated cost increases during an economic downturn, do you really think they’ll hire more when the economy starts growing on its own again? Of course not. Despite this, the White House predicts its plan will “cut costs” for businesses. House Speaker Nancy Pelosi even makes the bizarre prediction that passage of health reform will lead to 400,000 new jobs “immediately,” and millions more down the road. Such claims don’t hold water because health reform includes $569.2 billion in new taxes, at last count 160 new bureaucracies and regulations, and 16,500 new IRS agents to collect all those taxes. Tax hits on businesses and industries include: V $52 billion on companies that do not provide what the government deems “acceptable” or “affordable” insurance for workers. V $60.1 billion on health insurers. V $27 billion on drugmakers and importers. V $20 billion on makers and importers of medical devices. V $2.7 billion on the tanning industry. And of course the companies themselves don’t pay. You do — both as a consumer, through higher prices, and as an employee, through lower wages. As the Tax Policy Center, a center-liberal think tank, noted recently , “Economists generally believe that the burden of payroll taxes is borne by workers in the form of lower wages, regardless of whether the tax is levied on the employer or employee.”

But that’s not the end of it.

A new Medicare tax on capital gains, dividends and other investment income has been raised from 2.9% to 3.8%. Supposedly, this is a tax on the “wealthy,” those with $200,000 or more in income It’s really a tax on small business, entrepreneurs and investors.

This provision will push the top cap-gains rate from 15% to almost 24%, while the dividend rate will rise from 35% to 43.4%.

This amounts a big new tax on the very people who are most likely to own or start a new business and hire workers. Health reform will tax large numbers of job creators out of business — and no one in the White House seems to know, or even care.

But it will have an enormous impact. As a result of the Obama-Care taxes on successful individuals and companies, investment in new companies will slow, and old companies will face a higher cost of capital. New jobs will be created offshore in places such India and China.

Economist Steve Entin of the Institute for Research on the Economics of Taxation estimated the Medicare tax would reduce GDP by 1.3%, capital formation by 3.4% and after-tax incomes of those who don’t pay the tax directly by 1.2%.

And those estimates came when the tax was “only” 2.9% — not the 3.8% it is in the current bill. So the economic losses would in fact be even larger than Entin estimated.

Because of these taxes and other faults in the plan, a group of 130 economists last Thursday sent President Obama a letter imploring him not to sign the bill, saying that it would be a job-killer.

“In our view,” the economists wrote, “the health care bill contains a number of provisions that will eliminate jobs, reduce hours and wages, and limit future job creation.”

Health reform’s taxes and huge new costs will lead to semi-permanent stagnation in the U.S. economy, marked by higher unemployment and lower standards of living.

Is this how Americans see their future? Based on the Tea Party movement and growing anger at the government for seizing control of the economy’s high ground, we doubt it.

The only real question is, are the White House and Congress listening?

Dick Morris Warns the '8 Traitors Who Have Sold Out This Country' That They Will Be Targeted in Nov.

Sunday, March 14, 2010

Why Health Bill Makes No Sense

Investors Business Daily:

Health Reform: So it’s come down to this — desperate Democratic leaders strong-arming members on the worst bill ever before they go home to explain to constituents why they decided to commit political suicide.

We’ve said just about all we’ve had to say on this issue — actually dating back to 1993-94, when we wrote nearly 100 editorials in opposition to HillaryCare. Since January of last year, we’ve weighed in 150 more times against the latest version of socialized medicine.

But to review, here are just 15 reasons why a government takeover of the finest medical system in the world makes no sense at all:

1. The people don’t want it! This, we would think, should have some bearing on decision-making. Yet the Democrats forge ahead without consent of the governed. In the latest Rasmussen poll, 53% opposed the Democrats’ reform while 42% were in favor. More than four in 10 “strongly” opposed; just two in 10 “strongly” favored. This jibes with other surveys, including our own IBD/TIPP Poll, taken since last year.

2. Doctors don’t want it! A survey we took last summer of 1,376 practicing physicians found that 45% would consider leaving their practices or taking early retirements if the Democrats’ reform became law. In December, the results were validated by a Medicus poll in which 25% of doctors said they’d retire early if a public option is implemented and another 21% would stop practicing even though they were far from their retirement years. Even if the bill doesn’t have a “public option,” nearly 30% said they’d quit the profession under the plans being considered.

3. Half the Congress doesn’t want it! Not a single Republican backed the health care bill that cleared the Senate on Christmas Eve 60-39. House passage was by a slim 220 to 215, and the lone Republican “aye” has since switched to “no.” Columnist Michael Barone says other changes would put the House vote today at 216-215 in favor, and he has doubts Democrats can even muster 216.

House Speaker Nancy Pelosi made her job of securing yes votes even more difficult last week when she told a meeting of county officials that “we have to pass the bill so you can find out what is in it.” Members of Congress aren’t waiting: They’ve already exempted themselves from whatever they inflict on us.

4. People are happy with the health care they’ve got! Polls show that 84% of Americans have health insurance and that few are displeased with what they’ve got. Last month, the St. Petersburg Times looked at eight polls and reported that satisfaction rates averaged 87%.

5. It doesn’t even cover the people they set out to cover! Supporters of government-run health care say there are as many as 47 million Americans — 9 million to 10 million of them illegal aliens — without medical insurance. The Democrats’ plans, however, will put only 31 million of the uninsured under coverage.

6. Costs will go up, not down! Democrats say their plans will cost less than $1 trillion over the first decade. But analyst Michael Cannon at the Cato Institute puts the cost at $2.5 trillion over the first 10 years. Even if we go with the government’s lower estimates, the cost is already on the rise. A new estimate by the Congressional Budget Office puts the cost of the Senate bill at $875 billion over 10 years, $4 billion more than its original projection. Imagine how fast costs would soar if one of the bills became public policy.

7. Real cost controls are nowhere to be found! The Democrats are offering no meaningful tort reform that will help push down the high malpractice insurance premiums that are a burden to doctors and their patients. Nor are they considering any other cost-saving provisions, such as allowing the sale of individual health plans across state lines or easing health insurance mandates.

8. Insurance premiums will rise, not fall! One goal of nationalizing health care is to lower costs, to bend the spending curve downward. Yet, as Democratic Sen. Dick Durbin acknowledged Wednesday, that won’t be the case.

“Anyone who would stand before you and say, ‘Well, if you pass health care reform, next year’s health care premiums are going down,’ I don’t think is telling the truth,” he said from the Senate floor. “I think it is likely they would go up.”

An analysis completed by the CBO at the request of Sen. Evan Bayh confirms Durbin’s suspicions. Insurance coverage in the individual market will “be about 10% to 13% higher in 2016 than the average premium for nongroup coverage in that same year under current law,” it concluded.

9. Medicare is already bankrupting us! The Medicare trust fund, which has unfunded obligations of $37.8 trillion, will be insolvent in 2017. How can lawmakers justify another entitlement that will cost trillions when they can’t pay for existing liabilities?

10. There aren’t enough doctors now! Last month, 26% of physicians responding to a Web poll on  , which calls itself “the largest online physician community,” said they had been forced to close, or were considering closing, their solo practices. Providing coverage for an additional 31 million Americans when the number of doctors is shrinking won’t improve our health care.

11. The doctor-patient relationship will be wrecked! The latest IBD/TIPP Poll, taken just last week, found that Americans, by a wide 48%-26% margin, believe the doctor-patient relationship will decline if the Democrats’ plan is passed.

12. Medical care will also deteriorate! IBD/TIPP has also found that 51% of Americans believe care would get worse under government control. Only 10.5% said they felt it would improve. In our doctor poll, 72% disagreed with administration claims that the government could cover 47 million more people with better-quality care at lower cost.

13. Rationing of care is inevitable! Health care is not an unlimited resource and must be rationed, either by the individual, providers or government. In Britain and Canada, where the government does the rationing, medical treatment waiting lists are sometimes deadly and quite often excessively long.

For instance, late cancer diagnoses in an overcrowded public health care system cause up to 10,000 needless deaths a year in Britain. The reasons cited for the late diagnoses include doctor delay, delay in primary care, system delay and delay in secondary care.

14. Private health insurers will be destroyed! Added mandates and price controls will force many insurers to simply get out of the health plan business because it will no longer be profitable.

15. It’s probably unconstitutional! One way to help bring down the number of uninsured is to demand that those without coverage buy health plans. But the government has never passed a law requiring Americans to buy any good or service. Constitutional scholars say any such mandate would likely draw a legal challenge.

GOP’s Ryan Dissects ObamaCare, Lays Out ‘Roadmap’ To Health

GOP’s Ryan Dissects ObamaCare, Lays Out ‘Roadmap’ To Health

He says plan can save Medicare, cut costs — unlike Dems’ reforms



Rep. Paul Ryan, R-Wis., took the national stage last month as he cut down Democratic health care plans point by point. If the GOP win back the House in November, Ryan will become Budget Committee chairman. And he has lots of ideas. He recently updated his “Roadmap for America’s Future” to address many issues, including the budget deficit, entitlements, the tax system and health care.

IBD recently sat down with Ryan to discuss his ideas. In Part One he dissects ObamaCare’s flaws and how his “Roadmap” would improve our health care system.

IBD: President Obama said his overhaul will “bring greater competition, choice, savings and efficiencies to our health care system.”

Ryan: It will do the opposite of all three. It will mean less competition and less choice because it narrows the options consumers will have to get health insurance. It puts everybody on a glide path to go into an exchange where people will have three choices of policies — gold, silver and bronze. It standardizes health insurance and takes underwriting out of health insurance, which is how many insurers compete.

At the end of the day you’ll have a few big insurers selling different versions of the same color. With all the new mandates and rules, small and medium-sized insurers can’t compete because they don’t have the economies of scale. What you’ll have is this handful of really large insurers simply becoming claims processors for federally run health insurance. a -

in Milwaukee that has 2,200 employees, 1,600 in Milwaukee. It sells in the individual market and it has the biggest share of policies with health savings accounts. If this bill becomes law, they’ll have to close because of the rules and regulations. That means they lay off the 1,600 people in Milwaukee and send out cancellation notices to their 1.3 million policyholders.

The only ones that will survive are the really big companies. That will make prices go up. And it’s an openended entitlement that says to everyone who makes under $100,000, if your health care expenses exceed 2% to 9.8% (depending on income level), don’t worry, taxpayers will pay the rest of it. That is an invitation of cost explosion.

IBD: Let’s move to your Roadmap. On health insurance, you want to replace the employer-tax exclusion with a refundable tax credit of $2,300 for individuals and $5,700 for families. They can use it to buy insurance and pocket the difference.

Ryan: They should be able to pocket the difference because it is important to have a shopping incentive like that to put price pressure in the right place.

IBD: People fear that they’ll lose their employer-based coverage under ObamaCare. Doesn’t the tax credit have the same weakness? You give people with employer-based coverage a tax credit in place of the tax exclusion, but there is no guarantee the employer will keep that coverage.

Ryan: First, many employers who offered their employees health insurance 10 years ago don’t anymore. More and more employers are dropping it anyway. So more and more people don’t get health insurance from their jobs and they get no tax benefit. Let’s end the discrimination against people who don’t get health insurance through their jobs.

Second, I’m just de-linking the tax deduction for employees from the job and reattaching it to the individual. The employers still have the same tax incentive to provide health insurance to their employees.

I’m saying since more employers are dropping health insurance, since more people are changing jobs, losing jobs, going into business for themselves, make that tax benefit their property and not the property of employers.

IBD: John McCain proposed a similar plan in the 2008 campaign. Obama attacked him because eliminating the exclusion, in effect, raised taxes, though only on the rich. How can you deal with similar attacks?

Ryan: What’s funny is Obama is doing it now under his bill. The president is proposing to take away the tax exclusion, at least for a certain segment, and then use that money to spend on programs. That really is a tax increase. I’m exchanging one tax benefit for another. You lose your exclusion, but you get it back as a tax credit.

I would argue that the current tax exclusion doesn’t make any sense because we are subsidizing the wrong people. The people in the highest tax bracket get the biggest tax break for health insurance.

IBD: But how do you get around the political problem, that you’re raising taxes?

Ryan: I’m not worried about the political problem. Economists on the left and right will tell you the taxexclusion system is one of the greatest sources of health inflation. It creates this third-party payer system that divorces consumer — the patient — from prices. You have to deal with that.

The vast majority of Americans will get a tax cut under my plan, on average about $1,400. If you don’t have health care from your job, you’ll get $5,700 more for your family for health care. Yes, people in the top tax bracket would not get as much from this system. But people in the middle and lower brackets will get more, and they are the ones having a hard time buying health insurance. If we are trying to help get insurance to the uninsured and help middle-class families afford health insurance, the Roadmap is a far better way.

IBD: Explain the state insurance exchanges the Roadmap would create. Also, why would they have to offer a plan that meets “the same statutory standard used for the health benefits given to members of Congress”?

Ryan: Exchanges would have to offer a plan like the standard Blue Cross option in the federal employee system. That way, people trapped in those states with extraordinarily high-cost plans can get basic insurance. If they want to buy insurance with all the bells and whistles, that cover acupuncture and hair plugs, they still can. It accomplishes much the same objective of interstate shopping, which I favor.

IBD: What if some people think that even the basic congressional plan is still bells and whistles? What if they want even less coverage?

Ryan: Then with interstate shopping they can go find a better plan. The point is not to create a floor, but to create an option that’s not now available in many states.

IBD: Starting in 2022, you would reform Medicare by giving seniors $11,000 a year to buy private insurance. Critics have suggested seniors don’t have the sophistication to find cost-effective coverage.

Ryan: That’s a paternalistic and condescending notion. The seniors I represent sure analyze these things, they have children that look out for their best interests, and there are plenty of groups and service clubs that can help seniors.

But Medicare has a $38 trillion hole right now. It is unsustainable. What my plan says, if you are retired or above age 55, we’re not going to make any changes. You’re going to get Medicare as it exists now. But we’ve got to face up to the fact that Medicare will not be there for later generations.

For those under age 55, we put it on a path toward sustainability, and it works like the plan I get from the Federal Employee Health Benefit Plan. I get a list of plans that have been pre-certified by the Office of Personnel Management. I get a payment from my employer, the federal government— the taxpayers — and I apply that payment to the plan that works for me and my family.

That’s what I propose for Medicare, with three changes. More support for low-income people to cover their out-of-pocket costs with a medical savings account. Less support for the wealthy because they can afford more on their own. Riskadjusting the payments so as people’s health deteriorates, they get more money to get affordable coverage. And seniors can select among a list of pre-certified Medicare plans.

That wipes out the unfunded liability and makes Medicare permanently solvent. That’s been scored by Department of Health and Human Services actuaries and the Congressional Budget Office as achieving that.

Friday, March 5, 2010

Fannie to Banks, Shut up and Take it

Fannie Mae To Banks: Shut Up And Take It

By Ed Carson Fri., March 05, '10 12:37 PM ET Tags: Freddie Mac - Fannie Mae - Banks - Wall Street - Mortgages

Fannie Mae(FNM) and Freddie Mac(FRE) are pressing banks to buy back huge swaths of home loans as a way for the mortgage finance giants to recoup some of their massive losses that the taxpayer has to cover.

It’s hard to feel sympathy for lenders that slackened or ignored credit standards during the housing boom. But Freddie and Fannie knew what they were getting into when they bought the loans. The quasi-private firms were a major cause of the mortgage crisis, using their (then implicit) government subsidy to expand and leverage up far more than any truly private company could, then using their size to buy or back vast amounts of subprime debt.

Freddie and Fannie, now under government conservatorship, essentially are the market for buying mortgages. So banks have little choice but to knuckle under, Bloomberg reports:

Fannie Mae and Freddie Mac are looking for more faulty loans to return after suffering $202 billion of losses since 2007, and banks may have to go along, since the two U.S.- owned firms now buy at least 70 percent of new mortgages.

“If you want to originate mortgages and keep that pipeline running, you have to deal with the push-backs,” said Paul Miller, an analyst at FBR Capital Markets in Arlington, Virginia, and former examiner for the Federal Reserve. “It doesn’t matter how much you hate Fannie and Freddie.”

The Freddie and Fannie push-back of soured loans onto lenders could have a serious impact on banks’ earnings as they try to shore up capital.

More broadly, Freddie and Fannie offer a key lesson: Monopolies are worrisome, but government monopolies are insidious. They have far more power and can always argue that they are helping taxpayers or serving the public interest.