By Peter Ferrara / February 9, 2015 / American Thinker
Quietly, underneath the radar, all of Barack Obama’s legacy as President is already crumbling. By the end of 2017, his promise of fundamental transformation of our nation will be as faded and forlorn as Ozymandias.
Balancing the Budget
Within a couple of months, the Republican House and the Republican Senate will have passed matching budget resolutions that will balance the budget within 10 years. The Congressional Budget Office projects the budget deficit for fiscal 2015 (which ends on Sept. 30) under the current baseline at $468 billion. That is still the highest in history before President Obama, with the previous record at $458.6 billion in 2008. Moreover, CBO projects that the 2015 deficit will more than double by 2024 to $1.088 trillion.
But the prospect now is that new House Budget Committee Chairman Tom Price (R-GA) and new Senate Budget Committee Chairman Mike Enzi (R-WY) will propose identical budget resolutions that will balance the federal budget within 10 years. They can build on the budgets by former House Budget Committee Chairman Paul Ryan, which sharply reduced federal spending and debt over the long run, but never reached the shorter term, 10 year balanced budget milestone.
The key to that is careful, politically sensitive entitlement reform. That would include Ryan’s Medicare reforms, sold under the banner that Ryan’s reformed Medicare is better for seniors than Medicare under Obamacare. For all the hysterical, ignorant, hypocritical demagoguery that Democrats have spouted about Ryan’s Medicare reforms, all that those reforms amount to is expanding the more modern, popular, Medicare Parts C and D with their market incentive structure, proven effective at controlling costs, to the old fashioned Medicare Parts A and B.
The further, necessary entitlement reforms are to expand the wildly successful 1996 welfare block grant reforms of just one federal welfare program, the old, New Deal Aid to Families with Dependent Children (AFDC) program, to ultimately all federal welfare programs. The incentives of those 1996 reforms successfully led two-thirds of those formerly dependent on AFDC to go to work and leave the program entirely. As a result, after 10 years, the program, renamed Temporary Assistance to Needy Families (TANF), cost 50% less than the old program would have cost under prior trends. Yet the poor who went to work were documented to enjoy incomes roughly 25% higher than their former welfare benefits.
Expanding those reforms to all federal means tested welfare programs would achieve the ultimate dream of President Reagan, and his legendary top welfare reform advisor Robert Carleson, to send welfare back to the states. But it also would save trillions over the first 10 years alone. This year’s budget should at least aggressively expand those reforms to as many federal, means tested welfare programs as possible.
The Republican Budget Committees should avoid the political trap of proposing Social Security benefit cuts. Social Security reform should wait until the Republican Party is ready to revisit proposals for personal savings, investment and insurance accounts for Social Security, on Milton Friedman’s Chilean model. That would result ultimately in the greatest reductions in government spending in world history. Yet seniors would enjoy higher, not lower, retirement benefits, from lifetimes of real savings and investment, and they would choose their own, individual retirement ages, under market incentives. This too was Reagan’s ultimate dream for Social Security.
Emerging Republican leaders among the Presidential candidates will reinvigorate that issue. Social Security reform would better wait until an inspired, grassroots, reform tidal wave in 2017. The final entitlement reform component would be to repeal and replace Obamacare, as discussed below.
All of this will greatly hearten the Republican grassroots conservative base, and lay groundwork for Republican victory in 2016.
A second, emerging, major reform breakthrough for conservatives involves tax reform. The key here is the highly politically appealing tax reform proposal of new Ways and Means Chairman Paul Ryan. His plan, which was included in his budget proposals adopted by the entire Republican House, would apply a 10% federal income tax rate to family incomes up to $100,000, and 25% after that. Under that plan, close to 90% of working families would be subject to only the 10% rate. The federal corporate income tax rate would be reduced to 25% as well. Such a tax reform would leave federal tax rates after Obama lower than they were after President Reagan!
The biggest problem here is that Ryan seems too willing to hold off until he explores possible compromises with Obama. But Obama is not serious about any of that, as evidenced by his proposal to impose draconian, punitive, double taxation on the overseas earnings of American multinational companies. Ryan should talk to Obama. But he should also push rapidly ahead advancing his own proposal out of the Ways and Means Committee, and through enactment by the entire House. He should focus more on compromise and agreement with Senate Finance Committee Chairman Orrin Hatch, who should have no problem embracing Ryan’s reform outline. This would be the most effective strategy to force any possible compromise with Obama as well.
Of course, Obama will most likely veto any bipartisan tax reform plan passed by the entire Congress. Possibly, as Congressional Democrats grow in awareness that they will be on their own after the passing of Obama’s Age of Aquarius, that Obama veto can be subject to a truly historic Congressional override, supported by a grassroots tidal wave. Otherwise, 2017 is soon enough to reestablish and expand Reaganite tax policy. All of this will further hearten the Republican conservative grassroots base.
Repeal and Replace Obamacare
Finally, there is the pending repeal and replacement of Obamacare, which is on a fatal collision course with the Supreme Court case of King v. Burwell, to be decided by this summer. That case involves a legal challenge to the Obamacare subsidies for the purchase of health insurance, which the Obamacare law as enacted by Congress provides are only available for health insurance purchased on Exchanges established by states.
The problem for Obamacare is that only 14 states have established their own health care Exchanges. A total of 34 have refused to establish them, and 2 more tried and failed to do so. So the Supreme Court by this summer will strike down the Obamacare subsidies for health insurance in 36 states. I filed a brief in the Supreme Court for the American Civil Rights Union, which I serve as General Counsel, urging the Court to do precisely this, as the plain language of the statute leaves no other alternative.
Moreover, the Obamacare law also provides that where the Obamacare subsidies do not apply, the Obamacare individual mandate and employer mandate do not apply either. This would mean that the remaining 14 states could repeal the highly unpopular individual mandate, which is effectively a tax on the middle class and working people, and the highly unpopular employer mandate, which is effectively a tax on middle class jobs and wages, just by repealing their state Exchanges. The end result would be that the Obamacare health insurance benefits, and the individual and employer mandates would be gone in at least 36 states, and maybe more.
President Obama would no doubt come to the Congress asking it to fix his broken Obamacare by providing for the Obamacare health insurance benefits, and individual and employer mandates, to apply in all 50 states. But he would get exactly zero support in the Republican controlled Congress for that.
Instead, Congressional Republicans should pass legislation that would finally repeal and replace Obamacare. That Republican replacement should focus primarily on just two issues: (1) targeting public assistance to help the poor buy essential health insurance, and (2) providing means for those uninsured who have developed highly expensive pre-existing conditions, such as cancer or heart disease, to obtain essential health insurance.
The first can be achieved by going back to the first theme above of block granting federal means tested welfare programs back to the states. That would include block granting Medicaid to the states, with each free to adopt the reforms that would best suit the poor of their state. Preferably, states would transform their Medicaid programs to provide health insurance vouchers for each poor family sufficient to enable them to buy essential health coverage of their choice.
The second goal can be achieved by providing that states could use part of their Medicaid block grant funds to establish an Uninsurable Risk Pool in each state. That Risk Pool would offer coverage to the uninsured who had become so sick while uninsured with highly costly illnesses like cancer or heart disease that they could no longer buy coverage anywhere in the private market. The Risk Pool would charge applicants a premium based on their ability to pay to ensure that the Pool can serve a safety net function. The Medicaid block grant funds and state taxpayers would finance the remainder of the Pool’s costs.
This reform would restore the primacy of guaranteed renewability in American law. Even before Obamacare, state and federal law provided that health insurance could not be canceled because the insured became sick while insured. That was prohibited even under the common law as breach of contract. Under guaranteed renewability, health insurance must be continued as long as the premiums continue to be paid, nor could premiums be discriminatorily increased beyond the standard for everyone else already covered because an insured became sick.
Obamacare was sold to gullible “progressives” on the grounds that it would provide for universal health insurance coverage. But even the establishment CBO scored Obamacare as leaving 30 million Americans uninsured 10 years after full implementation! Under the above reforms, the poor who lack the necessary funds to buy health insurance would be provided financial help to do so. Those uninsured who became too sick without health coverage to get health insurance in the market would be able to get essential coverage through the Uninsurable Risk Pools. Those with health insurance would be assured they could keep it through guaranteed renewability.
The Obamacare replacement plan would improve Medicare for seniors by repealing the $700 billion in Medicare cuts imposed by Obamacare. It would also ensure that seniors on Medicare would enjoy the freedom to choose Health Savings Accounts for their Medicare coverage through Medicare Part C.
Repealing and replacing Obamacare would also involve a major tax cut. Close to a trillion dollars in Obamacare taxes would be repealed. That would include a 16 percent reduction in the capital gains tax rate, and in the tax rate on corporate dividends, and nearly a 25 percent reduction in the top Medicare payroll tax rate, which is a direct tax on employment. The employer mandate, which is a massive effective tax on jobs, would also be repealed. The individual mandate is another massive effective tax on the middle class and working people, contrary to Obama’s pledge as a candidate never to increase taxes on those workers. The reduction in the capital gains tax and the tax on corporate dividends would increase job creation by increasing the necessary capital investment. These reforms would also save trillions in unnecessary federal spending over the years.
The reforms would also sharply reduce burdensome and unnecessary health care and insurance overregulation. Repealing the employer mandate would end the Obamacare incentives for part time 29 hour a week jobs to replace full time 40 hour a week jobs. Repealing the individual mandate would mean that if you liked your health care plan, you could keep it, because your health care plan would be entirely a matter of your own personal choice.
These reforms would also involve a comprehensive strategy to control health costs. Health Savings Accounts (HSAs), proven effective in controlling costs, would be expanded throughout the whole health care system. The poor on Medicaid would be free to choose HSAs with their health insurance vouchers. Seniors on Medicare would be assured that they could choose HSAs through Medicare Part C. The repeal of costly Obamacare overregulation, including the employer mandate, the individual mandate, guaranteed issue, and community rating, and costly Obamacare taxes would further reduce health costs. Further provisions could empower state tort reform.
All of this would further inspire the Republican conservative grassroots base to victory in 2016.
Here Comes the Sun
Imagine Obama’s furious, “progressive,” fundamental transformation of America succeeded by a fully enacted plan to achieve a balanced federal budget, tax reform providing for lower federal tax rates than under President Reagan, and Obamacare repealed and replaced by Patient Power, free market medicine. In the process, we would achieve Reagan’s ultimate dream for welfare reform, and Social Security reform. All that would be necessary then to consign Obama and his “Progressives” to the dustbin of history would be a Reagan-like rebuilding of the nation’s defenses, and a Peace through Strength foreign policy realigning America with its traditional allies. The Reagan fundamental transformation of America would then have been fully restored. America would have survived the same, furious, assault by the Marxist “Progressives” that brought down many other countries, thanks to the brilliant Constitution of America’s Framers, and the indomitable spirit of the American people.
Peter Ferrara served in the White House Office of Policy Development for President Reagan and as Associate Deputy Attorney General of the United States under President George H.W. Bush. He presently serves as a Senior Fellow for the Heartland Institute and for the National Tax Limitation Foundation.