The Democrats Plan to Raise Taxes

The Democrats have postponed a vote on the expiring tax rates until after the election. The reason is simply because they can’t agree on extending all of the current rates that are about to increase, and they aren’t crazy enough to raise taxes right before an election. But the tax increases are likely coming, no matter how they try to spin this for the election.

What the Democrats are trying to do is use the previously higher tax rates as a baseline, and they want to do this for two main reasons. One is so that they can claim that keeping the current rates would cost the government tax revenue and would supposedly increase the deficit (nevermind that Bush’s tax cuts increased tax revenue or that spending could be cut to decrease the deficit). The second is so that they can claim that keeping the current income tax rates for the middle class would be a tax cut. This is, of course, completely dishonest since there is no tax cut on the table, only a tax increase.

The deficit argument is particularly misleading. This Congress has had no problem adding debt, but right before a midterm in which the Democrats figure to lose big, they are making claims about decreasing the deficit. Interesting timing, isn’t it? Notice that they don’t say anything about spending levels, which are the main reason for deficits. One could increase taxes, and perhaps tax revenues, but the deficit only shrinks if the government takes in more than what it spends. Who believes that the spend-crazy Democrats in this Congress are going to use any extra tax revenue to pay off debt instead of simply spending more?

No, the Democrats’ argument isn’t really about decreasing the deficit, no matter what they say. What it is really about is fairness, as Barack Obama told us in a presidential primary debate:

GIBSON: All right. You have, however, said you would favor an increase in the capital gains tax. As a matter of fact, you said on CNBC, and I quote, “I certainly would not go above what existed under Bill Clinton,” which was 28 percent. It’s now 15 percent. That’s almost a doubling, if you went to 28 percent.

But actually, Bill Clinton, in 1997, signed legislation that dropped the capital gains tax to 20 percent.

OBAMA: Right.

GIBSON: And George Bush has taken it down to 15 percent.

OBAMA: Right.

GIBSON: And in each instance, when the rate dropped, revenues from the tax increased; the government took in more money. And in the 1980s, when the tax was increased to 28 percent, the revenues went down.

So why raise it at all, especially given the fact that 100 million people in this country own stock and would be affected?

OBAMA: Well, Charlie, what I’ve said is that I would look at raising the capital gains tax for purposes of fairness.

We saw an article today which showed that the top 50 hedge fund managers made $29 billion last year — $29 billion for 50 individuals. And part of what has happened is that those who are able to work the stock market and amass huge fortunes on capital gains are paying a lower tax rate than their secretaries. That’s not fair.

And what I want is not oppressive taxation. I want businesses to thrive, and I want people to be rewarded for their success. But what I also want to make sure is that our tax system is fair and that we are able to finance health care for Americans who currently don’t have it and that we’re able to invest in our infrastructure and invest in our schools.

And you can’t do that for free.

Why won’t President Obama and the Democrats repeat this to explain why they haven’t extended the Bush tax rates? The answer is obvious, and it’s sad that they won’t be honest with us.

Making the New Republican Pledge

For anyone who believes or claims that Republicans have no ideas (ignoring the Roadmap), here is a simple pledge offered by the GOP for a national agenda. Will following the specific proposals of the pledge fix all of our major problems? Probably not, but the general platform would be a major step in the right direction. Do the Democrats have anything like this to offer? So far, they seem to be running away from their agenda.

The Republicans may be split over some of the specifics of the Roadmap (a topic for another day), but they are united over this pledge, which is divided into several parts that I’ve outlined below. I’ve also listed some of the specific proposals of each area. In each policy area, the Republicans contrast their view with that of the left, and I can’t help but notice how similar their contrasting points are to the three that I recently suggested they make.

Here is a summary of the pledge, which I’ll gladly endorse despite having a few issues with some of the specific proposals:

1) A plan to create jobs, end economic uncertainty, and make America more competitive: stopping tax hikes, small business tax deductions, repeal business mandates of ObamaCare.

2) Stop out of control spending and reduce the size of government: canceling unused stimulus funds, cutting government spending to pre-stimulus and pre-bailout levels, establishing a hard cap on new discretionary spending, cutting Congress’ budget, holding weekly votes on spending cuts, ending TARP, reforming Fannie and Freddie.

3) Repeal and replace ObamaCare: repealing the law, enacting medical liability reform, opening health insurance purchases across state lines, expanding HSAs, prohibiting taxpayer funding of abortion.

4) Reform Congress and restore trust: reading bills, adhering to the Constitution, making it easier to cut spending, advancing legislative issues one at a time.

5) Keep our nation secure at home and abroad: passing funds for the troops without attaching unrelated items, keeping terrorists off American soil, demanding a comprehensive detention policy, funding missile defense, enforcing tough sanctions on Iran, enforcing the border laws and changing immigration policy to allow for local enforcement.

Each policy area is contrasted with the Democrat agenda. The choice in November is clear. We can have more of the left, or we can elect Republicans and hold them to this pledge.

Connecticut’s Largest Health Insurer’s Rate Increases Approved

Connecticut has approved rate hikes of over 20% for some insurance plans (H/T Ed Morrissey):

The state’s largest health insurer was granted rate hikes Friday that will be well over 20 percent for some plans, drawing sharp criticism from the attorney general.

Anthem Blue Cross and Blue Shield in Connecticut requested a wide range of premium increases, which will take effect Oct. 1, to cover the costs of new benefits required by federal health reform. Higher prices mostly affect new members shopping for a health plan on the individual market rather than people who have group plans through an employer or some other organization.

Of course rates had to go up. Insurance companies have to cover more people with more restrictions on how they can do that. They also have new imposed 80% or 85% medical loss ratios (MLR) to deal with, limiting profit margins (a study of insurance companies already complying in 2009 with the MLR versus those that did not revealed significantly lower profit margins for those already in compliance). When your expenses go up and decrease your profit margins, you have to raise your top line and/or cut other expenses to maintain your profit. For insurance companies who must have a high level of expenses for paid benefits, this means higher premiums. ObamaCare puts insurance companies in this situation.

Think of it this way: health insurance companies have an average profit margin of 3.4%, and according to the study above, those who comply with the MLR only make an average margin of 0.7%. If to comply with the new MLR (among other regulations) takes 2.7% of your profit margin, or 2.7 cents off every dollar, how do you make up that loss? With an average profit of 0.7 cents per dollar, you must now generate about four more dollars of revenue to make the same profit, or an increase of 400% in revenue. How can you do that? The easiest way is probably to increase premiums.

Of course, this won’t stop Democrats from demonizing the insurance companies as if the insurers are simply increasing rates to line their pockets. Here is what Connecticut’s Democrat Attorney General had to say about the news of the rate increases:

Attorney General Richard Blumenthal called on Insurance Commissioner Thomas Sullivan “to schedule public hearings on all pending health insurance rate increase requests, ensuring proper analysis and inquiry by consumers, businesses and government officials.”

“Anthem and other insurers are seeking massive, unjustified increases that will crush consumers and companies, especially small businesses, struggling with the worst economic downturn in decades,” Blumenthal said.

This sounds pretty similar to what HHS Secretary Sebelius recently said about insurance companies blaming rate hikes on ObamaCare: the insurance companies are to blame for the rate increases. This is all too predictable, as are future attempts by the Democrats to use this demonization of insurance companies to suggest more government control over the industry.

New START Passes Senate Finance Committee

The vote was 14-4, and while it is troubling for people who read arguments made by people like John Bolton and Mitt Romney, it is not surprising. What was particularly disappointing was that Senator Lugar voted for the new START. His vote was expected, however, considering his recent debate with Mitt Romney. Senator Lugar, if you recall, played a key role in the pivotal 1986 elections in the Philippines, which brought a Democratic shift to the country.

Senator Lugar was not the only Cold Warrior to support the new START. George Shultz had signed on as well.

Islam and the Left: Two Important Books

With the anniversary or 9/11 and the controversy over the Ground Zero mosque, now is a good time to talk about two important books that examine Islam and how the left views it. The two books are Andy McCarthy’s The Grand Jihad (which I’ve already mentioned), and Paul Berman’s The Flight of the Intellectuals. Both books carefully review some of the mainstream historical Islamic philosophers and leaders, and both authors believe that the American left has aligned itself with the wrong versions of the religion.

Andy McCarthy suggests that the left has aligned itself with some parts of the jihadist Islam, which includes the non-violent concept of dawa, because of mutual interest in changing traditional American values and institutions. McCarthy sheds a light on the Islamist movement that often goes unnoticed, as it uses the American political and educational systems in place to advance the Islamist agenda.

His use of the term Islamist is in itself interesting, as he makes a difficult attempt to separate Islamists from moderate Muslims. He also makes an important conclusion to consider, which is that the jihadists have a strong doctrinal rationale for their movement, meaning that Islam is indeed a major part of the jihadists’ motivation. What McCarthy has been trying to emphasize is that Islam itself needs to be examined and addressed, even if doing so would be politically incorrect, because it is a factor in the global threat of terrorists and others who wish to spread sharia.

Paul Berman tries to answer the question of why the left has promoted some radical Islamic spokesmen instead of others who would be considered more moderate. He considers the views of people like Hassan al-Banna, Jamal al-Banna, Tariq Ramadan, Sayyid Qutb, and Sheikh Qaradawi. Here is what Berman writes near the end of his book to explain what he has noticed:

It would be wonderful, after all, to think that suicide terrorism today is advocated only by a lunatic fringe of wild extremists, the Qutbist ultra-reactionaries, or by the people whom Ramadan dismisses as salafi literalists, together with the people like Sheikh Qaradawi, whom Ramadan does not dismiss – the hardcore champions of Hassan al-Banna. But that is not the case. People with seemingly reasonable and even appealing views on a variety of themes sometimes join the lunatic fringe and the al-Banna mainstream in making those arguments. … And some very bright journalists from the non-Islamic press seem unable to recognize these anomalies, or unwilling to point them out.

Why so? It is because the Islamist movement, in prospering, has succeeded in imposing its own categories of analysis over how everyone else tends to think. Mainstream Islamists look on Jamal al-Banna as a free-thinking maverick, and on Sheikh Qaradawi as a sound and reassuring orthodox moderate, and on Tariq Ramadan as a man half-way lost to the vapors of Western liberalism – and these judgments, which are Islamist judgments, end up getting adopted by the Western and non-Islamist journalists, as well, who report the judgments as fact, without pausing to make any investigations of their own.

( The Flight of the Intellectuals, p. 285)

Berman believes that the growth of the Islamist movement and the development of terrorism are the two main reasons that the Islamists have been misunderstood and feared. He has plenty of evidence in his book to support his conclusions, as does McCarthy.

Obama Has Adopted Many Bush Policies for Fighting Terror

On the anniversary of 9/11, here is an interesting article that summarizes some of the positions that the Obama administration has taken from the Bush administration to fight the war on terror. None of this is a surprise, as we’ve been covering it from the beginning and pointing out the various positions President Obama has adopted that he once criticized en route to election.

During yesterday’s press conference, President Obama must have gotten a small taste of what it was like to be George W. Bush, as some press members pushed him for answers on why he hasn’t adhered to some of his promises to reverse Bush policies for conducting the war. Gitmo and civilian trials were mentioned, and President Obama offered probably the best defense of not using civilian trials in all cases that he probably ever has on camera.

This week’s Ninth Circuit ruling on rendition further highlights the sharp turn in this area that President Obama has made since taking office. For most people, such changes are probably welcome ones.

Bending Healthcare’s Cost Curve Upward

All throughout the ObamaCare debate, we heard about the need to bend the cost curve downward. That was a central goal of ObamaCare. The law was crafted to front load the first ten years with new taxes and back load the same period with  massive subsidies in order to make the CBO budget score look favorable. But even before the big subsidies start kicking in, CMS’ economists are predicting that overall health spending will increase from 6.1% to 6.3% a year, thanks to ObamaCare:

Regardless of the health law, national health spending has been rising in recent years and economists expect that to continue. In February, the federal Centers for Medicare and Medicaid Services projected that overall national health spending would increase an average of 6.1% a year over the next decade.

The center’s economists recalculated the numbers in light of the health bill and now project that the increase will average 6.3% a year, according to a report in the journal Health Affairs. Total U.S. health spending will reach $4.6 trillion by 2019, accounting for nearly one of every five U.S. dollars spent, the report says.

That would be bending the cost curve upward. Jake Tapper of ABC asked President Obama about this report yesterday during the painfully drawn out press conference. President Obama’s explanation? We weren’t going to insure millions more people without spending more, and that the plan wasn’t going to work right away. But this is not only re-writing history, it is also overlooking the fact that the real costs won’t kick in until the subsidies do. That overall spending is increasing now before the full spending of the law comes into play is a very bad sign.

Insurers are now claiming that ObamaCare is causing them to ask for even higher premiums to pay for the law’s new requirements. This was expected, but is not what we were told would happen. My prediction that the Democrats would use rate increases as an excuse to blame insurers is already coming true: HHS Secretary Sebelius warns that the administration will not tolerate such blame from insurers, and that insurers who do might be kept out of the insurance exchanges:

“There will be zero tolerance for this type of misinformation and unjustified rate increases,” Health and Human Services Secretary Kathleen Sebelius said in a letter to the insurance lobby.

“Simply stated, we will not stand idly by as insurers blame their premium hikes and increased profits on the requirement that they provide consumers with basic protections,” Sebelius said. She warned that bad actors may be excluded from new health insurance markets that will open in 2014 under the law. They’d lose out on a big pool of customers, as many as 30 million people nationwide.

In other words, politics will help determine whether or not insurers get to be part of the new exchanges. And I’m not sure what kind of increased profits will come from the new consumer protections, as the law requires the insurance companies to have medical loss ratios of at least 80%. Insurance companies may ultimately increase profits due to having more customers, but their profit margins shouldn’t increase because of this new law.

ObamaCare is going to increase cost and spending, and we’re already hearing excuses and blame for it. Don’t expect the people who sold it to us to admit any fault.

More Numbers on ObamaCare and Small Business

I’ve been analyzing numbers for ObamaCare’s expected impact on small businesses, and this new Commonwealth Fund report provides more context. The points that I’ve been emphasizing are that the impact of ObamaCare on small businesses will be relatively low, and that any positive gain in the number of employer-insured will be held down or even negated by a loss in the number of employer-insured due to the combination of penalties and regulations. The Commonwealth Fund report reiterates my points:

Provisions of the ACA will affect the coverage of workers in small and large firms. It will cover those currently without coverage, stabilize the coverage of those with insurance, and shift some workers to the insurance exchanges or to Medicaid. For example, the small business tax credit is estimated to provide new coverage or stabilize existing coverage for about 3.4 million workers and family members employed in small firms by 2013. Small firms eligible to offer their employees health insurance through the insurance exchanges will provide new coverage or stabilize existing coverage for about 5 million workers and their families by 2019. The combination of the individual requirement to health insurance and the employer penalties for not offering coverage are expected to provide employer-based health insurance to 6 million to 7 million people who are currently without employer health insurance.

[Emphasis mine, and footnotes removed]

So we have a positive pick up of 6-7 million people who currently lack employer-based insurance. Even that number is arguably low value for what we would be paying, but the numbers are actually worse:

Still, a large number of small firms with lower-wage workforces may decide to stop offering health insurance if their workers can gain subsidized, comprehensive coverage through the exchanges and Medicaid in 2014. The CBO estimates that 8 million to 9 million workers—mostly in small, lower-wage firms—will lose their employer coverage but are expected to gain health insurance through the exchanges and Medicaid.

[Footnotes removed]

So 8-9 million workers would lose the employer coverage. We’ve actually seen much higher estimates of the number of employees who would lose their coverage because the mandates would actually create the incentive for employers to pay the penalties instead of paying for insurance. If more people are going to lose their employer coverage and move to the exchanges or to Medicaid than will actually gain employer coverage, then why didn’t we simply expand Medicaid and subsidize these exchanges as opposed to having all these other provisions? (Trick question, because the point was always to shift people into government coverage)

The bottom line of ObamaCare’s impact on small businesses hasn’t changed. It will have a small positive effect, if any, and could actually have more negative impact overall on employer-sponsored insurance.

August Employment Report Should Be the Political Death Bell for Democrats This Year

If you haven’t given up on the current economic agenda after this latest jobs report, then you’re not going to change your mind. The unemployment rate actually ticked up to 9.6%, with the private sector adding only 67,000 jobs. Overall non-farm employment decreased by 54,000 as census workers lost their temporary jobs.

Do you know why there hasn’t been and will not be private sector growth with this government? No, it’s not because employers and investors are all mean people. It’s because adding jobs is about expanding business and making more money, and the liberals who have been running the Democrat party since 1972 are opposed to the idea of people becoming more wealthy, unless it is they who decide who those people are.

The threat of tax hikes next year and new regulatory schemes is only causing businesses to hold onto their money or to look for more competitive locations to run their businesses. How do the liberals running the Democrat party respond? They blame the businesses. Just watch Senator Boxer rip Carly Fiorina in their California Senate debate this week for shipping American jobs overseas. Why would Ms. Fiorina have done that if not to make her company more competitive, as a CEO’s job is to create a profit for investors? Liberals like Senator Boxer set policies that create incentives for American businesses and investors to look elsewhere, and then they blame the businesses and investors for doing so.

If the Democrats really wanted to get the economy back on track, they’d extend the Bush tax rates, drop new regulatory schemes like cap and trade, roll back ObamaCare, and start working to cut public sector and union expenses that are dragging down states and the entire country. They would rather be elected by promising favors they cannot deliver on, however, and so they will not do any of those things. And we will suffer for it if we don’t see this latest jobs report as a knockout punch for the Democrats this year.

Reluctant Commander in Chief

A struggling president had the opportunity on Tuesday night to do the right thing, and to help himself in the process. As President Obama spoke from the Oval Office about the end of combat in Iraq, he failed, however, to do the one big thing he could have done: credit George W. Bush for the success in Iraq.

This president has shown countless times how small he can be, and that is how he looked and sounded in a speech that was not too bad for someone whose heart was not in the war that he was winding down.  President Obama used the opportunity to remind us that he was fulfilling his campaign pledge to end the war. In doing so, he not only failed to credit his predecessor for the accomplishment in Iraq, but he also re-wrote history: The drawing down of combat forces in Iraq was done on a timeline set by George Bush. President Obama had promised an immediate withdrawal, but did the responsible thing in adhering to the agreement that preceded him. Addressing that timeline, he also spoke not of victory and its significance.

As Bill Kristol reminds us, however, it was not a reasonable expectation that President Obama would put the war into a broader national security context. President Obama has never supported the Iraq war, and he opposed the surge that created the conditions for the withdrawal that he addressed last night. Politics may suggest that a president not admit when wrong, but doing so could have gone a long way for a president that has lost so many supporters. Ronald Reagan was one of the few to admit his administration’s mistake when he addressed the Iran-Contra affair. Neither in politics nor in character, however, is President Obama like Ronald Reagan or George W. Bush.

Whereas George W. Bush shifted gears from a domestic president to a commander in chief, President Obama has done so reluctantly. A New York Times piece from this weekend reports descriptions of President Obama’s priorities, which remain domestic despite entering the Oval Office as a war president:

With the economy in tatters and health care on his agenda, Mr. Obama was determined to keep the wars from becoming a major distraction. When he held a videoconference on Iraq on his first full day in office, officials recalled, he said: “Guys, before you start, there’s one thing I want to say to you and that is I do not want to screw this up.”

While the desire to not mess up the war is admirable for someone who opposed it, that attitude is a far cry from the enthusiasm President Obama has displayed for his domestic agenda. When deciding on the counterinsurgency in Afghanistan with a timeline, President Obama was supposedly calculating how his decision would affect his agenda at home:

One adviser at the time said Mr. Obama calculated that an open-ended commitment would undermine the rest of his agenda. “Our Afghan policy was focused as much as anything on domestic politics,” the adviser said. “He would not risk losing the moderate to centrist Democrats in the middle of health insurance reform and he viewed that legislation as the make-or-break legislation for his administration.”

Such calculation is not completely unreasonable, but it suggests that the president was setting national security policy based on his domestic priorities. He continued to make that connection Tuesday night when he oddly used the Iraq war completion as a symbol for renewed focus on the economy. While that wasn’t inappropriate, it further reiterated what his priority is. In combination with no broad vision for our foreign policy in the war on terror, that focus suggests how reluctant our commander in chief is to lead the wars.

We already knew that, of course, but the president’s address was a reminder of that as much as it was anything else.