Step right up, folks; step right up! That’s right, make some room. Gather round. For the past two years we’ve been wowed by the sleight of hand of O the Magnificent and his trusty sidekicks in Congress. This is truly one of the greatest tricks of illusion in decades. Nope, we haven’t seen a trick this good since the Progressives lauded the passage of the Sixteenth Amendment to empower Congress to tax incomes.
In that illusion, an income tax was justified to fund the normal operations of government and to defray lost government revenue due to eliminating various taxes on foreign imports (tariffs). The nation’s first permanent income tax authorized by the Sixteenth Amendment was 1% on incomes above $10,000. The tax topped out at 6% on incomes of $250,000.
Not even 5 years later, Congress had found that it liked spending other people’s money so much that rates were increased to 16% on the first $10,000 and a whopping 72% on incomes over $250,000. What’s that you say? We had World War I to pay for? True, but after the war was over, the rates never went back down to prewar levels.
Fast forward to the present day and consider the newest government sleight of hand. Now they say a good magician never reveals his tricks, but in this case we’re going to make an exception. So gather round, and listen up, ‘cause I’m only going to show you this once.
Now here. Watch the lovely assistant. That’s right. Become captivated by her siren’s call. The sparkly dress, the bright lights, and the smoke and sparks are all there for a reason. They distract you from what is really going on. That government healthcare won’t cost taxpayers a cent—heck, if she’s feeling flirty, she may even tell you it’ll save Uncle Sam money in the long run without sacrificing quality of healthcare. Watch her wink as she clip-clops in those heels and promises you: if you like the insurance plan you have with your current employer, you’ll get to keep it. See her smile! You believe her, don’t you? Of course you do, folks; of course you do!
Now stand captivated as she waves around red velvet and lit torches and promises you amazement. And wait for the illusion to play out. And if you tire of the circuses, I’m sure she has some bread for you, too. But I won’t make you wait around to see how this trick ends. You’re an FFP reader, so you’re smarter than that. Instead, I’ll take you behind the scenes, showing you what’s really going on behind that velvety red curtain.
Illusion #1: The government (some anyway) tell us the private sector messed up health insurance.
At least one of our political parties in the US will argue unequivocally that “big business,” in its quest to gobble up the world in the name of profit and trample the huddled masses of exploited workers, is responsible for messing up health care.
What these razzle-dazzlers conveniently forget to mention is that employer-provided health insurance is an artifact of an earlier government intervention into the private market. In 1942 during the economic depression and World War II, Congress passed and Franklin D. Roosevelt signed the Stabilization Act of 1942, which, among other things, froze wages that a business was allowed to pay its workers to the rate in effect as of September 15, 1942. (See how easily wars are misused to justify the government stealing individual freedoms? This is in the same camp as “never let a crisis go to waste”…)
Businesses wanted to continue to attract and retain talented workers, but Congress knew best in those days just as they do today. Another government regulatory body, the War Labor Board ruled that indirect benefits, such as employer provided health insurance, did not count as “salary” or “wages.” Lastly, in 1954, the beloved IRS decreed that employer-provided health insurance was tax exempt. Employer-provided health insurance policies proliferated at or about the same rate as many small rodents, folks!
Illusion #2: The government likes to ignore unintended consequences.
Impressive tom-foolery, eh? Want more, you say? Try this hypothetical gem:
In 2009, Joe works for a company offering a health plan with family coverage. The biweekly premium is $550, or $14,300 per year. The employer wants to cover 80% of this cost and pays $440 of Joe’s premium, or $11,440 per year. Enter ObamaCare and the increased minimum coverage requirements (E.g., contraceptives, coverage for dependent children up to age 26—“dependent” and “child” don’t seem synonymous at that age…). My own insurance premiums have increased 41% since the passage of ObamaCare—a much steeper rate of increase than observed in years past. Suppose the same happens to Joe’s insurance. His annual premium for coverage of himself and family now costs $16,130. The company can try to keep pace with the new premiums (now $12,900!), it can select a less costly plan, or it can pay less of the overall cost (both options increasing out-of-pocket costs to Joe).
But suppose the company needs capital to implement new “green” equipment to meet EPA regulations and needs to cut operating costs. Fast! The company could terminate its employer-provided insurance program and pay a $2,000 fine (or fee if you prefer) to the government. Joe would no longer have coverage from his employer, but would have coverage from the government via a variety of programs such as Medicaid, SCHIP, or the government insurance exchanges.
A sympathetic boss or HR rep will call Joe in to tell him that the company’s health plan has just become too expensive to maintain and that the company is cancelling its health insurance program. A preprinted pamphlet explaining the government’s health exchange program will be slid across the counter to Joe who once believed the mantra of “if you like your insurance you can keep your insurance.”
Illusion #3: The government uses magic fairy dust instead of mathematics. Sort of.
Last Friday, on the eve of the 2 year anniversary of the Affordable Choice Act (aka “Obamacare”), the Congressional Budget Office (CBO) released a report bearing the riveting and engaging title “CBO and JCT’s Estimates of the Effects of the Affordable Care Act on the Number of People Obtaining Employment-Based Health Insurance.”
One of the scenarios explored in the report opined (promising the scenario was unlikely of course. Picture the magician tapping the glass to show you it’s real glass—never mind the false bottom) that 20 million Americans who receive health insurance through their employers will lose this coverage. Despite the projected increase in participation in this scenario, the CBO waved its magic wand, sprinkled some pixie dust, and assumed that despite more costs and more users in government programs, the net cost to the government actually goes down.
How? The analysis opines that the business will pay more in taxes to individuals to make up for the lost benefit and more in business taxes because the business will no longer receive a tax exemption on the amount paid for health insurance premiums for employees. The missing link of course is that in our scenario, one of the reasons the business had to consider cancelling the insurance program was other expenses (also tax deductible…) that were needed to keep the business operating. Ergo, no magical untapped source of tax revenue for Uncle Sam. Just fairy dust.
Illusion #4: When things get bad, the government will start waving around torches and sending out more sexy assistants to dance.
Since the health care law isn’t fully implemented in the US yet (and as we’ve been told by one of the Great Magician’s assistants, “we had to pass the law to find out what’s in it”), let’s turn an eye across the pond to our neighbors in the UK who have the single payer national health service craved by many in Congress. This is a great illusion, watch closely! In the UK, citizens complained about wait time to get to an emergency room at hospitals. The magicians (the Labor party) campaigned on a promise of no more than 4 hours wait to receive treatment.
And deliver they did by pulling a thriving rabbit out of a box that onlookers thought must have surely crushed the poor thing. Unfortunately, news reports in the UK decried the fact that 7 of 11 ambulance trusts reported more than 43,000 cases where patients were literally parked in an ambulance outside a hospital. Thus, Labor could deliver on its promise to have patients treated within the promised timeframe…….of arriving inside the emergency department. Hidden from view is the dead, crushed rabbit as the magician distracted the audience by pulling one out of a hat that looked similar.
I can’t wait to see what happens in the US as we find out what else is in the health care law. And now you know, my friend. The secret’s out. But don’t try this at home, kids. It’s a dangerous trick that requires layers of dishonesty and deceit that pervade layer upon layer of America, from its well-intentioned employers to its greedy lobbyists. But that’s an unnecessary warning, isn’t it? After all, you’re a FFP reader—dishonesty and deceit just aren’t your style.
National Bureau of Economic Research Report “Employer-Sponsored Health Insurance and Health Reform”
Daily Mail “A&E patients left in ambulances for up to FIVE hours ‘so trusts can meet government targets’ “