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Ezra Klein's Improbable Defense Of BaucusCare

Klein writes:

Over on the HCAN site, they're arguing that "The House bill covers more people, is more affordable, and is just as deficit neutral as the Finance bill." The first two clauses are true. The third simply isn't. The House bill is funded through income taxes, which don't grow as quickly as health-care costs. In the second decade, the costs of the plan rapidly outpace the revenues, and the deficit explodes. Conversely, the excise tax is inside the health-care sector, and is designed to grow more quickly than health-care costs. It cuts the deficit in the second 10 years, which makes it quite a bit friendlier to the budget.

(Emphasis supplied.) Because the excise tax on health care is "designed" to grow more quickly than health care costs does not mean it will. Indeed, to assume, as the CBO does, that there will be no adjustments made by employer purchasers of health insurance to AVOID the excise tax is sheer nonsense. (Anyone ever hear of folks asking for paycuts to avoid income tax?) Moreover, Ezra has not seen even a CBO scoring of the House bill, which is pending("The [CBO] estimates [. . .] do not indicate what their impact would be on the nation's budget deficit"), (See also Scarecrow for a further debunking of Klein's claim) so he has no idea what even the CBO will say on that score.

This is part of a point I made earlier - "I urge people in the coming weeks of intense negotiations to read whatever [P]rogressive" Village wonks (Ezra, Jon Cohn, Steve Benen, [Yglesias], Kevin Drum etc.)[. . .] through that prism [their tacit support for BaucusCare.] Here is Ezra implausibly attacking the House bills because he prefers BaucusCare to the proposals from the House. It would be preferable if he just would say so imo.

Speaking for me only

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  • Display: Sort:
    Deficit neutered (5.00 / 1) (#17)
    by Illiope on Fri Oct 16, 2009 at 04:02:00 PM EST
    the cost of a public option seems to be beside the point... oh wait, that only pertains to military spending.

    So, since this is all about projections (5.00 / 2) (#45)
    by Anne on Fri Oct 16, 2009 at 06:02:25 PM EST
    that no one has any way of knowing will prove to be accurate, it's coming down to hiding one's preferences behind the shield of CBO interpretation, with d-day and Scarecrow at FDL choosing to hang their hats on the interpretation of the CBO analysis, viz.:

    This is a pretty big deal. The Senate Finance Committee has all along touted their version of health care reform as the only deficit-neutral bill that keeps under President Obama's benchmark of $900 billion dollars over 10 years. It turns out that the latest CBO analysis of the merged bills coming out of the House of Representatives actually cost around $900 billion or less, and cover more Americans than the SFC bill - and that's WITH a public option.

    Congressional budget analysts have given House leaders cost estimates for two competing versions of their plan to overhaul the health-care system, concluding that one comes within striking distance of the $900 billion limit set by President Obama and the other falls below it.

    House leaders have been working to lower the cost of the $1.2 trillion health-care package they offered in July. The report from the Congressional Budget Office, a copy of which was obtained by The Washington Post, puts the cost of one plan at $859 billion over the next decade and the other at $905 billion.

    To fit within the window, the House bill lowered the subsidies offered to those who can't afford insurance, which is not great. But it does include a public option, which CBO has said would save money to the federal budget in the long run.

    that they think supports the House plans and Ezra choosing to pimp BaucusCare by looking at the numbers a different way.

    I get that whatever we do will cost money, so, if we're going to spend it, could we please spend it on something that might actually improve access to and affordability of health CARE?

    Ezra is becoming tiresome, but I guess it's hard work trying to fill Broder's shoes.

    Given what we know of the socio-pathology... (5.00 / 2) (#47)
    by lambert on Fri Oct 16, 2009 at 09:50:36 PM EST
    ... of Versailles, these guys are supporting BaucusCare not on policy grounds, but because they want to suck up to Obama by supporting what they believe he will support. Yay!

    Exactly (none / 0) (#48)
    by ruffian on Fri Oct 16, 2009 at 10:37:04 PM EST
    If Obama had spent the last 4 months acting like the HELP or House plans were the center of the universe instead of waiting for Baucus to make President Snowe happy, Ezra would be talking up those plans instead.

    The whole conversation was driven by where Obama placed his emphasis, as is to be expected.

    Parent

    No. (none / 0) (#1)
    by Ramo on Fri Oct 16, 2009 at 03:28:04 PM EST
    The bulk of the revenue (~2/3) that the CBO scores from capping the employer deduction is due to increased income tax revenues.

    Excise tax (none / 0) (#2)
    by Big Tent Democrat on Fri Oct 16, 2009 at 03:31:37 PM EST
    means taxing the health care plans.

    To wit, treating health care benefits as INCOME.

    Think of a tax provision that allows deduction of your car as a business expense. Suppose it was capped.

    Would people lower their auto expenses as a result?

    Of course they would.

    Parent

    The CBO assumes that health care spending... (none / 0) (#4)
    by Ramo on Fri Oct 16, 2009 at 03:34:53 PM EST
    ... is largely converted into income. The revenues come from that.

    Parent
    A ridiculous assumption (none / 0) (#5)
    by Big Tent Democrat on Fri Oct 16, 2009 at 03:36:03 PM EST
    No, it's a pretty reasonable one. (none / 0) (#7)
    by Ramo on Fri Oct 16, 2009 at 03:42:38 PM EST
    Health care plans aren't offered out of the generosity of employers' hearts.  People want them.  If they didn't get them, or the plans are downgraded, they will be able to bargain for an equivalent amount of income (the cost of the plan minus 40% past the cap).

    Parent
    Right... (5.00 / 2) (#38)
    by sj on Fri Oct 16, 2009 at 05:00:57 PM EST
    ... we haven't had raise in 2 years and you think that we'll be able to "bargain" for our salary PLUS the price of the insurance benefit.  

    Benefits have already been downgraded with no commensurate increase in salary.  Just wondering where you work...

    Parent

    Ha! (none / 0) (#8)
    by Big Tent Democrat on Fri Oct 16, 2009 at 03:43:28 PM EST
    Amazing how the unions do not think so.

    Parent
    Union contracts based on better times. (none / 0) (#11)
    by Ramo on Fri Oct 16, 2009 at 03:46:04 PM EST
    Sooooo (5.00 / 2) (#12)
    by Big Tent Democrat on Fri Oct 16, 2009 at 03:47:07 PM EST
    If they were made in better times, why should we expect that income will be increeased?

    Parent
    Economy in general... (2.00 / 1) (#15)
    by Ramo on Fri Oct 16, 2009 at 03:49:04 PM EST
    Not a relatively small number of gold plated union contracts.

    Parent
    No (none / 0) (#16)
    by Big Tent Democrat on Fri Oct 16, 2009 at 03:57:11 PM EST
    Good benefits in exchange for foregoing increased wages is what happened.

    If the excise tax were to REALLY work to increase revenue, negotiations between employers and employees going forward will have to IGNORE the new excise tax and continue to expand the price of the health insurance packages.

    For example, if instead, employees say no thanks on the better health plan, pay me more, and the employer says, well it makes no difference to me since we all get taxed on higher cost health insurance, then the excise tax is not going to garner any gains in revenue.

    In essence, the argument you present defeats Ezra's argument against funding health insurance reform through income tax increases as that is where the money ois going to go.

    apparently, the CBO says so too.

    Parent

    "Pay me more" (none / 0) (#18)
    by Ramo on Fri Oct 16, 2009 at 04:04:40 PM EST
    Puts additional revenue in the income tax basket, from a pool that has been increasing much faster than incomes.

    Parent
    Your sentence is not understandbale (none / 0) (#19)
    by Big Tent Democrat on Fri Oct 16, 2009 at 04:10:06 PM EST
    to me in this context.

    Obviously increased income puts money in the income tax baslet. Indeed, that is my point.

    In the end, we are going to be financing health care through income tax because the EXCISE TAX will not raise the necessary funds PRECISELY BECAUSE employers and employees will act to minimize their tax burdens.

    The top tax rate now is LOWER than the excise tax proposed by BacusCare, the excise tax Ezra says will raise more money than an income surtax on higher incomes dedicated to health care spending. It defies logic and common sense to think this willbe so. As you say, even the CBO expects that the health care benefits will be converted into income. I suspect that corporations will pocket much more of the money that might exist rather than workers.

    What I really expect is what the unions fear - the workers will get nothing but a crappier health care plan.

    Parent

    This is getting tautological. (none / 0) (#22)
    by Ramo on Fri Oct 16, 2009 at 04:17:16 PM EST
    Increased income taxes due to the cap isn't money that disappears into the ether.  In fact, in the steady state that is where ALL the money from the cap comes from.

    Corporations will pocket it?  Huh?  What's stopping them from pocketing large amounts of health care spending right now?

    Parent

    What's keeping them from doing it? (none / 0) (#26)
    by Big Tent Democrat on Fri Oct 16, 2009 at 04:35:33 PM EST
    Two things actually. Inertia and expectation.

    The deals they have made and the tax treatment.

    For some reason, I am questioning whether you have any doubts about whether you think the market acts in ways not beneficial to the commonweal.

    I am not one who thinks the market always gets it right.

    Parent

    Inertia (2.00 / 1) (#32)
    by Ramo on Fri Oct 16, 2009 at 04:52:06 PM EST
    Ok, so your position is that any tax change involves corporations pocketing whatever increase in profit they get.  Do you think labor bargaining power is that asymmetric?  Really?  I assume you're in favor of rigid continental European style labor laws.

    Parent
    Employee bargaining power in the US (none / 0) (#33)
    by Big Tent Democrat on Fri Oct 16, 2009 at 04:52:59 PM EST
    is not equal to that of employers, to put it mildly.

    Parent
    BTW (none / 0) (#35)
    by Big Tent Democrat on Fri Oct 16, 2009 at 04:54:25 PM EST
    RECOGNIZING that employee bargaining power is not equal to that of employers is not the same thing as wanting "socialism."

    But, to take your point, CERTAINLY in Europe the excise tax approach would be much more palatable than in the US.


    Parent

    Equality was never a claim that I made. (none / 0) (#37)
    by Ramo on Fri Oct 16, 2009 at 04:59:58 PM EST
    I support EFCA.  But I don't believe that major changes in the tax code is inherently war on the poor.

    Parent
    The Bush tax cuts were (none / 0) (#39)
    by Big Tent Democrat on Fri Oct 16, 2009 at 05:01:14 PM EST
    The Clinton tax reform was good for the poor.

    The excise tax proposed by Baucus would be bad for the less well off and certainly for workers.

    Parent

    In the long run (none / 0) (#41)
    by Steve M on Fri Oct 16, 2009 at 05:16:06 PM EST
    I assume the law of supply and demand will bring total compensation back to where it is right now, subject to the important caveat that if we tax something that isn't currently taxable, we suck money out of the system that isn't there for the employer/employee to divvy up any more.

    In the short run, though, the employee is very unlikely to see his wages increase by the same amount as the value of the health insurance he's losing.  It's not an employee-friendly marketplace right now, to put it mildly.

    However, it seems to me like the only thing that will be scaled back is the proverbial "gold-plated" insurance coverage.  So if there's an excise tax on coverage valued at more than $21,000, and I currently get $31,000 of health coverage from my employer, the worst-case scenario is that my coverage gets scaled back to $21,000.  Maybe I'll see some of the lost $10k in my paycheck, maybe I won't, but it still seems like I'm left with pretty good health coverage.  It's not as though I'm losing my insurance altogether.

    Parent

    Ringing endorsement? (none / 0) (#42)
    by Big Tent Democrat on Fri Oct 16, 2009 at 05:28:05 PM EST
    No.

    Parent
    BTW I would add (none / 0) (#43)
    by Big Tent Democrat on Fri Oct 16, 2009 at 05:29:55 PM EST
    that if the effect of the passage of the excise tax is AVOIDANCE of the tax, then how exactly did it raise money for health care?

    Parent
    There is a difference (none / 0) (#44)
    by Steve M on Fri Oct 16, 2009 at 05:37:33 PM EST
    between a budget-neutral bill and a bill that is scored as budget neutral.

    The CBO mostly plays it straight, in my view, but they have very serious limitations.  One of those is that they seem incredibly reluctant to make any assumptions whatsoever about consequences, because it might require them to buy into one side of a partisan debate.  Regardless, some consequences are so darn obvious that you have a worthless analysis if you don't consider them.

    Parent

    And also undermining Ezra's argument (none / 0) (#6)
    by Big Tent Democrat on Fri Oct 16, 2009 at 03:37:55 PM EST
    BTW, given his idea that income tax revenue will grow more slowly than health insurance costs.

    Parent
    The question is the time scale. (none / 0) (#9)
    by Ramo on Fri Oct 16, 2009 at 03:44:22 PM EST
    It'll grow as fast as the health care system as long as employer based care is unraveling.  Then it will grow as fast as incomes.

    Parent
    What will grow as fast? (none / 0) (#10)
    by Big Tent Democrat on Fri Oct 16, 2009 at 03:45:12 PM EST
    Revenues from the excise tax... (none / 0) (#13)
    by Ramo on Fri Oct 16, 2009 at 03:47:38 PM EST
    ... should grow at something like rate of increase in health care spending minus the CPI.

    Parent
    Why? (none / 0) (#14)
    by Big Tent Democrat on Fri Oct 16, 2009 at 03:48:20 PM EST
    Let's see (none / 0) (#20)
    by Ramo on Fri Oct 16, 2009 at 04:12:21 PM EST
    By the CPI, I just meant a normalization factor.  Ignore that.

    What I mean is that income growth is not as fast as employer health care spending.  The latter has been keeping pace with the health sector generally.  Severing the employer subsidy will allow wages to better keep up with health care spending.

    Parent

    Saying it don't make it so (none / 0) (#21)
    by Big Tent Democrat on Fri Oct 16, 2009 at 04:14:19 PM EST
    "Severing the employer subsidy will allow wages to better keep up with health care spending"

    Why?

    Parent

    Why not? (none / 0) (#23)
    by Ramo on Fri Oct 16, 2009 at 04:21:23 PM EST
    The firm down the street is not being dicks to their employees, and is retaining them more effectively, turning a better profit, etc.

    Parent
    Not all companies are interested in retention (5.00 / 1) (#46)
    by cawaltz on Fri Oct 16, 2009 at 06:04:06 PM EST
    If I remmeber correctly a certain employer with over a million employees got caught with a memo suggesting that it was more cost effective to ditch people once they hit a certain point in their "career."

    Parent
    Why not? (none / 0) (#25)
    by Big Tent Democrat on Fri Oct 16, 2009 at 04:31:50 PM EST
    Why not indeed. It's amazing how median wages have grown in line with the increase in GDP. Why indeed?

    My gawd.

    Parent

    Guess what's growing much faster than the GDP (none / 0) (#27)
    by Ramo on Fri Oct 16, 2009 at 04:48:26 PM EST
    Goldman bonuses (5.00 / 2) (#28)
    by Big Tent Democrat on Fri Oct 16, 2009 at 04:50:20 PM EST
    Or maybe you meant (5.00 / 2) (#29)
    by Big Tent Democrat on Fri Oct 16, 2009 at 04:51:18 PM EST
    unemployment?

    Parent
    Wait wait (5.00 / 2) (#30)
    by Big Tent Democrat on Fri Oct 16, 2009 at 04:51:40 PM EST
    foreclosures?

    Parent
    No wait (5.00 / 2) (#31)
    by Big Tent Democrat on Fri Oct 16, 2009 at 04:51:52 PM EST
    bankruptcies?

    Parent
    Hilarious. (none / 0) (#34)
    by Ramo on Fri Oct 16, 2009 at 04:53:49 PM EST
    I thought so (none / 0) (#36)
    by Big Tent Democrat on Fri Oct 16, 2009 at 04:54:46 PM EST
    not to me... (none / 0) (#40)
    by sj on Fri Oct 16, 2009 at 05:07:33 PM EST
    I would add (none / 0) (#3)
    by Big Tent Democrat on Fri Oct 16, 2009 at 03:33:25 PM EST
    that your argument undermines Ezra's argument.

    Parent
    Trust? (none / 0) (#24)
    by mmc9431 on Fri Oct 16, 2009 at 04:24:25 PM EST
    So in addition to trusting the insurance industry, we're also expected to trust that employers will pass on savings to employees? That sure is a lot of trusting to expect!