Obamacare repeal: A Call for Caution

Update: A version of this piece appeared in Rare.

Yesterday evening, the House Ways & Means and Energy & Commerce Committees released their drafts to repeal and replace Obamacare. The plans are a mixed bag for Americans who might have been hoping for much-needed relief from the failing and expensive Affordable Care Act.

There’s been a lot of partisan noise that will likely only ramp up in future days, so it’s useful to step back and take a measured look at what’s promised in this legislation.

Image via US News & World Report

The committees, as they are wont to do, are far behind schedule. As FreedomWorks Jason Pye pointed out last night, they’ve released this text long after the January deadline set out in the terrifically bad “fake budget” that kicked off the process. Lawmakers are not wasting any time now, though, moving to committee votes this Wednesday, less than 48 hours after the text is released and before a Congressional Budget Office score has been completed.

Depending on who you ask, the planis either a dark billionaire’s fantasy that will rip coverage away from dying Americans, or Literally Obamacare with a better name.

Between the extremes, there are real reasons that elected officials and organizations including the House Freedom Caucus and Republican Study Committee are expressing skepticism at some of the details.

First, there is some good news. The plans would end the individual and employer mandates, while phasing out Medicaid expansion and seeking to expand state authority and Health Savings accounts (HSAs). Writing in Forbes, Ryan Ellis points out that the plan nearly doubles the HSA contribution limit, saying, “HSAs will become a powerful new financial savings vehicle to rival 401(k)s and IRAs.”

These types of options have the potential to save federal funds, allow better healthcare under more localized jurisdiction, and empower individuals to save and pay for healthcare without burdensome government interference.

That said, fiscal conservatives are right to be concerned. Here are a few reasons why:

Keeping Intact Major Elements of the ACA: Two of the most significant provisions of the ACA — allowing young people to stay on their parents’ insurance until 26 years old and requiring coverage for Americans with preexisting conditions — are preserved in the plan. As the Cato Institute’s Michael Cannon points out, “It would repeal far less of ObamaCare than the bill Republicans sent to President Obama one year ago,” while keeping intact many of the regulations that are straining insurance marketplaces right now.

To attempt to urge people to keep coverage and avoid crashing the market, these plans swap out the Obamacare individual mandate with a provision known as “continuous coverage,” or in other words, encouraging people to maintain insurance coverage by requiring those who do not to pay a 30% surcharge. To some conservatives, this provision is an individual mandate by another name.

The Medicaid Rollback: As Reason‘s Peter Suderman points out, the Medicaid rollback is a bit of an “awkward balancing act” — one that may or may not please the four moderate Republican Senators who have already balked at ending the subsidies. The plan would allow states to keep the federal funds until the end of 2019, “and for those who maintain continuous coverage after.” As Cannon suggests, we may never see full rollback, and again, fiscal conservatives should question the costs involved.

Refundable Tax Credits: Perhaps most concerning, the plan would swap out healthcare subsidies for refundable tax credits based on age, a provision an RSC memo reportedly called a “Republican welfare entitlement.”

New Spending: While Republican leadership often insists that everything we see now has already been discussed in their “Better Way” blueprint, that’s not exactly true. As Jason Pye notes, while the Better Way plan had  suggested $25 billion for state grants, yesterday’s plan would award around $100 billion in a new fund set up to help states with high-risk pools and preexisting coverage.

Without CBO scoring, it’s hard to tell just how fiscally responsible this legislation will be, but there are reasons to be concerned, not only at the details but also about what we still don’t know.

So what happens next? 

House Republican leadership are in a tough position. As Washington Post points out, “There is no precedent for Congress to reverse a major program of social benefits once it has taken effect and reached millions of Americans.” Leadership finds itself attempting to please both moderate Republicans who want to keep parts of the plan alive, and fiscal hawks who are pushing back against anything but full repeal.

Any plan will inevitably cause some marketplace disruption, and Republicans are already facing angry, full-stop Democratic opposition to even the most milquetoast plans.

They would be wise to remember what they have promised the American people, and what is at stake. It’s exceedingly hard to make excuses for a plan that has no official cost implications, clings to major elements of a failing ACA, and has been released with so little time for careful consideration.

And we know that Leadership who claim that all of these elements have been included in past plans are not being entirely honest.

Whether this plan is a step in the right direction is a debatable question. Whether it needs serious work is not. Let’s hope the House committees can address the most troublesome parts of the bill when they meet tomorrow.

And everyone who cares about the debt, spending, and ensuring true free-market solutions should never let up — especially now when those who claim to agree with us are in power.

Jonathan Bydlak in Forbes: Bloated Defense Budgets Put America’s Troops At Risk

Writing today in Forbes, CRS founder and president Jonathan Bydlak takes on a timely issue: Big Pentagon budgets and how wasteful spending in the country’s largest bureaucracy harms our country’s soldiers.

How much does the Department of Defense (DoD) waste on overhead and outside contractors?

Pentagon officials recently paid an outside consulting firm to find out. When the consultants put the figure at $125 billion, defense officials were appalled—and scared Congress would cut their budget. So they tossed the multimillion-dollar report in the trash and hoped no one would find it.

Now that the document has leaked, Pentagon higher-ups have a second chance to trim the fat and use the savings to recruit more troops and purchase better weapons, as the report itself recommended. By injecting some much-needed competition and demanding pricing transparency, the Trump Administration’s Defense Department can ensure that government contracts serve troops and taxpayers—bigly.

Read the full piece here.

Jonathan Bydlak in The Hill: How to miss the point and make Americans pay

Writing in The Hill, Coalition president Jonathan Bydlak takes on a recent contentious issue for DC policymakers: The so-called border-adjusted tax. While the Coalition is neutral on tax policy, we are deeply concerned to see policymakers  apparently forgetting the root of the problem: Spending.

Supporters of this tax plan cannot have it both ways and should be honest about what we’re dealing with. In short, one does not envy GOP leadership, who must somehow balance long-desired tax reform with a President who wants protectionism but many in their caucus who do not – and all of it must somehow be paid for, to avoid running up a deficit, but also avoid hiking taxes.

If only there were another option.

The United States is teetering on the edge of a $20 trillion national debt, while Congress stumbled through yet another budget season where inability to finish the process resulted in last-minute, temporary spending packages passed under threat of shutdown.

In this environment, cutting any spending becomes next to impossible, but things are different now – or, at least, they should be.

Read the full piece here.

Where did the fiscal conservatives go?

This post originally appeared at the Institute to Reduce Spending.

Fiscal Conservatism has been the bedrock of the Republican Party for years. From Reagan to Ryan, McConnell to Cruz, Republicans have prided themselves on small government and fiscal restraint. But how true are these claims, really? Are all Republicans fiscal conservatives? Sadly, the answer is no.

Jennifer Rubin of the Washington Post recently criticized Republicans for taking spending off the table to pay for tax cuts, saying: “If Republicans want tax simplification and fairness and still want significant spending (on health care and defense), they must pay for it. Period.”

While it is not our place to delve into tax policy, Ms. Rubin is right on one point: Massive spending, major tax cuts, and no focus on reducing spending is a foolhardy plan. And as Republicans twist themselves deeper into discussions of just how exactly to raise massive tax revenue, fiscal conservatives ought to ask instead: What happened to cutting spending, anyway?

For all their talk of fiscal responsibility, Republicans have not yet offered a plan to cut spending and debt – and even the long-vaunted Obamacare repeal seems to be in some danger. Fiscal conservatism should not include only tax cuts – in fact, in cannot.

Fiscal conservatives should keep a close watch moving forward to ensure that politicians – especially those who claim to care about spending – do not forget how important true reform really is.

UPDATED: Trump budget requests $54 billion in new Pentagon spending

Today, the White House released details on the President’s budget proposal, and it is a serious blow to hopes that the administration would target big spending across government.

The budget proposes a $54 billion increase to Pentagon spending, while leaving untouched major spending drivers including Social Security and Medicare. Not to worry, though, because these eye-popping increases will be made up for by a series of deep offsets to non-Defense discretionary spending.

While full details have yet to be released, these targeted programs are said to include the Environmental Protection Agency and the State Department, as well as non-mandatory social welfare programs and foreign aid.

This news should be disquieting for all fiscal conservatives.

Chart via FreedomWorks

Over the next decade, mandatory spending (ie. that spending that rarely gets voted on) will be more than $32.4 trillion — that’s nearly 65% of all federal spending.

Meanwhile, Pentagon spending currently makes up about half of discretionary spending — that is, what Congress regularly does take votes on.

In other words, this budget will hold steady the largest portion of all federal spending and dramatically increase the largest portion of discretionary spending, while suggesting dramatic cuts to what is around 15% of 2017 federal outlays.

Fiscal conservatives should be glad for any belt-tightening and realize how difficult it is to cut any spending, but these numbers just don’t add up.

For context, President Trump is proposing a $54 billion increase, a number that – by itself – is more than all but six countries spend on their entire military budgets.

This total is more than the entire budgets of Homeland Security, Housing and Urban Development, the Department of Energy, the Department of Justice, the State Department, and the Environmental Protection Agency.

Even if the entire State Department  and EPA base budgets were to be cut to zero, the shortfall would not be made up.

There is certainly an argument to be made that Pentagon spending should dwarf other agencies and countries. That question is not for us to decide.

But however one falls in that debate, new spending must be paid for — because the national debt is also a national security threat.

When General Mattis himself has previously warned against State Department cuts, the idea that this level of offsets from non-Defense discretionary can even be achieved is dubious, to say the least.

Make no mistake: All areas of the federal budget must be open for reforms and belt-tightening.

And the case can certainly be made that, thanks to the Budget Control Act, Pentagon spending has been significantly squeezed in recent years. Perhaps, even to the point where such major changes are necessary – although maybe it’s worth starting with the $125 billion in waste the Pentagon itself identified and promptly covered up in 2015.

But strategy must drive dollars, not the other way around. An administration memo released before the budget was drafted all but says the opposite: “The amendment will also include offsets from lower priority programs where appropriate, but will be a net increase over the FY 2017 topline requested by the previous Administration.”

In other words, no matter what, the topline will go up.

Fiscal conservatives are right to question this type of approach.

There are real consequences to deficits and debt out of control, and Republicans often do not keep their promises to rein in big spending drivers, reform entitlements, and trim the fat.

But it is still remarkably disheartening to see a budget that by and large does not even make these promises to begin with.

Updated note: A version of this piece appears in Rare.us. Read here!


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