Category: James Capretta
Capretta: The Project to Replace Obamacare Begins Now
| January 8, 2013 | 3:04 pm | James Capretta | No comments

As 2013 begins, encouraging a discussion about how to replace the president’s health-care law might strike some observers as a case of particularly bad timing. After all, in the year just ended, the Supreme Court upheld most of the provisions of the law and the president won reelection. As a consequence, the best opportunities to remove the law from the books before it ever really got started are now gone. The tough reality now is that Obamacare is not going to be undone during the next four years. So why bring up an alternative plan at this point?

The answer is that replacing Obamacare is by necessity a long-term project; you have to start somewhere. Moreover, it remains essential. Like it not, health-care policy is central to the struggle over the size and scope of governmental power. Without a better approach than Obamacare, there will be no success in limiting government or in lessening the dependence of citizens on the state.

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Capretta and Levin: The GOP’s Payroll Tax Opportunity
| December 10, 2012 | 11:15 am | James Capretta, Yuval Levin | No comments

Published for The Weekly Standard, December 10, 2012

Despite the outcome, Republican presidential nominee Mitt Romney did many things right during the course of this year’s campaign. Perhaps most notably, polls suggest that he was able to convince a plurality of Americans that the GOP’s plan for smaller government was better for promoting long-term economic growth than the president’s statist approach. But there was one line of attack Romney was never able to overcome, and which may well have cost him the working-class voters he needed to win: The Obama campaign effectively drove home the notion that Romney, and Republicans more generally, care more about the rich than the middle class.

There can be no doubt that answering that charge, by proving it wrong, will be essential to the GOP’s electoral future. That cannot mean adopting policies that Republicans don’t believe are right, but it must mean taking every opportunity to apply conservative principles for the benefit of working families, and showing voters why conservative ideas are better for everyone, emphatically including the middle class.

And yet, mere weeks after the election, we find congressional Republicans once again at risk of falling into the Democrats’ trap. The so-called fiscal cliff that is now riveting Washington’s attention involves the automatic application of the spending cuts agreed to in last year’s debt-ceiling talks combined with the expiration of several tax policies, which promises to increase the tax bills of many Americans. The two most significant tax increases result from the expiration of the Bush tax cuts (which would raise everyone’s income taxes) and the expiration of the payroll-tax holiday enacted in 2010 and renewed last year (which would raise everyone’s payroll taxes).

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Capretta and Levin: Why ObamaCare Is Still No Sure Thing
| November 19, 2012 | 10:12 am | James Capretta, Yuval Levin | No comments

Published for the Wall Street Journal, November 19, 2012

Champions of ObamaCare want Americans to believe that the president’s re-election ended the battle over the law. It did no such thing. The Patient Protection and Affordable Care Act won’t be fully repealed while Barack Obama is in office, but the administration is heavily dependent on the states for its implementation.

Republicans will hold 30 governorships starting in January, and at last week’s meeting of the Republican Governors Association they made it clear that they remain highly critical of the health law. Some Republican governors—including incoming RGA Chairman Bobby Jindal of Louisiana, Ohio’s John Kasich, Wisconsin’s Scott Walker and Maine’s Paul LePage—have already said they won’t do the federal government’s bidding. Several Democratic governors, including Missouri’s Jay Nixon and West Virginia’s Earl Ray Tomblin, have also expressed serious concerns.

Talk of the law’s inevitability is intended to pressure these governors into implementing it on the administration’s behalf. But states still have two key choices to make that together will put them in the driver’s seat: whether to create state health-insurance exchanges, and whether to expand Medicaid. They should say “no” to both.

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Capretta: SCOTUS Post-Mortem, What’s Next?
| June 28, 2012 | 2:09 pm | James Capretta | No comments

Published for economics21.org, June 28th, 2012

Today’s Supreme Court decision is complex and will likely take weeks to fully digest in terms of what it means for the future of ObamaCare.

But a few things are becoming clear. For starters, the Court found that at least one part of ObamaCare is indeed unconstitutional. Specifically, the provisions of the statute by which the federal government would try to coerce the states into a massive Medicaid expansion were ruled invalid by the Court. This could potentially have very significant implications for the law, including how many people gain coverage and federal costs for the premium credit program (which is supposed to cover people above Medicaid eligibility up to 400 percent of the federal poverty line).

Second, the fact that the Supreme Court allowed the mandate to stand by asserting that it is really a tax and not a mandate could have both important political and legal repercussions. Among other things, if the mandate is just an optional tax that can be paid in lieu of getting health insurance, then the basis by which the law was estimated by the Congressional Budget Office (CBO) would seem to be flawed. CBO, taking a page from the book of “behavioral economics,” assumed that very large numbers of American would sign up for insurance under the law even though it would be against their financial interests to do so. For many people, they would be far better off paying the tax than paying premiums to a health plan, but CBO assumed they would pay premiums nonetheless largely because signing up for coverage would be perceived as “the right thing to do” given its “mandatory” nature under federal law. This was always a very dubious assumption by CBO, but now, based on the Court’s ruling, it would seem to be even less plausible. Today, the Court essentially called ObamaCare a “play or pay” option for Americans. The Court has now said that the law is only valid under the Constitution if it really is valid choice for citizens to pay the tax in lieu of premiums. If CBO revises its estimates accordingly, the coverage numbers could fall dramatically even as the federal deficit estimates take a very large hit.

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Capretta: Obamacare’s Failings Go Well Beyond the Individual Mandate and Medicaid
| June 26, 2012 | 3:09 pm | James Capretta | No comments

Published for The Heritage Foundation, June 21st, 2012

Obamacare is under review by the Supreme Court because of its constitutionally suspect provisions, namely the “individual mandate” and the coercive Medicaid provisions. Certainly, the Court would do the country an immense favor by striking down the entire law so the decks were cleared for a sensible, market-based reform plan. But in the event that the Court does not invalidate the entirety of Obamacare, it is important to remember that what might remain on the books is just as problematic as the provisions under legal scrutiny. The following are just four of the worst features of Obamacare; there are many other aspects of the law that would be damaging. And all of these features could remain threats to the strength of the economy and quality of American health care if the Court upholds the law or severs the unconstitutional provisions from the rest of the legislation. That is why Congress must stand ready to repeal the rest of Obamacare in the event that the Court does not invalidate the entire thing.

1. The Taxes. It is often forgotten that in addition to being a massive federal power grab, Obamacare contains one of the largest tax increases ever imposed on the American economy—at a time when job growth should be the nation’s number one priority. In total, the Congressional Budget Office estimated the Obamacare tax hikes would raise about $800 billion in new revenue over a decade. 1. By 2035, these taxes are expected to raise an additional 1.2 percent of GDP in taxes. 2. The tax sections of Obamacare read like a “who’s who” list of bad tax policy. It begins with an increase in the Medicare payroll tax of 0.9 percent for individuals with incomes above $200,000 ($250,000 for couples) in 2013. This tax will depress the demand for labor at a time when job creation is critical for jump-starting the economy. Some may think that this tax will not hit the middle class because of the relatively high initial income thresholds. They are wrong. The income thresholds were purposely not indexed to inflation, so, as the years pass, more and more middle-income families will cross the thresholds because of normal wage growth. Obamacare also includes an additional 3.8 percent tax on investment  income; a new 2.3 percent excise tax on medical devices that will reduce the size of the industry; taxes on the drug and insurance industry that will be passed on to consumers in the form of higher premiums; and a tax on high-premium insurance plans that will also be passed on to consumers.

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Capretta: Supreme Suspense: Getting Ready for the ObamaCare Decision
| June 13, 2012 | 3:03 pm | James Capretta | No comments

Published for economics21.org, June 13th, 2012

Very soon, the Supreme Court will be rendering judgment on the constitutionality of ObamaCare. It is one of the most highly anticipated decisions in decades, and for good reason. Whatever the outcome, it’s going to be a political earthquake. The only question is the degree to which it will shake up the political and policy landscape.

Of course, at this point, only a handful of people have any idea how the court will rule, and they aren’t talking (or at least one presumes — and hopes — they aren’t). So there’s no real way to predict what the Court will decide.

Still, it’s possible to boil down the various scenarios to a handful that capture the most likely outcomes, and to examine the implications of those scenarios through both a policy and a political lens. Indeed, for those who have spent the past three years opposing ObamaCare, it’s critically important to be prepared for all eventualities because what the key players in this drama say and do in the days after the Court issues its decision could be just as important as the decision itself to the future of ObamaCare and American health care.

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Capretta: It’s Obama’s Economy
| June 6, 2012 | 10:42 am | James Capretta | No comments

Published for National Review Online, June 6th, 2012.

Last week’s dismal jobs report struck like a thunderbolt, shaking the confidence of those who assumed an Obama second term was all but a sure thing. It’s finally dawning on the political class that, yes, President Obama could lose the presidential election this November.

This might help explain Paul Krugman’s latest column in the New York Times. In it, Krugman attempts to answer the “political lifeline” question that is now on the minds of many Democrats: What could possibly save the president, flailing in the ocean of his own failed record in office, from defeat? Krugman’s advice, though not particularly creative, is certainly easy to remember: Blame the Republicans!

Of course, this president doesn’t need to be convinced of the value of an effective blame game. Blaming Republicans is one of his strong suits. As his four-year term in office winds down, he still devotes significant space in nearly every public utterance to blaming his predecessor for his troubles.

But Krugman wants President Obama to go still farther in this regard. Instead of just blaming President Bush for the state of the economy he inherited in 2009, Krugman wants the president to make the case that, if not for the implementation of ill-conceived Republican economic policies in recent years, the Obama economy would be roaring along just fine in 2012.

In other words, despite the fact that the president has been in office since 2009, this isn’t really Obama’s economy at all; it’s actually the Republicans’ economy.

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Blahous and Capretta: Exposing the Medicare Double Count

Published for www.online.wsj.com, May 1, 2012

One of the enduring mysteries of President Obama’s health law is how its spending constraints and payroll tax hikes on high earners can be used to shore up Medicare finances and at the same time pay for a massive new entitlement program. Isn’t this double counting?

The short answer is: Yes, it is. You can’t spend the same money twice. And so, thanks to the new health law, federal deficits and debt will be hundreds of billions of dollars higher in the next decade alone.

Here’s how it works. When Congress considers legislation that alters taxes or spending related to Medicare’s Hospital Insurance Trust Fund, the changes are recorded not just on the Hospital Insurance Trust Fund’s books, but also on Congress’s “pay-as-you-go” scorecard.

The “paygo” requirement is supposed to force lawmakers to find “offsets” for new tax cuts or entitlement spending, and thus protect against adding to future federal budget deficits. Putting the Medicare payroll tax hikes and spending constraints on the “pay-as-you-go” ledger was instrumental in getting the health law through Congress, because doing so fostered a widespread misperception that the law would reduce future deficits.

But the same provisions add to the Hospital Insurance Trust Fund’s reserves, which expands Medicare’s spending authority. Medicare can only pay full benefits so long as its trust fund has sufficient reserves to meet these obligations. If the trust fund has insufficient resources, then spending must be cut automatically to ensure the fund does not go into deficit. The health law’s Medicare provisions prevent these spending cuts from taking place for several more years.

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Capretta: The President’s Incoherent Economic ‘Philosophy’
| April 26, 2012 | 2:51 pm | James Capretta | No comments

Published for www.nationalreview.com, April 23, 2012

Once upon a time, President Obama was a traditional Keynesian. When he came into office, he favored a massive injection of new governmentspending into the economy in the name of “stimulus” — counter-cyclical federal activity aimed at offsetting depressed consumer demand emanating from a recession-battered private sector.

Unfortunately for the president, that approach to economic revival has now been thoroughly discredited in the public’s mind. The problem with Keynesianism isn’t the theory; it’s the practice. What happens in the real world — that is, the world in which Congress drafts and passes legislation — isn’t a series of tidy, one-time, highly valuable public investments that would not have occurred were it not for the legislation.

No, when Congress writes stimulus spending bills, what we get are narrow-purpose pet projects, large federal bureaucracies, ideological hobbyhorses, and spending that simply displaces what otherwise would have occurred anyway, especially at the state level. The net result provides little if any boost to aggregate demand because the states — and to some extent private citizens — simply pocket the federal money and reduce their deficits and debts. Meanwhile, what federal taxpayers get is a permanent increase in the size of government — because almost nothing in politics is ever “one-time” — as well as a massive increase in the national debt.

Of course, it didn’t help that the president and his advisers claimed that the $800 billion stimulus bill that Congress passed in early 2009 would keep the unemployment rate below 8 percent. Because unemployment soared past 8 percent in early 2009, and even now, more than three years after passage of the stimulus bill, it still has not fallen back below that level even once.

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Capretta: Unsubstantiated Budget Attacks, the Sequel
| April 5, 2012 | 1:38 pm | James Capretta | No comments

Published for www.nationalreview.com, April 4, 2012

In April 2011, President Obama went to George Washington University and delivered a highly publicized and very political attack on the budget plan put together by House Budget Committee Chairman Paul Ryan. In that speech, the president called the Ryan plan, and especially its Medicare-reform component, an unconscionable attack on the elderly. He also accused it of being, effectively, un-American.

Fast-forward to April 2012. Congressman Ryan has again assembled a budget plan to head off national insolvency. He has again rallied his colleagues to take up this budget blueprint and pass it through the full House, despite the political risks associated with doing so. And, like night following day, the president has again delivered an incredibly partisan attack on the House’s handiwork, denouncing it with some of the most over-the-top political rhetoric ever heard in a presidential address.

In that regard, yesterday’s “address” was very similar to last year’s highly political budget speech. It was sort of like a movie sequel, trying to capture that same partisan magic that fired up his electoral base a year ago. Unfortunately for the president, his speech today was about as imaginative and interesting as most big-budget movie sequels.
He called the budget plan adopted by the House last week a “radical vision” that would undo the nation’s social contract by penalizing the poor and favoring the rich. And he again supported an alternative vision for fiscal policy, based on what he calls a “balanced plan” for deficit reduction — meaning a plan that raises taxes to cover higher governmental spending commitments.

At the bottom of this budget standoff is a fundamental difference of views on what is causing our fiscal crisis in the first place, both today and in the future.

The president and his allies continue to cling to the false narrative that the reason we are experiencing budget deficits is because of tax cuts and unfinanced wars. This is a completely distorted view of budgetary reality.

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