Looks like a timely movie.. I'm gonna watch it!

Let us pray that Rep. Roger's words do not fall on deaf ears.

By MARTIN FELDSTEIN

While the deficits caused by the fiscal stimulus package will end in 2011 and will help to sustain a fragile recovery in 2010, the deficits projected for the longer term are a threat to our economic future. The starting point for controlling those future deficits is for Congress to abandon the administration's health-care plan—a plan that will cost more than $1 trillion.

The deficits projected for the next decade and beyond are unprecedented. According to an assessment released in March by the Congressional Budget Office (CBO), the president's budget implies that deficits will average 5.2% of GDP over the next decade and will be 5.5% of GDP in 2019. Without the president's proposals, the budget office forecasts a 2019 deficit of only 2% of GDP.

The CBO's deficit projections are based on the optimistic assumptions that the economy will grow at a healthy 3% pace with no recessions during the next decade; that there will be no new spending programs after this year's budget; and that the rising national debt will increase the rate of interest on government bonds by less than 1%. More realistic assumptions would imply a 2019 deficit of more than 8% of GDP and a government debt of more than 100% of GDP.

Such enormous deficits would crowd out productivity-enhancing investments in new equipment and software as the government borrows funds otherwise available to private investors. The result would be slower economic growth and a lower standard of living.

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David Gothard

 

In the nearer term, the projected deficits could cause interest rates on bonds and mortgages to rise sharply if bond investors fear that the government will not prevent inflation. This is a greater risk now that more than half of the U.S. government debt is held by the Chinese and other foreign investors. Such an interest rate rise could kill a recovery in 2010 or 2011 and depress growth in the years that follow.

Dropping the Obama health plan would significantly reduce fiscal deficits over the next decade and help restore public confidence in the ability of Congress to control spending. The CBO estimates that the House committee versions of the Obama health plan would add more than $1 trillion to federal deficits over the next decade. But the actual costs would be much higher.

For starters, $1 trillion of extra debt-financed spending would cause the government to pay about $300 billion of extra interest in the next decade. Moreover, the CBO's method of estimating the cost of such a program doesn't recognize the incentives it creates for households and firms to change their behavior.

The House health-care bill gives a large subsidy to millions of families with incomes up to three times the poverty level (i.e., up to $66,000 now for a family of four) if they buy their insurance through one of the newly created "insurance exchanges," but not if they get their insurance from their employer. The CBO's cost estimate understates the number who would receive the subsidy because it ignores the incentive for many firms to drop employer-provided coverage. It also ignores the strong incentive that individuals would have to reduce reportable cash incomes to qualify for higher subsidy rates. The total cost of ObamaCare over the next decade likely would be closer to $2 trillion than to $1 trillion.

The administration's claim that the health-care plan would be "self-financing" is both false and irrelevant. It is false because it would only be self-financing if one counts a variety of President Obama's proposed tax increases—and even those would produce much less revenue than is assumed in the budget calculations. The claim is irrelevant because those tax increases have nothing to do with health care and could be used instead to reduce other projected deficits.

For example, the administration and the congressional designers of ObamaCare say they would finance a substantial part of health reform with the revenue from new taxes on corporate foreign profits and on high-income individuals. The likely revenue from these tax changes would be much less than the official estimates because of the induced changes in taxpayer behavior that the estimators ignore.

Previous experience with changes in the marginal tax rates of high-income individuals implies that the current proposal to raise the marginal tax rate to about 50% from today's 40% would produce only about half of the official revenue estimates. No one knows how much of the estimated extra tax revenue on foreign profits would be lost as the resulting fall in international competitiveness reduces profits, and as businesses sell their overseas subsidiaries or shift their profits in other ways.

While abandoning health reform would be an important step, it would not be enough to limit the exploding level of future deficits and debt. That requires substantial reductions in existing spending programs, if large tax increases are to be avoided. Since Medicare is the largest contributor to the explosive growth in government spending, a good way to start shrinking government outlays would be by restructuring Medicare to shift more of its costs to supplementary private insurance, perhaps on an income-related basis.

Given the perceived need for significant additional tax revenue to shrink future fiscal deficits, there is now talk in Washington of introducing a value-added tax (VAT), the kind of national sales tax that European governments use to finance their welfare states. That would be a triply bad idea. Although it is a tax on spending, a VAT effectively raises marginal tax rates. Like the income tax, it reduces the reward for work and entrepreneurship by adding a tax to the prices of all goods and services. A VAT would also be grossly unfair to those whose lifetime savings would now be subject to a new tax when they start to spend those savings.

A VAT would open the door to an explosion of new spending programs. That's because, no matter how low the initial rate, the tax rate would be drawn inevitably to European rates of more than 15%—on top of existing income and payroll taxes.

The key to raising revenue without raising marginal tax rates or creating a new tax is to reduce or eliminate some of the "tax expenditures" that now lower tax revenue by special deductions and exclusions. Ending the current exclusion from taxable income of employer payments for health insurance would increase income tax revenue by more than $1 trillion over the next five years and nearly $3 trillion over the next decade. Eliminating this subsidy would also lead to a restructuring of private health insurance that would give patients the incentive to seek more cost-effective care and thereby bring down the overall cost of health care.

Restructuring Medicare and reforming tax rules would be politically difficult. But a failure by Congress to address the exploding path of fiscal deficits would be morally irresponsible.

Mr. Feldstein, chairman of the Council of Economic Advisers under President Ronald Reagan, is a professor at Harvard and a member of The Wall Street Journal's board of contributors.

Obama will be pushing hard this week to persuade lawmakers to pass his healthcare plan. THIS MUST NOT PASS. KEEP THE PRESSURE ON YOUR ELECTED OFFICIALS. Read this article to see why.

This is what happens in a single-payer, government-controlled healthcare system. Every time. We need to continue to speak out against socialized healthcare or this is what we'll have. Bet on it.

Internet companies and civil liberties groups were alarmed this spring when a U.S. Senate bill proposed handing the White House the power to disconnect private-sector computers from the Internet.

They're not much happier about a revised version that aides to Sen. Jay Rockefeller, a West Virginia Democrat, have spent months drafting behind closed doors. CNET News has obtained a copy of the 55-page draft of S.773 (excerpt), which still appears to permit the president to seize temporary control of private-sector networks during a so-called cybersecurity emergency.

The new version would allow the president to "declare a cybersecurity emergency" relating to "non-governmental" computer networks and do what's necessary to respond to the threat. Other sections of the proposal include a federal certification program for "cybersecurity professionals," and a requirement that certain computer systems and networks in the private sector be managed by people who have been awarded that license.

"I think the redraft, while improved, remains troubling due to its vagueness," said Larry Clinton, president of the Internet Security Alliance, which counts representatives of Verizon, Verisign, Nortel, and Carnegie Mellon University on its board. "It is unclear what authority Sen. Rockefeller thinks is necessary over the private sector. Unless this is clarified, we cannot properly analyze, let alone support the bill."

Representatives of other large Internet and telecommunications companies expressed concerns about the bill in a teleconference with Rockefeller's aides this week, but were not immediately available for interviews on Thursday.

A spokesman for Rockefeller also declined to comment on the record Thursday, saying that many people were unavailable because of the summer recess. A Senate source familiar with the bill compared the president's power to take control of portions of the Internet to what President Bush did when grounding all aircraft on Sept. 11, 2001. The source said that one primary concern was the electrical grid, and what would happen if it were attacked from a broadband connection.

When Rockefeller, the chairman of the Senate Commerce committee, and Olympia Snowe (R-Maine) introduced the original bill in April, they claimed it was vital to protect national cybersecurity. "We must protect our critical infrastructure at all costs--from our water to our electricity, to banking, traffic lights and electronic health records," Rockefeller said.

The Rockefeller proposal plays out against a broader concern in Washington, D.C., about the government's role in cybersecurity. In May, President Obama acknowledged that the government is "not as prepared" as it should be to respond to disruptions and announced that a new cybersecurity coordinator position would be created inside the White House staff. Three months later, that post remains empty, one top cybersecurity aide has quit, and some wags have begun to wonder why a government that receives failing marks on cybersecurity should be trusted to instruct the private sector what to do.

Rockefeller's revised legislation seeks to reshuffle the way the federal government addresses the topic. It requires a "cybersecurity workforce plan" from every federal agency, a "dashboard" pilot project, measurements of hiring effectiveness, and the implementation of a "comprehensive national cybersecurity strategy" in six months--even though its mandatory legal review will take a year to complete.

The privacy implications of sweeping changes implemented before the legal review is finished worry Lee Tien, a senior staff attorney with the Electronic Frontier Foundation in San Francisco. "As soon as you're saying that the federal government is going to be exercising this kind of power over private networks, it's going to be a really big issue," he says.

Probably the most controversial language begins in Section 201, which permits the president to "direct the national response to the cyber threat" if necessary for "the national defense and security." The White House is supposed to engage in "periodic mapping" of private networks deemed to be critical, and those companies "shall share" requested information with the federal government. ("Cyber" is defined as anything having to do with the Internet, telecommunications, computers, or computer networks.)

"The language has changed but it doesn't contain any real additional limits," EFF's Tien says. "It simply switches the more direct and obvious language they had originally to the more ambiguous (version)...The designation of what is a critical infrastructure system or network as far as I can tell has no specific process. There's no provision for any administrative process or review. That's where the problems seem to start. And then you have the amorphous powers that go along with it."

Translation: If your company is deemed "critical," a new set of regulations kick in involving who you can hire, what information you must disclose, and when the government would exercise control over your computers or network.

The Internet Security Alliance's Clinton adds that his group is "supportive of increased federal involvement to enhance cyber security, but we believe that the wrong approach, as embodied in this bill as introduced, will be counterproductive both from an national economic and national secuity perspective."

Update at 3:14 p.m. PDT: I just talked to Jena Longo, deputy communications director for the Senate Commerce committee, on the phone. She sent me e-mail with this statement:

The president of the United States has always had the constitutional authority, and duty, to protect the American people and direct the national response to any emergency that threatens the security and safety of the United States. The Rockefeller-Snowe Cybersecurity bill makes it clear that the president's authority includes securing our national cyber infrastructure from attack. The section of the bill that addresses this issue, applies specifically to the national response to a severe attack or natural disaster. This particular legislative language is based on longstanding statutory authorities for wartime use of communications networks. To be very clear, the Rockefeller-Snowe bill will not empower a "government shutdown or takeover of the Internet" and any suggestion otherwise is misleading and false. The purpose of this language is to clarify how the president directs the public-private response to a crisis, secure our economy and safeguard our financial networks, protect the American people, their privacy and civil liberties, and coordinate the government's response.

Unfortunately, I'm still waiting for an on-the-record answer to these four questions that I asked her colleague on Wednesday. I'll let you know if and when I get a response.

Washington is continually using FEAR as a means to stealthily take more and more power and erode Constitutional freedoms. Bush did it with the Patriot Act, and this administration seems to have this disease in spades.

Don't fall for it, folks. With the exception of the military, the government is NEVER better at responding to emergencies than private enterprise (FEMA anyone?) This is nothing more than another ploy for power and control.

Solution: let the Government EMPOWER those who do the job now to do it even better. Work with them to keep them informed and let them do their job.

"...Dr. Emanuel has fought for a government takeover of health care for over a decade. In 1993, he urged that President Bill Clinton impose a wage and price freeze on health care to force parties to the table. "The desire to be rid of the freeze will do much to concentrate the mind," he wrote with another author in a Feb. 8, 1993, Washington Post op-ed. Now he recommends arm-twisting Chicago style. "Every favor to a constituency should be linked to support for the health-care reform agenda," he wrote last Nov. 16 in the Health Care Watch Blog. "If the automakers want a bailout, then they and their suppliers have to agree to support and lobby for the administration's health-reform effort."

Is this what Americans want?"

Common sense about government-controlled healthcare and why it won't work. Self-government is the foundation of any free and prosperous society. No incentives for personal responsibility = bankrupt system. Spread the word!