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Analysis

“The sharp run-up in public sector debt will likely prove one of the most enduring legacies of the 2007-2009 financial crisis in the United States and elsewhere,” A recent study presented at the American Economic Association contains some very important findings on the negative impact of large government debt buildups on economic growth. Data spanning 200 years and 44 countries reveals that countries with very high gross government debt (classified as 90 percent or more of GDP) experienced median growth rates one percentage point below countries with lower gross debt, and average growth rates a full four percentage points below countries with lower gross debt. The recent explosion in government debt resulting from the financial crisis will cause U.S. gross debt to surpass 90 percent of GDP this year, and to approach 100 percent of GDP by the end of the decade. Very high, sustained debt levels could seriously harm economic growth in the U.S. The authors caution that, “seldom do countries simply ‘grow’ their way out of deep debt burdens.” Serious and comprehensive action will need to be taken in the U.S. to reduce annual budget deficits and bring down the debt level to prevent a sustained period of below-potential economic growth.

Dec 18 2009

Behind the Numbers

Will 14,000 Americans Lose Their Health Ins. Every Day?

“If we don't act, 14,000 Americans will continue to lose their health insurance every single day,” President Obama claimed in July. That number has been used frequently in the debate over health care reform. It’s a striking number, but a number that is subject to significant debate and interpretation. The statement implies that there are 14,000 fewer Americans with health insurance each and every day. Nice sound bite, but misleading.

Dec 15 2009

All the Wrong Incentives -- Part IV

How Democrats’ Health Care Reform Proposals Would Harm Workers and Families

CASE # 4: DISINCENTIVES TO OFFER HEALTH BENEFITS

9.8% Cap on Employee Contributions Encourage Employers to Eliminate Insurance Coverage

High Cost Plans Tax Discourages Employers from Offering FSAs

Dec 15 2009

All the Wrong Incentives--Part III

How Democrats’ Health Care Reform Proposals Would Harm Workers and Families

CASE # 3: DISINCENTIVES FOR JOB CREATION AND HIGHER WAGES

Small Business Subsidies Discourage Job Creation and Wage Growth
Both the House and Senate bills include temporary subsidies to small businesses to encourage them to offer employer-sponsored health insurance. The credits are available to businesses with 10-25 employees.

Dec 10 2009

All the Wrong Incentives -- Part II

How Democrats’ Health Care Reform Proposals Would Harm Workers and Families

CASE #2: DISINCENTIVES FOR MARRIAGE

Marriage has been shown to have tremendous individual and societal benefits. Yet the Democrats’ proposed health care legislation would create new marriage penalties for both low- to moderate-income and upper-income individuals and families. These penalties can be so large in some cases that couples might forgo marriage in order to avoid thousands of dollars in new taxes.

Subsidies Discourage Marriage
On the lower end of the income scale, the subsidies provided in the bills to individuals and families to purchase health insurance contain severe marriage penalties, and these penalties come on top of those already present under today’s tax code.

Dec 09 2009

All the Wrong Incentives -- Part I

How Democrats’ Health Care Reform Proposals Would Harm Workers and Families

CASE # 1: DISINCENTIVES TO WORK

High Marginal Tax Rates Discourage Work
The bills’ health insurance subsidies for individuals and families between 133% and 400% of the poverty line fall in value as income rises, which means that an increase in earnings (through more hours of work or a pay-raise) results in a higher cost for health insurance. The subsidies would tack on an additional 12% to 20% to marginal tax rates, which already approach 40% to 50% for families receiving cash welfare (TANF), supplemental food assistance (SNAP), and earned income tax credit payments (EITC). Tacking on the additional marginal tax rates caused by subsidies would result in marginal tax rates of 50- 60% for most affected families.

Young Workers Discouraged from Working; Their Earnings Reduce Family Health Subsidies
One provision of Senate Democrats’ proposed health care bill would target families with children—teenagers or college students—who work and earn income. It is very common for teenagers and college students to obtain jobs so that they can have some spending money of their own or help with their educational expenses. Whereas the measure of income used to determine the eligibility of a family for various low-income benefits does not include the wages of teens and college students, the Senate bill penalizes the families of these younger workers by including their wages in benefit eligibility calculations.

Related Image
If the Medicare cost savings proposed in the Senate's Health Care bill were directed into the Medicare HI Trust Fund, instead of funding a new entitlement program, Medicare's 75-year unfunded liability would be reduced by $3.9 trillion or 29%, moving the programs insolvency from 2017 to 2023.
Related Image
If the new Medicare tax increases and cost savings proposed in the Senate's Health Care bill were directed into the Medicare HI Trust Fund, instead of funding a new entitlement program, Medicare's 75-year unfunded liability would be reduced by $4.3 trillion or 32%, moving the programs insolvency from 2017 to 2023.