Jennifer Rubin on Obama's Foreign Policy

Spinning Obama’s Foreign-Policy Flops

Earlier this month, Jackson Diehl detailed Obama’s lack of success in forging productive relationships with foreign leaders. Now Obama’s dutiful flacks and media handmaidens take to the front page of Diehl’s paper to explain Obama was merely making use of his “charisma.” Now he is getting around to those relationships. There is this jaw-dropping bit of spin:

The change from a year ago is stark. In his widely broadcast address in Cairo last June, Obama called Israeli settlements in the occupied territories “illegitimate.” By contrast, he met last week at the White House with Israeli Prime Minister Binyamin Netanyahu for two hours, urging him privately to freeze Jewish settlement construction.

What relationship is Obama making use of there? If this is Obama’s idea of a forging bonds with foreign leaders (condemning his country, reading the prime minister the riot act, twice snubbing Netanyahu during his White House visits), our foreign-policy apparatus surely is guilty of gross malfeasance. Then the blind quotes are trotted out to — surprise, surprise — ding George W. Bush and explain how Obama’s newfound personal diplomacy is vastly superior to his predecessor’s:

“Obama is not the sort of guy who looks for a best buddy, and that’s very different than Bush,” said a European diplomat, who spoke on the condition of anonymity to speak candidly about perceptions of U.S. leaders abroad. “Sometimes being too personal is not a good thing. You can make mistakes.”

No, Obama is the sort of guy who returns the Winston Churchill bust, gives Gordon Brown and the Queen of England cheap-o gifts, bows to dictators, and slams the elected prime minister of Israel. Completely different. But even the Washington Post must concede that Obama has not forged really any productive relationships with world leaders:

Obama, who was an Illinois state senator just four years before he was elected president, knew few world leaders upon taking office. Since then, he has developed mostly arm’s-length relationships with fellow heads of state, including many from developing countries that previous presidents largely ignored or shunned to protect U.S. relationships with more traditional allies.

Let’s get real — Obama has not really used his charisma to promote anything but himself:

Republican critics say the approach has unsettled the United States’ best friends, and failed more than succeeded in promoting American interests on some of the most far-reaching foreign policy challenges of the day.

Obama’s direct appeal to the people of China and Iran[ Did we miss this? Was he championing democracy at some point?], for example, has produced little change in the attitude of their governments, showing the limits of a bottom-up approach when it comes to dealing with authoritarian countries. Middle East peace talks remain moribund after the administration’s so-far-unsuccessful attempts to end Israeli settlement construction or to persuade Arab governments to make even token diplomatic gestures toward the Jewish state.

As Simon Serfaty of theCenter for Strategic and International Studies notes, “He is beginning to face a crisis of efficacy.” In other words, despite all the reverential treatment by liberal elites, Obama has yet to develop effective ties with allies or used public diplomacy to further American interests. His infatuation with dictatorial regimes, his embrace of multilateralism, and his willingness to kick allies (e.g., Israel, Poland, the Czech Republic, Britain, Honduras) in the shins have left America more isolated and rogue states more emboldened than ever before. An assessment from Der Spiegel put it this way, recalling Obama’s Cairo speech (which the Obami still laud as an achievement of some sort):

The applause for Obama’s Cairo speech died away in the vast expanses of the Arabian Desert long ago. “He says all the right things, but implementation is exactly the way it has always been,” says Saudi Arabian Foreign Minister Saud al-Faisal.

Obama’s failure in the Middle East is but one example of his weakness, though a particularly drastic and vivid one. The president, widely celebrated when he took office, cannot claim to have achieved sweeping successes in any area. When he began his term more than a year ago, he came across as an ambitious developer who had every intention of completing multiple projects at once. But after a year, none of those projects has even progressed beyond the early construction phase. And in some cases, the sites are nothing but deep excavations. … Obama can hardly count on gaining the support of allies, partly because he doesn’t pay much attention to them. The American president doesn’t have a single strong ally among European heads of state

Perhaps less time spent crafting stories for the Post and more time working on a viable foreign policy built on American interests rather than Obama’s ego would be in order.

Remember When Dissent Was Patriotic?

How to Pay for ObamaCare?

The Rich Can't Pay for ObamaCare

The president intends to squeeze an extra $1.2 trillion over 10 years from a tiny sliver of taxpayers who already pay more than half of all individual taxes. It won't work.

President Barack Obama's new health-care legislation aims to raise $210 billion over 10 years to pay for the extensive new entitlements. How? By slapping a 3.8% "Medicare tax" on interest and rental income, dividends and capital gains of couples earning more than $250,000, or singles with more than $200,000.

The president also hopes to raise $364 billion over 10 years from the same taxpayers by raising the top two tax rates to 36%-39.6% from 33%-35%, plus another $105 billion by raising the tax on dividends and capital gains to 20% from 15%, and another $500 billion by capping and phasing out exemptions and deductions.

Add it up and the government is counting on squeezing an extra $1.2 trillion over 10 years from a tiny sliver of taxpayers who already pay more than half of all individual taxes.

It won't work. It never works.

The maximum tax rate fell to 28% in 1988-90 from 50% in 1986, yet individual income tax receipts rose to 8.3% of GDP in 1989 from 7.9% in 1986. The top tax rate rose to 31% in 1991 and revenue fell to 7.6% of GDP in 1992. The top tax rate was increased to 39.6% in 1993, along with numerous major revenue enhancers such as raising the taxable portion of Social Security to 85% of benefits from 50% for seniors who saved or kept working. Yet individual tax revenues were only 7.8% of GDP in 1993, 8.1% in 1994, and did not get back to the 1989 level until 1995.

Punitive tax rates on high-income individuals do not increase revenue. Successful people are not docile sheep just waiting to be shorn.

From past experience, these are just a few of the ways that taxpayers will react to the Obama administration's tax plans:

• Professionals and companies who currently file under the individual income tax as partnerships, LLCs or Subchapter S corporations would form C-corporations to shelter income, because the corporate tax rate would then be lower with fewer arbitrary limits on deductions for costs of earning income.

• Investors who jumped into dividend-paying stocks after 2003 when the tax rate fell to 15% would dump many of those shares in favor of tax-free municipal bonds if the dividend tax went up to 23.8% as planned.

• Faced with a 23.8% capital gains tax, high-income investors would avoid realizing gains in taxable accounts unless they had offsetting losses.

• Faced with a rapid phase-out of deductions and exemptions for reported income above $250,000, any two-earner family in a high-tax state could keep their income below that pain threshold by increasing 401(k) contributions, switching investments into tax-free bond funds, and avoiding the realization of capital gains.

• Faced with numerous tax penalties on added income in general, many two-earner couples would become one-earner couples, early retirement would become far more popular, executives would substitute perks for taxable paychecks, physicians would play more golf, etc.

In short, the evidence is clear that when marginal tax rates go up, the amount of reported incomes goes down. Economists call that "the elasticity of taxable income" (ETI), and measure it by examining income tax returns before and after marginal tax rates claimed a bigger slice of income reported to the IRS.

The evidence is surveyed in a May 2009 paper for the National Bureau of Economic Research by Emmanuel Saez of the University of California at Berkeley, Joel Slemrod of the University of Michigan, and Seth Giertz of the University of Nebraska. They review a number of studies and find that "for an elasticity estimate of 0.5 . . . the fraction of tax revenue lost from behavioral responses would be 43.1%." That elasticity estimate of 0.5 would whittle the Obama team's hoped-for $1.2 trillion down to $671 billion. As the authors note, however, "there is much evidence to suggest that the ETI is higher for high-income individuals." The authors' illustrative use of a 0.5 figure is a perfectly reasonable approximation for most purposes, but not for tax hikes aimed at the very rich.

For incomes above $100,000, a 2008 study by MIT economist Jon Gruber and Mr. Saez found an ETI of 0.57. But for incomes above $350,000 (the top 1%), they estimated the ETI at 0.62. And for incomes above $500,000, Treasury Department economist Bradley Heim recently estimated the ETI at 1.2—which means higher tax rates on the super-rich yield less revenue than lower tax rates.

If an accurate ETI estimate for the highest incomes is closer to 1.0 than 0.5, as such studies suggest, the administration's intended tax hikes on high-income families will raise virtually no revenue at all. Yet the higher tax rates will harm economic growth through reduced labor effort, thwarted entrepreneurship, and diminished investments in physical and human capital. And that, in turn, means a smaller tax base and less revenue in the future.

The ETI studies exclude capital gains, but other research shows that when the capital gains tax goes up investors avoid that tax by selling assets less frequently, and therefore not realizing as many gains in taxable accounts. In these studies elasticity of about 1.0 suggests the higher tax is unlikely to raise revenue and elasticity above 1.0 means higher tax rates will lose revenue.

In a 1999 paper for the Australian Stock Exchange I examined estimates of the elasticity of capital gains realization in 11 studies from the Treasury, Congressional Budget Office and various academics. Whenever there was a range of estimates I used only the lowest figures. The resulting average was 0.9, very close to one. Four of those studies estimated the revenue-maximizing capital gains tax rate, suggesting (on average) that a tax rate higher than 17% would lose revenue.

Raising the top tax on dividends to 23.8% would prove as self-defeating as raising the capital gains tax. Figures from a well-know 2003 study by the Paris School of Economics' Thomas Piketty and Mr. Saez show that the amount of real, inflation-adjusted dividends reported by the top 1% of taxpayers dropped to about $3 billion a year (in 2007 dollars) after the 1993 tax hike. It hovered in that range until 2002, then soared by 169% to nearly $8 billion by 2007 after the dividend tax fell to 15%. Since very few dividends were subject to the highest tax rates before 2003 (many income stocks were held by tax-exempt entities), the 15% dividend tax probably raised revenue.

In short, the belief that higher tax rates on the rich could eventually raise significant sums over the next decade is a dangerous delusion, because it means the already horrific estimates of long-term deficits are seriously understated. The cost of new health-insurance subsidies and Medicaid enrollees are projected to grow by at least 7% a year, which means the cost doubles every decade—to $432 billion a year by 2029, $864 billion by 2039, and more than $1.72 trillion by 2049. If anyone thinks taxing the rich will cover any significant portion of such expenses, think again.

The federal government has embarked on an unprecedented spending spree, granting new entitlements in the guise of refundable tax credits while drawing false comfort from phantom revenue projections that will never materialize.

Mr. Reynolds is a senior fellow with the Cato Institute and the author of "Income and Wealth" (Greenwood Press, 2006).

ObamaCare Passes the House

I'll have lots more to write on this later. Basically, the upshot is that...after looking like the fate of ObamaCare was doomed, the House of Representatives finally passed the Senate version of Health Care reform legislature. The President was able to assuage the concerns of a coalition of pro-life Democrats, led by Michigan Democratic Representative Bart Stupak, by promising to sign an executive order restricting the use of federal funding for abortions (more on that later). Also, wobbly Democrats in the House secured promises from Democrats in the Senate that they would "fix" the Senate legislation, which contains the "cornhusker kickback," the "Louisiana Purchase," and the "Gator Aid," using the reconciliation procedure.

I'll talk about some of the ideas above, but for now I will leave you with an instructive post on the immediate impact of ObamaCare, which the president will probably sign some time this week.

This post comes from a blog of which I had not previously heard, called the Liberty Papers

ObamaCare’s Immediate Impact

by Brad Warbiany

As we all know, most of ObamaCare is pushed out to 2014 or so. But Ezra Klein, ever helpful, points out this nice PDF which explains what will occur nearly immediately. Ezra is always celebrating the cost-control measures of ObamaCare, so let’s see how these provisions stack up:

1. SMALL BUSINESS TAX CREDITS—Offers tax credits to small businesses to make employee coverage more affordable. Tax credits of up to 35 percent of premiums will be immediately available to firms that choose to offer coverage. Effective beginning for calendar year 2010. (Beginning in 2014, the small business tax credits will cover 50 percent of premiums.)

Okay, an immediate hit to Uncle Sugar here, but probably not big unless it really changes behavior immediately. So we start hurting the deficit right away. This is a net hit on government spending, but one might think that it probably won’t do much to private healthcare costs in the short run. I expect this will result in marginally increased coverage and thus will show no real change to health insurance premiums.

2. BEGINS TO CLOSE THE MEDICARE PART D DONUT HOLE—Provides a $250 rebate to Medicare beneficiaries who hit the donut hole in 2010. Effective for calendar year 2010. (Beginning in 2011, institutes a 50% discount on brand?name drugs in the donut hole; also completely closes the donut hole by 2020.)

Another government spending hit on drug coverage. In 2011, a 0% subsidy in this range jumps to 50%. According to Wikipedia, this may affect somewhere in the range of 25% of Medicare Part D enrollees. I’ll leave it to others to quantify this, but this is another spending measure.

3. FREE PREVENTIVE CARE UNDER MEDICARE—Eliminates co?payments for preventive services and exempts preventive services from deductibles under the Medicare program. Effective beginning January 1, 2011.

Oh, look! Another government spending increase subsidy! And as one of Ezra’s colleagues at WaPo points out, preventative care doesn’t really lower total medical spending costs. So overall this is not a cost-control measure for government budgets or spending in general.

4. HELP FOR EARLY RETIREES—Creates a temporary re?insurance program (until the Exchanges are available) to help offset the costs of expensive health claims for employers that provide health benefits for retirees age 55?64. Effective 90 days after enactment

Another subsidy. This’ll mainly hit government, I don’t see a major change to insurance premiums here. There may be additional companies who provide early-retiree benefits, but only union jobs and government tend to do so. Most who are wealthy enough to retire early on their own will cover their own medical insurance costs — not their employer.

5. ENDS RESCISSIONS—Bans health plans from dropping people from coverage when they get sick. Effective 6 months after enactment.

And here we go. The first of [many] provisions that will raise private insurance premiums. Of course, this depends on how common rescissions are. The left says they happen OMG like ALL THE TIME, so if they’re right, it’s a big hit. I don’t think it’s a huge change, but it’s definitely going to raise premiums.

6. NO DISCRIMINATON AGAINST CHILDREN WITH PRE?EXISTING CONDITIONS—Prohibits health plans from denying coverage to children with pre?existing conditions. Effective 6 months after enactment. (Beginning in 2014, this prohibition would apply to all persons.)

Again, an increase to private health insurance premiums. But hey, who’ll complain? After all, it’s for the children.

7. BANS LIFETIME LIMITS ON COVERAGE—Prohibits health plans from placing lifetime caps on coverage. Effective 6 months after enactment.

Again, if you think anything other than that this will increase premiums up front, you’re smoking something. And you shouldn’t be smoking, because it’s bad for you. But on the bright side, in 6 months you can be assured your lung cancer will be treated with no limits. And don’t worry about lying about that smoking habit on your insurance application, because rescissions are banned too.

8. BANS RESTRICTIVE ANNUAL LIMITS ON COVERAGE—Tightly restricts new plans’ use of annual limits to ensure access to needed care. These tight restrictions will be defined by HHS. Effective 6 months after enactment. (Beginning in 2014, the use of any annual limits would be prohibited for all plans.)

Again, we have a regulation that’ll up private premiums. [Do you see a pattern here?] Costs must be amortized, so this added risk is going to show up in premium hikes rather than limits on annual coverage. Insurance is built to hedge risk, and its increasingly looking like the risks to the insurer don’t expire [until you do].

9. FREE PREVENTIVE CARE UNDER NEW PRIVATE PLANS—Requires new private plans to cover preventive services with no co?payments and with preventive services being exempt from deductibles. Effective 6 months after enactment. (Beginning in 2018, this requirement applies to all plans.)

Ahh, two fun ones here. Immediate premium increase (costs must be amortized, you know), and a probable increase in total healthcare costs, for the aforementioned reason that preventative care doesn’t lower total spending.

10. NEW, INDEPENDENT APPEALS PROCESS—Ensures consumers in new plans have access to an effective internal and external appeals process to appeal decisions by their health insurance plan. Effective 6 months after enactment.

Again, here come higher premiums. Unless you think the external appeals boards are going to rule less in favor of the patient than the insurance companies would have, of course. Since the left believes insurers deny care left and right, this has to be a big impact, right?

11. ENSURING VALUE FOR PREMIUM PAYMENTS—Requires plans in the individual and small group market to spend 80 percent of premium dollars on medical services, and plans in the large group market to spend 85 percent. Insurers that do not meet these thresholds must provide rebates to policyholders. Effective on January 1, 2011.

“Ensuring value for premium payments” sounds a lot nicer than “capping profit margins”, doesn’t it? If the left’s belief that insurers are fat and happy and spend all their money on lavish bonuses instead of medical services, this would in fact be a cost control measure. One story from late last year suggests insurers already spend above 80% (Wall Street analysts say low 80’s, industry says 87%). Overall, my read is that this probably isn’t a major component either way.

12. IMMEDIATE HELP FOR THE UNINSURED UNTIL EXCHANGE IS AVAILABLE (INTERIM HIGH?RISK POOL)—Provides immediate access to insurance for Americans who are uninsured because of a pre?existing condition ? through a temporary high?risk pool. Effective 90 days after enactment.

Initially there’ll be $5B in subsidy for this risk pool. It’s unclear whether some of this funding will replace existing state gov’t funding (35 states already have high-risk pools), so I’m not sure how much of that $5B is a net adder to the total cost. But the simple fact is this — while it might be better for some of those people currently denied due to pre-existing conditions (i.e. 100% risks), much of the cost will come out of *OUR* pockets.

13. EXTENDS COVERAGE FOR YOUNG PEOPLE UP TO 26TH BIRTHDAY THROUGH PARENTS’ INSURANCE – Requires health plans to allow young people up to their 26th birthday to remain on their parents’ insurance policy, at the parents’ choice. Effective 6 months after enactment.

This one just baffles me. Should we really be disincentivizing kids adults to get good jobs where they might be covered? I can understand an exemption for people on the 7+ year college program (hopefully grad school, not this guy), but if your offspring is 24 and not in school, it seems to me that it’s not your employer’s problem to provide them with health insurance (since it’s usually the cheapest method). Perhaps this *IS* actually a cost-control measure, since most 23-25 year olds are healthy and will add to the risk pool. But even so, I can imagine “Employee + Family” or “Employee + Children” plans increasing in premium, because they’re not usually charged based on how many kids are specifically enrolled.

14. COMMUNITY HEALTH CENTERS—Increases funding for Community Health Centers to allow for nearly a doubling of the number of patients seen by the centers over the next 5 years. Effective beginning in fiscal year 2010.

There’s short-run deficit cost here, but the goal is understandable. Clinics are likely a better way of treating immediate non-emergency medical needs than emergency rooms, so there may be some cost-reduction in the delivery method of care. Presumably not all of the supposed “doubling” of patients will be people whose only alternative was a regular doctor visit or ER visit, so there may be some gross increase in the total number of patients served. This one could go either way, and I’ll leave it to the statisticians to score it. But I’ll grant that there’s at least a possibility of cost-control here.

15. INCREASING NUMBER OF PRIMARY CARE DOCTORS—Provides new investment in training programs to increase the number of primary care doctors, nurses, and public health professionals. Effective beginning in fiscal year 2010.

Again, another big subsidy. Gives 10% bonuses to PCP and General Surgeons starting in 2011, and it’s unclear here what “new investment in training programs” really amounts to, but the early notes I’ve seen suggest it’s largely student loan repayment changes. I don’t see that much here that will blunt the existing trend for doctors to head into specialization rather than primary care. 10% is nice but it’s nowhere near the difference between a specialist’s salary and a primary care doctor.

16. PROHIBITING DISCRIMINATION BASED ON SALARY—Prohibits new group health plans from establishing any eligibility rules for health care coverage that have the effect of discriminating in favor of higher wage employees. Effective 6 months after enactment.

This one is also somewhat vague. But usually when I hear about plans to avoid “eligibility rules” that “discriminate”, I think they’re trying to find ways to make it impossible to discriminate against bad health risks. Richer people tend to be healthier people, so it seems that if they accomplish their goal, it necessarily raises premiums.

17. HEALTH INSURANCE CONSUMER INFORMATION—Provides aid to states in establishing offices of health insurance consumer assistance in order to help individuals with the filing of complaints and appeals. Effective beginning in FY 2010.

Ahh, a two-fer! First is the direct government subsidy to states to hire new “consultants”. The second is the premium increase by pushing harder against health providers regarding complaints and appeals, which will likely often be adjudicated by the external appeals boards mentioned in point 10.

18. CREATES NEW, VOLUNTARY, PUBLIC LONG?TERM CARE INSURANCE PROGRAM—Creates a long?term care insurance program to be financed by voluntary payroll deductions to provide benefits to adults who become functionally disabled. Effective on January 1, 2011.

Voluntary? I wonder how long it will remain so. And how exactly does this different from the disability portion of Social Security? All I see here is a big new shiny bureaucracy, that will work as quickly as possible to entrench themselves by making this as involuntary as possible.

Conclusion:

So there you have it, folks. Of 18 highlighted points, most or all of them will increase payments made by government or increase health insurance premiums. This is “bending the cost curve”.