[StBernard] Wall Street Journal Editorial - A Reckless Congress

[Westley Annis]

http://online.wsj.com/article/SB124779717982855785.html
A Reckless Congress 
Democrats want to ram through one of the greatest raids on private income
and business in American history.

Say this about the 1,018-page health-care bill that House Democrats unveiled
this week and that President Obama heartily endorsed: It finally reveals at
least some of the price of the reckless ambitions of our current government.
With huge majorities and a President in a rush to outrun the declining
popularity of his agenda, Democrats are bidding to impose an unrepealable
European-style welfare state in a matter of weeks.

Mr. Obama's February budget provided the outline, but the House bill now
fills in the details. To wit, tax increases that would take U.S. rates
higher even than most of Europe. Yet even those increases aren't nearly
enough to finance the $1 trillion in new spending, which itself is surely a
low-ball estimate. Meanwhile, the bill would create a new government health
entitlement that will kill private insurance and lead to a government-run
system.

Hyperbole? That's what people said when we warned about this last fall in "A
Liberal Supermajority," but even we underestimated the ideological
willfulness of today's national Democrats. Consider only a few of the
details:

 A huge new income surtax. The bill's main financing comes from another tax
increase on top of the increase already scheduled for 2011 under Mr. Obama's
budget. The surtax starts at one percentage point for adjusted gross income
above $350,000 in 2011, rising to two points in 2013; a 1.5 point surtax at
incomes above $500,000, rising to three in 2013; and a whopping 5.4
percentage points in 2011 and beyond on incomes above $1 million.

This would raise the top marginal federal tax rate back to roughly 47% or
48%, if you include the Medicare tax and the phase-out of certain deductions
and exemptions. With the current top rate at 35%, this would be the largest
rate increase outside the Great Depression or world wars.

The average U.S. top combined state-federal marginal tax rate would hit
about 52%. This would be higher than in all but three (Denmark, Sweden,
Belgium) of the 30 countries measured by the OECD. According to the nearby
table compiled by the Heritage Foundation, taxpayers in at least five U.S.
states would pay higher marginal rates even than Sweden. South Korea, which
Democrats worry is stealing American jobs, would be able to grab even more
as its highest rate is a far more competitive 38.5%.

House Democrats say they deserve credit for being honest about the tax
increases needed to fund their ambitions. But then they also claim that this
surtax would raise $544 billion in new revenue over 10 years. America's
millionaires aren't that stupid; far fewer of them will pay these rates for
very long, if at all. They will find ways to shelter income, either by
investing differently or simply working less. Small businesses that pay at
the individual rate will shift to pay the 35% corporate rate. When the
revenue doesn't materialize, Democrats will move to soak the middle class
with a European-style value-added tax.

Phony numbers. Democrats will have to come up with something, because even
the surtax puts their bill at least $300 billion short of honest financing.
The public insurance "option" doesn't even begin until 2013 and the costs
are heavily weighted toward the later years, but the tax hikes start in
2011. So under Congress's 10-year budget window, the House bill is able to
pay for seven years of spending with nine years of taxes. Andy Laperriere of
the ISI Group estimates the bill would add $95 billion to the deficit in
2019 alone.

Then there's yesterday's testimony, from Congressional Budget Office (CBO)
Director Doug Elmendorf, that ObamaCare's cost "savings" are an illusion.
Mr. Obama claims government can cover more people and pay less to do it. But
Mr. Elmendorf told the Senate Finance Committee that "In the legislation
that has been reported we don't see the sort of fundamental changes that
would be necessary to reduce the trajectory of federal spending by a
significant amount. And on the contrary, the legislation significantly
expands the federal responsibility for health-care costs."

Further on the public plan: "It raises the amount of activity that is
growing at this unsustainable rate."

No matter, Speaker Nancy Pelosi is whisking the bill through House
committees even before CBO has had a chance to score it in detail. As
Wisconsin Republican Paul Ryan put it to us, "We will not have read it, and
we will not have a score of it, but we will have passed it out of
committee."

A new payroll tax. Unemployment is at 9.5% and rising, but Democrats will
nonetheless impose a new eight percentage point payroll tax on employers who
don't provide health insurance for employees. This is on top of the current
15% payroll tax, and in addition to a new 2.5-percentage point tax on
individuals who don't buy health insurance. This means that any employer
with more than $400,000 in payroll would have to pay at least 25% above the
salary to hire someone. Result: Many fewer new jobs, with a higher
structural jobless rate, much as Europe has experienced as its welfare
states have expanded.

Other new taxes, including an as yet undetermined levy on private health
plans. This tax, which Democrats say could raise $100 billion or so, would
make it even harder for private plans to compete with the government plan,
which would already benefit from government subsidies and lower capital
costs. For good measure, the House bill also gets the ball rolling on tax
increases on foreign-source corporate income.

We could go on, and we will in coming days. But the most remarkable quality
of this health-care exercise is its reckless disregard for economic and
fiscal reality. With the economy still far from a healthy recovery, and the
federal fisc already nearly $2 trillion in deficit, Democrats want to ram
through one of the greatest raids on private income and business in American
history. The world is looking on, agog, and wondering why the United States
seems intent on jumping off this cliff.