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Universal Obamacare: Will It Bankrupt America?

By    |   Wednesday, 22 April 2009 06:55 PM EDT

A growing chorus of experts is warning the Obama administration’s plan to add 47 million people to the health-insurance rolls may kill hopes for a sustained economic recovery.

Obama’s healthcare plan would follow the $700 billion TARP bailout, the $787 billion stimulus, and a $410 billion, earmark-laden budget appropriation -- at a time when the national debt already exceeds $11 trillion.

Such staggering deficits are leading economists to question whether enough investment capital would be left over once the expected economic recovery takes hold. Any economic recovery could stall or be seriously limited, economists say.

Alarms over the cost of the program are sounding just as senators begin a series of roundtable discussions on health care. Democrats hope those discussions will lead to a bipartisan agreement.

Senate Finance Committee chairman Sen. Max Baucus, D-Mont., and ranking member Sen. Chuck Grassley, R-Iowa, are hosting those hearings. Grassley urged Tuesday that healthcare reform must be made “in a fiscally responsible way.”

Critics say Democrats’ healthcare proposals are far from fiscally responsible, however.

“What it will mostly do is bloat -- once again -- spending and borrowing,” Doug Bandow, a Cato Institute Senior Fellow, tells Newsmax.

Bandow says spending hundreds of billions more on healthcare will hurt job creation during a period of already high unemployment.

He adds that government economists have already warned the economic stimulus package will eventually reduce Gross Domestic Product by crowding out private investment. A massive healthcare bill will only make matters worse.

Bandow is not alone in his concerns.

In its January report on the budget outlook, the Congressional Budget Office warned that even without the Obama health plan, the double whammy of high deficits and rising health-care costs could throttle the recovery.

“High deficits in the near term may be inevitable in the face of the financial crisis and severe economic weakness,” stated the CBO report. “However, once the nation gets past this downturn, it will still face significant fiscal challenges posed by rising healthcare costs and the aging of the population.

“Continued large deficits and the resulting increases in federal debt over time would probably constrain long-term economic growth by reducing national savings and investment, which in turn would cause productivity and wage growth to gradually slow,” the CBO concluded.

The greatest single threat to budget stability over the long run, according to the CBO: The sharp rise in Medicare and Medicaid. Such spending, the CBO reported, must be controlled “for the fiscal situation to be sustainable in future decades.”

Despite such troublesome reports, signs Democrats intend to push through health-care reform are as omnipresent as cherry blossoms in the Nation’s Capital these days. Among them:

  • The Health, Education, Labor, and Pensions Committee chaired by Sen. Edward Kennedy is also seeking to transform the nation’s healthcare system.

  • Baucus and Kennedy sent President Obama a letter Monday promising to have health care legislation ready for his review by June.

  • On Wednesday, Rep. Charles Rangel, D-N.Y., will gavel in a House Ways and Means Committee hearing on the health-insurance market.

  • Neither House Speaker Nancy Pelosi nor Senate Majority Leader Harry Reid is ruling out a special legislative maneuver, reconciliation, to fast-track healthcare reform, if Republicans refuse to play along.

    Just how much will healthcare reform cost? Until the details are worked out, no one can say precisely. But if the ultimate program resembles at all the one Obama laid out during the campaign, the price tag will be staggering.

    According to The Heritage Foundation, low-end estimates project a cost of $1.17 trillion over the first 10 years of the program -- far more than the $684 billion in Obama’s preliminary budgetary framework.

    Another estimate pegs the cost at $1.6 trillion over the next decade. The highest estimate, which is based on a 7 percent annual inflation in medical costs, holds that the original Obama plan would cost $6 trillion over the next 10 years.

    Such eye-popping numbers led former Arkansas Gov. Mike Huckabee, an oft-mentioned GOP presidential contender for 2012, to tell Newsmax: “Not only is the cost like swallowing a pill the size of an elephant, even worse is that there is no indication that Obama is seriously addressing the real cost of healthcare in the United States -- chronic disease and the lack of preventive care.

    “By simply adding more fuel to the raging fire of a disease-care system that fails to restructure the system,” Huckabee says, “he only accelerates our plunge into an unsustainable cost without addressing the root cause of the crisis.”

    Based on Congressional Budget Office estimates, it is by no means clear how an aging America will pay for its rising healthcare costs even without universal care.

    The CBO already predicts healthcare costs will swell -- from 5 percent of GDP this year to more than 6 percent in 2019, and approaching 12 percent by 2050.

    Of course, rising costs are the very rationale cited by advocates of universal health care. People can’t afford insurance and medical costs are skyrocketing, they say, so the government needs to step in.

    So what are the chances a system heavily regulated by the federal government will operate more efficiently? Not good, most experts agree.

    “We can’t afford to have the government run anything else in our lives, because it doesn’t do it well, and it makes it much more expensive,” South Carolina GOP Sen. Jim DeMint tells Newsmax. “We need every American to have a health insurance policy that they can afford, and keep, and own -- something they have that is not from government.

    “With the amount of money we’re already spending, the ability to get everyone insured,” DeMint continued, “if we’ll just develop the policies at the federal level that make it easier for people to buy insurance policies, and make insurance policies more competitive -- but the people in control make it harder and harder for individuals to have their own insurance. And now they’re saying, ‘There are uninsured people, so we need government healthcare.’ We don’t need government healthcare, that’s the last thing we need.”

    Thomas P. Miller, a former senior health economist for the Joint Economic Committee of Congress, and a resident fellow at the American Enterprise Institute, calls the notion that the federal government can achieve net savings “political smoke.” While some savings may be generated, they will be poured back into the program to help offset costs, he says.

    Indeed, Miller finds the economics of the current proposals so vague that he has labels them “faith-based initiatives.” And it is unclear, he says, how much more red ink the federal government can tolerate.

    “We may have used up our reserve capacity to both borrow money, stretch the ability of the Federal Reserve’s balance sheet, the sustainability of the dollar as the long-standing reserve currency of the world’s economy,” he says. “All these things become harder, rather than easier, given how far we’ve either already climbed up that hill, or descended into that trench, depending on your perspective.”

    The rising tab run up by the Obama administration is one reason Miller says its narrow political window for healthcare reform will only remain open through the end of the year. Congressional Democrats have cited a similar timetable.

    In a sign it might compromise on elements of the plan in exchange for rapid approval, the Obama administration has suggested it might accept reforms that fall short of promises made on the campaign trail. And it is already drawing fire from the left for doing so.

    Obama’s real objective, Miller says, is to “lock in” policies that transfer control of healthcare choices to politicians and technocrats in Washington. Purported cost savings, he says, are mere “rhetorical cover” for Obama’s primary political agenda.

    All of which means businesses could soon be scrambling to find the capital they need, once the economic recovery begins in earnest.

    “Once the economy gets going and business sees a real opportunity to invest and expand again, they’re going to bump up against the fact that the feds are spending an enormous amount of money,” Bandow says. “This is just going to transform the credit marketplace, and we can’t assume the Chinese will forever be helpful in buying all of our debt. What that does to interest rates, and what that does to private investment, could be quite significant.”

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    A growing chorus of experts is warning the Obama administration’s plan to add 47 million people to the health-insurance rolls may kill hopes for a sustained economic recovery. Obama’s healthcare plan would follow the $700 billion TARP bailout, the $787 billion stimulus, and...
    Wednesday, 22 April 2009 06:55 PM
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