Archive for March, 2010

This Week’s Theme: Dems’ Reform is a Bitter Pill

The Promise: “We have to pass the bill so that you can find out what is in it…” – Nancy Pelosi

The Reality: For once Madame Speaker was exactly right. We did have to pass the bill to find out what was in it. But as new polls show, young adults are not liking what they are seeing.

Fact 1: Polling Shows Young Adults Do Not Like Health Care Reform

A Rasmussen poll taken a week after the reforms were signed into law finds that among Millennials:

• 60% believe that the health care plan will increase the deficit
• 45% believe the plan will have a negative impact on them personally while only 25% believe it will have a positive effect
• 53% strongly favor in repealing the bill
• 49% say they will vote for a candidate who favors repeal while 46% say they will support the candidate who opposes repeal

President Obama and congressional Democrats underestimated young adults concern with the national debt and the economy. Many of us don’t have jobs and many more of us are looking with trepidation towards graduating into a bad economy.

When young adults are pinching pennies we expect the federal government to be forced to do the same. After all, it is rare to see young adults being the financially responsible ones. More than ever our generation understands the need to get this country back in the black. We understand that if the nation’s debt crisis is not solved now then it is our generation who will be the ones stuck with the tab. We understand that the tab must be paid for through either higher taxes or reduced benefits. So when the government pushes a budget-busting health care plan, rather than a job creation agenda, it’s easy to see why we’re concerned.

Fact 2: We Want the Government to Create, Not Destroy Jobs

Democrats sold health care reform as an engine for job creation. Barack Obama used his weekly radio address to say that reform will build a,

“New foundation for our economy to create the good, lasting jobs and shared prosperity of tomorrow.”

Nancy Pelosi went as far to put numbers behind the promise saying,

“Health insurance reform is about jobs. This legislation alone will create 4 million jobs, about 400,000 jobs very soon.”

Unfortunately companies feel a little differently about the effects of the health care bill. Among some recent reports of the cost of reform:

• $1 billion – AT&T
• $100 million – Prudential Financial Inc.
• $150 million – Boeing Co.
• $150 million – Deere & Company
• $100 million - Caterpillar

This is money being directly removed from an already struggling private sector that could have been used to create jobs. American businesses are already face an uphill battle to remain competitive in the world economy due to our high cost of labor. Reducing profits makes it more difficult to hire new employees and much easier to make the decision to shift your labor to other nations.

At the time when we most need to create a pro-jobs environment the health care bill is proving to be a job killer.

Fact 3: Young Adults Can’t Afford Democrats Health Care Reform

The bill is also a bad deal for young adults. The AP recently reported that,

Under the health care overhaul, young adults who buy their own insurance will carry a heavier burden of the medical costs of older Americans – a shift expected to raise insurance premiums for young people when the plan takes full effect.

Beginning in 2014, most Americans will be required to buy insurance or pay a tax penalty. That’s when premiums for young adults seeking coverage on the individual market would likely climb by 17 percent on average, or roughly $42 a month, according to an analysis of the plan conducted for The Associated Press.

Young adults are healthier, and thus cheaper to insure, than older citizens. Prior to passing reform health care plans reflected this fact in the cost of health care plans. However, the Democrats’ plan subsidizes the higher insurance costs of older Americans by mandating young adults buy more coverage than they may otherwise need. As one health care expert admitted,

It’s essential that young, healthy people participate because the requirement that people have insurance “is really a mechanism for financing health care reform.”

The government should not view Millennials, who have been hit harder than any other age group during the recession, as a method to finance their plan. Although reforms do include an option to remain on your parent’s insurance to the age of 26 and some subsidies to reduce the costs the bill still has an unfair impact on young adults. Young adults want the ability to choose a plan that suits their needs at a price they are willing to pay – not the government forcing them to buy a one size fits all plan they cannot afford.

Bottom Line: Health care reform is like a drug where the side effects are worse than the disease. Simply put, this is one bitter pill young adults should not have had to swallow.

by Brandon Greife, Political Director

The United States is crossroads. We are facing a massive deficit brought on by historic spending and entitlement expansion. The nation is now coming to the slow realization that these policies cannot be sustained without crippling their economy for years to come. But it is the next generation that will be responsible for the fiscal responsibility of today’s government.

Therein lies the problem. Former Congressman Jack Danforth said back in 1992 that,

“I have never seen more senators express discontent with their jobs . . . I think the major reason is that, deep down in our hearts, we have been accomplices to doing something terrible and unforgivable to this wonderful country. Deep down in our hearts, we know that we have bankrupted America and that we have given our children a legacy of bankruptcy . . . We have defrauded our country to get ourselves elected.”

That quote sums up the multitude of problems that prevents the government from coming up with real solutions to the debt crisis. First, an election survival instinct instructs Congressmen to ignore the problem. Entitlement reform is as polarizing as Duke basketball. Elected officials, who remain in a constant struggle to stay in office, tend to shy away from divisive topics which could cost them votes.

The perfect example is health care reform. Finding votes on one of the Democrats top legislative priorities was akin to pulling teeth. And that’s when you try to give people something. Imagine the toxicity of a policy choice that requires taking away something from people. Fortunately the tide may be turning here. Recent polls show that people’s concern with the debt and deficit are growing into major issues amongst the electorate. But while the issue remains popular in the abstract it receives much less fanfare in practice. For instance, everyone likes hearing that a candidate will cut the deficit, nobody likes hearing that he’s going to do it by increasing the retirement age.

Second, there is very little incentive for the government to act immediately. Jack Danforth’s quote about bankrupting future generations was made back in 1992 – nearly 20 years ago! If Congress senses there is an opportunity to kick an unpopular can down the road it is pretty much a sure bet that they will. Eventually the problem must come to a head. There are only so many generations who can say, “we must do this to save our kid’s future” before that future becomes the present.

Third, a generational struggle exists in the fight to lower the budget deficit. As the Economist wrote,

“The main fault line is often intergenerational. Some promises, particularly on public-sector pensions and health care, may impose too great a burden on the next generation. Middle-aged Americans have written checks on the accounts of their children. Scaling back those promises, for example by raising the pension age, is a prerequisite for getting public finances in order just about everywhere . . .”

Older generations don’t have the same anxiety about national debt and budget deficits as younger generations. Older voters take a micro-view of the debt and are mainly concerned with maintaining and maximizing their benefits. Younger voters take a macro-view in that they understand that without reform they are likely to either suffer through increased taxes or reduced benefits. Unfortunately, older voters are notoriously reliable to show up to vote in November whereas young voters must overcome a stigma of apathy. The stigma has translated into a powerful voting cue for members of Congress. Tough to win elections, especially as a Republican, by conceding the older cohort to another candidate. This is why Danforth felt like an “accomplice to doing something terrible.”  He, like many of today’s politicians, understood the political expediency (which runs directly in contrast with the long-term economic expediency) of the continued growth in government spending.

While an intergenerational fault line exists it does not follow that there must be an avalanche of debt. Our nation is already approaching the first prerequisite to getting generations on the same page – a common understanding of the debt and entitlement crisis we face. But we must also seek out reforms that cater to young and old alike. For instance, we could eliminate the Social Security payroll tax so that we close the gap between dollars paid into the program and benefits received by the retiree but also index the retirement age to today’s life expectancy. Entitlements and debt are simply too big of an issue to be tackled by only one age constituency. We must find common ground where we can and promote an understanding that we must fix the system before it breaks down completely.

We must not be “accomplices” in bankrupting this generation. Our generation is one step ahead in their understanding of the dire fiscal future of this nation. We still face an uphill struggle. We must make Washington understand that we must act quickly. Our actions must make them believe that the truly politically toxic maneuver is to ignore the issue. We’re fighting against an image of our own creation, but it is a fight we can win.

by Brandon Greife, Political Director

The latest roundup of news, commentary and analysis from around the web

Many people have objected to Barack Obama’s use of mandates to force the purchase of insurance, including…Barack Obama (Cato)

Barack Obama also objected to the appointment of lobbyists to high government office…until he started appointing them en-masse (Open Secrets)

Here’s a look back at 10 of Obama’s failed nominees (Sen. Jim DeMint)

President Obama can’t even get his own administration behind his hard line against Israel… (Politico)

…Nor prominent members of his own party (Real Clear Politics)

And one of the left’s flagship magazines is fretting over the long term suppression of growth because of Obama’s debt (The New Republic)

The Wall Street Journal asks the surprising question: What does more damage to US security; Israeli settlements or Lady Gaga? (Wall Street Journal)

Rep. Henry Waxman has declared an all out war on Generally Accepted Accounting Principles (Megan McCardle, The Atlantic)

Approval of the Congress is the lowest it has been since 1994.  Those who don’t learn from history… (The Washington Post)

Gov. Chris Christie has been showing real leadership in New Jersey since his election in November (Real Clear Markets)

In light of Google’s recent withdrawel from China, Co-Founder Sergey Brin speaks out against Chinese censorship … (Der Spiegel)

…And Google’s CEO Erik Schmidt teams up with Verizon CEO Ivan Seidenberg to argue for an extremely limited government role in broadband expansion (Wall Street Journal)

The next CR-Wire will be posted on Friday, April 2nd

Last year President Clinton predicted that “the minute health care reform passed, President Obama’s approval ratings would go up 10 points.” He’s not Nostradamus, he may not even be Carnac the Magnificent, but his prediction was pretty close. According to Gallup, the week before health care reform was signed into law Barack Obama’s job approval reached its lowest point – 46%. A week later, after the reform legislation passed, Obama’s approval rating jumped to 51% – a 5% bump.

Though likely not the type of increase that was expected or hoped-for it still represented the fact that passing health care was a victory for the Obama administration. Unfortunately, Clinton’s statement was more prescient than even he probably intended. Turns out the approval rating bump lasted for about “a minute” after health care reform passed.

The latest Gallup daily tracking poll showed Obama dipped back into pre-reform levels with 46% disapproving and 46% approving. Moreover, the trend holds in other post health care polls. For instance:

• Rasmussen Poll finds that 47% approve and 53% disapprove of President Obama’s. Passing health care has also done little to budget those with strong feelings. Latest polling shows 43% strongly disapprove and 30% strongly approve.
• CNN finds that 45% approve of the way President Obama handles health care policy while 54% approve
• ABC finds that 48% approve of Obama’s handling of reform while 49% disapprove

Two weeks removed from President Obama passing what is sure to be his signature piece of legislation, the bill that will be a part of his legacy forever, and all he got was a measly (and temporary) 5% bump? That surely does not bode well for the Democrats in November. It appears David Axelrod was wrong when he said, “as people become familiar with [the health care bill], it will sell itself.” But we should not be surprised. In hundreds of speeches stretching over 12 months President Obama has been attempting to sell the bill. Although the details are still trickling out (like how much its going to cost companies) the back and forth between the parties provided most people with a good idea of what to expect. Still, people weren’t buying what the Democrats were selling. Why should adding a signature at the end change any of that? In fact, I would expect people’s opinions of the bill, and thus Obama’s approval ratings on the issue, to go down. While Democrats’ clever accounting trick that allowed taxes to begin right away but delayed benefits for four years may have made for a nice CBO score, it likely won’t thrill too many taxpayers.

But there is one positive for Democrats passing health care that may get overlooked. A recent Congressional Insiders poll signaled a narrowing in the intensity gap between the parties. The poll found that 77% of Democrats feel that they will be the more energized party in November while 97% of Republicans felt the same way. The GOP still has the edge – but passing health care reform may have knocked the rust off many of Obama’s 2008 supporters. Then again, anger is a much more powerful emotion than contentment, so Democrats must find a way to keep their base excited now that one of their main selling points has been accomplished. Republicans on the other hand must make sure they don’t lose the momentum they have gained over the past year. Merely because recent polls shows that Obama didn’t get the bump he (we) expected doesn’t mean we can cruise into November. The opportunity is there but we must seize it.

by Brandon Greife, Political Director

A year ago President Obama said that the Making Home Affordable program will “refinance loans for millions of families in traditional mortgages who are underwater or close to it. . . . And through this plan, we will help between 7 and 9 million families restructure or refinance their mortgages so they can afford – avoid foreclosure.” The reality has been slightly less impressive. But then again, that has been the trend from the Obama presidency. Overpromise, under-deliver.

The original intention of this Obama initiative which includes the Home Affordable Modification Program (HAMP) was to pay lenders to modify borrowers’ mortgages by lowering their monthly payments. The goal was to protect homeowners from foreclosure. Unfortunately that ideal changed. Much like “created” became “saved” the Treasury Department stepped in and turned “help up to 3 to 4 million at-risk homeowners avoid foreclosure” into “3 to 4 million homeowners will receive offers for a trial modification.” But as Neil Barofsky, the special inspector general for the Troubled Asset Relief Program, said in a report:

“This goal is essentially meaningless. This program will be defined and must be defined as it was to the American people, how many people receive permanent modifications and stay in their home. They’ve actually harmed the people in this program was intended to help, borrowers who’ve been put in pointless trial modifications.”

Harsh words, but much needed for a program that is not living up to its lofty goals and hefty price tag. Since the housing crisis began in 2007 nearly 5 million homeowners have received foreclosure filings. However, the HAMP program has done little to stem the rash of foreclosures with 4.5 million new filings expected in 2010. But while millions of homeowners are underwater and foreclosures continue to rise, the HAMP program has only 168,703 households had received permanent loan modifications to reduce their mortgage payments.

After an unsuccessful launch to the program, the Obama administration rushed to quickly assist borrowers, in an effort to appear to be doing something. It was enough for the Congressional Oversight Panel to declare that,

“It increasingly appears that HAMP is targeted at the housing crisis as it existed six months ago, rather than as it exists right now.”

Trial modifications began without even verifying the loan recipient’s income.  When the number of borrowers receiving permanent assistance slowed down, the Obama administration began to pressure financial institutions to turn more trial modifications into long term help. The total debt of the borrower, including student loans, car payments, and credit cards, was never thoroughly analyzed before being given a loan.  The result being that the median ratio of monthly debt payments to pretax income remains 60% – unaffordable to most homeowners. Consequently, 40% of homeowners in the program will re-default.

The threat of re-defaults is especially discouraging. By not adequately assessing the full debt picture of many of the program’s participants the program threatens to merely delay foreclosures rather than preventing them. Moreover, as the Wall Street Journal reported, participants mortgage payments will gradually return to their pre-HAMP levels, which may lead to a new string of defaults. Dean Baker, co-director for the Center of Economic and Policy Research, argued that

“As it is, I think that the main impact of the HAMP program has been to string people along so that they continue to make payments on an underwater mortgage.”

$50 billion is a lot to spend to simply delay foreclosures. And I doubt the American people (or taxpayers) take solace in the Treasury’s revised definition of success to include “offers” rather than actually preventing foreclosures. Frankly, we deserve better out of our government. In a time when American families are pinching pennies and tracking every expense – the federal government should be expected to do the same. Preventing people from losing their homes is a laudable goal. But spending $50 billion in taxpayer money without thoroughly understanding the problem and then hiding behind new definitions of success is simply unacceptable.

We expect the government to solve our problems, not merely push them off to the future. Then again, we should’ve learned by now.

by Brandon Greife

In sports everyone knows preseason polls don’t count for much. All they are is a bunch of talking heads making their best guess as to who will be good. Sure, fans love them. Of course, schools want the high ranking. But in the end – the only ranking that matters comes at the end of the season, not the beginning.

The same goes for health care reform polls. Prior to passage it was nearly impossible to tell which side truly had the momentum. Some who said they opposed reform really only did so because it didn’t contain the public option. Some who said they favored it didn’t quite have any clue what was in it. Now most of the chips are on the table. I say most because it will take years to find out the true effects of the health care reform plan. Possibly more importantly, it will take years to find out the true cost.

Nevertheless, now that we’re officially out of the health care preseason let’s take a look at the polls.  One of the first polls released after the health care vote showed a massive uptick in support for the legislation. The poll, done by Gallup, showed that 49% of people thought that passing reform was a “good thing” versus 40% who thought it was a “bad thing.” After the results came out a collective defeated “sigh” came from across the Republican base. For months, literally every poll showed that voters were against health care reform and now that it passed…everyone loves it! It was enough for Nancy Pelosi to say,

“What we see already is a sea change in attitude that we got the job done. . . We passed legislation, and that has made a very big difference in the receptivity of the American people.”

It appeared as if Republicans should begin to temper their November expectations. But could that really be it? Evidence in, case closed, people have decided to love what they previously hated? No. Recent polls are showing that the bounce in support for health care and Barack Obama was just that – a bounce. For instance, a new Washington Post poll showed that 46% said they support the new law while 50% were opposed. Though still a slight improvement, this is hardly a “sea change.” But what is perhaps most important in this poll was the result that wasn’t published in the newspaper – the sampling bias. As HotAir reported,

This poll has a D/R/I split of 34/24/38, giving Democrats a ten-point advantage in the partisan split.  That’s an increase of four points since the February survey, and far outside of reality.  Recall that Barack Obama won his presidential popular vote by seven points, with significant Republican crossover voting.

But the Washington Post poll does seem to better capture the mood of the nation. Among some other findings in the week in polling:

• CBS News poll found that 62% of people said Republicans should continue to challenge the health care bill
• Rasmussen found that 50% think the Democrats health care plan is bad for the country while 41% believe it will be good
• Quinnipiac found that despite passage of the bill voters disapprove of health care reform 49%-to-40%

With the first few games played Democrats still appear to be trailing in the health care polls. The disapproval gap has narrowed slightly but that is to be expected with all the hoopla of signing a piece of legislation that we’ve been talking about nonstop now for 12 months. But as the excitement fades will people gradually become more content with the idea or will people revert to pre-passage levels of dislike. The more likely answer appears to be the latter option. Democrats structured the reform legislation so that costs begin immediately but most of the coverage benefits do not begin until year four. Though great for the CBO score it may be bad for the poll numbers. People simply don’t like paying for things they are getting the benefit of (and even then they’ll complain about the pricetag.)

Remember that we’re still playing the regular season, and I reiterate – the only poll that matters is the last one. Both Democrats and Republicans have said their game plan for the November championship game will be to run on health care. Those final polls, the one’s deciding the elections, will determine who won the game, but it appears Republicans should still go into the postseason with some confidence.

by Brandon Greife

A compilation of interesting news and analysis that we have come across at the College Republican National Committee

In a great, but frightening article, renowned economist Paul Samuelson analyses the potentially disastrous spending policies of the Obama Administration and the long term fiscal effects of ObamaCare (Paul Samuelson)

After one week of ObamaCare, the damage is already rolling in.  Businesses are reporting stunning new expenses to comply with the law…(Wall Street Journal)

…But the Democrats are doing their best to intimidate companies from saying so (Washington Examiner)

An analysis by the think tank RAND indicates that America’s already frightening health spending inflation will increase after ObamaCare.  The biggest problem facing American healthcare has been made worse by this ‘reform’ (The Economist)

It’s no wonder the middle class is drifting from Obama… (The Wall Street Journal)

…and the President didn’t get his expected poll bounce after the passage of the bill (Gallup)

Meanwhile, a poll in Florida shows the Democrats taking a big hit as a result of the bill’s passage (Miami Herald)

Will the Age of Obama be remembered as the time when America’s financial standing fell apart?  Quite possibly (Real Clear Markets)

As investors dump treasuries, the likelyhood of an interest rate rise is going up (The Wall Street Journal)

As rhetoric against China heats up, America faces the prospect of a dangerous economic war with China (The Guardian)

After a pledge to fix America’s standing in the world, the President has won America new enemies and alienated its friends (The SF Chronicle)

In an unlikely alliance, Jesse Jackson Jr. and Mike Pence team up to defend Israel amidst an all out assault from the Obama administration (The Hill)

What does Ayad Allawi’s victory in Iraq mean for the US? (The New Republic)

Obama’s appointee for the National Labor Relations Board is a reckless choice (Las Vegas Review Journal)

How will the electoral map look after the 2010 census?  (CBS)

The next CR-Wire will be posted on Wednesday, March 31st

We are starting a new feature at collegerepublicans.org.  Three times a week we are going to post a compilation of news stories on politics and policy, business, international relations and anything else we come across.  Be sure to send us any interesting reads that you would like to see included.  In the meantime, here’s the inaugural ‘CR-Wire’

March 24th: One of the worst days in modern history for American foreign policy (NY-Post)

What effect will ObamaCare actually have on the national debt?  The bond markets render their verdict (Michael Barone)

What is the immediate effect of ObamaCare’s passage?  Business takes a hit (American Spectator)

Twenty ways ObamaCare curtails freedom (Investor’s Business Daily)

The American people don’t want this bill, but it’s still getting some ringing endorsements.  Castro calls it a ‘miracle’ (CBS News, Yahoo News)

As Greece implodes, America faces the same fate if we don’t change course (IBD)

The Congressional Budget Office says government debt will be 90% of America’s GDP by 2020 (Washington Times)

Social Security began running deficits this week, seven years earlier than expected.  We need entitlement reform (The Hill)

While publicly chastising Israel all week, the Obama Administration weakened proposed sanctions against Iran (Wall Street Journal)

Obama will seemingly stop at nothing to humiliate a vital American ally (London Times)

Europe’s Dilemma: Growth versus the safety net (Wall Street Journal)

The international news media has been stunningly silent while Turkey formulates plans to expel thousands of Armenians (The New Republic)

Pelosi says she’s set a precedent for how to pass bills in the future.  For the sake of transparency and good government, let’s hope not (The Hill)

Meg Whitman leads Jerry Brown in the race for California Governor (Public Policy Polling)

The Next CR-Wire will be posted on Monday, March 29th

We all remember the petty school playground comeback, “it’s a free country.” It probably didn’t give us the right to pull the girl’s hair, skip someone in the lunch line, or whatever other juvenile stunt we pulled in elementary school. But the foundational principle of the argument is sound. This is a country founded on the concept of unparalleled personal freedoms. But what does it mean to be free? Do you think of yourself, as Jerry Seinfeld would say, “master of my domain,” or do you think, I’m dependent on someone for my existence.

Given recent events, it may surprise some people that the US recently scored as a “mostly free” country on the Democracy Index, behind Canada, Ireland, Germany, and Spain, down from a rating as a “free country”, the previous year.  The index ranks countries by the individual citizens’ freedom to succeed by one’s own initiative.  This rating is measured by the index of dependency on government, which is rapidly increasing in the United States. In 1962 it was at 19%.  Currently, it stands at 24%, and will rise even higher if Obamacare is signed into law.

The dependence on government is decaying the incentive of private individuals to work, innovate, and create jobs.  Dependency on government is robbing us of our freedom.

How did we get here?  Historically, private citizens and local entities, churches, and fraternal organizations provided more assistance to needy members of society than today.  Before World War II, Americans with lower incomes obtained health care through community institutions, some operated by churches and social clubs.

Local community based charitable organizations once provided the majority of aid, resulting in personal relationships between individuals receiving help and those in the community providing assistance.

Before, community aid representatives were aware of a struggling person’s needs and tailored assistance according to the community’s budget constraints. Today, housing and other needs are addressed by anonymous government bureaucrats with no ties to the community of the needy person.

Starting in the early 1900’s, government gradually offered more and more services previously provided by self-help and mutual aid organizations.  For example, mutual aid, religious, and educational organizations helped low income Americans with housing assistance.  Today, the government provides nearly all public housing assistance.  Today, Social Security and government programs provide much or all of the income to poor or lower financial class households.  Unemployment insurance, welfare payments provide income to the needy that was previously provided by unions, charities, and mutual aid societies. Income assistance has become a government program with little connection to local and civil society.

To turn around this cycle of dependency and reinstate the incentive to work, innovate, and create jobs, four clear steps can be taken:

1. The US must eliminate confiscatory taxation and simplify a tax code riddled with exemptions and loopholes. We propose adopting a simple two tiered tax structure, modeled after Paul Ryan’s Roadmap for America’s Future in which people would pay a flat 10% on income up to $100,00 and 25% on income above that
2. Income tax deductions allowable for charitable giving at 10% of total giving.  This will encourage community based social services.
3. Incentivize people to create and sustain their own retirement funds.  Set a goal of 10% of total income.
4. Government support such as welfare and food stamps must be needs based. A safety net should only catch those who fall – not everyone

A free country is populated by self-reliant people who are compassionate towards their neighbors.  This was the vision of the founders.  We should not aspire to be a “mostly free” country. We could have been called that without all the worry about the Revolutionary War. And anyway, “it’s a mostly free country” just doesn’t have the same ring to it in a playground argument.

by Ben Mason (hat tip Brandon Greife)

In his State of the Union Barack Obama said that “[j]obs must be our number one focus in 2010.” He must have forgotten. Instead, it has been health care reform 24/7. Not only has a job creation agenda fallen by the wayside, if early returns are any indication, health care reform will be a job killer.

A day after passing health care, three major corporations: Verizon, Caterpillar, and Deere have all issued reports explaining their estimated tax hit. Among the worrisome projections:

• Verizon issued a letter to employees stating that “Verizon’s costs will increase in the short-term. These cost increases are primarily driven by two provisions [taxing a subsidy for prescription drug coverage and a tax on high value health plans].”
• Caterpillar, in a letter to Nancy Pelosi, said that it would increase the company’s health care costs by more than $100 million in just the first year. The letter said that, “We can ill afford cost increases that place us at a disadvantage versus our global competitors.”
• Deere, through a press release, announced that “the company’s expenses are expected to be about $150 million higher on an after-tax basis.”

However, these three companies are not unique. As Longbow Research analyst Eli Lustgarten explains, “Deere and Caterpillar are bellwether companies and it’s hard to believe that they are unique. We expect that most companies will have to adjust to the new regulations.” There is little reason to expect this won’t be part of a much larger trend. Earlier this year 10 companies including Boeing, Xerox, Met Life, and Exelon sent a letter to Congressional leaders warning of the costs of increases.

One of the largest reasons for the increased financial burden is that the health care reform bill will begin taxing the government subsidies on retiree prescription drug coverage. Prior to the bill, the government gave a partial tax subsidy to employers to encourage them to maintain drug plans for their retirees. Slashing the subsidy will thus force companies to pay a substantial increase in drug costs or, perhaps worse, cause them to drop coverage. It was enough to cause Susan Exkerly, senior VP for the National Federation of Independent Business to claim,

“This isn’t a healthcare bill, this is a tax bill wrapped up in healthcare paper. For small businesses, healthcare reform has always been about costs – reducing them. But the only thing this bill does is drive costs even higher.”

For better or worse the health care bill will shape Obama’s legacy. History could have also been made by shepherding us out of this recession. However the unexpected costs and taxes on businesses in health care reform will further disrupt the economy’s ability to get back on its feet. We are climbing out of the worst economic hole in our lifetimes but Democrats seem content to shovel more dirt in our face.

by Brandon Greife (hat tip Matthew Cavanaugh)