“Fiscal Cliff” Talks: An Update

Today, for the first time since the election, President Obama and House Speaker John Boehner met alone, face-to-face, at the White House to discuss ongoing negotions over the budget.   (I can’t help but see the photo, which shows Obama with a hand on Boehnr’s shoulder, as a reference to the “Saturday Night Live” skit that appeared last night.  

I’m more and more hopeful about the budget negotiations. Recentlly, I wrote that Obama had “won round one,” explaining that I believed CNN’s report that  the Republicans and Democrats have reached a deal on taxes. “Both sides agree the wealthy will pay more, so now fiscal cliff talks come down to how much Republicans can wring out of the White House in return for giving in on taxes.”  Based on everything I know about the economics and the politics of the situation, this makes sense. /

Since then Boehner has said:  “No progress has been made.”

This does not change the story:  If, as CNN’s sources say, (and I believe) Republicans have conceded that taxes cuts for the top 2% must expire Janauary 1, while cuts for the remaining 98% will continue, that doesn’t mean they are ready to make the agreement public.

Understandably, Republicans are not willing to acknowledge that they lost round one of negotiations until they can also announce that they won something in round two.  Nor does  President Obama want to blind-side Boehner by letting it leak that a tax deal is in place. That would be counter-productive.

                          The Inside Story and the Outside Story

Recentlly, the Washington Post’s Ezra Klein reported:  “Right now, the fiscal cliff negotiations are proceeding on two tracks.

“One track includes the press releases, public statements and legislative tactics the two parties are deploying to prove the purity of their faith and their commitment to beating the other side to a bloody pulp. Watch these closely and it’s easy to get depressed.  . . ‘There isn’t a progress report;’ Republican House Speaker John Boehner sighed Friday, ‘because there’s no progress to report.’

“The other track includes the offers, counteroffers and red lines proposed by Boehner and President Obama. If you look at these closely, a deal is taking shape.”

 I agree with Ezra about the “two tracks”. But I don’t agree regarding the “shape” of the deal that is emerging.

First, I agree that  the majority of Republicans in Congress have accepted the fact that the Bush-era tax breaks for folks earning over $200,000 (and couples earning over $250,000) will have to expire. I won’t try to guess when politicians will complete the two stages of bargaining and be ready to announce a deal. We may go right up to the January 1 deadline.

Moreover, it is  possible that when it comes to cutting government spending, too many Republicans will remain stubbornly, and foolishly, intransigent — insisting on concessions that would inflict pain on the middle-class.

If that happens, I predict that President Obama will let us sail over the so-called “fiscal cliff.”  He knows this wouldn’t do any permanent damage to the economy.  As Rutgers reported today, even Wall Street does not seem panicked by the prospect: “Investors have peered over the cliff and realized they are looking at a gentle slope . . . . some investors say lawmakers still have time in early 2013 to strike a deficit-reduction deal without imperiling the economy. A survey of 62 Wall Street money managers released on December 5 showed market losses would be manageable if the U.S. goes over the fiscal cliff, even though worries still run deep.

Many on Wall Street understand that, early in the spring, the administration could undo Draconian spending cuts, while lowering tax rates for the 98%. Public pressure will ensure that happens. (In the meantime, the Treasury Secretary could lower withholding rates so that middle-class Americans didn’t suddenly see their paychecks trimmed.)

But taking a ride down that slope would do lasting damage to the GOP.  Polls show that voters would blame Republicans. This is why I think that, in the end, Republican leadership in Congress will do whatever it must to make a deal before January.  As I indicate in the post below. Tea Party extremists in the Republican party are being side-lined.

Continue reading

6 COMMENTS SO FAR -- ADD ONE

Can U.S. Businesses Afford Obamacare?

No doubt you have heard that the Olive Garden, Denny’s and Papa John’s Pizza all are slapping an “Obamacare surcharge” on the price of their products.  They claim they have no choice.

But the news that Americans might pay 50 cents more for a mediocre $10 meal at the Olive Garden is not what bothers me most. Since President Obama was re-elected each of these restaurant chains have announced that they also plan to cut many full-time workers’ hours back to less than 30 hours a week in order to duck the cost of providing health care benefits.. This means that employees who are now working 40 hours a week will have to look for a second job—or find a way to support themselves on less than three-quarters of their current salary.

Michael Tanner, a fellow at the conservative Cato Institute, argues that companies outside the restaurant business also will be forced to down-size. Just a few days ago, Tanner wrote: “While restaurants are especially vulnerable to the cost of Obamcare other business are being hit too. For example, Boston Scientific has announced that it will now lay off up to 1,400 workers and shift some jobs to China. And Dana Holdings, an auto-parts manufacturer with more than 25,000 employees, says it too is exploring ObamaCare-related layoffs.”

Obamacare will  “keep unemployment high,” Tanner claims, because under reform legislation, businesses that have at least 50 employees working over 30 hours a week are expected to offer their workers affordable health insurance. If they choose not to, and more than 30 of their employees qualify for government subsidies to help them purchase their own coverage, the employer must pay a penalty of $3,000 for each worker who receives a subsidy— up to a maximum of $2,000 times the number of the company’s full-time employee minus 30. (The Kaiser Family Foundation offers an excellent graphic explaining the rule.) 

By paying the fine, the employer is, in effect, paying a share of a tax credit that would cost the government anywhere from roughly $1,700 for a single young worker  to over $12,000 to help the average 35-year-old worker who has a spouse, two children, and reports $35,000 in total household income.

Conservatives like Tanner argue that that is unfair, and that small businesses– “the engine of job growth”– will be hit hardest.  

What they  don’t do is look at the math:

Continue reading

11 COMMENTS SO FAR -- ADD ONE

Could President Romney repeal Obamacare? No.

 Mitt Romney’s web site makes a bold promise: “On his first day in office, Mitt Romney will issue an executive order that paves the way for the federal government to issue Obamacare waivers to all 50 states. He will then work with Congress to repeal the full legislation as quickly as possible.”

Many of Romney’s supporters assume that this is what will happen if he wins. But in truth, even if Republicans take both the White House and the Senate, Romney wouldn’t have the power to “repeal the full legislation.” Nor could a new president grant waivers that would let states ignore the Affordable Care Act (ACA). We live in a nation ruled by law, not magic wands.

That said, those who support reform should keep a close eye on the Massachusetts Senate race, where Democrat Elizabeth Warren is challenging Republican Senator Scott Brown. The outcome could determine whether Democrats continue to hold 53 seats out of 100. (Political analysts rate Brown and Nevada’s Dean Heller as the two most vulnerable Senate Republican incumbents. If Republicans win the Senate, they won’t be able dismantle reform, but they could do serious damage to the ACA, by eliminating the subsidies that will help middle-class and low-income Americans purchase insurance. But even if they take over the Senate they will not be able to change the new rules for insurance companies.

                                    Romney’s Promises – and Why You Can’t Believe them

Begin with the “Obamacare waivers” for the states.

“There are no ‘Obamacare waivers’ that could be issued by executive order,” Washington & Lee health law scholar Timothy Jost explained in a recent phone interview. That’s right: these waivers simply don’t exist. Here, we’re tripping over one of those “Big Lies” that have become a feature of the Romney campaign. (Nazi propaganda chief Joseph Goebbels was the master of the tactic: if you tell a colossal lie, and repeat it often enough, people will believe it, not matter how outrageous. After all, who would make up such a whopper?)

On the HealthAffairs BlogJost elaborates :

You will find the rest of this post on HealthInsurance.org If you like, you can return here to comment.

2 COMMENTS SO FAR -- ADD ONE