Commentary Magazine


Topic: Internal Revenue Service

The IRS Targets Conservative Groups—As It Once Targeted COMMENTARY

This morning, an IRS official named Lois Lerner apologized for inappropriately targeting non-profit groups for scrutiny in 2012 based on the fact that they had the words “Tea Party” or “Patriot” in their names. There are many things that need to be said about this. First, and simplest, is to ask how seriously the Obama administration is going to take this outrageous effort at political suppression by an agency under its charge. Has the IRS inspector general gotten involved? Has a U.S. attorney been apprised of this matter, which can only be considered an act of political intimidation and therefore would fall under the aegis of various federal criminal statutes? If not, why not?

Second, this is a test for the mainstream media. If the fact that the targeted groups are conservative means that the story is soft-pedaled and not subject to major investigative scrutiny, any argument against liberal bias evaporates now and forever. Will this be brought up at today’s press briefing at the White House with Jay Carney? You can bet that had any such thing happened in reverse during the Bush administration, Tony Snow would have been bombarded with questions for weeks if not months.

As it happens, I know something about the chilling effect of an IRS investigation into a non-profit’s 501 (c)-3 status because in 2009, COMMENTARY (a non-profit) received a letter from the Internal Revenue Service threatening the revocation of the institution’s standing as a non-profit due to a claim that on our website we had crossed the line in the 2008 election from analysis to explicit advocacy of the candidacy of John McCain for president. (Non-profits are not permitted to endorse candidates.) The charge was false—all we had done was reprint a speech delivered at a COMMENTARY event by then-Sen. Joseph Lieberman in which he had endorsed McCain.

Taking away a non-profit’s ability to receive tax-exempt charitable contributions is equivalent to a death sentence.

We were told by counsel that, should the IRS rule against us, we would have almost no recourse. You might think free speech rights would trump any such effort, but of course no one is challenging your speech rights, merely finding that what you say runs afoul of laws dealing with non-profits. You have no constitutional right to non-profit status, after all.

Disproving the false charge, which we did eventually in part by literally printing out the 2 million words that had appeared on this site in 2008 and sending them in many boxes to the IRS to show that the words in which Lieberman said he was supporting McCain were essentially a part per million, cost us tens of thousands of dollars and dozens upon dozens of hours of lost work time. The inquiry, which never should have been brought, was closed. But talking to lawyers and strategizing and the like in such a circumstance make the experience an ordeal that leaves you a bit shell-shocked—which is, of course, the point.

Now, I had assumed that a hostile reader or hostile liberal group was responsible for the IRS inquiry into COMMENTARY, but there is a salient detail in today’s story that makes me think something else might have been at work. IRS official Lerner said the effort against the conservative groups in 2012 came from “low-level” officials in the Cincinnati office. The investigation into COMMENTARY came out of the Columbus office. Is there something going on inside the IRS offices in Ohio?

Who will find out?

This morning, an IRS official named Lois Lerner apologized for inappropriately targeting non-profit groups for scrutiny in 2012 based on the fact that they had the words “Tea Party” or “Patriot” in their names. There are many things that need to be said about this. First, and simplest, is to ask how seriously the Obama administration is going to take this outrageous effort at political suppression by an agency under its charge. Has the IRS inspector general gotten involved? Has a U.S. attorney been apprised of this matter, which can only be considered an act of political intimidation and therefore would fall under the aegis of various federal criminal statutes? If not, why not?

Second, this is a test for the mainstream media. If the fact that the targeted groups are conservative means that the story is soft-pedaled and not subject to major investigative scrutiny, any argument against liberal bias evaporates now and forever. Will this be brought up at today’s press briefing at the White House with Jay Carney? You can bet that had any such thing happened in reverse during the Bush administration, Tony Snow would have been bombarded with questions for weeks if not months.

As it happens, I know something about the chilling effect of an IRS investigation into a non-profit’s 501 (c)-3 status because in 2009, COMMENTARY (a non-profit) received a letter from the Internal Revenue Service threatening the revocation of the institution’s standing as a non-profit due to a claim that on our website we had crossed the line in the 2008 election from analysis to explicit advocacy of the candidacy of John McCain for president. (Non-profits are not permitted to endorse candidates.) The charge was false—all we had done was reprint a speech delivered at a COMMENTARY event by then-Sen. Joseph Lieberman in which he had endorsed McCain.

Taking away a non-profit’s ability to receive tax-exempt charitable contributions is equivalent to a death sentence.

We were told by counsel that, should the IRS rule against us, we would have almost no recourse. You might think free speech rights would trump any such effort, but of course no one is challenging your speech rights, merely finding that what you say runs afoul of laws dealing with non-profits. You have no constitutional right to non-profit status, after all.

Disproving the false charge, which we did eventually in part by literally printing out the 2 million words that had appeared on this site in 2008 and sending them in many boxes to the IRS to show that the words in which Lieberman said he was supporting McCain were essentially a part per million, cost us tens of thousands of dollars and dozens upon dozens of hours of lost work time. The inquiry, which never should have been brought, was closed. But talking to lawyers and strategizing and the like in such a circumstance make the experience an ordeal that leaves you a bit shell-shocked—which is, of course, the point.

Now, I had assumed that a hostile reader or hostile liberal group was responsible for the IRS inquiry into COMMENTARY, but there is a salient detail in today’s story that makes me think something else might have been at work. IRS official Lerner said the effort against the conservative groups in 2012 came from “low-level” officials in the Cincinnati office. The investigation into COMMENTARY came out of the Columbus office. Is there something going on inside the IRS offices in Ohio?

Who will find out?

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Human Rights Watch Now Openly Endorsing BDS

Human Rights Watch doesn’t like Israel. No surprise there. But since the advocacy group still does important work on human rights issues in other countries, it continues to get taken seriously by the media and government officials. This legitimacy should end immediately in light of HRW’s latest report, which tacitly endorses the beyond-fringe Boycott, Divestment, and Sanctions movement. From the text of the study:

The report is based on case studies comparing Israel’s starkly different treatment of settlements and next-door Palestinian communities in these areas. It calls on the US and EU member states and on businesses with operations in settlement areas to avoid supporting Israeli settlement policies that are inherently discriminatory and that violate international law.

The report also asks the U.S. to avoid “offsetting the costs of Israeli expenditures on settlements by withholding U.S. funding from the Israeli government in an amount equivalent to its expenditures on settlements and related infrastructure in the West Bank.”

That’s bad enough. But there was one recommendation that really caught my eye:

Congress should request a report from the General Accounting Office on the subject of tax-exempt organizations that support settlements and settlement-related activities. Such a study should include specific assessments of the amounts and types of donations involved and the actual end-uses of such donations in the settlements. The report should also address whether current laws and regulations regarding charitable organizations ensure that tax-exempt status is not granted to organizations that facilitate human rights violations or violations of international humanitarian law, are adequately enforced, and whether they are adequate or require revision.

Hmm. As we know from the Z Street case, the IRS has already been giving some pro-Israel groups a hard time on their tax-exemption applications — ostensibly because Israel has a “higher risk of terrorism.” But could the IRS also be concerned about tax-exempt groups giving support to Israeli settlements? And if not, will this be the next rallying cry picked up by the BDS movement?

In addition to those suggestions, HRW also recommended the following quasi-BDS tactics:

• The international community should tack on extra tariffs to products imported from Israeli settlements: “Ensure that policies do not promote settlement activity, such as the discriminatory violations of Palestinian human rights documented in this report, by enforcing tariff agreements in accordance with international law, such that Israeli settlement goods are not given preferential treatment, including by requiring and enforcing clear origin labeling.”

• Businesses operating from the settlements should cease involvement in any activity that HRW deems to be a violation of international law, “including where necessary ending such [business] operations altogether.”

The NGO Monitor has also denounced the report. In an e-mail, it called it evidence that HRW “endorses boycott, divestment, and sanctions (BDS), disguised as opposition to settlements, but in reality seeking the destruction of Israel.”

“This is further proof of HRW founder Robert Bernstein’s conclusion that the organization has turned Israel into a pariah state,” NGO Monitor president Gerald Steinberg added, in a statement on Sunday.

Human Rights Watch doesn’t like Israel. No surprise there. But since the advocacy group still does important work on human rights issues in other countries, it continues to get taken seriously by the media and government officials. This legitimacy should end immediately in light of HRW’s latest report, which tacitly endorses the beyond-fringe Boycott, Divestment, and Sanctions movement. From the text of the study:

The report is based on case studies comparing Israel’s starkly different treatment of settlements and next-door Palestinian communities in these areas. It calls on the US and EU member states and on businesses with operations in settlement areas to avoid supporting Israeli settlement policies that are inherently discriminatory and that violate international law.

The report also asks the U.S. to avoid “offsetting the costs of Israeli expenditures on settlements by withholding U.S. funding from the Israeli government in an amount equivalent to its expenditures on settlements and related infrastructure in the West Bank.”

That’s bad enough. But there was one recommendation that really caught my eye:

Congress should request a report from the General Accounting Office on the subject of tax-exempt organizations that support settlements and settlement-related activities. Such a study should include specific assessments of the amounts and types of donations involved and the actual end-uses of such donations in the settlements. The report should also address whether current laws and regulations regarding charitable organizations ensure that tax-exempt status is not granted to organizations that facilitate human rights violations or violations of international humanitarian law, are adequately enforced, and whether they are adequate or require revision.

Hmm. As we know from the Z Street case, the IRS has already been giving some pro-Israel groups a hard time on their tax-exemption applications — ostensibly because Israel has a “higher risk of terrorism.” But could the IRS also be concerned about tax-exempt groups giving support to Israeli settlements? And if not, will this be the next rallying cry picked up by the BDS movement?

In addition to those suggestions, HRW also recommended the following quasi-BDS tactics:

• The international community should tack on extra tariffs to products imported from Israeli settlements: “Ensure that policies do not promote settlement activity, such as the discriminatory violations of Palestinian human rights documented in this report, by enforcing tariff agreements in accordance with international law, such that Israeli settlement goods are not given preferential treatment, including by requiring and enforcing clear origin labeling.”

• Businesses operating from the settlements should cease involvement in any activity that HRW deems to be a violation of international law, “including where necessary ending such [business] operations altogether.”

The NGO Monitor has also denounced the report. In an e-mail, it called it evidence that HRW “endorses boycott, divestment, and sanctions (BDS), disguised as opposition to settlements, but in reality seeking the destruction of Israel.”

“This is further proof of HRW founder Robert Bernstein’s conclusion that the organization has turned Israel into a pariah state,” NGO Monitor president Gerald Steinberg added, in a statement on Sunday.

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Is the IRS Investigating Pro-Israel Groups for Terrorism Ties?

Court affidavits filed by the IRS indicate that the agency has been giving extra scrutiny to Jewish organizations that provide material or financial support to Israel, out of concerns that these resources may be going to “terrorist” activities.

The court documents came to light during an ongoing legal battle between the pro-Israel group Z Street and the IRS. Z Street filed a lawsuit against the agency in August, alleging that its request for tax-exempt status was delayed because of its support for the Jewish state.

IRS officials now say that Z Street’s application was referred to a special task force that deals with groups that support countries with a “higher risk of terrorism.”

“The application indicated that Z Street could be providing resources to organizations within Israel or facilitating the provision of resources to organizations within the state of Israel,” wrote IRS official Jon Waddell in a Dec. 12 affidavit. “Israel is one of many Middle Eastern countries that have a ‘higher risk of terrorism’”

He said that referring organizations to the IRS’s investigative task force is “appropriate whenever an application mentions providing resources to organizations in a country with a higher risk of terrorism.”

But Z Street founder Lori Lowenthal Marcus denied that the group provided assistance to Israel. “We have never, ever given any money or resources to anybody, or any organization, in Israel at all,” Lowenthal Marcus told me during an interview. “We don’t give money to anything. Even if this ridiculous [IRS] policy exists, Z Street still doesn’t fall within it, so what are they doing?”

She added that the incoming Republican House leadership has expressed interest in potentially launching an investigation into the matter.

Z Street asserts that it isn’t the only pro-Israel group the IRS has targeted. At the end of November, Z Street introduced a letter in court that appeared to show an IRS agent giving unusual scrutiny to another Jewish group that had also applied for 501(c)3 status.

In the letter, the agent asked the group, “Does your organization support the existence of the land of Israel?” At the time, some tax attorneys told Politico’s Ben Smith that they found the IRS’s inquiries to be inappropriate.

Lowenthal Marcus says Z Street will keep moving ahead with its lawsuit, and of course we’ll be following the developments here at CONTENTIONS.

Court affidavits filed by the IRS indicate that the agency has been giving extra scrutiny to Jewish organizations that provide material or financial support to Israel, out of concerns that these resources may be going to “terrorist” activities.

The court documents came to light during an ongoing legal battle between the pro-Israel group Z Street and the IRS. Z Street filed a lawsuit against the agency in August, alleging that its request for tax-exempt status was delayed because of its support for the Jewish state.

IRS officials now say that Z Street’s application was referred to a special task force that deals with groups that support countries with a “higher risk of terrorism.”

“The application indicated that Z Street could be providing resources to organizations within Israel or facilitating the provision of resources to organizations within the state of Israel,” wrote IRS official Jon Waddell in a Dec. 12 affidavit. “Israel is one of many Middle Eastern countries that have a ‘higher risk of terrorism’”

He said that referring organizations to the IRS’s investigative task force is “appropriate whenever an application mentions providing resources to organizations in a country with a higher risk of terrorism.”

But Z Street founder Lori Lowenthal Marcus denied that the group provided assistance to Israel. “We have never, ever given any money or resources to anybody, or any organization, in Israel at all,” Lowenthal Marcus told me during an interview. “We don’t give money to anything. Even if this ridiculous [IRS] policy exists, Z Street still doesn’t fall within it, so what are they doing?”

She added that the incoming Republican House leadership has expressed interest in potentially launching an investigation into the matter.

Z Street asserts that it isn’t the only pro-Israel group the IRS has targeted. At the end of November, Z Street introduced a letter in court that appeared to show an IRS agent giving unusual scrutiny to another Jewish group that had also applied for 501(c)3 status.

In the letter, the agent asked the group, “Does your organization support the existence of the land of Israel?” At the time, some tax attorneys told Politico’s Ben Smith that they found the IRS’s inquiries to be inappropriate.

Lowenthal Marcus says Z Street will keep moving ahead with its lawsuit, and of course we’ll be following the developments here at CONTENTIONS.

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The Tax Deal: Politics and Principles

Reaction to the tax deal is all over the lot, on both sides of the political spectrum. Paul Mirengoff thinks it is a very good deal for Republicans (John Hinderaker would go further and label it a great deal). Grover Norquist says it is a much bigger victory for Republicans than recognized. Mark Levin thinks it is a bad deal, and Hugh Hewitt is deeply dispirited.

Jonathan Chait thinks Obama got more from the Republicans than Chait thought he would. Jonathan Bernstein thinks it is actually a win for the Democrats. The New York Times thinks it is a disappointing retreat by the White House. Obama himself did not sound very happy.

We’ll find out who was right in two years, when all the issues will resurface in the middle of a presidential election.

But it is not too soon to note the intellectual collapse of one of Obama’s principal arguments. For the past two years, he castigated the Bush tax cuts as breaks for “millionaires and billionaires,” even though the across-the-board cuts primarily benefited people in the lower brackets (the proportion of millionaires and billionaires among taxpayers is one-third of 1 percent, according to the latest IRS statistics). In order to raise any real money from “millionaires and billionaires,” Obama had to define them as individuals making one-fifth of a million dollars (one-fourth in the case of couples) – because there were 10 times as many people in that group as real millionaires, and therefore (applying the Willy Sutton principle of public policy) that was the place to go.

The White House ended up opposing a “compromise” under which taxes would be raised only on real millionaires, since there was not enough money in that group to make that resolution sufficiently remunerative for the government. More than taxing millionaires and billionaires, the White House really wanted to tax the non-millionaires. When that proved impossible, the White House went in a different direction.

In contrast, the Republicans were unified around a set of principles easier to explain and defend: don’t raise taxes in a recession; don’t increase taxes on employers if you want more employment; don’t ask the public, which is fairly crying out for you to cut spending, to send you $700 billion more to spend. These principles are unlikely to be proved wrong in two years.

Reaction to the tax deal is all over the lot, on both sides of the political spectrum. Paul Mirengoff thinks it is a very good deal for Republicans (John Hinderaker would go further and label it a great deal). Grover Norquist says it is a much bigger victory for Republicans than recognized. Mark Levin thinks it is a bad deal, and Hugh Hewitt is deeply dispirited.

Jonathan Chait thinks Obama got more from the Republicans than Chait thought he would. Jonathan Bernstein thinks it is actually a win for the Democrats. The New York Times thinks it is a disappointing retreat by the White House. Obama himself did not sound very happy.

We’ll find out who was right in two years, when all the issues will resurface in the middle of a presidential election.

But it is not too soon to note the intellectual collapse of one of Obama’s principal arguments. For the past two years, he castigated the Bush tax cuts as breaks for “millionaires and billionaires,” even though the across-the-board cuts primarily benefited people in the lower brackets (the proportion of millionaires and billionaires among taxpayers is one-third of 1 percent, according to the latest IRS statistics). In order to raise any real money from “millionaires and billionaires,” Obama had to define them as individuals making one-fifth of a million dollars (one-fourth in the case of couples) – because there were 10 times as many people in that group as real millionaires, and therefore (applying the Willy Sutton principle of public policy) that was the place to go.

The White House ended up opposing a “compromise” under which taxes would be raised only on real millionaires, since there was not enough money in that group to make that resolution sufficiently remunerative for the government. More than taxing millionaires and billionaires, the White House really wanted to tax the non-millionaires. When that proved impossible, the White House went in a different direction.

In contrast, the Republicans were unified around a set of principles easier to explain and defend: don’t raise taxes in a recession; don’t increase taxes on employers if you want more employment; don’t ask the public, which is fairly crying out for you to cut spending, to send you $700 billion more to spend. These principles are unlikely to be proved wrong in two years.

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Are You Now or Have You Ever Been a Zionist?

We know that the Obama administration has been far from friendly to Israel — but is this sentiment now influencing policy at the IRS?

The Jewish group Z Street, which claims that its request for tax-exempt status was delayed by the IRS because of its support Israel, has been engulfed in a legal battle with the government agency for months. The case heated up last week after the organization introduced a letter that appeared to show an IRS agent giving unusual scrutiny to another Jewish group that had also applied for 501(c)3 status. Among the questions asked by the agent: “Does your organization support the existence of the land of Israel?”

Z Street said that this is further evidence that the IRS has started targeting pro-Israel groups. Ben Smith at Politico has the details of the letter:

A Pennsylvania Jewish group that has claimed the Internal Revenue Service is targeting pro-Israel groups introduced in federal court today a letter from an IRS agent to another,  unnamed organization that tax experts said was likely outside the usual or appropriate scope of an IRS inquiry.

“Does your organization support the existence of the land of Israel?” IRS agent Tracy Dornette wrote the organization, according to this week’s court filing, as part of its consideration of the organizations application for tax exempt status. “Describe your organization’s religious belief system toward the land of Israel.”

But are these inquiries simply inappropriate, or are they evidence of an official campaign against Zionist organizations? A couple of tax attorneys consulted by Smith said they found the questions to be out of line:

“The claims go far beyond what should be the IRS’s role,” said Paul Caron a University of Cincinnati law professor and the author of TaxProf Blog.

Ellen Aprill, a law professor at Loyola University in Los Angeles said the second question was “appropriate” in the context of an application seeking a tax exemption on religious grounds.

“The first one is not the way I would want any of my agents to do it,” she said.

Some have wondered why Z Street is waging a public fight against the IRS instead of handling the tax issue privately. But Z Street founder Lori Lowenthal Marcus told me that her main worry here isn’t her own group’s tax-exempt status — it’s whether the government is holding pro-Israel groups to an unfair standard.

“My concern is that people are sort of veering off into tax world instead of Constitutional law,” said Lowenthal Marcus, a former constitutional lawyer, who added that she believes the actions of the IRS could constitute a First Amendment violation.

But apart from Z Street and the unnamed Jewish group mentioned in the letter, other organizations have yet to step up with claims that they were treated unfairly by the IRS.

Lowenthal Marcus said this doesn’t surprise her and noted that taking on the IRS can be an intimidating task. “Who’s going to challenge them?” she asked.

The current evidence is hardly enough to prove that there has been an official change in IRS policy toward pro-Israel groups, but the letter produced by Z Street shows that the case definitely deserves further inquiry. There is precedent for the IRS denying tax-exempt status to groups that clash with the government’s official policy — the Bob Jones University case is the most prominent example. But while the Obama administration has certainly taken an unfriendly stance toward Israel, this position could hardly be characterized as “official” government policy.

Ron Radosh at Pajamas Media also argues that this issue warrants a public investigation and suggests that this might be the task for a Republican-chaired House Oversight Committee: “What must now be publicly investigated — more work, perhaps, for Rep. Darrell Issa,  likely the new chairman of the House Oversight and Government Reform Committee — is, as Z Street put it, whether or not the IRS is  ‘improperly considering the political viewpoint of applicants’ and engaging in ‘clear viewpoint discrimination.’”

We know that the Obama administration has been far from friendly to Israel — but is this sentiment now influencing policy at the IRS?

The Jewish group Z Street, which claims that its request for tax-exempt status was delayed by the IRS because of its support Israel, has been engulfed in a legal battle with the government agency for months. The case heated up last week after the organization introduced a letter that appeared to show an IRS agent giving unusual scrutiny to another Jewish group that had also applied for 501(c)3 status. Among the questions asked by the agent: “Does your organization support the existence of the land of Israel?”

Z Street said that this is further evidence that the IRS has started targeting pro-Israel groups. Ben Smith at Politico has the details of the letter:

A Pennsylvania Jewish group that has claimed the Internal Revenue Service is targeting pro-Israel groups introduced in federal court today a letter from an IRS agent to another,  unnamed organization that tax experts said was likely outside the usual or appropriate scope of an IRS inquiry.

“Does your organization support the existence of the land of Israel?” IRS agent Tracy Dornette wrote the organization, according to this week’s court filing, as part of its consideration of the organizations application for tax exempt status. “Describe your organization’s religious belief system toward the land of Israel.”

But are these inquiries simply inappropriate, or are they evidence of an official campaign against Zionist organizations? A couple of tax attorneys consulted by Smith said they found the questions to be out of line:

“The claims go far beyond what should be the IRS’s role,” said Paul Caron a University of Cincinnati law professor and the author of TaxProf Blog.

Ellen Aprill, a law professor at Loyola University in Los Angeles said the second question was “appropriate” in the context of an application seeking a tax exemption on religious grounds.

“The first one is not the way I would want any of my agents to do it,” she said.

Some have wondered why Z Street is waging a public fight against the IRS instead of handling the tax issue privately. But Z Street founder Lori Lowenthal Marcus told me that her main worry here isn’t her own group’s tax-exempt status — it’s whether the government is holding pro-Israel groups to an unfair standard.

“My concern is that people are sort of veering off into tax world instead of Constitutional law,” said Lowenthal Marcus, a former constitutional lawyer, who added that she believes the actions of the IRS could constitute a First Amendment violation.

But apart from Z Street and the unnamed Jewish group mentioned in the letter, other organizations have yet to step up with claims that they were treated unfairly by the IRS.

Lowenthal Marcus said this doesn’t surprise her and noted that taking on the IRS can be an intimidating task. “Who’s going to challenge them?” she asked.

The current evidence is hardly enough to prove that there has been an official change in IRS policy toward pro-Israel groups, but the letter produced by Z Street shows that the case definitely deserves further inquiry. There is precedent for the IRS denying tax-exempt status to groups that clash with the government’s official policy — the Bob Jones University case is the most prominent example. But while the Obama administration has certainly taken an unfriendly stance toward Israel, this position could hardly be characterized as “official” government policy.

Ron Radosh at Pajamas Media also argues that this issue warrants a public investigation and suggests that this might be the task for a Republican-chaired House Oversight Committee: “What must now be publicly investigated — more work, perhaps, for Rep. Darrell Issa,  likely the new chairman of the House Oversight and Government Reform Committee — is, as Z Street put it, whether or not the IRS is  ‘improperly considering the political viewpoint of applicants’ and engaging in ‘clear viewpoint discrimination.’”

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Flotsam and Jetsam

More European nations in trouble. “The debt crisis in Europe escalated sharply Friday as investors dumped Spanish and Portuguese bonds in panicked selling, substantially heightening the prospect that one or both countries may need to join troubled Ireland and Greece in soliciting international bailouts.”

More evidence that the IRS is targeting the hawkish pro-Israel group Z Street. Wouldn’t it be front-page news if J Street were asked if it supported Iran sanctions?

More reason to doubt that the Obami have a clue about what to do about North Korea. The State Department’s PJ Crowley tweets “SecClinton talked with Chinese FM Yang today and encouraged Beijing to make clear that North Korea’s behavior is unacceptable.” Is “unacceptable” really the strongest they can do? Or is “unacceptable” (as in “A nuclear-armed Iran is unacceptable”) just diplomat-speak for “We’re sorry to see X happen.”

More criticism of Obama’s approach to Egypt. “The president and his secretary of state have brought up democracy and human rights in private conversations with Egyptian leaders but shied away from them in public. They have failed to make any connection between Mr. Mubarak’s domestic repression and the more than $1 billion in U.S. aid Egypt receives every year, much of it directed to the military. They have not supported efforts in Congress to pass legislation or even nonbinding resolutions linking bilateral relations to political reform.”

More defensiveness from Sarah Palin. Not helpful for a presidential contender. Dead-on for a conservative community organizer.

More nonsense from Tom Friedman. No, Tom, too much texting by American kids is not a bigger problem than North Korean nukes. Another example of not-very-smart liberal punditry.

More problems for Rahm Emanuel. “Through an odd chain of events, Mr. Halpin, a 59-year-old industrial real-estate developer here, has become the face of a movement to force Mr. Emanuel out of the race to become Chicago’s next mayor. A lawsuit filed with the Chicago Board of Election Commissions Friday by a Chicago attorney on behalf of two city residents charges that Mr. Emanuel, the former chief of staff to President Barack Obama, is ineligible to run because he lost his Chicago residency when he rented his home to Mr. Halpin in 2009.” Really, wasn’t the entire race an excuse to get off the sinking White House ship?

More evidence that the GM bailout was no success for the taxpayers. The union? Well, that’s another story. “General Motors Co.’s recent stock offering was staged to start paying back the government for its $50 billion bailout, but one group made out much better than the taxpayers or other investors: the company’s union. Thanks to a generous share of GM stock obtained in the company’s 2009 bankruptcy settlement, the United Auto Workers is well on its way to recouping the billions of dollars GM owed it — putting it far ahead of taxpayers who have recouped only about 30 percent of their investment and further still ahead of investors in the old GM who have received nothing.”

More European nations in trouble. “The debt crisis in Europe escalated sharply Friday as investors dumped Spanish and Portuguese bonds in panicked selling, substantially heightening the prospect that one or both countries may need to join troubled Ireland and Greece in soliciting international bailouts.”

More evidence that the IRS is targeting the hawkish pro-Israel group Z Street. Wouldn’t it be front-page news if J Street were asked if it supported Iran sanctions?

More reason to doubt that the Obami have a clue about what to do about North Korea. The State Department’s PJ Crowley tweets “SecClinton talked with Chinese FM Yang today and encouraged Beijing to make clear that North Korea’s behavior is unacceptable.” Is “unacceptable” really the strongest they can do? Or is “unacceptable” (as in “A nuclear-armed Iran is unacceptable”) just diplomat-speak for “We’re sorry to see X happen.”

More criticism of Obama’s approach to Egypt. “The president and his secretary of state have brought up democracy and human rights in private conversations with Egyptian leaders but shied away from them in public. They have failed to make any connection between Mr. Mubarak’s domestic repression and the more than $1 billion in U.S. aid Egypt receives every year, much of it directed to the military. They have not supported efforts in Congress to pass legislation or even nonbinding resolutions linking bilateral relations to political reform.”

More defensiveness from Sarah Palin. Not helpful for a presidential contender. Dead-on for a conservative community organizer.

More nonsense from Tom Friedman. No, Tom, too much texting by American kids is not a bigger problem than North Korean nukes. Another example of not-very-smart liberal punditry.

More problems for Rahm Emanuel. “Through an odd chain of events, Mr. Halpin, a 59-year-old industrial real-estate developer here, has become the face of a movement to force Mr. Emanuel out of the race to become Chicago’s next mayor. A lawsuit filed with the Chicago Board of Election Commissions Friday by a Chicago attorney on behalf of two city residents charges that Mr. Emanuel, the former chief of staff to President Barack Obama, is ineligible to run because he lost his Chicago residency when he rented his home to Mr. Halpin in 2009.” Really, wasn’t the entire race an excuse to get off the sinking White House ship?

More evidence that the GM bailout was no success for the taxpayers. The union? Well, that’s another story. “General Motors Co.’s recent stock offering was staged to start paying back the government for its $50 billion bailout, but one group made out much better than the taxpayers or other investors: the company’s union. Thanks to a generous share of GM stock obtained in the company’s 2009 bankruptcy settlement, the United Auto Workers is well on its way to recouping the billions of dollars GM owed it — putting it far ahead of taxpayers who have recouped only about 30 percent of their investment and further still ahead of investors in the old GM who have received nothing.”

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Flotsam and Jetsam

Don’t be president, then. “Obama miffed by questions on U.S.”

Don’t think Dems fail to grasp how toxic ObamaCare is. “A leading Senate Democrat vowed Friday to introduce legislation killing a part of the new healthcare reform law that imposes new tax-filing requirements on small businesses. Sen. Max Baucus (D-Mont.), chairman of the Finance Committee and a leading architect of the reform law, said a provision requiring businesses to report more purchases to the IRS will impose undue paperwork burdens on companies amid an economic downturn when they can least afford it.”

Don’t get your hopes up. “All the president has to do is abandon some foolish ideological presuppositions, get down to work, and stop fishing for compliments. If he did so, he’d end up getting genuine compliments—from us and, we dare say, from the American people. And then his self-respect would have a firmer ground than vanity.”

Don’t underestimate your impact, Nancy. “‘We didn’t lose the election because of me,’ Ms. Pelosi told National Public Radio in an interview that aired Friday morning.” No wonder Republicans are “giddy.”

Don’t believe that Obama learned anything from his rebuffs in Copenhagen (on global warming and the Olympics). Charles Krauthammer nails it: “Whenever a president walks into a room with another head of state and he walks out empty-handed — he’s got a failure on his hands. And this was self-inflicted. With Obama it’s now becoming a ritual. It’s a combination of incompetence,  inexperience, and arrogance. He was handed a treaty by the Bush administration. It was done. But he wanted to improve on it. And instead, so far, he’s got nothing. … And this is a pattern with Obama. He thinks he can reinvent the world. With Iran, he decides he has a silver tongue, he’ll sweet-talk ’em into a deal. He gets humiliated over and over again. With the Russians he does a reset, he gives up missile defense, he gets nothing.”

Don’t you wish the Obami would stop giving excuses that make them sound even more incompetent? “The U.S. position on settlements has not officially changed, [National Security Council's Dan] Shapiro said. The United States still believes that the Israeli settlement moratorium should be extended, but that Palestinians should stay in peace talks even if it is not. He said that President Obama — who said Monday that Israeli settlement construction was ‘never helpful’ to peace talks Israel announced further construction plans in East Jerusalem — wasn’t trying to publicly criticize Netanyahu with his remarks. He simply answered a question put to him in a direct way, said Shapiro.” But not publicly criticize Bibi? They are frightfully inept — or disingenuous.

Don’t you miss smart diplomacy? “President Obama’s failure to conclude the Korea-United States Free Trade Agreement (KORUS) is a disaster. It reveals a stunning level of ineptitude and seriously undermines America’s leadership in the global economy. The implications extend far beyond selling Buicks in Busan. … The debacle in Seoul is a slap in the face of a critical U.S. ally in a critical region, and it will cast doubt on U.S. trade promises in other negotiations elsewhere. But if an American president loses his credibility, the damage spreads beyond the narrow confines of economic deals and Northeast Asia.”

Don’t be shocked. CNN’s guest roster skews left.

Don’t let your family pet do this at home. “A 150-pound mountain lion was no match for a squirrel-chasing terrier on a farm in eastern South Dakota. Jack the Jack Russell weighs only 17 pounds, and yet he managed to trap the cougar up a tree on Tuesday. Jack’s owner, Chad Strenge, told The Argus Leader that the dog ‘trees cats all the time,’ and that the plucky terrier probably ‘figured it was just a cat.’”

Don’t be president, then. “Obama miffed by questions on U.S.”

Don’t think Dems fail to grasp how toxic ObamaCare is. “A leading Senate Democrat vowed Friday to introduce legislation killing a part of the new healthcare reform law that imposes new tax-filing requirements on small businesses. Sen. Max Baucus (D-Mont.), chairman of the Finance Committee and a leading architect of the reform law, said a provision requiring businesses to report more purchases to the IRS will impose undue paperwork burdens on companies amid an economic downturn when they can least afford it.”

Don’t get your hopes up. “All the president has to do is abandon some foolish ideological presuppositions, get down to work, and stop fishing for compliments. If he did so, he’d end up getting genuine compliments—from us and, we dare say, from the American people. And then his self-respect would have a firmer ground than vanity.”

Don’t underestimate your impact, Nancy. “‘We didn’t lose the election because of me,’ Ms. Pelosi told National Public Radio in an interview that aired Friday morning.” No wonder Republicans are “giddy.”

Don’t believe that Obama learned anything from his rebuffs in Copenhagen (on global warming and the Olympics). Charles Krauthammer nails it: “Whenever a president walks into a room with another head of state and he walks out empty-handed — he’s got a failure on his hands. And this was self-inflicted. With Obama it’s now becoming a ritual. It’s a combination of incompetence,  inexperience, and arrogance. He was handed a treaty by the Bush administration. It was done. But he wanted to improve on it. And instead, so far, he’s got nothing. … And this is a pattern with Obama. He thinks he can reinvent the world. With Iran, he decides he has a silver tongue, he’ll sweet-talk ’em into a deal. He gets humiliated over and over again. With the Russians he does a reset, he gives up missile defense, he gets nothing.”

Don’t you wish the Obami would stop giving excuses that make them sound even more incompetent? “The U.S. position on settlements has not officially changed, [National Security Council's Dan] Shapiro said. The United States still believes that the Israeli settlement moratorium should be extended, but that Palestinians should stay in peace talks even if it is not. He said that President Obama — who said Monday that Israeli settlement construction was ‘never helpful’ to peace talks Israel announced further construction plans in East Jerusalem — wasn’t trying to publicly criticize Netanyahu with his remarks. He simply answered a question put to him in a direct way, said Shapiro.” But not publicly criticize Bibi? They are frightfully inept — or disingenuous.

Don’t you miss smart diplomacy? “President Obama’s failure to conclude the Korea-United States Free Trade Agreement (KORUS) is a disaster. It reveals a stunning level of ineptitude and seriously undermines America’s leadership in the global economy. The implications extend far beyond selling Buicks in Busan. … The debacle in Seoul is a slap in the face of a critical U.S. ally in a critical region, and it will cast doubt on U.S. trade promises in other negotiations elsewhere. But if an American president loses his credibility, the damage spreads beyond the narrow confines of economic deals and Northeast Asia.”

Don’t be shocked. CNN’s guest roster skews left.

Don’t let your family pet do this at home. “A 150-pound mountain lion was no match for a squirrel-chasing terrier on a farm in eastern South Dakota. Jack the Jack Russell weighs only 17 pounds, and yet he managed to trap the cougar up a tree on Tuesday. Jack’s owner, Chad Strenge, told The Argus Leader that the dog ‘trees cats all the time,’ and that the plucky terrier probably ‘figured it was just a cat.’”

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Another Strategy in the War on Free Speech

The war on free speech has taken an ominous turn. It was bad enough when campaign finance “reformers” were imploring the Congress and courts to stifle core political speech. But now they’ve adopted a new tactic:

Since the Supreme Court’s January decision in Citizens United v. FEC, Democrats in Congress have been trying to pass legislation to repeal the First Amendment for business, though not for unions. Having failed on that score, they’re now turning to legal and political threats. Funny how all of this outrage never surfaced when the likes of Peter Lewis of Progressive insurance and George Soros helped to make Democrats financially dominant in 2006 and 2008.

Chairman Max Baucus of the powerful Senate Finance Committee got the threats going last month when he asked Internal Revenue Service Commissioner Douglas Shulman to investigate if certain tax exempt 501(c) groups had violated the law by engaging in too much political campaign activity. Lest there be any confusion about his targets, the Montana Democrat flagged articles focused on GOP-leaning groups, including Americans for Job Security and American Crossroads.

Not since Richard Nixon has the IRS been employed to target political enemies. Where does the IRS commissioner stand on this? Is he going to take auditing directions from politicians seeking partisan advantage? It would be appropriate when Congress convenes in January for the new GOP chairmen to conduct some hearings and make sure the IRS isn’t going to allow itself to be used in this fashion. The surest way, however, to prevent that is for Democratic pols to cease using the tax authority to intimidate and attack their political opponents.

The war on free speech has taken an ominous turn. It was bad enough when campaign finance “reformers” were imploring the Congress and courts to stifle core political speech. But now they’ve adopted a new tactic:

Since the Supreme Court’s January decision in Citizens United v. FEC, Democrats in Congress have been trying to pass legislation to repeal the First Amendment for business, though not for unions. Having failed on that score, they’re now turning to legal and political threats. Funny how all of this outrage never surfaced when the likes of Peter Lewis of Progressive insurance and George Soros helped to make Democrats financially dominant in 2006 and 2008.

Chairman Max Baucus of the powerful Senate Finance Committee got the threats going last month when he asked Internal Revenue Service Commissioner Douglas Shulman to investigate if certain tax exempt 501(c) groups had violated the law by engaging in too much political campaign activity. Lest there be any confusion about his targets, the Montana Democrat flagged articles focused on GOP-leaning groups, including Americans for Job Security and American Crossroads.

Not since Richard Nixon has the IRS been employed to target political enemies. Where does the IRS commissioner stand on this? Is he going to take auditing directions from politicians seeking partisan advantage? It would be appropriate when Congress convenes in January for the new GOP chairmen to conduct some hearings and make sure the IRS isn’t going to allow itself to be used in this fashion. The surest way, however, to prevent that is for Democratic pols to cease using the tax authority to intimidate and attack their political opponents.

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Take Half a Loaf, and Demand the Rest

Obama, eight weeks before the election, has decided to adopt one of many ideas the Republicans put forth in February 2009: a tax break for businesses. As this report explains:

Companies can now deduct new investment expenses, but over a longer period of time—three to 20 years. The proposed change, which would let companies keep more cash now, is meant to give companies who may be hesitant to invest an incentive to expand, acting as a spur to the overall economy. …

Under current law, if a company spends $10 million on a new factory, it gets to deduct the full amount of the cost over a period of between three and 20 years, depending on the investment. So it cuts its stated pre-tax profits by a varying amount each year, thus reducing taxes until the cost of the investment has been written off.

Under the new proposal, the company would get to deduct the full $10 million in the first year. That would give it an immediate cash infusion to offset the costs of investment. It would also give certainty that the full tax benefit would be realized. Companies often don’t get to write off the full cost of an investment over an extended time.

It is not a bad idea, but it simply isn’t as critical as an extension of the Bush tax cuts. Republicans and business leaders were quick to point this out:

“The White House is missing the big picture. These aren’t necessarily bad proposals, but they don’t address the two big problems that are hurting our economy—excessive government spending, and the uncertainty that Washington Democrats’ policies, especially their massive tax hike, are creating for small businesses,” said House Minority Leader John A. Boehner (R, Ohio). …

The best thing to do is to get rid of uncertainty, and that includes the cliff we’re falling off with all these [tax] provisions that are expiring,” said Bill Rys, tax counsel for the National Federation of Independent Business, a small-business group.

Many NFIB members also are concerned about a new requirement for reporting purchases of more than $600 to the Internal Revenue Service, he added. He questioned whether many business owners would choose to buy more equipment, at least until sales pick up.

It is, on the one hand, a giant concession that tax cuts matter. On the other hand, it leaves the Obama team without any reasoned defense for letting the Bush tax cuts expire — or, for that matter, loading up employers with new mandates. (“Many NFIB members also are concerned about a new requirement for reporting purchases of more than $600 to the Internal Revenue Service.”) As one businesswoman put it, “If this will be offered as a tradeoff for raising the top two rates, it’s a non-starter.”

Nor is it even clear that this is all that helpful at this point:

N. Gregory Mankiw, of Harvard University, and another former CEA chairman under President Bush, questioned whether the Obama proposal would have a big impact. Businesses can already take out a bank loan at extremely low interest rates to pay for new investments in plants and equipment, but they are not doing so, he said. It’s unclear why they would make those investments for a tax break.

And it is even less clear why we should be giving with one hand and taking away with the other. (Jay Timmons, executive vice president of the National Association of Manufacturers: “The good news [is that] the administration recognizes that manufacturing is key to getting the economy back on track and ensuring we are able to sustain economic growth and job creation. But you can’t do that if you’re penalizing one sector of manufacturing while trying to incent another.”)

The most principled position for conservatives is to accept the president’s tax cut (on the Milton Friedman theory that we should support any tax cut, any time) and demand that the Bush tax cuts be retained. Really, if tax cuts are good and the economy is in the tank, why not?

Obama, eight weeks before the election, has decided to adopt one of many ideas the Republicans put forth in February 2009: a tax break for businesses. As this report explains:

Companies can now deduct new investment expenses, but over a longer period of time—three to 20 years. The proposed change, which would let companies keep more cash now, is meant to give companies who may be hesitant to invest an incentive to expand, acting as a spur to the overall economy. …

Under current law, if a company spends $10 million on a new factory, it gets to deduct the full amount of the cost over a period of between three and 20 years, depending on the investment. So it cuts its stated pre-tax profits by a varying amount each year, thus reducing taxes until the cost of the investment has been written off.

Under the new proposal, the company would get to deduct the full $10 million in the first year. That would give it an immediate cash infusion to offset the costs of investment. It would also give certainty that the full tax benefit would be realized. Companies often don’t get to write off the full cost of an investment over an extended time.

It is not a bad idea, but it simply isn’t as critical as an extension of the Bush tax cuts. Republicans and business leaders were quick to point this out:

“The White House is missing the big picture. These aren’t necessarily bad proposals, but they don’t address the two big problems that are hurting our economy—excessive government spending, and the uncertainty that Washington Democrats’ policies, especially their massive tax hike, are creating for small businesses,” said House Minority Leader John A. Boehner (R, Ohio). …

The best thing to do is to get rid of uncertainty, and that includes the cliff we’re falling off with all these [tax] provisions that are expiring,” said Bill Rys, tax counsel for the National Federation of Independent Business, a small-business group.

Many NFIB members also are concerned about a new requirement for reporting purchases of more than $600 to the Internal Revenue Service, he added. He questioned whether many business owners would choose to buy more equipment, at least until sales pick up.

It is, on the one hand, a giant concession that tax cuts matter. On the other hand, it leaves the Obama team without any reasoned defense for letting the Bush tax cuts expire — or, for that matter, loading up employers with new mandates. (“Many NFIB members also are concerned about a new requirement for reporting purchases of more than $600 to the Internal Revenue Service.”) As one businesswoman put it, “If this will be offered as a tradeoff for raising the top two rates, it’s a non-starter.”

Nor is it even clear that this is all that helpful at this point:

N. Gregory Mankiw, of Harvard University, and another former CEA chairman under President Bush, questioned whether the Obama proposal would have a big impact. Businesses can already take out a bank loan at extremely low interest rates to pay for new investments in plants and equipment, but they are not doing so, he said. It’s unclear why they would make those investments for a tax break.

And it is even less clear why we should be giving with one hand and taking away with the other. (Jay Timmons, executive vice president of the National Association of Manufacturers: “The good news [is that] the administration recognizes that manufacturing is key to getting the economy back on track and ensuring we are able to sustain economic growth and job creation. But you can’t do that if you’re penalizing one sector of manufacturing while trying to incent another.”)

The most principled position for conservatives is to accept the president’s tax cut (on the Milton Friedman theory that we should support any tax cut, any time) and demand that the Bush tax cuts be retained. Really, if tax cuts are good and the economy is in the tank, why not?

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Flotsam and Jetsam

When debating illegal immigration, let’s remember who wants to come here: “those ill-used souls who, having braved coyotes both literal and figurative to get here, are now, with the submissive resignation of the most forbearing lama, slaving away washing dishes in restaurant kitchens, or bent double picking grapes in Napa, or cleaning the toilets of people who look right through them as if they were not flesh and blood, and whose children are serving honorably in the United States military.” Read the whole thing.

When looking for media bias, you can always count on the New York Times. In this hatchet job, it’s pretty obvious that the Humane Society and MADD roped the Gray Lady into going after their antagonist, the libertarian activist Richard Berman, who seems to be doing nothing illegal despite the Times‘s inferences. (Indeed, the IRS investigated a Berman entity and “found nothing that would warrant a revocation of its tax exemption.”)

When world leaders awoke from their Obama daze, they reacted like many Americans: “They are no longer dazzled by his rock star personality and there is a sense that there is something amateurish and even incompetent about how Obama is managing U.S. power. For example, Obama has asserted that America is not at war with the Muslim world. The problem is that parts of the Muslim world are at war with America and the West. Obama feels, fairly enough, that America must be contrite in its dealings with the Muslim world. … America right now appears to be unreliable to traditional friends, compliant to rivals, and weak to enemies.”

When will Jewish non-leaders start demanding that we withdraw from the UN Human Rights Council? “The United States and its allies suffered a series of setbacks at the United Nations on Friday as the Human Rights Council flirted with media censorship and was poised to elevate an anti-American politician and a Cuban to key positions. Concerns about censorship were raised after the 56-nation Organization of the Islamic Conference (OIC), which has tremendous sway in the United Nations, successfully pushed through a resolution that creates a watchdog to monitor how religion is portrayed in the media.” (And for this, we needed a new ambassador to the OIC? Doesn’t seem like the ambassador is persuading the OIC of anything — or is the point to demonstrate that we don’t care to oppose its totalitarian impulses?)

When you see evidence like this, you also see just how lacking in goodwill toward Israel Obama is, such that he would insist the Jewish state be the subject of an inquest: “New footage from the Mavi Marmara was released by the Foreign Ministry on Friday afternoon, this time showing IHH head Bülent Yildirim inciting to violence against Israeli commandos hours before the encounter that claimed the lives of nine Turkish passengers. ‘We follow in the footsteps of the martyrs,’ Yildirim could be seen declaring to a large crowd of activists. ‘You shall see, we will definitely claim one or two victories. … If you send the commandos, we will throw you down from here and you will be humiliated in front of the whole world. … If they board our ship, we will throw them into the sea, Allah willing!’”

When Obama can’t decide whether to send an aircraft carrier to take part in South Korean naval exercises because it might upset North Korea and China – after promising our ally unequivocal support — you get an idea of how much trouble we and our allies are in.

When you return a terrorist to the heart of Wahhabism, guess what happens? “The United States have sent back around 120 Saudis from the detention camp at the U.S. naval base in Cuba, set up after the U.S. launched a ‘war on terror’ following the September 11 attacks by mostly Saudi suicide hijackers sent by al Qaeda.” The Saudi running the fake rehab operation (“religious re-education by clerics and financial help to start a new life”) blames “strong personal ties among former prisoners but also tough U.S. tactics as the reason why some 20 percent of the returned Saudis relapsed into militancy compared to 9.5 percent overall in the rehabilitation program.” The Saudis consider the plan such a smashing success that they are building five new centers. Yes, it is madness for us to facilitate this.

When debating illegal immigration, let’s remember who wants to come here: “those ill-used souls who, having braved coyotes both literal and figurative to get here, are now, with the submissive resignation of the most forbearing lama, slaving away washing dishes in restaurant kitchens, or bent double picking grapes in Napa, or cleaning the toilets of people who look right through them as if they were not flesh and blood, and whose children are serving honorably in the United States military.” Read the whole thing.

When looking for media bias, you can always count on the New York Times. In this hatchet job, it’s pretty obvious that the Humane Society and MADD roped the Gray Lady into going after their antagonist, the libertarian activist Richard Berman, who seems to be doing nothing illegal despite the Times‘s inferences. (Indeed, the IRS investigated a Berman entity and “found nothing that would warrant a revocation of its tax exemption.”)

When world leaders awoke from their Obama daze, they reacted like many Americans: “They are no longer dazzled by his rock star personality and there is a sense that there is something amateurish and even incompetent about how Obama is managing U.S. power. For example, Obama has asserted that America is not at war with the Muslim world. The problem is that parts of the Muslim world are at war with America and the West. Obama feels, fairly enough, that America must be contrite in its dealings with the Muslim world. … America right now appears to be unreliable to traditional friends, compliant to rivals, and weak to enemies.”

When will Jewish non-leaders start demanding that we withdraw from the UN Human Rights Council? “The United States and its allies suffered a series of setbacks at the United Nations on Friday as the Human Rights Council flirted with media censorship and was poised to elevate an anti-American politician and a Cuban to key positions. Concerns about censorship were raised after the 56-nation Organization of the Islamic Conference (OIC), which has tremendous sway in the United Nations, successfully pushed through a resolution that creates a watchdog to monitor how religion is portrayed in the media.” (And for this, we needed a new ambassador to the OIC? Doesn’t seem like the ambassador is persuading the OIC of anything — or is the point to demonstrate that we don’t care to oppose its totalitarian impulses?)

When you see evidence like this, you also see just how lacking in goodwill toward Israel Obama is, such that he would insist the Jewish state be the subject of an inquest: “New footage from the Mavi Marmara was released by the Foreign Ministry on Friday afternoon, this time showing IHH head Bülent Yildirim inciting to violence against Israeli commandos hours before the encounter that claimed the lives of nine Turkish passengers. ‘We follow in the footsteps of the martyrs,’ Yildirim could be seen declaring to a large crowd of activists. ‘You shall see, we will definitely claim one or two victories. … If you send the commandos, we will throw you down from here and you will be humiliated in front of the whole world. … If they board our ship, we will throw them into the sea, Allah willing!’”

When Obama can’t decide whether to send an aircraft carrier to take part in South Korean naval exercises because it might upset North Korea and China – after promising our ally unequivocal support — you get an idea of how much trouble we and our allies are in.

When you return a terrorist to the heart of Wahhabism, guess what happens? “The United States have sent back around 120 Saudis from the detention camp at the U.S. naval base in Cuba, set up after the U.S. launched a ‘war on terror’ following the September 11 attacks by mostly Saudi suicide hijackers sent by al Qaeda.” The Saudi running the fake rehab operation (“religious re-education by clerics and financial help to start a new life”) blames “strong personal ties among former prisoners but also tough U.S. tactics as the reason why some 20 percent of the returned Saudis relapsed into militancy compared to 9.5 percent overall in the rehabilitation program.” The Saudis consider the plan such a smashing success that they are building five new centers. Yes, it is madness for us to facilitate this.

Read Less

The Taxman Cometh — Not!

Andrew Ross Sorkin of the New York Times has a piece on the proposal to tax the “carried interest” of hedge-fund partners at the rate of ordinary income (right now, 35 percent) instead of at the rate of capital gains (15 percent). I haven’t studied the issue, so I don’t know where I come down on it, but Sorkin, inadvertently, reveals exactly why the current tax system is irretrievably broken. He writes:

Of course, even if the measure passes, Wall Street executives are ready: They’ve already begun devising clever new “structures” to skirt the tax change.

The moment the bill is signed, “the games will begin,” said Francois Hechinger, a tax partner at BDO Seidman who advises venture capital firms. “That’s when people will try to figure out how to get around this.”

If we’ve learned anything from the financial crisis, it seems that new regulations on Wall Street always have a way of breeding another generation of “financial innovation” meant to circumvent them.

Ever since the modern income tax was born in 1913 with an act of Congress 14 pages long, there has been an ongoing evolutionary arms race between the tax collectors and the taxpayers. Every new provision in the tax code begets new means of legally avoiding taxes, which beget new provisions that outlaw the new means, regulate it, or — influenced by lobbyists — even encourage it. The Tax Act of 1942 was 208 pages long. Of those 208 pages, 162 dealt with closing or defining loopholes in earlier acts.

As of 2006, the number of densely printed pages in the tax code was 3,387. The U.S. Code of Federal Regulations dealing with taxes and written by the IRS — in effect, the Talmud to the Torah of the tax code — is 20 volumes, totaling 13,458 pages.

The very, very rich (such as hedge-fund partners) have far more influence in Washington, of course, than the average citizen and are paid attention to by Democrats and Republicans alike. As long as we have a democracy, it will be ever thus. If the taxes on carried interest go up, something else will get them the very rich the hook, just as the nominal 90 percent tax rates of the 1950s were largely negated by a vast number of deductions.

The gathering fiscal problems of the United States will not be solved as long as the current tax code is in place. Unfortunately, among the prime beneficiaries of the current code are the 535 members of Congress, who reap rich harvests of campaign contributions from it.

Andrew Ross Sorkin of the New York Times has a piece on the proposal to tax the “carried interest” of hedge-fund partners at the rate of ordinary income (right now, 35 percent) instead of at the rate of capital gains (15 percent). I haven’t studied the issue, so I don’t know where I come down on it, but Sorkin, inadvertently, reveals exactly why the current tax system is irretrievably broken. He writes:

Of course, even if the measure passes, Wall Street executives are ready: They’ve already begun devising clever new “structures” to skirt the tax change.

The moment the bill is signed, “the games will begin,” said Francois Hechinger, a tax partner at BDO Seidman who advises venture capital firms. “That’s when people will try to figure out how to get around this.”

If we’ve learned anything from the financial crisis, it seems that new regulations on Wall Street always have a way of breeding another generation of “financial innovation” meant to circumvent them.

Ever since the modern income tax was born in 1913 with an act of Congress 14 pages long, there has been an ongoing evolutionary arms race between the tax collectors and the taxpayers. Every new provision in the tax code begets new means of legally avoiding taxes, which beget new provisions that outlaw the new means, regulate it, or — influenced by lobbyists — even encourage it. The Tax Act of 1942 was 208 pages long. Of those 208 pages, 162 dealt with closing or defining loopholes in earlier acts.

As of 2006, the number of densely printed pages in the tax code was 3,387. The U.S. Code of Federal Regulations dealing with taxes and written by the IRS — in effect, the Talmud to the Torah of the tax code — is 20 volumes, totaling 13,458 pages.

The very, very rich (such as hedge-fund partners) have far more influence in Washington, of course, than the average citizen and are paid attention to by Democrats and Republicans alike. As long as we have a democracy, it will be ever thus. If the taxes on carried interest go up, something else will get them the very rich the hook, just as the nominal 90 percent tax rates of the 1950s were largely negated by a vast number of deductions.

The gathering fiscal problems of the United States will not be solved as long as the current tax code is in place. Unfortunately, among the prime beneficiaries of the current code are the 535 members of Congress, who reap rich harvests of campaign contributions from it.

Read Less

Tax Day

“Can I deduct the cost of marijuana if it’s for medical use?”

“Only if you’re filing a joint return.”

The Cato Institute has an excellent short film on all that is wrong with the federal tax system. In short, that system violates all four principles of taxation described by Adam Smith:

1. The subjects of every state ought to contribute towards the support of the government, as nearly as possible, in proportion to their respective abilities; that is, in proportion to the revenue which they respectively enjoy under the protection of the state.

As Warren Buffett complained, his effective tax rate is half that of his secretary.

2. The tax which each individual is bound to pay ought to be certain, and not arbitrary.

The system is so complex that not even professionals can be sure what people owe. Send out the tax information of a middle-class couple with children to six tax accountants and they will come up with six different sums owed. That experiment has been run numerous times. The advice the IRS itself gives out is frequently wrong.

3. Every tax ought to be levied at the time, or in the manner, in which it is most likely to be convenient for the contributor to pay it.

Most people never see the money, as it never gets into their paychecks. Those with incomes not subject to withholding must estimate in January, April, July, and October, regardless of whether those months are convenient.

4. Every tax ought to be so contrived as both to take out and to keep out of the pockets of the people as little as possible over and above what it brings into the public treasury of the state.

Well over 50 percent of filers hire people to fill out the forms because they can’t understand them. The corporate income tax is even worse. As the Wall Street Journal explains today, the cost of complying with the corporate income tax this year will equal 89 percent of the revenues received by the government. General Electric’s tax return, filed electronically, will be the equivalent of 24,000 pages long.

The current tax system benefits two groups: the rich and powerful, who are able to lobby Congress for loopholes, subsidies, tax credits, etc. etc., and the 535 members of Congress, who sell those loopholes, subsidies, tax credits, etc. etc. Yes, sell. They are traded for campaign contributions. It’s as legal as it is disgraceful.

There is no reforming the current system, as it is permeated with corruption. But Congress is utterly unable to write a new tax code from scratch. If this country is to ever get out from under a tax code that has become a clear and present danger to American prosperity and power, it will have to be done using a means similar to the military base closings after the Cold War: in secret, with Congress voting up or down, no amendments.

Only overwhelming pressure will make that happen. That’s another reason why the 2010 election might turn out to be the most consequential midterm election in American history.

“Can I deduct the cost of marijuana if it’s for medical use?”

“Only if you’re filing a joint return.”

The Cato Institute has an excellent short film on all that is wrong with the federal tax system. In short, that system violates all four principles of taxation described by Adam Smith:

1. The subjects of every state ought to contribute towards the support of the government, as nearly as possible, in proportion to their respective abilities; that is, in proportion to the revenue which they respectively enjoy under the protection of the state.

As Warren Buffett complained, his effective tax rate is half that of his secretary.

2. The tax which each individual is bound to pay ought to be certain, and not arbitrary.

The system is so complex that not even professionals can be sure what people owe. Send out the tax information of a middle-class couple with children to six tax accountants and they will come up with six different sums owed. That experiment has been run numerous times. The advice the IRS itself gives out is frequently wrong.

3. Every tax ought to be levied at the time, or in the manner, in which it is most likely to be convenient for the contributor to pay it.

Most people never see the money, as it never gets into their paychecks. Those with incomes not subject to withholding must estimate in January, April, July, and October, regardless of whether those months are convenient.

4. Every tax ought to be so contrived as both to take out and to keep out of the pockets of the people as little as possible over and above what it brings into the public treasury of the state.

Well over 50 percent of filers hire people to fill out the forms because they can’t understand them. The corporate income tax is even worse. As the Wall Street Journal explains today, the cost of complying with the corporate income tax this year will equal 89 percent of the revenues received by the government. General Electric’s tax return, filed electronically, will be the equivalent of 24,000 pages long.

The current tax system benefits two groups: the rich and powerful, who are able to lobby Congress for loopholes, subsidies, tax credits, etc. etc., and the 535 members of Congress, who sell those loopholes, subsidies, tax credits, etc. etc. Yes, sell. They are traded for campaign contributions. It’s as legal as it is disgraceful.

There is no reforming the current system, as it is permeated with corruption. But Congress is utterly unable to write a new tax code from scratch. If this country is to ever get out from under a tax code that has become a clear and present danger to American prosperity and power, it will have to be done using a means similar to the military base closings after the Cold War: in secret, with Congress voting up or down, no amendments.

Only overwhelming pressure will make that happen. That’s another reason why the 2010 election might turn out to be the most consequential midterm election in American history.

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We Still Don’t Know What’s in It

Bill McGurn helps highlight two defects in ObamaCare — its uncertainty and its potential to bully the American people. They come together in the provision for an individual mandate, something Obama ran against during the campaign (when he was also promising not to raise taxes on those making less than $250,000).

How could there be uncertainty about this key feature? Nancy Pelosi promised, after all, that if we passed it, we’d find out what was in it. Well, this is what comes of racing through a largely secretive legislative process. McGurn explains “one of the murkiest bits of this legislation”:

In testimony before a House Ways and Means subcommittee last Thursday, the IRS commissioner deflected questions about the agency’s precise role vis-à-vis health care. Mr. Shulman reassured citizens that this bill does not “fundamentally alter” their relationship with the IRS, and said the IRS would not be snooping into their health records. About the penalties associated with the mandate, he was less clear.

Partly that’s because the law is unclear. The original House bill opened the door for criminal sanctions against Americans who didn’t buy health insurance and pay the penalty. The Senate bill did the same until Sen. John Ensign (R., Nev.) successfully pushed to amend the bill. Even so, the final language begs the question that Mr. Shulman and Mr. Weiner avoided: Who’s going to enforce the mandate, and how?

You might wonder how we can possibly predict costs if we don’t know how many people, if any, are going to herded into the arms of Big Insurance. You might wonder how we are going to achieve compliance with a law that many already resent if it’s not even clear whether the IRS will go after people. Both are good questions, revealing just how uninterested the Democrats were in thinking through and crafting effective legislation. They simply wanted a notch in their belt and to silence the hollering from their base. Getting a coherent, understandable legislative scheme just wasn’t a priority for them.

And then there is the bullying if, in fact, the mandate exists and will be enforced with the full power of the federal government:

Almost by definition, those hit by the mandate will be either young people starting out, or those working for smaller businesses that do not provide employees with health coverage. Back in November, a report by the Congressional Budget Office and Joint Committee on Taxation estimated that nearly half (46%) of the mandate penalties will be paid by Americans under 300% of the poverty line. In today’s dollars, that works out to $32,500 for an individual. For a family of four, it’s $66,150. …

In his appearance before Congress, Mr. Shulman stated he was still working on “the proper resources” the IRS would need to handle the tax provisions of the health-care act. Maybe that won’t mean 16,500 new agents. If the Republicans do manage to take back Congress come November, however, it should mean hearings in which Mr. Shulman provides the American people with specific answers about how much bigger the IRS is going to get because of this bill—and how exactly the IRS will deal with Americans who don’t pay the penalty tax.

So we will, as McGurn points out, either witness the IRS hassling modest-income Americans into buying insurance they don’t want, or the law will be “unenforced.” If it is the latter, all the estimated cost “savings” supposedly achieved by expanding the risk pool of the newly insured can be tossed onto the heap of misrepresentations and fiscal fantasies deployed to pass the bill despite the dire warnings of those like Rep. Paul Ryan. This is the personification of the ever-growing bureaucratic state — incomprehensible, threatening, and very, very expensive.

Bill McGurn helps highlight two defects in ObamaCare — its uncertainty and its potential to bully the American people. They come together in the provision for an individual mandate, something Obama ran against during the campaign (when he was also promising not to raise taxes on those making less than $250,000).

How could there be uncertainty about this key feature? Nancy Pelosi promised, after all, that if we passed it, we’d find out what was in it. Well, this is what comes of racing through a largely secretive legislative process. McGurn explains “one of the murkiest bits of this legislation”:

In testimony before a House Ways and Means subcommittee last Thursday, the IRS commissioner deflected questions about the agency’s precise role vis-à-vis health care. Mr. Shulman reassured citizens that this bill does not “fundamentally alter” their relationship with the IRS, and said the IRS would not be snooping into their health records. About the penalties associated with the mandate, he was less clear.

Partly that’s because the law is unclear. The original House bill opened the door for criminal sanctions against Americans who didn’t buy health insurance and pay the penalty. The Senate bill did the same until Sen. John Ensign (R., Nev.) successfully pushed to amend the bill. Even so, the final language begs the question that Mr. Shulman and Mr. Weiner avoided: Who’s going to enforce the mandate, and how?

You might wonder how we can possibly predict costs if we don’t know how many people, if any, are going to herded into the arms of Big Insurance. You might wonder how we are going to achieve compliance with a law that many already resent if it’s not even clear whether the IRS will go after people. Both are good questions, revealing just how uninterested the Democrats were in thinking through and crafting effective legislation. They simply wanted a notch in their belt and to silence the hollering from their base. Getting a coherent, understandable legislative scheme just wasn’t a priority for them.

And then there is the bullying if, in fact, the mandate exists and will be enforced with the full power of the federal government:

Almost by definition, those hit by the mandate will be either young people starting out, or those working for smaller businesses that do not provide employees with health coverage. Back in November, a report by the Congressional Budget Office and Joint Committee on Taxation estimated that nearly half (46%) of the mandate penalties will be paid by Americans under 300% of the poverty line. In today’s dollars, that works out to $32,500 for an individual. For a family of four, it’s $66,150. …

In his appearance before Congress, Mr. Shulman stated he was still working on “the proper resources” the IRS would need to handle the tax provisions of the health-care act. Maybe that won’t mean 16,500 new agents. If the Republicans do manage to take back Congress come November, however, it should mean hearings in which Mr. Shulman provides the American people with specific answers about how much bigger the IRS is going to get because of this bill—and how exactly the IRS will deal with Americans who don’t pay the penalty tax.

So we will, as McGurn points out, either witness the IRS hassling modest-income Americans into buying insurance they don’t want, or the law will be “unenforced.” If it is the latter, all the estimated cost “savings” supposedly achieved by expanding the risk pool of the newly insured can be tossed onto the heap of misrepresentations and fiscal fantasies deployed to pass the bill despite the dire warnings of those like Rep. Paul Ryan. This is the personification of the ever-growing bureaucratic state — incomprehensible, threatening, and very, very expensive.

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The GOP in the Wake of ObamaCare

We are now a week out from the passage of ObamaCare, so it’s worth considering what approach the Republican party might take in the months ahead.

The first thing is to understand that, politically speaking, the GOP is in extremely good shape. President Obama succeeded in passing health care legislation — but he has not succeeded in making it popular. If you analyze the different polls that have come out since the passage of ObamaCare, it shows several things: the president received a slight bump, less than usual for a legislative victory of this magnitude, and it is in the process of evaporating. And because both parties are determined to make the midterm elections a referendum on ObamaCare — Democrats because they don’t want to leave it undefended, Republicans because they believe the public’s dislike of this legislation is intense and won’t recede — that is what the elections will largely be about.

Second, Republicans and their allies need to ensure that the president and Democrats now have full ownership of ObamaCare. That means creating benchmarks, such as when we begin to see increases in premiums and taxes, cuts in Medicare Advantage, employers dumping employees into the exchange once it’s up and running, an increase in the oversight activity of the IRS (which is responsible for enforcing this new mandate), and more.

The GOP also needs to highlight the negative, radiating effects of ObamaCare, as companies adjust to the new world they inhabit. For example, Caterpillar said ObamaCare would cost the company at least $100 million more in the first year alone. Medical-device maker Medtronic said that new taxes on its products could force it to lay off a thousand workers. The telecom giant Verizon warned that its costs will increase in the short term. As the Wall Street Journal editorialized last week, “Businesses around the country are making the same calculations as Verizon and no doubt sending out similar messages. It’s only a small measure of the destruction that will be churned out by the rewrite of health, tax, labor and welfare laws that is ObamaCare, and only the vanguard of much worse to come.”

In addition to highlighting the damaging effects of ObamaCare, Republicans need to sear into public consciousness the many false promises and assurances Mr. Obama and Democrats made. Here the stimulus package offers some helpful guidance. In order to pass it, and shortly after he signed it into law, the president and his team made guarantees about how many jobs it would create, including how unemployment would not rise above 8 percent. But a strange thing happened along the way. Unemployment topped 10 percent last year. We have lost rather than gained millions of jobs. The high expectations Obama had created were shattered, and with it the beginning of Obama’s credibility. And this, in turn, begins the downward political slide of the Democratic party under Obama.

The same thing can happen, in spades, with health care. Democrats know it, too. Just a few days ago, for example, Senator Claire McCaskill of Missouri said her party has probably oversold the legislation that just became law. “The side on which I’m on, that voted for the bill, probably is overpromising, [has] not been clear enough about the fact that this is going to be an incremental approach over time, [and] the benefits aren’t going to be felt by most Americans immediately,” McCaskill told MSNBC’s Joe Scarborough.

Memo to Ms. McCaskill: It’s a little late, Senator. The president has made, repeatedly and on the record, extravagant claims. He promised the moon and the stars. When those things not only don’t come to pass, but when people see that their lives are worse off thanks to ObamaCare, there will be a very high political price to pay.

Finally, the GOP needs to connect ObamaCare to the broader narrative it plays into: the modern-Democratic party is fiscally irresponsible to the point of recklessness, it is clueless when it comes to creating economic growth, and Democrats are enchanted with the prospect of centralizing power and control. At a time when trust in the federal government is near an all-time low and disgust with the federal government is near an all-time high, Barack Obama and Democrats have become, as never before, the party of big government.

This is something the GOP can work with.

What will matter, when all is said and done, are the real-world effects of ObamaCare. If it succeeds, then Obama and Democrats will have taken important strides to help them retain their majority status in America. If on the other hand you believe, as I do, that ObamaCare is a pernicious piece of legislation, one that will have terribly damaging consequences as its provisions uncoil, then Democrats will have inflicted on themselves enormous damage.

Both parties have waged everything on this fight. The midterm elections will give us an early indication of which one bet the right way.

We are now a week out from the passage of ObamaCare, so it’s worth considering what approach the Republican party might take in the months ahead.

The first thing is to understand that, politically speaking, the GOP is in extremely good shape. President Obama succeeded in passing health care legislation — but he has not succeeded in making it popular. If you analyze the different polls that have come out since the passage of ObamaCare, it shows several things: the president received a slight bump, less than usual for a legislative victory of this magnitude, and it is in the process of evaporating. And because both parties are determined to make the midterm elections a referendum on ObamaCare — Democrats because they don’t want to leave it undefended, Republicans because they believe the public’s dislike of this legislation is intense and won’t recede — that is what the elections will largely be about.

Second, Republicans and their allies need to ensure that the president and Democrats now have full ownership of ObamaCare. That means creating benchmarks, such as when we begin to see increases in premiums and taxes, cuts in Medicare Advantage, employers dumping employees into the exchange once it’s up and running, an increase in the oversight activity of the IRS (which is responsible for enforcing this new mandate), and more.

The GOP also needs to highlight the negative, radiating effects of ObamaCare, as companies adjust to the new world they inhabit. For example, Caterpillar said ObamaCare would cost the company at least $100 million more in the first year alone. Medical-device maker Medtronic said that new taxes on its products could force it to lay off a thousand workers. The telecom giant Verizon warned that its costs will increase in the short term. As the Wall Street Journal editorialized last week, “Businesses around the country are making the same calculations as Verizon and no doubt sending out similar messages. It’s only a small measure of the destruction that will be churned out by the rewrite of health, tax, labor and welfare laws that is ObamaCare, and only the vanguard of much worse to come.”

In addition to highlighting the damaging effects of ObamaCare, Republicans need to sear into public consciousness the many false promises and assurances Mr. Obama and Democrats made. Here the stimulus package offers some helpful guidance. In order to pass it, and shortly after he signed it into law, the president and his team made guarantees about how many jobs it would create, including how unemployment would not rise above 8 percent. But a strange thing happened along the way. Unemployment topped 10 percent last year. We have lost rather than gained millions of jobs. The high expectations Obama had created were shattered, and with it the beginning of Obama’s credibility. And this, in turn, begins the downward political slide of the Democratic party under Obama.

The same thing can happen, in spades, with health care. Democrats know it, too. Just a few days ago, for example, Senator Claire McCaskill of Missouri said her party has probably oversold the legislation that just became law. “The side on which I’m on, that voted for the bill, probably is overpromising, [has] not been clear enough about the fact that this is going to be an incremental approach over time, [and] the benefits aren’t going to be felt by most Americans immediately,” McCaskill told MSNBC’s Joe Scarborough.

Memo to Ms. McCaskill: It’s a little late, Senator. The president has made, repeatedly and on the record, extravagant claims. He promised the moon and the stars. When those things not only don’t come to pass, but when people see that their lives are worse off thanks to ObamaCare, there will be a very high political price to pay.

Finally, the GOP needs to connect ObamaCare to the broader narrative it plays into: the modern-Democratic party is fiscally irresponsible to the point of recklessness, it is clueless when it comes to creating economic growth, and Democrats are enchanted with the prospect of centralizing power and control. At a time when trust in the federal government is near an all-time low and disgust with the federal government is near an all-time high, Barack Obama and Democrats have become, as never before, the party of big government.

This is something the GOP can work with.

What will matter, when all is said and done, are the real-world effects of ObamaCare. If it succeeds, then Obama and Democrats will have taken important strides to help them retain their majority status in America. If on the other hand you believe, as I do, that ObamaCare is a pernicious piece of legislation, one that will have terribly damaging consequences as its provisions uncoil, then Democrats will have inflicted on themselves enormous damage.

Both parties have waged everything on this fight. The midterm elections will give us an early indication of which one bet the right way.

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Flotsam and Jetsam

Jane Hamsher or Bill Kristol? “This bill will mandate that millions of people who are currently uninsured purchase insurance from private companies, or the IRS will collect up to 2% of their annual income in penalties. … The bill was written so that most Wal-Mart employees will qualify for subsidies, and taxpayers will pick up a large portion of the cost of their coverage. … In 2009, health care costs were 17.3% of GDP [but] in 2019 [under the] Senate bill [they'll be] 20.9% of GDP. … This bill does not bring down costs.”

The end of the Blue Dogs: “The party made a concerted effort in 2006 and 2008 to recruit candidates that could win moderate or GOP-leaning districts. That’s a key reason why Democrats won such big congressional majorities. But after forging a big-tent caucus, Speaker Pelosi has not governed that way. Instead, she pushed Blue Dog and other moderate Democrats to vote as if they represented her San Francisco district.” When the Republicans did this, I think the media narrative was that the party was risking majority support for ideological extremism.

Quin Hillyer channels the anti–Bart Stupak anger: “And if he thinks he will be ever live it down or be allowed to forget it, well, maybe he doesn’t think very well.”

How incompetent is NPR to get duped by a fake AIPAC release saying the group favors a settlement freeze? Doesn’t public radio know anything about AIPAC? Your tax dollars at work.

Marco Rubio is crushing potential opponents: “Former Florida House Speaker Marco Rubio for now runs well ahead in a three-way race for the U.S. Senate in Florida, should Governor Charlie Crist decide to run as an independent. The first Rasmussen Repots telephone survey of a potential three-candidate Senate race finds Rubio earning 42% support from likely voters in the state. Democrat Kendrick Meek picks up 25%, and Crist runs third with 22%. Eleven percent (11%) are undecided.”

Gov. Bob McDonnell on ObamaCare: “[T]his massive and complex piece of legislation allows the federal government to exercise control over one-sixth of the United States economy. … Most disconcerting is the provision mandating that every American must purchase health insurance or face a monetary penalty. … Just a few days ago I approved a bill, passed on a bipartisan basis, which prohibits mandatory insurance purchases for Virginians. Virginia’s Attorney General has rightly chosen to challenge the constitutionality of the federal mandate. I anticipate that he will be joined by a number of other states.” It now becomes an issue in every state race.

Yuval Levin on the latest regarding the Cornhusker Kickback: “That kickback was of course offered as an enticement to win the vote of Senator Ben Nelson, and to help him forget about his pro-life principles. Well lo and behold, Nelson has now announced that he opposes the reconciliation bill and will vote against it. Apparently it taxes and spends too much. It really renews your faith in politicians, doesn’t it?”

Not just a headache or fodder but potential grounds for prosecution: “The formidable Patrick Fitzgerald is leading a probe of Guantanamo Bay defense lawyers whom the CIA accused of giving detainees photos of CIA agents in an attempt to identify interrogators. … The investigation could be a headache for the Justice Department, and fodder for the attacks from Liz Cheney and others on the Guantanamo Bay lawyers.”

Perhaps Obama picked a fight on the wrong issue. Most Israelis think Bibi Netanyahu was aware of the decision to approve additional housing units in Jerusalem, but “most of those asked by the survey supported the view that construction in east Jerusalem should be treated like construction in Tel Aviv, despite the harsh criticism launched at the government over the recent diplomatic dispute with the US. Only a quarter of those polled believe the construction project should not have been approved, with 41% saying that only the timing was wrong. The number of people supportive of the construction in Ramat Shlomo neighborhood is twice that of its objectors.”

ABC staffers are grumbling over the hiring of Christiane Amanpour for This Week. Well, if it’s any consolation to the eminently qualified Jake Tapper, the criterion used was apparently “celebrity.” It certainly wasn’t objectivity. Or accuracy. Remember this one.

Jane Hamsher or Bill Kristol? “This bill will mandate that millions of people who are currently uninsured purchase insurance from private companies, or the IRS will collect up to 2% of their annual income in penalties. … The bill was written so that most Wal-Mart employees will qualify for subsidies, and taxpayers will pick up a large portion of the cost of their coverage. … In 2009, health care costs were 17.3% of GDP [but] in 2019 [under the] Senate bill [they'll be] 20.9% of GDP. … This bill does not bring down costs.”

The end of the Blue Dogs: “The party made a concerted effort in 2006 and 2008 to recruit candidates that could win moderate or GOP-leaning districts. That’s a key reason why Democrats won such big congressional majorities. But after forging a big-tent caucus, Speaker Pelosi has not governed that way. Instead, she pushed Blue Dog and other moderate Democrats to vote as if they represented her San Francisco district.” When the Republicans did this, I think the media narrative was that the party was risking majority support for ideological extremism.

Quin Hillyer channels the anti–Bart Stupak anger: “And if he thinks he will be ever live it down or be allowed to forget it, well, maybe he doesn’t think very well.”

How incompetent is NPR to get duped by a fake AIPAC release saying the group favors a settlement freeze? Doesn’t public radio know anything about AIPAC? Your tax dollars at work.

Marco Rubio is crushing potential opponents: “Former Florida House Speaker Marco Rubio for now runs well ahead in a three-way race for the U.S. Senate in Florida, should Governor Charlie Crist decide to run as an independent. The first Rasmussen Repots telephone survey of a potential three-candidate Senate race finds Rubio earning 42% support from likely voters in the state. Democrat Kendrick Meek picks up 25%, and Crist runs third with 22%. Eleven percent (11%) are undecided.”

Gov. Bob McDonnell on ObamaCare: “[T]his massive and complex piece of legislation allows the federal government to exercise control over one-sixth of the United States economy. … Most disconcerting is the provision mandating that every American must purchase health insurance or face a monetary penalty. … Just a few days ago I approved a bill, passed on a bipartisan basis, which prohibits mandatory insurance purchases for Virginians. Virginia’s Attorney General has rightly chosen to challenge the constitutionality of the federal mandate. I anticipate that he will be joined by a number of other states.” It now becomes an issue in every state race.

Yuval Levin on the latest regarding the Cornhusker Kickback: “That kickback was of course offered as an enticement to win the vote of Senator Ben Nelson, and to help him forget about his pro-life principles. Well lo and behold, Nelson has now announced that he opposes the reconciliation bill and will vote against it. Apparently it taxes and spends too much. It really renews your faith in politicians, doesn’t it?”

Not just a headache or fodder but potential grounds for prosecution: “The formidable Patrick Fitzgerald is leading a probe of Guantanamo Bay defense lawyers whom the CIA accused of giving detainees photos of CIA agents in an attempt to identify interrogators. … The investigation could be a headache for the Justice Department, and fodder for the attacks from Liz Cheney and others on the Guantanamo Bay lawyers.”

Perhaps Obama picked a fight on the wrong issue. Most Israelis think Bibi Netanyahu was aware of the decision to approve additional housing units in Jerusalem, but “most of those asked by the survey supported the view that construction in east Jerusalem should be treated like construction in Tel Aviv, despite the harsh criticism launched at the government over the recent diplomatic dispute with the US. Only a quarter of those polled believe the construction project should not have been approved, with 41% saying that only the timing was wrong. The number of people supportive of the construction in Ramat Shlomo neighborhood is twice that of its objectors.”

ABC staffers are grumbling over the hiring of Christiane Amanpour for This Week. Well, if it’s any consolation to the eminently qualified Jake Tapper, the criterion used was apparently “celebrity.” It certainly wasn’t objectivity. Or accuracy. Remember this one.

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Flotsam and Jetsam

Another Red State senator with a potential re-election problem: “Incumbent Democratic Senator Byron Dorgan may have a serious problem on his hands if Republicans recruit Governor John Hoeven to run for the U.S. Senate in North Dakota next year. The first Rasmussen Reports Election 2010 telephone survey of likely voters in North Dakota finds the popular Republican governor leading Dorgan by 22 points — 58% to 36%.”

Harry Reid says any senator who didn’t get a “deal” is a sucker. Well, he didn’t quite say it that way — but almost: “I don’t know if there’s a senator who doesn’t have something in this bill that’s important to them. … And if they don’t have something in it that’s important to them, then it’s doesn’t speak well for them.” Next we’ll be hearing that the Cornhusker Kickback is “golden.”

James Pinkerton explains: “It’s not sausage-making, it’s three-card-monte-playing. … But the whole point of three-card-monte is not to build an enduring monument of some kind–the point is to get the money away from the rubes. Or, in this case, the votes away from the voters. We’ll see in 11 months how this game plays out.”

Sen. Ben Nelson is convinced that the backlash against him is “all orchestrated.” Yes, the outrage from the right-to-life community, the governor, and the local branch of Americans for Prosperity is quite “orchestrated,” and they will be equally united when he comes up for re-election.

Three of her top two reasons for opposing ObamaCare: “1. Forces you to pay up to 8% of your income to private insurance corporations — whether you want to or not. 2. If you refuse to buy the insurance, you’ll have to pay penalties of up to 2% of your annual income to the IRS. … 5. Paid for by taxes on the middle class insurance plan you have right now through your employer, causing them to cut back benefits and increase co-pays.” Jane Hamsher or Dana Perino?

CBS headline: “Democrats Worry of Dismal Mid-Term.” Democratic pollster Celinda Lake says, “Our voters are less enthusiastic than Republicans and independents.” And that was before the 1 a.m. Senate health-care vote.

In Virginia, which Obama won in 2008 by 5 percentage points, voters disapprove of his performance by a 54 to 44 percent margin. Only 30 percent of white voters approve of his performance.

Isn’t it delusional to think a bill that more than 60 percent of voters disfavor is going to help the party that passed it on a strict party-line vote? “Slumping in the polls and struggling to pass climate and financial legislation, President Barack Obama and Democratic leaders are counting on an historic health care victory to buoy their electoral prospects in 2010. … Last week’s Wall Street Journal/NBC News poll not only showed a substantial majority opposed to the plan, but for the first time, it showed a plurality favoring the status quo over passage.”

Independents disapprove of Obama’s performance by a lot — more than a dozen points on average.

Many of them may be in agreement with Michael Goodwin: “I now regard his campaign as a sly bait-and-switch operation, promising one thing and delivering another. Shame on me. Equally surprising, he has become an insufferable bore. The grace notes and charm have vanished, with peevishness and petty spite his default emotions. His rhetorical gifts now serve his loathsome habit of fear-mongering.”

Another Red State senator with a potential re-election problem: “Incumbent Democratic Senator Byron Dorgan may have a serious problem on his hands if Republicans recruit Governor John Hoeven to run for the U.S. Senate in North Dakota next year. The first Rasmussen Reports Election 2010 telephone survey of likely voters in North Dakota finds the popular Republican governor leading Dorgan by 22 points — 58% to 36%.”

Harry Reid says any senator who didn’t get a “deal” is a sucker. Well, he didn’t quite say it that way — but almost: “I don’t know if there’s a senator who doesn’t have something in this bill that’s important to them. … And if they don’t have something in it that’s important to them, then it’s doesn’t speak well for them.” Next we’ll be hearing that the Cornhusker Kickback is “golden.”

James Pinkerton explains: “It’s not sausage-making, it’s three-card-monte-playing. … But the whole point of three-card-monte is not to build an enduring monument of some kind–the point is to get the money away from the rubes. Or, in this case, the votes away from the voters. We’ll see in 11 months how this game plays out.”

Sen. Ben Nelson is convinced that the backlash against him is “all orchestrated.” Yes, the outrage from the right-to-life community, the governor, and the local branch of Americans for Prosperity is quite “orchestrated,” and they will be equally united when he comes up for re-election.

Three of her top two reasons for opposing ObamaCare: “1. Forces you to pay up to 8% of your income to private insurance corporations — whether you want to or not. 2. If you refuse to buy the insurance, you’ll have to pay penalties of up to 2% of your annual income to the IRS. … 5. Paid for by taxes on the middle class insurance plan you have right now through your employer, causing them to cut back benefits and increase co-pays.” Jane Hamsher or Dana Perino?

CBS headline: “Democrats Worry of Dismal Mid-Term.” Democratic pollster Celinda Lake says, “Our voters are less enthusiastic than Republicans and independents.” And that was before the 1 a.m. Senate health-care vote.

In Virginia, which Obama won in 2008 by 5 percentage points, voters disapprove of his performance by a 54 to 44 percent margin. Only 30 percent of white voters approve of his performance.

Isn’t it delusional to think a bill that more than 60 percent of voters disfavor is going to help the party that passed it on a strict party-line vote? “Slumping in the polls and struggling to pass climate and financial legislation, President Barack Obama and Democratic leaders are counting on an historic health care victory to buoy their electoral prospects in 2010. … Last week’s Wall Street Journal/NBC News poll not only showed a substantial majority opposed to the plan, but for the first time, it showed a plurality favoring the status quo over passage.”

Independents disapprove of Obama’s performance by a lot — more than a dozen points on average.

Many of them may be in agreement with Michael Goodwin: “I now regard his campaign as a sly bait-and-switch operation, promising one thing and delivering another. Shame on me. Equally surprising, he has become an insufferable bore. The grace notes and charm have vanished, with peevishness and petty spite his default emotions. His rhetorical gifts now serve his loathsome habit of fear-mongering.”

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Democrats’ Economic Plans

Neither Barack Obama or Hillary Clinton are going to give John McCain a run for his money with fiscal conservatives. Indeed, it may be that in an economic downturn their proposals sound even worse.

Obama in an interview yesterday on CNBC said he would raise the capital gains tax (the exact amount to be determined later), raise the top marginal individual income tax rate to 39%, raise the cap on social security taxes (currently $102,000), raise taxes on “dirty energy” like coal ( Did they know about this in Ohio? Are they listening in West Virginia?), and hike a few others (e.g. death tax, dividends). The only question he wouldn’t answer is whether he is a “liberal,” instead declaring that “My attitude is that I believe in the market, I believe in entrepreneurship, I believe in opportunity, I believe in capitalism and I want to do what works. . . But what I want to make sure of is it works for all America and not just a small sliver of America.” (Perhaps someone should tell him that capitalism requires capital.)

Obama has repeatedly said that he would raise income taxes only on those making more than $75,000. Americans For Tax Reform provided me with this interesting statistical information :

According to the IRS Statistics of Income Bulletin, the top 20% of households earn more than $75,000 in Adjusted Gross Income. This represents about 30 million households. A good guess would be about 100 million affected Americans. (The source for this is also IRS-SO.) The top 20% of income earners (that is, those earning $75,000 or more) pay nearly 90% of all federal income taxes (Source: Tax Foundation).

Interestingly in a debate last November Hillary Clinton took exception with the notion that Obama’s plan to raise the social security tax cap (then $97,500) would only impact the rich. She said that “it is absolutely the case that there are people who would find that burdensome. I represent firefighters. I represent school supervisors. I’m not talking — and, you know, it’s different parts of the country. So you have to look at this across the board and the numbers are staggering.” She also said that she does “not want to fix the problems of Social Security on the backs of middle-class families and seniors. If you lift the cap completely, that is a $1 trillion tax increase. I don’t think we need to do that.” (So if $97,500 isn’t rich then one supposes she agrees with McCain and his advisors today who asserted that $75,000 isn’t rich either.)

But Clinton is no role model for free marketers. The New York Times may kvell over her mastery of health care policy, but she declared in an interview that she’s going to cap health care insurance at 5 to 10% of individuals’ earnings and require all insurers to cover consumers regardless of health status or age. But what if insurers can’t do this ( i.e. suppose it costs more than 10% of the average American’s salary to insure them, especially the sick people)? Ah, not to worry: “Government insurance similar to Medicare would be available to all consumers.” And of course, those taxes increases she would enact to pay for this aren’t tax increases. Rolling back the Bush tax cuts “should not be rightly labeled as a tax increase,” she says, since they will expire in 2011.

Perhaps McCain won’t be disadvantaged on domestic policy after all.

Neither Barack Obama or Hillary Clinton are going to give John McCain a run for his money with fiscal conservatives. Indeed, it may be that in an economic downturn their proposals sound even worse.

Obama in an interview yesterday on CNBC said he would raise the capital gains tax (the exact amount to be determined later), raise the top marginal individual income tax rate to 39%, raise the cap on social security taxes (currently $102,000), raise taxes on “dirty energy” like coal ( Did they know about this in Ohio? Are they listening in West Virginia?), and hike a few others (e.g. death tax, dividends). The only question he wouldn’t answer is whether he is a “liberal,” instead declaring that “My attitude is that I believe in the market, I believe in entrepreneurship, I believe in opportunity, I believe in capitalism and I want to do what works. . . But what I want to make sure of is it works for all America and not just a small sliver of America.” (Perhaps someone should tell him that capitalism requires capital.)

Obama has repeatedly said that he would raise income taxes only on those making more than $75,000. Americans For Tax Reform provided me with this interesting statistical information :

According to the IRS Statistics of Income Bulletin, the top 20% of households earn more than $75,000 in Adjusted Gross Income. This represents about 30 million households. A good guess would be about 100 million affected Americans. (The source for this is also IRS-SO.) The top 20% of income earners (that is, those earning $75,000 or more) pay nearly 90% of all federal income taxes (Source: Tax Foundation).

Interestingly in a debate last November Hillary Clinton took exception with the notion that Obama’s plan to raise the social security tax cap (then $97,500) would only impact the rich. She said that “it is absolutely the case that there are people who would find that burdensome. I represent firefighters. I represent school supervisors. I’m not talking — and, you know, it’s different parts of the country. So you have to look at this across the board and the numbers are staggering.” She also said that she does “not want to fix the problems of Social Security on the backs of middle-class families and seniors. If you lift the cap completely, that is a $1 trillion tax increase. I don’t think we need to do that.” (So if $97,500 isn’t rich then one supposes she agrees with McCain and his advisors today who asserted that $75,000 isn’t rich either.)

But Clinton is no role model for free marketers. The New York Times may kvell over her mastery of health care policy, but she declared in an interview that she’s going to cap health care insurance at 5 to 10% of individuals’ earnings and require all insurers to cover consumers regardless of health status or age. But what if insurers can’t do this ( i.e. suppose it costs more than 10% of the average American’s salary to insure them, especially the sick people)? Ah, not to worry: “Government insurance similar to Medicare would be available to all consumers.” And of course, those taxes increases she would enact to pay for this aren’t tax increases. Rolling back the Bush tax cuts “should not be rightly labeled as a tax increase,” she says, since they will expire in 2011.

Perhaps McCain won’t be disadvantaged on domestic policy after all.

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From COMMENTARY: Health Care in Three Acts

As President Bush prepares to address the issue of health care in his State of the Union address, COMMENTARY is fortunate to have a trenchant analysis of the wider problem, “Health Care in Three Acts,” by Eric Cohen and Yuval Levin, coming out in the February issue. Here is an advance look.

Americans say they are very worried about health care: on generic lists of voter concerns, health issues regularly rank just behind terrorism and the Iraq war. And politicians are eager to do something about it. To empower consumers, the White House has advanced the idea of Health Savings Accounts; to help the uninsured, it has explored using Medicaid more creatively. Senator Edward Kennedy of Massachusetts, the Democrats’ leader on this issue, has backed “Medicare for all.” The American Medical Association has called for tax credits to put private coverage within reach of more Americans. A number of recent books have proposed solutions to our health-care problems ranging from socialized medicine on the Left to laissez-faire schemes of cost containment on the Right. In Washington and in the state capitals, pressure is building for serious reforms.

But what exactly are Americans worried about? Untangling that question is harder than it looks. In a 2006 poll, the Kaiser Family Foundation found that while a majority proclaimed themselves dissatisfied with both the quality and the cost of health care in general, fully 89 percent said they were satisfied with the quality of care they themselves receive. Eighty-eight percent of those with health insurance rated their coverage good or excellent—the highest approval rating since the survey began 15 years ago. A modest majority, 57 percent, were satisfied even with its cost.

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As President Bush prepares to address the issue of health care in his State of the Union address, COMMENTARY is fortunate to have a trenchant analysis of the wider problem, “Health Care in Three Acts,” by Eric Cohen and Yuval Levin, coming out in the February issue. Here is an advance look.

Americans say they are very worried about health care: on generic lists of voter concerns, health issues regularly rank just behind terrorism and the Iraq war. And politicians are eager to do something about it. To empower consumers, the White House has advanced the idea of Health Savings Accounts; to help the uninsured, it has explored using Medicaid more creatively. Senator Edward Kennedy of Massachusetts, the Democrats’ leader on this issue, has backed “Medicare for all.” The American Medical Association has called for tax credits to put private coverage within reach of more Americans. A number of recent books have proposed solutions to our health-care problems ranging from socialized medicine on the Left to laissez-faire schemes of cost containment on the Right. In Washington and in the state capitals, pressure is building for serious reforms.

But what exactly are Americans worried about? Untangling that question is harder than it looks. In a 2006 poll, the Kaiser Family Foundation found that while a majority proclaimed themselves dissatisfied with both the quality and the cost of health care in general, fully 89 percent said they were satisfied with the quality of care they themselves receive. Eighty-eight percent of those with health insurance rated their coverage good or excellent—the highest approval rating since the survey began 15 years ago. A modest majority, 57 percent, were satisfied even with its cost.

Evidently, though, this widespread contentment with one’s own lot coexists with concern on two other fronts. Thus, in the very same Kaiser poll, nearly 90 percent considered the number of Americans without health insurance to be a serious or critical national problem. Similarly, a majority of those with insurance of their own fear that they will lose their coverage if they change jobs, or that, “in the next few years,” they will no longer be able to afford the coverage they have. At least as troubling is what the public does not seem terribly bothered about—namely, the dilemmas of end-of-life care in a rapidly aging society and the exploding costs of Medicare as the baby-boom generation hits age sixty-five.

All of this makes it difficult to speak of health care as a single coherent challenge, let alone to propose a single workable solution. In fact, America faces three fairly distinct predicaments, affecting three fairly distinct portions of the population—the poor, the middle class, and the elderly—and each of them calls for a distinct approach.

For the poor, the problem is affording coverage. Forty-six million Americans were uninsured in 2005, according to the Census Bureau. This is about 15.9 percent of the population, which has been the general range now for more than a decade, peaking at 16.3 percent in 1998.

But that stark figure fails to convey the shifting face and varied make-up of the uninsured. On average, a family that loses its coverage will become insured again in about five months, and only one-sixth of the uninsured lack coverage for two years or more. In addition, about a fifth of the uninsured are not American citizens, and therefore could not readily benefit from most proposed reforms. Roughly a third of the uninsured are eligible for public-assistance programs (especially Medicaid) but have not signed up, while another fifth (many of them young adults, under thirty-five) earn more than $50,000 a year but choose not to buy coverage.

It is also crucial to distinguish between a lack of insurance coverage and a lack of health care. American hospitals cannot refuse patients in need who are without insurance; roughly $100 billion is spent annually on care for such patients, above and beyond state and federal spending on Medicaid. The trouble is that most of this is emergency care, which includes both acute situations that might have been prevented and minor problems that could have been treated in a doctor’s office for considerably less money. The real problem of the uninsured poor, then, is not that they are going without care, but that their lack of regular and reliable coverage works greatly to the detriment of their family stability and physical well-being, and is also costly to government.

For the middle class, the problem is different: the uncertainty caused in part by the rigid link between insurance and employment and in part by the vicissitudes of health itself. America’s employment-based insurance system is unique in the world, a product of historical circumstances and incremental reforms that have made health care an element of compensation for work rather than either a simple marketplace commodity or a government entitlement. This system now covers roughly 180 million Americans. It works well for the vast majority of them, but the link it creates between one’s job and one’s health coverage, and the peculiar economic inefficiencies it yields, result in ever-mounting costs for employers and, in an age of high job mobility, leave many families anxious about future coverage even in good times.

The old, finally, face yet another set of problems: the steep cost of increasingly advanced care (which threatens to paralyze the government) and the painful decisions that come at the limits of medicine and the end of life. Every American over sixty-five is eligible for at least some coverage by the federal Medicare program, which pays much of the cost of most hospital stays, physician visits, laboratory services, diagnostic tests, outpatient services, and, as of 2006, prescription drugs. Established in 1965, Medicare is funded in part by a flat payroll tax of 2.9 percent on nearly every American worker and, beyond that, by general federal revenue. Most recipients pay only a monthly premium that now stands at $88.50, plus co-payments on many procedures and hospital stays.

But precisely because Medicare is largely funded by a payroll tax, it suffers acutely from the problems of an aging society. In 1950, just over 8 percent of Americans were over sixty-five. Today that figure stands at nearly 15 percent, and by 2030 it is expected to reach over 20 percent, or 71 million Americans. Moreover, the oldest of the old, those above the age of eighty-five, who require the most intense and costly care, are now the fastest growing segment of the population; their number is expected to quadruple in the next half-century.

For Medicare, therefore, just as for Social Security, the number of recipients is increasing while the number of younger workers to pay the bills is declining. But Medicare faces a greater danger still. Its costs are a function not only of the number of eligible recipients but of the price of the services they use. Over the past few years, health-care spending in America has increased by about 8 percent each year, most steeply for older Americans who have the most serious health problems. As these costs continue to rise much faster than the wages on which Medicare’s funding is based, the program’s fiscal decline will be drastic, with commensurately drastic consequences for the federal budget.

Three different “crises,” then, each of a different weight and character. The crisis of the uninsured, while surely a serious challenge, has often been overstated, especially on the Left, in an effort to promote more radical reforms than are necessary. The crisis of insured middle-class families has been misdiagnosed both by the Right, which sees it purely as a function of economic inefficiency, and by the Left, which sees it as an indictment of free-market medicine. And the crisis of Medicare has been vastly understated by everyone, in an effort to avoid taking the painful measures necessary to prevent catastrophe. In each case, a clearer understanding may help point the way to more reasonable reforms.

In the case of the uninsured, the best place to begin is with the solution most frequently proposed to their plight: a government-run system of health care for all Americans.

Under such a system—which exists in some form in most other industrialized democracies—the government pays everyone’s medical bills, and in many cases even owns and runs the health-care system itself. The appeal of this idea lies in its basic fairness and simplicity: everyone gets the same care, from the same source, in the same way, based purely on need. In one form or another—actual proposals have varied widely, with Hillary Clinton’s labyrinthine scheme of 1993 merely the best known of many—this “single-payer” model remains the preferred health-care solution of the American Left. But it is ill-suited to the actual problems of America’s uninsured, and adopting it would greatly exacerbate other problems as well.

Everywhere it has been tried, the single-payer model has yielded inefficient service and lower-quality care. In Britain today, more than 700,000 patients are waiting for hospital treatment. In Canada, it takes, on average, seventeen weeks to see a specialist after a referral. In Germany and France, roughly half of the men diagnosed with prostate cancer will die from the disease, while in the United States only one in five will. According to one study, 40 percent of British cancer patients in the mid-1990’s never got to see an oncologist at all.

Such dire statistics have in fact caused many Western democracies with single-payer systems to turn toward market mechanisms for relief. The Swedes have begun to privatize home care and laboratory services. Australia now offers generous tax incentives to citizens who eschew the public system for private care. To send a message to the government, the Canadian Medical Association recently elected as its president a physician who runs a private hospital in Vancouver, actually illegal in Canada. “This is a country in which dogs can get a hip replacement in under a week,” the new president told a newspaper interviewer, “while humans can wait two or three years.”

Defenders of the single-payer concept often point out that, despite patient complaints about the quality of care, overall measures of health in countries with such systems are roughly equivalent to those in America. That may be so, but the chief reason lies in social and cultural factors—crime rates, diet, and so forth—that make life in many other Western nations safer and healthier than life in America, and that would not be altered by a single-payer health system. Besides, citizens in those other nations benefit enormously from medical innovations produced and made possible by America’s dynamic private market; if that market were hobbled by a European-style bureaucracy, their quality of care would suffer along with ours.

And quality of care, it is important to remember, is one thing that most Americans are happy with. Any reform that promises to replace immediate access to specialists with long waiting lines, or the freedom to choose one’s own doctor with restrictive government mandates, is certain to evoke deep hostility, and thereby to cut into public support for efforts to help the uninsured.

On this score, proponents of socialized medicine would do well to consult the cautionary example of the health-maintenance organization (HMO). HMO’s are insurers who contract directly with providers, often for a flat fee, reviewing physician referrals and medical decisions in order to prevent unnecessary procedures or expenses. By the mid-1990’s, this capacity for cost-containment had made HMO’s very attractive to policy-makers and families alike. And they delivered on their cost-cutting promise. In those years, as David Gratzer notes in his recent book The Cure (Encounter, 325 pp., $25.95), private health-care spending per capita grew by just 2 percent annually (today the figure is nearly 10 percent, though the reasons for this, as we shall see below, go beyond just the decline of HMO’s).*

But the public soon chafed under the authoritarian character of a system in which case managers were entrusted with decisions that often seemed arbitrary, while doctors resented having their medical judgment questioned by bureaucrats. Participation soon declined, and HMO’s themselves began to take on the characteristics of traditional insurance plans. By the middle of this decade, they had joined the bipartisan list of stock American villains: in the 2004 presidential campaign, President Bush accused Senator John Kerry of getting “millions from executives at HMO’s,” while Kerry pledged to “free our government from the dominance of the lobbyists, the drug industry, big oil, and HMO’s—so that we can give America back its future and its soul.”

In a single-payer government system, everything Americans dislike about HMO’s would be worse: rationing, top-down control, perverse incentives, and, for patients, very little say. As has happened in Europe, a single-payer approach would also turn health-care costs entirely into government costs, grossly distorting public spending and threatening to crowd out other important government functions. The result would be a political, fiscal, and social disaster.

There is a better way to assist the uninsured: not universal government health care but universal private insurance coverage. Such an effort could begin by identifying the populations in need. Those who are uninsured by their own choice could be offered incentives to purchase at least some minimal coverage, or be penalized for failing to do so. Those who cannot afford insurance could be given subsidies to purchase private coverage based on their level of income, and then pooled into a common group to give them some purchasing power and options. Their coverage would still not equal that available to people in the most generous employer-based plans, but it would offer reliable access to care without destroying the quality and flexibility of the American system.

Although such a plan might not be cheap, it would not be nearly so expensive or complex as a single-payer system. The money for it could be taken, in part, from Medicaid funds now used to pay doctors and hospitals for care already provided to the uninsured, with such “uncompensated-care” programs gradually transformed into a voucher system for purchasing private coverage. But though it might rely on some federal dollars, the reform itself would best be undertaken and managed at the state level. After all, health insurance is regulated by the states, Medicaid is largely managed by the states, and different states face different challenges and possess different resources.

In Massachusetts and Florida, ideas like these are already being tested, although it is too early to judge the results. The federal government can help other states try this more practical approach by clearing away regulatory obstacles and by providing incentives for experiments in creative reforms.

This brings us to the health-care anxieties of middle-class Americans. Although these concerns are in most respects much less pressing than those of the poor, they are real enough. Middle-class families are, besides, the heart and soul of America’s culture and economy, as well as the essential political force for any sober assessment and improvement of America’s health-care system.

Generally speaking, the worries expressed by these Americans stem from the peculiarities of our employer-based insurance market. It is, indeed, a very odd thing that more than 180 million Americans should be covered by insurance purchased for them by their employers. The companies we work for do not buy our food and clothing, or our car and home insurance. They pay us for our labor, and we use that money to buy what we want.

No less odd is the character of what we call health insurance. Insurance usually means coverage for extreme emergencies or losses. We expect auto insurance to kick in when our car is badly damaged in an accident, not when we need a routine oil change; homeowner’s insurance covers us after a fire, flood, or break-in, not when we need to repair the deck or unclog the gutters. But when it comes to health, we expect some element of virtually every expense to be covered, including routine doctor checkups and regular care.

America’s insurance system is largely a historical accident. During World War II, the federal government imposed wage controls on American employers. No longer able to raise salaries to compete for employees, companies turned instead to offering the lure of fringe benefits, and the era of employer-based health care was born. Thanks to a 1943 IRS ruling allowing an exemption for money spent by employers on health insurance, an enormous tax incentive was created as well. Rather than giving a portion of every dollar to the government, employees could get a full dollar’s worth of insurance through their company.

Of course, wage controls are long gone, but the system they inadvertently created, including the tax exemption, remains in place. Although this system has served most Americans very well, it has two significant drawbacks. First, by forging a tight link between one’s job and one’s health insurance, it makes losing a job, or changing jobs, a scary proposition, especially for parents. Second, it lacks any serious check on costs. Because insurance often pays the bulk of every single bill (instead of kicking in only for emergencies or extreme expenses), most American families do not know, or attend to, the actual cost of their health care.

Any car owner can tell you the price of a gallon of gas or an oil change. But what is the price of knee surgery? Or even a regular doctor’s visit? Does one hospital or doctor charge more than another? Most patients pay only a deductible that, while often not cheap, bears almost no relation to the price of the service they receive. As a result, they do not behave like consumers, shopping for the best price and thereby forcing providers to compete for their dollar.

Inured to such issues, families worry most about the lack of portability of their insurance, leaving it to economists to worry about the distorting effects of price inefficiencies. To gain the support of middle-class parents, any reform to the system would therefore need to address the former issue first.

Policy-makers on the Left have tended to understand this, but have over-read the anxiety of families, seeing it as a broad indictment of America’s free-market health care. They have thus offered the same bad solution to the problems of the insured as they do to the problems of the uninsured: a government-run system that will replace our present one. As for conservative policy-makers, they sometimes tend to overlook the concerns of middle-class families altogether, focusing on inefficiency before portability.

The conservative health-care solution of the moment is the health savings account, or HSA. It has two components: a savings account to which individuals and employers can make tax-free contributions to be drawn on exclusively for routine health-care costs, and a high-deductible insurance plan to help pay for catastrophic expenses.

Since individuals can take their HSA’s with them when they change jobs (provided the new employer allows it), this option can indeed help promote insurance portability. But, generally speaking, that is neither its foremost aim nor its effect. Instead, it is seen by its proponents as helping to level the playing field by giving to individuals the same tax breaks that employers get in purchasing coverage, and as helping to train people to think like consumers, since in spending their own money they will have an incentive to spend as little of it as possible. In short, proponents of the HSA want to use market mechanisms to achieve lower costs and improved quality.

This is certainly a worthy goal—but does it meet the concerns of most Americans? David Gratzer, an advocate of the HSA, tells the story of a woman who used such an account in exactly the desired way. Needing foot surgery, and impelled to spend her own money wisely, she

took charge of the situation and thought about what she really needed. When a simple day-surgery was suggested, she looked around and decided on a local surgery center. She asked about clinic fees and offered to pay upfront—thereby getting a 50-percent discount. When she found out that an anesthetist would come in specifically to do the foot block, she asked her surgeon just to do it. She also negotiated the surgeon’s compensation down from $1,260 to $630. Finally, she got a prescription from her doctor for both antibiotics and painkillers, but only filled the former. “In the past, my attitude would have been, ‘just have all the prescriptions filled because insurance was paying for it, whether or not I need them.’”

Although Gratzer offers this as an ideal example, it will surely strike many people as a nightmare. Haggling with doctors, ignoring prescriptions, bypassing a specialist to save money—is this the solution to middle-class health-care worries? Who among us feels confident taking so much responsibility for judgments over his own health, let alone over the care of his children or his elderly parents?

If the HSA is to have wide appeal, it must be sold first and foremost as a means not of efficiency but of portability—and as part of a broader effort to expand the portability of health insurance generally. Nor should such an effort be aimed, at least at first, at undoing our employer-based system. Perhaps, given a blank slate, no sensible person would ever have designed the current system. But we do not have a blank slate. We have a system providing care that the vast majority of insured Americans are quite happy with—and that has also helped America resist the pressure for government-run health care of the kind for which every other developed nation is now paying a heavy price.

We have, in other words, a system that works but is in need of repairs, most notably in the realm of improved portability. Making this happen will require better cooperation between state and federal policy-makers. An exclusively national solution would require federalizing the regulation of health insurance, which is both undesirable and politically unachievable. Instead, states should be encouraged to develop insurance marketplaces like the one now taking shape in Massachusetts. Mediating between providers and purchasers, these would allow employers, voluntary groups, and individuals to select from a common set of private options. Whether working full-time, part-time, or not at all, individuals and families could choose from the same menu of plans and thus maintain constant coverage even as their job situations or life circumstances change. For those who cannot afford insurance and do not receive it from an employer, Medicaid dollars could be used to subsidize the purchase of a private plan.

The federal government, meanwhile, could ensure that Medicaid dollars allotted to states can be used to support such a structure of subsidies. It could also pursue other, smaller measures, like extending or eliminating the time limit on the COBRA program, which allows individuals leaving a job to keep their employment-based plan by paying the full premium. As states begin implementing marketplace reforms, the federal government could also find ways to encourage regional and eventually national marketplaces, which would enable the purchase of insurance across state lines.

In any such scheme, Health Savings Accounts would surely have a place. So would other measures of cost containment like greater price transparency. But the key to any large reform must be its promise to address the real worries of insured American families by preserving what is good about the current system while facing up to its limits and confronting its looming difficulties.

Unfortunately, when it comes to paying for the health care of older Americans, there are few attractive options. Costs have risen steeply in recent years, while the economic footing of the Medicare program has been steadily eroding. Nor are demographic realities likely to change for at least a generation; to the contrary, they may only worsen. So the solution must involve some form of cost containment.

This will not be easy. As Arnold Kling points out in Crisis of Abundance (Cato Institute, 120 pp., $16.95), costs are rising not because of increasing prices for existing medical services but because of a profound transformation in the way medicine is practiced in America. Between 1975 and 2002, the U.S. population increased by 35 percent, but the number of physicians in the country grew by over 100 percent. The bulk of these were specialists, whose services cost a great deal more than those of general practitioners. New technologies of diagnosis (like MRI exams) have also become routine, and not just for the old, and the number and variety of treatments, including surgeries, have likewise increased. We spend more because more can be done for us.

All of this spells heavier demands on the Medicare budget, to the point where the program’s fiscal prospects have become very bleak. Already accounting for roughly 15 percent of federal spending, Medicare will be at 25 percent by 2030 and growing. In David Gratzer’s words, “Medicare threatens to be the program that ate the budget.”

Worse yet, one of the most expensive and complicated burdens of an aging society is not even covered by Medicare. This is long-term care, involving daily medical and personal assistance to people incapable of looking after themselves. The Congressional Budget Office estimates that Americans spent roughly $137 billion on long-term care in 2000, and that by 2020 the figure will reach $207 billion. Longer lives, and the high incidence of dementia among the oldest of the old, are bound to impose an extraordinary new financial strain on middle-income families, whose consequent demand for government help will only worsen our already looming fiscal crisis.

Medicaid, which covers health care for the poor, does pay for some long-term care in most states. To qualify for this, and to avoid burdening their children, a growing number of the elderly have opted to spend down their assets when the need arises. But this ends up burdening their children anyway, if less directly. States already spend more on Medicaid than on primary and secondary education combined; if Medicaid comes to shoulder the bulk of long-term costs in the coming decades, it will bankrupt state coffers and place enormous strains on the federal budget.

Of course, the challenges of an aging society reach well beyond economics. As more and more Americans face an extended decline in their final years, elderly patients and their families will confront painful choices about how much care is worthwhile, who should assume the burdens of care-giving, and when to forgo additional life-sustaining treatment. Compared to this profound human challenge, fiscal dilemmas can seem relatively paltry. But they too necessitate hard and unavoidable choices.

One way or another, the Medicare program will have to be adjusted to a society with radically different demographics from the one it was designed to serve. If “seventy is the new fifty,” as a popular bumper sticker tells us, then the age of Medicare eligibility must begin to move up as well. That will inevitably impose a hardship on those who are already not vigorous in their sixties, as well as on those whose jobs are too physically demanding for even a healthy sixty-five-year-old. So hand in hand with raising the age of eligibility will need to go programs encouraging (or requiring) health-care savings earlier in life. At the same time, Medicare benefits will gradually have to become means-tested, so that help goes where it is most needed and benefits are most generous to those with the lowest incomes and fewest assets.

More fundamentally, the structure of the Medicare program will have to change. Its benefits now increase in an open-ended way that both reflects and drives the upward movement of health costs; if Medicare is to remain sustainable, constraints will gradually have to be put in place, so that benefits grow by a set percentage each year. The program will also need its own distinct and reasonably reliable funding source, which will require an adjustment in the design of the payroll tax.

Any such reforms will be politically explosive, to put it mildly. No politician in his right mind would run on a platform of limiting Medicare eligibility and capping its benefits. And yet, a decade from now, caring for aging parents will have become a burning issue for a great swath of America’s families as parents find themselves squeezed between the needs of their own parents and the needs of their children. Every politician will be expected to offer a solution, and will be subject to dangerous temptations: promising limitless care at the very moment when fiscal responsibility requires setting limits, or promising to “solve” our fiscal problems by abandoning the elderly. The least that responsible policy-makers can do now is to familiarize Americans with the realities of our aging society, so that when the time comes for difficult choices, we will not be blind-sided.

Understanding America’s three distinct health-care challenges, and the deficiencies of conventional responses to them, is the first step toward reform. Any approach we take will assuredly cost the taxpayers money. Already, nearly a third of the federal budget is spent on health-care, and that portion is certain to grow. The choice, however, is between paying the necessary price to ameliorate our genuine problems or paying far more to satisfy ideological whims or avoid politically painful decisions.

Neither socialized medicine nor a pure market approach is suited to America’s three health-care challenges, while the bipartisan conspiracy to ignore the looming crisis of Medicare in particular will return to haunt our children. Coming to grips with the true nature of our challenges suggests, instead, a set of pragmatic answers designed to address the real problems of the uninsured, of middle-class families, and of the elderly while protecting America’s private health-insurance system and looking out for the long-term fiscal health of the nation.

Even as we pursue practical options for reform, however, it behooves us to remember that health itself will always remain out of our ultimate control. Medicine works at the boundaries of life, and its limits remind us of our own. While our health-care system can be improved, our unease about health can never truly be quieted. And while reform will require hard decisions, solutions that would balance the books by treating the disabled and debilitated as unworthy of care are no solutions at all. In no small measure, America’s future vitality and character will depend upon our ability to rise to this challenge with the right mix of creativity and sobriety.

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