Tuesday, January 23, 2007

State of the Domestic Union

I haven't watched the State of the Union address in about five years. Too much applause. And it's not that I don't like to see the president receive applause, it's that all the cheering makes what should be a 15-20 minute speech ridiculously long.

So, rather than watch, I'll just read it tomorrow. But, really, with the advent of planned leaks, much of address is already known.

For instance, we already know that Bush will focus on domestic issues. (Gee, I wonder why?)

Part of the domestic agenda is supposed to be an acknowledgement that global warming exists and that humans have contributed to it. Word is that Bush won't actually take concrete steps to directly limit greenhouse gas emissions, but he will offer support for technologies that allow the market to take us in that direction.

As half-assed as I think this approach is, it is a big step for an administration that just last year was caught doctoring global warming reports to make their conclusions appear ambiguous.

But the admission is timed well. Reports are that a massive global warming study is set to be released in four parts in the coming months. The first segment, which spans 1,600 pages, was written by more than 600 scientists and reviewed by another 600 experts.

And, according to top US climate scientist Jerry Mahlman, who was one of the expert reviewers, when it comes to proving human-caused global warming, "The smoking gun is definitely lying on the table as we speak."

Also on tap for tonight's domestic address is health care tinkering. Bush plans to announce an alteration of the tax code so that some without health care will get tax breaks to help pay for coverage, while others who currently have insurance will see a tax increase to help the first group pay for their coverage.

Here are the details: Family coverage will start to be taxed after $15,000 per year and single coverage will start to be taxed after $7,500 per year. The revenue generated from this taxation will help fund the same tax break for people who purchase insurance on their own.

The proposal is sure to bring a lot of heat for Bush, who in the past has promised not to increase taxes, but I happen to agree, in part, with Ezra Klein on the proposal. Klein has written that "so far as incrementalism goes, this is supportable." [SEE UPDATE BELOW.]

After all, the president's plan essentially creates an even playing field for those who have coverage and those who don't when it comes to purchasing health coverage. I don't see anything wrong with that, although I do see some issues with thinking a tax break is enough to make coverage affordable for the majority of the 47 million uninsured, along with attempting to provide coverage for the uninsured by encouraging the insured to reduce their coverage (or pay more).

Plus, it's still just a band aid approach -- small and temporary, not significant and long term. Senator Ron Wyden -- who made a truly fundamental health care reform proposal in December -- nailed it when he said, "The [health care] market is broken. Private insurance companies cherry-pick. They’re trying to take just healthy people and send fragile people over to government programs more fragile than they are, and I’m not sure what this does to fix the broken market."

So there's global warming and health care on tap tonight, and rumor has it that immigration and energy policy will also be included.

But no State of the Union would be complete without the wild card issue. Past addresses have included a mission to Mars (actually a serious proposal) and Laura Bush heading an anti-gang task force (pure comedic gold). I'm on the edge of my seat waiting to hear what it'll be this year.

UPDATE: Ezra Klein pulls back his tentative support for the president's health care proposal: "What the early reports either didn't make clear or didn't know was that the plan's changes to health care deductibility don't set limits, they're creating, instead, a standard deduction of $7,500 for individuals and $15,000 for families."

A standard deduction? Is the White House kidding? So not only would this plan encourage those whose health care expenses exceed $15,000/$7,500 to reduce coverage, it would effectively encourage everyone to get as below those amounts as possible since they could apply the difference as an additional deduction on their income taxes.

As Klein writes, "The intent here is clear: To incentivize the purchase of low-quality, high-deductible care, particularly among the healthy, young, and/or rich. To degrade the risk pool, and encourage HSAs. To reduce coverage, costs, and health security."

If the standard deduction speculation is true, this proposal is nothing more than par for the course from this White House. Before it was just overly-optimistic tinkering; now it's actively-destructive tinkering.

Thankfully, as Klein notes, it's tinkering that doesn't stand a chance at passing the Congress.


Blogger Dad29 said...

Another pundit relates that the proposal will ALSO require employers to reveal their health-insurance premium contributions as taxable income to the employee.

That is a very important component of the program (if it's true as reported,) because SOME (not all) public-employee health plans are more expensive than the deductions mentioned above. Same can be said for SOME (not all) private-employee plans, especially those with Company-paid medical-cost reimbursements for 100% of all expenses. Yes, there are some--one right here in Milwaukee--which are NOT HSA/HRA plans.

The plan will have the effect of increasing tax liability for some folks.

January 23, 2007  
Blogger Seth Zlotocha said...

Employers would absolutely need to reveal their health insurance premium contributions as taxable income for their employees -- that is, those contributions above the deduction amounts. How else could it be taxed?

January 23, 2007  

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