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Guthrie repeats criticisms of health care bill to Rooster Booster crowd

April 1, 2010

When it was announced that U.S. Rep. Brett Guthrie was going to be speaking at today’s Rooster Booster breakfast, it was pretty safe to assume that the recently passed health care bill was going to be on the agenda.

U.S. Rep. Brett Guthrie

Guthrie, a Bowling Green Republican, spent much of his speech at the Greater Owensboro Chamber of Commerce event talking about the bill, and repeated accusations that the bill would provide federal funding for abortions and has brought announcements this week that businesses will have to charge hundreds of millions of dollars against earnings because of changes to a tax break companies have received for providing prescription drug coverage to retirees.

Several of the companies have been asked to testify to Congress about the impact of removing the tax break, and Guthrie labeled that call for testimony as “just an intimidation factor” to try to keep other companies from saying how they are affected. Guthrie said it takes considerable time and money to prepare for congressional testimony.

As for the tax break, Jon Healey with the Los Angeles Times had a good piece explaining the claims from companies including AT&T, John Deere and Caterpillar, each of which were mentioned by Guthrie this morning.

From Healey’s article

Perhaps the very first effect of the new healthcare reform law was to cause a number of major corporations to restate their earnings — dramatically so. AT&T announced a $1-billion charge. Deere & Co. and Caterpillar said they would take charges of $150 million and $100 million, respectively. And Boeing cut $150 million from its first-quarter earnings. That’s because the so-called Patient Protection and Affordable Care Act eliminated a 4-year-old tax break for employers that provided prescription drug benefits to retirees. The tax break doesn’t go away until 2013, but some companies felt compelled by securities law to report the hit to their earnings right away.

Some critics of the bill have pointed to the numbers as evidence of yet more of the bill’s hidden costs to industry and the economy. But it’s worth keeping them in perspective. Analysts at Credit Suisse predicted that the restatements would have minimal impact on company valuations, despite the fact that they would add up to a whopping $4.5 billion in lower earnings industrywide.

Apparently employers have been getting tax breaks on what they are contributing to help pay for prescription drug benefits for retirees, and on the portion paid by the government to help offset these costs, according to Healey.

UC Berkeley Economist Brad DeLong also points out that the tax break being eliminated was an extraordinary one to begin with. When Congress was working on a bill to add a prescription drug benefit to Medicare, some lawmakers worried that the new benefit would lead employers to eliminate the drug benefits that they had been providing retirees. So they agreed to reimburse employers for 28% of the cost of any plan that was at least as generous as the new Medicare benefit. That bit of corporate welfare was unusual in and of itself. But lawmakers also made the subsidies tax free, allowing employers to deduct the full cost of the benefit they provided — even the part financed by the taxpayers.

By DeLong’s calculation, that approach resulted in the government covering 63% of the price of retiree drug benefits at companies in the top tax bracket. The change will leave the government covering about 53%. As subsidies go, that’s still pretty generous.

On the topic of federally-funded abortion, Guthrie argued that because the government will be subsidizing a portion of the cost of insurance plans provided through the exchanges that are to be set up in the future, that money will essentially be paying for abortions if a consumer chooses a plan that covers the procedure.

The health care bill has stated that that portion of the coverage would have to be paid out of the consumer’s pocket instead of with the subsidy provided by the government, but Guthrie claims that “you can’t segregate that money out that way.”

By that logic, if a person receives any type of funding from the government, through tax breaks or credits or through any means, it could be argued that the federal government is funding any manner of activities the person is involved in. Federal dollars, though tax refunds or other federal sources, could be going to pay for unsavory things such as illegal drugs and prostitution, or such luxuries as caviar and champagne. Guthrie’s argument that this bill provides federal funding for abortions is a stretch, at best.

Guthrie also targeted provisions of the health care bill changing the nature of student loans for higher education. The changes mean the federal government will now be the lending agency rather than private banks, and Guthrie made the allegation that the change will mean that middle class students, who are the most likely to have to take out student loans for education, will end up paying more under the new system.

However, it was hard to reach that conclusion from Guthrie’s example, which was based upon a student paying the same interest rate whether a bank or the government holds the loan. In Guthrie’s example, the federal government would use the gap between the lower interest rate at which is can borrow the money and what it charges the student for the loan to help fund the provisions of the health care bill. Under the current system, the difference between those two rates heads to banks as a profit. In either case, the student pays the same.

Except, as reported by the New York Times, there are other provisions to help students pay back their loans over the long term.

From the Times article

Students who borrow money starting in July 2014 will be allowed to cap repayments at 10 percent of income above a basic living allowance, instead of 15 percent. Moreover, if they keep up payments, their balances will be forgiven after 20 years instead of 25 years — or after 10 years if they are in public service, like teaching, nursing or serving in the military.

Mr. Obama portrayed the overhaul of the student loan program as a triumph over an “army of lobbyists,” singling out Sallie Mae, the nation’s largest student lender, which he said spent $3 million on lobbying to stop the changes. “For almost two decades, we’ve been trying to fix a sweetheart deal in federal law that essentially gave billions of dollars to banks,” he said. The money, he said, “was spent padding student lenders’ pockets.”

Guthrie’s comments about the health care bill weren’t all negative. He noted that it will help provide insurance coverage to 32 million additional people, and remove lifetime caps on coverage.

I just wanted to provide some more context for Guthrie’s comments during this morning’s breakfast, and I’m sure that he would be able to provide additional support for his criticisms about what the health care reform bill will mean for the average person. That’s part of a good debate, and people shouldn’t shy away from arguing the facts about these large issues that have broad impacts.

The debate over the health care bill has been a very contentious one, and it appears both sides will continue sparring for some time to come, or at least until the elections in November.

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