Thoughts, essays, and writings on Liberty. Written by the heirs of Patrick Henry.

September 28, 2007

Smoke ‘em if You got ‘em…for the Good of the Children

by Stephen Littau

With the expiration of SCHIP looming on September 30th, the congress plans to extend and expand the program by adding another $35 billion over the next 5 years despite President Bush’s threat to veto the bill. The House passed the bill 265-159 with the support of 45 Republicans. The Senate also is expected to pass the bill with the help of Republicans and other Republicans are being targeted in an effort to override the veto. Fortunately, it appears that there are not enough votes to override the veto, but it’s going to be close.

With projected shortfall of $43 trillion in current entitlement spending, how is it that these Republicans think they can support this monstrosity without receiving the wrath of its base? I have a few theories but I think many believe they can support the program because of the perception that most taxpayers will not be funding the program. On paper, the only people who will be funding SCHIP will be smokers in the form of a $.61 sales tax. Smokers deserve to be punished anyway for their disgusting habit and surely those who crafted the bill arrived at this figure based on how much the SCHIP program is supposed to cost?

The New York Sun found some interesting research on whether or not the tax increase on cigarettes would be enough to fund the program:

We’ve written before on how corrupt is the government’s interest in the cigarette business. It turns out that the government needs to keep people smoking; the Heritage Foundation estimates the government would need to sign up some 22 million more Americans to take up smoking by 2017 to fund this increase in SCHIP. To add to the irony, most smokers are low-income Americans, meaning that the poor essentially will be funding the health insurance of the middle class. Mr. Bush would be right to veto it while working to increase access to private insurance through tax breaks and deregulation.

So if the Heritage Foundation is correct, where will the remaining revenues come from? This sin tax is merely a ruse to get people who otherwise would not support a tax increase to support a tax on others. It’s the old game of pitting one group of Americans against another to achieve political aims. What far too many people fail to realize is that we will all bear these costs; even if the states spent the funds only on health insurance for children (historically these revenues curiously end up funding projects that have nothing to do with the stated purpose of the tax).

Besides this shortfall, insurance for those who choose not to join the government health program will pay higher healthcare costs. Michael F. Cannon of the CATO Institute writes:

Inevitably, many families simply substitute SCHIP for private coverage. Economists Jonathan Gruber of MIT and Kosali Simon of Cornell University find that, in effect, when government expands eligibility for SCHIP and Medicaid, six out of every 10 people added to the rolls already have private coverage. Only four in 10 were previously uninsured.

In other words, SCHIP and Medicaid cover four previously uninsured Americans for the price of 10. That’s a bad deal even by government standards. Yet Republicans want to renew it, and Democrats think it’s an absolute bargain. They want to enroll more than 70 percent of all children.

It gets worse. SCHIP discourages these families from climbing the economic ladder. If a single mother of two earning minimum wage in New Mexico increases her annual earnings by $30,000, her net income does not change: She pays an additional $4,000 in taxes and loses $26,000 in SCHIP and other government benefits. Why should families expend that extra effort if it will leave them no better off financially? Expanding SCHIP would pull even more families into that low-wage trap.

It seems to me that Republicans are supporting this bill because they don’t want to be perceived as “against poor children” (But its not like they will get credit for it anyway come election time). Would it really be that difficult to come up with a free market alternative that would do a better job than a government program ever could? Cannon believes there is such a solution:

Each state forbids its residents to purchase coverage from out of state. That allows each state to enact costly health-insurance regulations without fear of competition from states with more consumer-friendly regulation. The Congressional Budget Office has estimated that these regulations increase health premiums by as much as 15 percent.

Congress could make coverage more affordable simply by letting consumers and employers purchase out-of-state coverage. Tearing down those trade barriers would force states to provide the protections consumers demand and eliminate unnecessary regulations. States that don’t provide consumer-friendly regulations would lose premium tax revenue to other states.

Sweeping away those trade barriers would make coverage more affordable without increasing government spending, trapping families in low-wage jobs or increasing prices for private purchasers.

Imagine that: instead of increasing government involvement in healthcare, getting government out of the way would do a better job. For a moment there I thought I would be obligated to take up smoking again…for the good of the children.

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  • http://JaimotsJargon Zyskandar A Jaimot

    The mostly DEMBHOLE [operant relevant portions of ^SSHOLES+DUMB-DEMOCRATS=DEMBHOLES] U.S HOUSE of ‘FOOLISH’ REPRESENTATIVES passed a bill to increase ‘health-care’ to supposed indigent children. Except the ‘children’ are now minors up until age 25 and are now ‘indigent’ even if their respective families earn up to $86,ooo dollars in income. Further people who can afford ‘private insurance’ will now receive mandatory ‘government insurance’ paid for by our TAX DOLLARS!!! Some ‘SOCIALIST DEMBHOLE RIP-OFF eh??? ‘Let’s do it for the chilluns’ – Ha!!! DEMBHOLE SOCIALISTA TURDHEADS!!!

  • http://Bellsouth Donald

    I will put name calling a side an let the others carry on. I will stick to my personal experience. I live in Fl. and retired from the school system. While working I exceeded $80,000.00 a year. I reared 4 children and now have 2 adopted children. As I worked, rearing a family of 4 children I personally had Ins. provided by my job. I paid an additional amount for my family. As I climbed the “ladder” the deductions became easier. Then came sickness and retirement. I now have an income from SS and Retirement of about $42,000.00. I have my Medicare A+B. I am taken care of. My wife has no insurance, but for now is healthy. OK. But my two children also do not have insurance, because I recieve a couple thousand to much. If the presient would not veto SCHIP, I and many like myself would be better off and not have to worry about our children’s health care. Right now it is a nightmare. Thank You for reading this. I hope only the Insurance Companies hate me.

  • http://www.thelibertypapers.org Stephen Littau

    Donald:

    I realize that SCHIP would be very attractive for someone in your situation. If SCHIP were to pass, my family would easily qualify. I can tell you that most of my expenses over the past 2 years or so have been medical expenses despite having private insurance. So why don’t I want SCHIP expanded so that my family can take advantage of the program? Because I realize its a fraud. My father told me that there is no such thing as a free lunch. He was right. There’s no such thing as free healthcare either.

    Healthcare is a very emotional issue, especially for those who are having health issues. I urge you to try not to look at this issue emotionally but rationally. As I mentioned in the post, we are looking at $43 trillion in unfunded liabilities for entitlement programs such as medicare, medicaid, S.S. etc. Now, this is before SCHIP or Hillary Clinton’s proposed healthcare plan. How do you suppose your children and grandchildren are going to pay for this?

    I don’t know about you but I can’t wrap my head around a dollar amount that high. When the baby boomers retire, we will have more individuals recieving S.S. than workers. Your children are going to have to pay half or more of their paychecks in taxes just to fund these programs and probably won’t have anything in S.S. or these other programs for themselves.

    It’s really a scary scenerio when you think about it. More than half of an individual’s income going to taxes? These are the things revolutions are made of – bloody revolutions.

    I urge you to do some additional research on this topic. The links in my article would be a good starting point. There is so much more to this than meets the eye.

    I wish you the best for you and your family.

  • Quincy

    Donald –

    You’re in a position caused by interference from the federal government, namely tax laws that make insurance tied to employment desirable when it normally wouldn’t be. Would you, for example, tolerate losing your homeowner’s or auto insurance when you left your job? Neither would I. Yet, because of an accident of history, WWII and FDR’s wage caps to be exact, health insurance became a “fringe benefit” of employment due to a tax loophole. I’d say that, had you been purchasing your own health insurance, for you and your family, you’d not be in this situation. This isn’t an indictment of you, since by accepting the “fringe benefit” you were pursuing the most rational course for your situation. Instead, it’s an indictment of the bad set of laws governing both health care and health insurance in this country.

    As Stephen correctly points out, this expansion of government expenditures and authority known as SCHIP, while providing short-term relief to your family, would actually place a severe long-term burden on your children and their children, who would bear the cost of this program during their careers and hence have less, likely a lot less, with which to provide for their own families.

    What needs to happen with health care is not more government, but less. The more we move health care expenditures away from the consumer, the less power the consumer has over his own destiny. You lament the insurance companies, however, before indicting them, I would ask you to remember that the insurance company that provided coverage to you never worked a day for *you*, but rather for your employer. Then, take your experience with the insurance company and extrapolate that out to a government-run health insurance system which works for “the people”, through the Congress and President. It will not be pretty, I assure you.

  • http://Bellsouth Donald

    I want to thank both Stephen and Quincy for their well worded and thoughtful responce to my comments. When I was around 12 or 13, I remember expressing my thoughts then (1951-1952) that insurance was creating it’s own problems that will affect us all. And it has. It encourages law suits, higher medical bills, higher everything “IT” touches. Without insurance to pay bills, which in turn creates laywers’ suits we all must pay more and insurers must pay more. It is a cycle created from “forced need, based on greed.” Also, I have an Insureance license so I know how they work, they do come in handy during times of despret needs and they do have their rightful place, but have also caused many of people’s problems. There is much more to say, but I feel this is enough. Again I Thank You.

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