The Congressional health care debate reaches its climacteric week, and The Washington Post op-ed page offers two good columns on the topic.

Robert Samuelson, “Obama’s illusions of cost-control“:

Though it seems compelling, covering the uninsured is not the health-care system’s major problem. The big problem is uncontrolled spending, which prices people out of the market and burdens government budgets. Obama claims his proposal checks spending. Just the opposite. When people get insurance, they use more health services. Spending rises. By the government’s latest forecast, health spending goes from 17 percent of the economy in 2009 to 19 percent in 2019. Health “reform” would probably increase that.

Unless we change the fee-for-service system, costs will remain hard to control because providers are paid more for doing more. Obama might have attempted that by proposing health-care vouchers (limited amounts to be spent on insurance), which would force a restructuring of delivery systems to compete on quality and cost. Doctors, hospitals and drug companies would have to reorganize care. Obama refrained from that fight and instead cast insurance companies as the villains.

Rep. Paul Ryan (R-WI), “Rep. Paul Ryan on what real health reform should look like“:

Through any analytical lens, the legislation will not address the central problem of skyrocketing health-care costs. The Congressional Budget Office estimates that families’ premiums could rise 10 to 13 percent; private-sector actuarial estimates top these already high numbers. The higher costs are driven by federalizing the regulation of insurance, narrowing consumers’ options and reducing competition among providers. The health-care market would be dominated by government programs and the largest insurance companies, operating as de facto government utilities.

Rather than tackle the drivers of health inflation, the legislation chases the ever-increasing premiums with huge new subsidies. Already, Washington has no idea how to pay for the unfunded promises in Medicare, Medicaid and Social Security — and creating this new entitlement would accelerate our path to fiscal ruin.

The National Association of Manufacturers is a member of the Start Over! business coalition, which outlined its principles and priorities for health care reform in a Feb. 22 letter to President Obama. Cost control and global competitiveness figured prominently:

Central to the discussion among summit attendees must be how reform ideas affect the ability of
our nation’s economy to recover and businesses to create jobs. Even in ideal economic times
imposing costly regulations and taxes on business is a bad idea. A competitive global
environment and an already burdensome tax and regulatory structure offer enough challenges for
businesses of all sizes to invest and create jobs. We should be looking for ways to streamline
and modernize these structures, rather than layering additional costs on job creators. Moreover,
the dismal state of our nation’s fiscal house requires that proposals be weighed against the threat
that large-scale spending poses to long-term economic stability and competitiveness.

Washington Post, “Senate passes $140 billion in tax breaks, aid to unemployed“:

Beyond those provisions, the bill carries renewals of several expired tax credits, including those for research and development, biodiesel, energy-efficient home improvements, and the deduction of state and local sales taxes. Those extensions helped attract the support of Republicans and the praise of business groups.

Dorothy Coleman, vice president of tax and domestic economic policy for the National Association of Manufacturers, said the research-and-development credit extension will be a particularly effective job creator. “Going ahead and acting on these [tax extensions] gives companies some certainty” about how they can spend money in the future, she said.

NAM President John Engler also issued a statement in support of the Senate action, with some exceptions. Excerpt:

The NAM’s “Jobs for America” report finds that by increasing the R&D credit and making it permanent, we would encourage innovation and boost total employment by hundreds of thousands of jobs this decade. Similarly, by providing additional time for companies to make required pension payments, the retirement security provisions will put cash back in the hand of employers, allowing them to grow and create jobs. We are also pleased the Senate bill broadens the tax credit for energy efficient windows, doors and skylights by allowing them to meet the 2010 Energy Star standards. And, we welcome the provision that will allow companies to use their unused Alternative Minimum Tax (AMT) credits based on hiring workers or making investments.

While we are pleased that the tax extenders and retirement provisions are included in the Senate-passed bill, we are disappointed that it also includes industry-specific taxes that will pile more costs on manufacturers and make them less competitive. We will continue to work with members of Congress to improve this critical bill so that it can foster job creation and global competitiveness without putting undue burdens on specific industries. It is important for lawmakers to remember throughout this jobs debate that government doesn’t create jobs, business does.

Bloomberg reports on business groups lobbying for a 35 percent death tax to prevent a return to the 55 percent tax rate at the end of the year. Business has long argued for eliminating the death tax altogether, but current political and budgetary realities make that an unrealistic goal at the moment.

A 35 percent rate “is really that sort of sweet spot of what’s acceptable to all sides,” said Dena Battle, director of tax policy for Washington-based National Association of Manufacturers. “We don’t want to see the tax go up to 55. We didn’t want to see the tax at 45.”

The longer Congress delays action, bringing a 55 percent tax closer to reality, the fewer reasons Democrats have to consider Kyl’s and Lincoln’s 35 percent alternative, said Jeff Shoaf, senior executive director for government affairs at Arlington, Virginia-based Associated General Contractors.

In a December 2009 column, Sen. Jon Kyl (R-AZ) explained the reasoning behind the language he and Sen. Blanche Lincoln (D-AR) have sponsored:

I have always believed that permanent repeal of the death tax represents the best policy, since it frees capital in the private market for more productive uses than fueling the federal government’s spending binge. However, even in the best of times, we have only been able to win 56 votes in the Senate for repeal, just shy of the needed 60. With the current makeup of Congress, permanent repeal is simply not in reach.

With that in mind, Democratic Senator Blanche Lincoln and I offered an amendment to the Senate budget resolution in 2009 that attempted to strike the best compromise. It would have permanently established a 35 percent death tax rate with a $5 million exemption amount indexed to inflation. That amendment passed by a vote of 51 to 48 with the support of 11 Democrats and every Republican senator. But, unfortunately, the congressional budget resolution is only an advisory measure.

John Engler, president of the National Association of Manufacturers, was interviewed by WJR’s Frank Beckman earlier this week, leading up to Engler’s appearances with former Gov. Jim Blanchard to help raise funds for the Michigan Political Leadership Forum.

The interview opens with the expected jousting and joshing on Michigan and Washington politics, but then Frank turns the discussion to the Milken Institute report, “Jobs for America.” Engler observes:

The big 10,000 foot view is that this nation needs to have a growth strategy, and with a growth strategy you end up getting jobs in the private sector. We don’t think there’s such a strategy in place at the moment, and it’s important to recognize that just like the states compete vigorously against each other, nations are now competing against each other.

Our nation really has opted out. It’s sort of like going to the Olympics and not training and hoping that somehow you’re going to win a medal. Not going to happen.

We think you’ve got to get very aggressive. When we look at the competitive environment in the world, you cannot send Michigan or Ohio or even North Carolina or Mississippi out to compete against Singapore or China or Ireland with some of the things that they’re doing to attract business and investment.

I tell people, Frank, that you want the United States to be the best place in the world to locate a company, to headquarter it. You want it to be the best place in the world to do the bulk of your research and development, and them finally, you want it to be a great place to do a lot of manufacturing, and especially to meet the needs of the North American market.

That’s when you get to the idea that taxes matter, regulations matter, the right kind of education or workforce training - all of that matters. Frankly, we’ve got so much room for improvement, and the conversation in Washington is creating lots of risks, lots of doubts, and solving no problems.

Engler and Beckman also discuss health care policy. The full interview is available as a podcast, “Frank talks with Gov. John Engler, who will be in town for the Michigan Political Leadership program at MSU.”

The Senate voted to invoke quorum on H.R. 2847, the Jobs for Main Street Act, on Monday by a vote of 62-30.

If the one-time tax credits for hiring accomplish anything it’s, uh, Jobs for Main Street!

Which is to say that a temporary, small credit for hiring an employee will hardly change an employer’s behavior, other than to perhaps prompt the filing of a form to qualify for the credit after the hiring of a worker who would have been hired in any case.

Congress should think about the big picture, beyond the 2010 elections. As the Tax Foundation concludes in a new special report, “The Importance of Tax Deferral and A Lower Corporate Tax Rate“:

Key Findings
• The United States is the only large economy that taxes corporate income worldwide with a tax rate exceeding 30 percent.
• During 2009, both Great Britain and Japan enacted territorial systems, giving their multinationals a major tax advantage over U.S.-based firms that are saddled with a worldwide system. Over 80 percent of developed nations now have territorial systems.
• Whether the U.S. moves to strengthen its worldwide system by repealing deferral or follows the international trend by adopting a territorial system, there will be unfortunate incentives created. In both cases, though, lowering our corporate tax rate will mitigate them.
• A reasonable upper-bound target might be a combined federal-state rate of roughly 25 percent, implying a federal corporate tax rate of roughly 20 percent.

These findings reinforce the NAM’s new economic analysis conducted by the Milken Institute, “Jobs for America,” which examined the U.S. corporate tax rate:

Reducing the U.S. corporate income tax rate to match the OECD average would trigger new growth. By 2019, it could boost real GDP by $375.5 billion (2.2 percent), create an additional 350,000 manufacturing jobs, and increase total employment by 2.13 million.

Two million jobs, eh? That’s a lot more than any temporary employment credit will ever achieve.

See also our NAM news release, “Manufacturers Disappointed with Senate Jobs Bill; Bill Doesn’t Go Far Enough to Create Jobs”

Anticipating Thursday’s Blair House event, President Obama’s health care plan provides some more detail than the White House’s previous proposals. Bloomberg:

Feb. 22 (Bloomberg) — President Barack Obama proposed the first Medicare tax on unearned income including capital gains, while raising fees on drugmakers and scaling back a levy on high-end benefits as part of a new plan to overhaul the nation’s health-care system.

The Obama plan released today marks a reversal from months of leaving the details of the legislation largely up to congressional Democrats, and is intended to break an impasse in negotiations. Much of the proposal draws from separate bills passed by the House in November and the Senate in December.

This morning we predicted the White House would provide “framework of principles of conceptual reforms,” but in fact, the website provides a little more substance than that. A little more. For example, on the revenue side, Title IX, one section states:

Title IX. Revenue Provisions
Health Industry Fees

The Act will impose fees on various sectors of the health industry, intended to recapture some of the benefits they get as more Americans purchase health insurance. These include: (i) a fee on branded prescription drug pharmaceutical companies in proportion to their federal sales; (ii) an excise tax on medical devices; (iii) an annual fee on health insurance companies; and (iv) an excise tax on indoor tanning services.

You can dig down further for more information. For example, on the medical device tax, there’s explanation in the “Other Policy Improvements” section:

Delay and Convert Fee on Medical Device Manufacturers to Excise Tax.
The medical device industry also stands to gain from expanding health insurance coverage.  Both the House and Senate bills raise $20 billion in revenue from this industry over 10 years.  The President’s Proposal replaces the medical device fee with an excise tax (yielding the same revenue) that starts in 2013 to facilitate administration by the IRS.

Replacing a fee with a tax! Now that IS reform.

This is just a quick reax from one blogger (with an interest in the medical device industry, under so much attack on the litigation front.) The NAM will have a statement later in the day.

Chairman Wilma Liebman of the National Labor Relations Board has been drawing more attention to her activities in recent months, with the NLRB’s Office of Public Affairs sending out news releases about case decisions and her views on issues.

The latest is a news release about a speech Liebman gave at Washington University Law School in St. Louis, “NLRB Chairman Wilma Liebman discusses state of American labor law.” (Fixed link.) Notable are these paragraphs:

Liebman noted that labor laws have provided access to economic justice at the workplace, contributed to the expansion of the American middle class and allowed labor and business to reach their own solutions in response to changing economic conditions. “Labor law still matters,” she said, although “the collective bargaining system and the legal institutions that support it are under severe stress.”

“Sober public dialogue is sorely needed if we are to figure out how to allow, indeed encourage, business to be flexible and competitive, yet also ensure workers the protections and promise of the law,” Liebman continued. “In other words, how are we to achieve the necessary delicate balance between market freedom and democratic values? What road we take in addressing these issues will depend on what kind of society we want to be.”

Our emphases.

The term “economic justice” is commonly used by those who believe in government-promoted redistribution of wealth. Organized labor favors the term, as you can see by searching the AFL-CIO website. The SEIU issued an entire report dedicated to “Social and Economic Justice” in 2004.

Liebman also sees it as a worthwhile goal to “achieve the necessary delicate balance between market freedom and democratic values,” thereby expressing the political view that the two are at odds and should be balanced. We contend that market freedoms and democratic values reinforce one another.

These are all familiar discussions in the political sphere and in policy disputes. But the NLRB is a quasi-judicial agency, “deciding cases based on formal records and hearings.” Board members perform an appellate function by ruling on disputes between employers and employees, business and organized labor. By weighing in on the side of labor — and the highlighted remarks implicitly do so — Liebman casts doubt on her ability to be a disinterested referee.

Liebman’s efforts for a higher profile are a relatively new phenomenon. Last October, the NLRB issued a news release, “New NLRB Office of Public Affairs to increase public engagement,” announcing a new head of the office, a former newspaper reporter and communications person at the union-supported Economic Policy Institute. Perhaps it’s a case of new people, new energy, new advocacy. I Twitter, therefore I am.

One could also speculate about a behavior common to executive branch agencies and multi-member boards when the balance of power shifts. Liebman has served on the NLRB since 1997, and President Obama designated her chairman when assumed office on Jan. 20, 2009. It’s now a two-member board, with the other member being the Republican, Peter Schaumber. Two new board members are still awaiting Senate confirmation, Mark Pearce, a Democrat, and Brian Hayes, a Republican, and it’s conceivable that the President will still recess appoint Craig Becker, previously blocked in a failed cloture vote. Once they come on board, the President can designate one of them a new chairman, that is, picking his own person. Chairmen have been known to lobby to keep their jobs in such circumstances. But a political PR campaign does damage to the NLRB’s reputation and ability to perform the judicial function it was created for.

Michigan Governor Jennifer Granholm wins the prize among governors so far for referring to “manufacturing” or “manufacturer” 14 times in her State of the State address. The Democratic governor spoke Wednesday, and here are the first references from her speech, “A State in Transition: Crossing to the New Michigan Economy“:

Where the old Michigan economy was all about autos and manufacturing…the new Michigan economy is much broader: clean energy, life sciences – like bio-economy and medical devices – homeland security and defense, advanced- manufacturing, film and tourism.

We have steadily focused on the unique attributes that give Michigan a competitive advantage.

No state has the skilled workforce we do.

Nobody has the capacity and the manufacturing know-how we have.

Nobody has the natural resources – the forests, the diverse agriculture – the water…that we have.

Combine that with our great universities and colleges, and we’re using these unique assets to attract new companies and whole new industries.

That’s our competitive advantage.

Somewhere in the ether this morning a commentator reported the Obama Administration’s desire to avoid FDR’s mistake of 1937 of restraining deficit spending too quickly. According to this theory, reduced federal spending reversed the previous four year’s progress and resulted in the Recession of 1937, throwing another four million Americans out of work.

So instead they want to raise taxes?

It’s a superficial view of history, in any case. The anti-growth policies started earlier than 1937. Roosevelt had demonized business, won passage of the anti-employer Wagner Act, and had vastly expanded federal regulation of the economy through the National Recovery Administration.

Amity Shlaes, author of the essential Depression Era history, “The Forgotten Man,” provides more details in a Wall Street Journal column, “How to Make a Weak Economy Worse“:

The attacks started with taxes. In 1935, well before the “hatred” speech, FDR led Congress in passaging a law that replaced a flat rate on corporate income with a graduated rate—itself a penalty on larger firms. Personal income taxes went up, as did other rates. In 1936 FDR signed into law the undistributed profits tax, which aimed to force reluctant firms to disgorge cash as dividends or by paying higher wages. This levy too was graduated, with a top rate of 27%.

The 1935 Wagner Act was a tiger that makes today’s union law look like a pussycat. It favored unions over companies in nearly every way, including institutionalizing the closed shop. And after Roosevelt’s landslide victory in 1936, the closed shop and the sit-down strike stole thousands of productive workdays from companies, punishing earnings and limiting ability to hire.

Utilities also became a target of legislation that made it difficult for them to raise capital.

See any modern parallels? There’s the excoriation of business as a “special interest,”  the Employee Free Choice Act (Wagner Act II) and the health care and cap-and-trade proposals to bring more of the private sector — and daily life — under government control.

Shlaes concludes:

The 1930s story suggests not that any individual reform is wrong per se. It reminds us rather that frustrated presidents are inconsistent, that antibusiness policies are cumulative, and that hostility yields more damage than benefit. Presidents can choose between retribution and recovery. They cannot have both.

From the Heritage Foundation’s budget expert, Brian Riedl, an analysis of President Obama’s FY2011 budget, “Obama’s Budget Seeks $2 Trillion More in Spending and Deficits Than Last Year.” Riedl highlights the unprecedented deficit spending, but in discussing economic growth, the immediate concern should be the tax increases.

President Obama bases nearly all of his (modest) deficit reduction on tax increases. Although no economic theory justifies raising taxes during a recession, he would impose nearly $1 trillion in tax hikes for 3.2 million upper-income families and small businesses. He would eliminate tax breaks for charitable giving and the mortgage interest deduction for millions of Americans.

President Obama has endorsed a cap-and-trade bill that would cost more than $800 billion over the next decade. He has also endorsed substantial tax hikes to finance health care reform. All told, tax increases would exceed $2 trillion, yet they are still not enough to prevent a $1 trillion annual deficit by 2020.

In imposing these new taxes, the Obama Administration would damage the global competitiveness of U.S. manufacturers and other businesses.  A report by the Tax Foundation documents that U.S. competitors are going in the opposition direction, reducing corporate taxes to promote growth, “OECD Nations Continue Cutting Corporate Tax Rates While U.S. Stands Still (Federal Plus Provincial/State Corporate Tax Rates for OECD Countries, 2008-2009).”

Less competitive = fewer sales = stagnation = fewer employees. So much for JOBS!

The recent analysis by the Milken Institute, “Jobs for America,” concludes that reducing the U.S. corporate income tax rate to match the OECD average would trigger new growth. By 2019, it could boost real GDP by $375.5 billion (2.2 percent), create an additional 350,000 manufacturing jobs, and increase total employment by 2.13 million.