On Jan. 30, the Obama administration unveiled a long list of exemptions from the ObamaCare insurance mandate. Flaws and contradictions in the law will cause millions of people to be uninsured. The administration also estimated that the cheapest family plan will cost $20,000 by 2016. This new information indicates that the Affordable Care Act is failing in both goals: making insurance affordable and covering the uninsured.

Children are the biggest victims. The hastily drafted law, passed before it was read, overlooked them.

The law says that beginning in 2014, employers with 50 or more full-time employees must offer coverage or pay a penalty. The law’s sloppy drafting left it unclear whether that meant worker’s coverage or family coverage.

Read it all from IBD.

The CBO forecast finds a persistent mismatch between tax revenue and spending over the coming decade. As the economy improves, tax revenue should rise to 19 percent of GDP for the period from 2015 through 2023, up from 15.8 percent in 2012, the report said. But federal spending, after an early-decade dip, will start rising persistently faster than revenues.

“After 2017, if current laws remain in place, outlays will start growing again as a percentage of GDP,” the CBO said. “The aging of the population, increasing health care costs, and a significant expansion of eligibility for federal subsidies for health insurance will substantially boost spending for Social Security and for major health care programs relative to the size of the economy.”

The CBO’s current-law “baseline” calls for spending to reach about 23 percent of GDP in 2023 and, more worrisome, to be “on an upward trajectory.”

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Update: An IBD article is also available on this, entitled “CBO Report Shows We’re Still Headed Toward A Fiscal Cliff” and it may be found there.

The $1.2tn in automatic spending cuts that Barack Obama once promised to avert are looking increasingly likely to occur because of entrenched politics in Washington, threatening a shock to confidence in the US economy.

Economists have long assumed that the so-called sequester ”“ a budgetary mechanism passed in 2011 that takes effect on March 1 and slashes the Pentagon’s budget by $600bn over 10 years while cutting discretionary spending for government programmes by another $600bn ”“ would be replaced or reversed by Congress.

Many saw a recent move by Republicans on Capitol Hill to extend the US borrowing authority as a sign of greater co-operation with the White House. But conservative lawmakers have recently made it clear that they were simply gearing up for another fight, and are prepared to take a hard line on the $1.2tn in cuts even amid objections from military hawks.

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We agree with Obama that it will take a combination of tax increases and spending cuts to put the government’s fiscal house in order. Republicans swallowed hard and accepted an increase in tax rates for the highest incomes to start the year. It’s the Democrats’ turn to recognize that federal benefit programs, and particularly healthcare entitlements such as Medicare and Medicaid, are on an unsustainable path despite the savings from the 2010 healthcare law.

Obama should lead a Democratic push for reforms that preserve these programs for those who need them, while also reducing the deficit and stopping the federal debt from growing faster than the economy. He’s in the best position to lead on this issue, able to provide political cover for Democrats concerned that their constituents won’t put up with changes to the status quo, while showing Republicans that there are ways to save money without abandoning the government’s commitment to the elderly and poor. To create an opening for the rest of his agenda, he needs to step up to that role.

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It’s interesting that our culture is rarely scandalized by this preaching of the Cross. That’s probably because it is a rare theme of Christian preaching these days. Instead we have been smitten with practical preaching that helps people become successful in life and business, and with ethical preaching that tells people how to live better. This is done for the noblest of reasons””to show the gospel relevant to people’s daily needs, but one can see where this has gotten us. When the Cross is preached, it is often preached in a way that falls on deaf ears. It’s seen as a theme for theologians to wax eloquent about with strange words like propitiation and justification, or something comforting to guilt-ridden religious types””but meaningless to regular human beings.

Need-driven preaching””even of the highest order, that is, our search for significance””communicates that Jesus is just another way to solve our problems. It is no wonder that the culture looks at us, pats us on the head, and says, “But we’ve found other, equally valid ways to solve our problems, thank you.” We tend to think that postmoderns have brought relativism down upon us, but it seems, we Christians have been the culprits the more we make our message about meeting people’s needs.
The most needful and difficult task of the church today is to again preach the message of the Cross, and to do so in a way that alarms, surprises, scandalizes, challenges, invigorates, and inspires a 21st century world. What that would look like exactly is hard to say; our theologians and pastors need to help us here. In the most general terms, it has to be about Christ first and last. It has to be about the Christ who came into the world not to improve generally good people, but to resurrect the dead, not to bolster our self-esteem but to forgive us, not to make people successful but to make them loving, not to win the culture but to establish a kingdom without end.

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REV. LUIS CORTES, Esperanza: We have a coalition of people of faith who are actually trying to get both the Republicans and the Democrats to have a conversation on immigration. The president did promise that he wanted to address it. We’re hoping that Congress can work together and this year we can come to an agreement on a more comprehensive immigration reform package.

ARCHBISHOP GEORGE CAREY, Former Archbishop of Canterbury: If we can solve the problem of Israel and make sure that Israel has a proper, proper nation with safe borders and so on and yet at the same time allow the Palestinians to have their own state. If we can solve that one, then many of the world’s problems in terms of interfaith dialogue will be resolved.

Sayyid Syeed, Islamic Society of North AmericaSAYYID SYEED, Islamic Society of North America: It’s very critical for America to have good reputation, to have good liaison, with the Muslim world.

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A political class that botched the fiscal cliff so badly are not going to be capable of a gigantic deal on complex issues. It’s like going into a day care center and asking a bunch of infants to perform “Swan Lake.”

–David Brooks in a piece on today’s NY Times Op-ed page entitled “The Next Four Years”

Public debt as a percentage of gross domestic product was around 38 percent in 1965. It is around 74 percent now. Debt could approach a ruinous 90 percent of G.D.P. in a decade and a cataclysmic 247 percent of G.D.P. 30 years from now, according to the Congressional Budget Office and JPMorgan.

By 2025, entitlement spending and debt payments are projected to suck up all federal revenue. Obligations to the elderly are already squeezing programs for the young and the needy. Those obligations will lead to gigantic living standard declines for future generations. According to the International Monetary Fund, meeting America’s long-term obligations will require an immediate and permanent 35 percent increase in all taxes and a 35 percent cut in all benefits….

[The final ‘solution didn’t] involve a single hard decision. It did little to control spending. It abandoned all of the entitlement reform ideas that have been thrown around.
Whom should we blame for this? Again, we should not blame Obama and Boehner. In their different ways, they and a number of other people in the Congress are trying to find a politically palatable way to deal with these hard issues. They got what conditions allowed.

Ultimately, we should blame the American voters. The average Medicare couple pays $109,000 into the program and gets $343,000 in benefits out, according to the Urban Institute. This is $234,000 in free money. Many voters have decided they like spending a lot on themselves and pushing costs onto their children and grandchildren. They have decided they like borrowing up to $1 trillion a year for tax credits, disability payments, defense contracts and the rest. They have found that the original Keynesian rationale for these deficits provides a perfect cover for permanent deficit-living. They have made it clear that they will destroy any politician who tries to stop them from cost-shifting in this way.

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In the House, the majority Republican party says it won’t raise the debt limit without spending cuts of equivalent amounts. Mr. Obama has said he won’t negotiate over the matter, saying it is the responsibility of Congress to enable the government to pay bills it has incurred.

The government spends 40% more than it takes in and borrows money to cover the difference. Without an increase in the debt ceiling, the Treasury won’t be able to borrow the additional money needed to pay all its bills.

Failure to make payment on even some of its obligations could wreak havoc in the economy and financial markets and possibly trigger another financial crisis and recession, analysts have warned.

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The Congressional Budget Office projects that over the next decade Social Security’s annual cash deficit will rise by nearly $100 billion, reaching $155 billion a year. The cost of servicing the extra public debt tied to cashing in $1 trillion worth of Social Security’s intragovernmental IOUs over the 10 years would add $40 billion to the deficit in 2022 alone, an IBD analysis finds.

Overall, Social Security would account for nearly $200 billion in annual deficits or nearly 20% of the $1 trillion-plus deficit that would occur under current policies, including fiscal-cliff tax hikes.

Then, over the following decade, the retirement program’s impact on deficits would really balloon.

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On top of the possible employment losses, what messages are we sending when the government penalizes marriage at any level? One message is clear. The decision by Congress to impose a marriage penalty only discourages couples from getting married and subsidizes cohabiting households. The Marriage and Religion Research Institute studies the social science data and research on the impacts of marriage and religious practice on the lives of children and the future of the nation. Statistics show that homes headed by married couples are less likely to need government assistance. Analyzing the data, they have found that children in homes headed by married couples are more likely to be higher-achieving students and better citizens, and are less likely to become dependent on the failing government subsidy system.

Add in the higher taxes (an average of $2,425 per employee) from the 2 percent tax increase in everyone’s paychecks to pay for Social Security and the myriad tax increases all families will pay thanks to the malady known as Obamacare, and it is likely that families will end this year with their own personal fiscal cliffs. If Congress is serious about tax reform, easing the burdens on all families should be at the center of any transformation.

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There are two major reasons for Medicare’s rising costs. The first is the program’s design, often tweaked but left fundamentally intact since its creation in 1965, which basically pays doctors and hospitals fixed fees for whatever they do. At a time of rapid (and often beneficial) medical innovation, the dominant incentive has been to provide more, and more expensive, care. Hence the House Ways and Means Committee’s 1965 estimate that Medicare hospital insurance would cost $9 billion by 1990 fell short by $58 billion. The second reason costs keep going up, of course, is the rising number of elderly eligible for Medicare, which is inevitable; the 50 million beneficiaries today will be 78”‰million in 2030.

The ultimate solution is structural: to limit growth in expenditures per beneficiary. Easier said than done. Liberals would empower the Independent Payments Advisory Board (IPAB) to stop payment for treatments it deems not cost-effective. The idea hasn’t gotten very far, partly because Republicans denounce it as “rationing.” Conservatives favor “premium support,” which would subsidize seniors to shop among competing insurance plans, but Democrats, the president included, have tarred that idea as a skimpy “voucher.”

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While many in Washington are breathing a sigh of relief and some are trying to spin the outcome as a win for the president, those who characterize this bill as a genuine victory for anyone at all have clearly lost perspective. The deal brokered by Vice President Joe Biden and Senate Minority Leader Mitch McConnell does make good on President Obama’s promise to bring a little more equity to the tax code by raising rates on wealthier Americans, and it temporarily averts the most draconian “sequestration” cuts. But the list of what it does not do, and what it does wrong, is long.

By midday Tuesday, the Congressional Budget Office had concluded that the Biden-McConnell package would add nearly $4 trillion to federal deficits over the next 10 years. This was largely because it actually extends and makes permanent more than 80% of the Bush tax cuts. So much for the idea that this whole struggle was supposed to help America get its financial house in order.

Just as bad, or perhaps worse in terms of the day-to-day lives of average people, the bill only postpones the forced cuts of sequestration by two months, to precisely the moment the country will be engaged in another ruinous debate about lifting our national debt ceiling to ensure the country can pay its bills. It thus creates a new, even more dangerous fiscal cliff….

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Update: George Will has also written on this I see–Perils Of The Entitlement State And Our Decadent Democracy.

Congress’ hectic resolution of the “fiscal cliff” crisis is the latest in a long series of decisions by lawmakers and the White House to do less than promised ”” and to ask Americans for little sacrifice ”” in confronting the nation’s burgeoning debt.

The deal will generate $600 billion in new revenue over 10 years, less than half the amount President Barack Obama first called for. It will raise income tax rates only on the very rich, despite Obama’s campaign for broader increases.

It puts off the toughest decisions about spending cuts for military and domestic programs, including Medicare and Social Security. And it does nothing to mitigate the looming partisan showdown on the debt ceiling, which must rise soon to avoid default on U.S. loans.

In short, the deal reached between Obama and congressional Republicans continues to let Americans enjoy relatively high levels of government service at low levels of taxation. The only way that’s possible, of course, is through heavy borrowing, which future generations will inherit.

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The budget deal passed by the U.S. Senate [and House]… would raise taxes on 77.1 percent of U.S. households, mostly because of the expiration of a payroll tax cut, according to preliminary estimates from the nonpartisan Tax Policy Center in Washington.

More than 80 percent of households with incomes between $50,000 and $200,000 would pay higher taxes. Among the households facing higher taxes, the average increase would be $1,635, the policy center said. A 2 percent payroll tax cut, enacted during the economic slowdown, is being allowed to expire as of [December 31]

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Congress approved a plan to end Washington’s long drama over the “fiscal cliff” late Tuesday after House Republicans surrendered to President Obama’s demand to let taxes rise on the nation’s richest households.

The House voted 257 to 167 to send the measure to Obama for his signature; the vote came less than 24 hours after the Senate overwhelmingly approved the legislation.

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Update: Here are the new numbers for 2013 in Congress–Democrats control of the Senate by 55 to 45 (change of 2) and Republicans control of the House of Representatives by 234-201 (change of 8)

A US Senate-backed deal [by a vote of 89-8] to stave off a “fiscal cliff” of drastic taxation and spending measures has passed to the House of Representatives.

President Barack Obama has urged the House to pass the bill “without delay”.

However, several representatives have spoken out against it, with one calling it “bad for America”.

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Senate leaders are racing against the clock to reach a “fiscal cliff” deal the House and Senate can approve on New Year’s Eve.

Leaders in the upper chamber narrowed their differences Sunday as Republicans agreed to drop a demand to curb cost-of-living increases to entitlement benefits, while Democrats showed flexibility on taxes.

Yet after months of talks on ways to avoid the fiscal cliff of tax hikes and spending cuts at the end of 2012, House and Senate lawmakers find themselves approaching the new year without a bill to present to their members.
Significant differences remain over two key parts of a deal ”” the automatic spending cuts known as the sequester and the estate tax.

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Update: a BBC article is there.

I will take comments on this submitted by email only to at KSHarmon[at]mindspring[dot]com.

When President Obama talks about taxing the rich, he means the top 2 percent of Americans. John A. Boehner, the House speaker, talks about an even thinner slice. But the current and future fiscal imbalances are too large to exempt 98 percent or more of the public from being part of the solution.

Ultimately, unless we scale back entitlement programs far more than anyone in Washington is now seriously considering, we will have no choice but to increase taxes on a vast majority of Americans. This could involve higher tax rates or an elimination of popular deductions. Or it could mean an entirely new tax, such as a value-added tax or a carbon tax.

To be sure, the path ahead is not easy. No politician who wants to be re-elected is eager to entertain the possibility of higher taxes on the middle class. But fiscal negotiations might become a bit easier if everyone started by agreeing that the policies we choose must be constrained by the laws of arithmetic.

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Whether or not there is a deal, the weeks since the election have produced a stark display of political gridlock. “The government is not working,” said Steve Bell, senior director of the Bipartisan Policy Center, who was a senior budget adviser to Senate Republicans for many years. “There is no doubt that the policy-making apparatus in this town has collapsed.”

Following the tea-party wave in the 2010 election, the 112th Congress looks set to be the least productive in recent history. By the end of November, the House had passed 146 bills over the previous two years, by far the smallest number for any Congress since 1948. The Senate passed fewer bills in 2012 than in any year since at least 1992.

Rather than smoothing over differences, the November election appears to have hardened them. “We came out of the election with both sides thinking they won and had an equal mandate,” said Ross Baker, a professor at Rutgers University who is now interviewing lawmakers on Capitol Hill for a book on bipartisanship. “One problem is we don’t have a common narrative to guide us.”

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I will take comments on this submitted by email only to at KSHarmon[at]mindspring[dot]com.

A long line of America’s top chief executives have rotated through Washington in recent weeks, loudly urging lawmakers and the White House to reach a broad deal to fix the budget. They once sounded optimistic. Now many of them aren’t talking, and if they are, they’re gloomy.

Mark Bertolini, chief executive of health-insurance company Aetna Inc., called the state of play “pitiful and embarrassing,” saying the chances are growing that a deal might not be reached by the end of the year to avert $500 billion in tax increases and spending cuts.

“Set aside my interest as the CEO of a participant in the economy here””as an American, I’m embarrassed if that’s where we end up,” Mr. Bertolini said in an interview. “It feels like it’s starting to fall apart.”

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The shape of a deal to avert the US fiscal cliff is at last emerging, with at least $1tn in new taxes, up to $1tn in fresh spending cuts and an increase in America’s debt ceiling, as negotiators scramble to reach an agreement before the end-of-the-year deadline.

Barack Obama, US president, and John Boehner, Republican speaker of the House of Representatives, held their third face-to-face meeting in eight days at the White House amid signs of growing momentum in the talks. If they strike a deal in the coming days, and are able to pass it through Congress, it would remove a huge cloud of uncertainty hanging over the global economy.

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Budget negotiations between the White House and Republican House Speaker John Boehner have progressed steadily in recent days, people close to the process said, breathing life into talks that appeared to have stalled.

Both sides still face sizable differences before any agreement might be reached by the end of the year, and talks could well falter again over such controversial issues as taxes and Medicare before any deal is ultimately reached.

The people familiar with the matter say talks have taken a marked shift in recent days as staff and leaders have consulted, becoming more “serious.” Both sides have agreed to keep details private, according to the people, who declined to detail where new ground was being broken.

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Mr. Vice President, and Mr. Speaker, and Members of the Senate and House of Representatives:

Yesterday, December 7, 1941””a date which will live in infamy””the United States of America was suddenly and deliberately attacked by naval and air forces of the Empire of Japan.

The United States was at peace with that Nation and, at the solicitation of Japan, was still in conversation with its Government and its Emperor looking toward the maintenance of peace in the Pacific. Indeed, one hour after Japanese air squadrons had commenced bombing in the American Island of Oahu, the Japanese Ambassador to the United States and his colleague delivered to our Secretary of State a formal reply to a recent American message. And while this reply stated that it seemed useless to continue the existing diplomatic negotiations, it contained no threat or hint of war or of armed attack.

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From there:

[Here is a list of]…the most expensive tax breaks in the current tax code, based on what those breaks would cost the U.S. Treasury in lost revenue from 2013 to 2017:

1) Exclusion of employer contributions for medical insurance premiums & medical: $1 trillion

2) Mortgage interest deduction: $606 billion

3) Deduction for 401(k) plans: $429 billion

4) Accelerated depreciation of machinery & equipment: $375 billion

5) Exclusion of net imputed rental income: $337 billion

6) Capital gains: $321 billion

7) Charitable contributions: $293 billion

….seasoned Washington hands say that once this rather gloomy back and forth has played out – and it might take another week or more – the work towards reaching a solution that both sides can sell to their parties and their lawmakers will begin in earnest.

A deal by Christmas, a week before the fiscal cliff deadline, remains uncertain but not out of the question. The so-called fiscal cliff is a combination of U.S. government spending cuts and tax increases due to be implemented under existing law in early 2013 that may cut the federal budget deficit but also tip the economy back into recession.

The pattern of little happening until very close to a holiday is well-established on Capitol Hill. The past three pre-Christmas seasons brought important eleventh-hour developments on health care in 2009, tax cut extensions in 2010 and the payroll tax holiday in 2011.

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….President Obama’s call for a return to Clinton-era tax rates is misleading: If the Bush upper-income tax cuts go away, tax rates will exceed those in place at the end of the 1990s.

The top effective federal marginal tax rate on work income would rise to roughly 44.6% from 37.9% in 2012.

That’s higher than under President Clinton because of a 0.9-percentage-point Medicare payroll tax hike for upper-income households, which passed with Obama-Care and takes effect in January.

Tax rates on long-term capital gains also will be higher than when Clinton left office if Bush tax cuts expire as ObamaCare’s new 3.8% Medicare tax on investment gains takes effect. Up to now, only wage and salary income has been subject to Medicare taxes.

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At first blush, it seems to make policy sense, too. The rich fabric of America’s civic life, from Boy Scouts to community orchestras to soup kitchens, is the envy of the world. Its diversity reflects in part how much it depends on private givers with diverse interests and motives, and not just on the government. Their giving is encouraged by the charitable deduction, enacted in 1917, just four years after the income tax itself. The deduction lets people feel they are beating the system even as they practice virtue.

But there’s a question of fairness that complicates the issue. Overwhelmingly, the deduction benefits the wealthy ”” and the rest of the country has to make up the gap.

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I do not forget the gravity which should characterize a paper addressed to the Congress of the nation by the Chief Magistrate of the nation, nor do I forget that some of you are my seniors, nor that many of you have more experience than I in the conduct of public affairs. Yet I trust that in view of the great responsibility resting upon me you will perceive no want of respect to yourselves in any undue earnestness I may seem to display.

Is it doubted, then, that the plan I propose, if adopted, would shorten the war, and thus lessen its expenditure of money and of blood? Is it doubted that it would restore the national authority and national prosperity and perpetuate both indefinitely? Is it doubted that we here–Congress and Executive can secure its adoption? Will not the good people respond to a united and earnest appeal from us? Can we, can they, by any other means so certainly or so speedily assure these vital objects? We can succeed only by concert. It is not “Can any of us imagine better?” but “Can we all do better?” Object whatsoever is possible, still the question recurs, “Can we do better?” The dogmas of the quiet past are inadequate to the stormy present. The occasion is piled high with difficulty, and we must rise with the occasion. As our case is new, so we must think anew and act anew. We must disenthrall ourselves, and then we shall save our country.

Fellow-citizens, we can not escape history. We of this Congress and this Administration will be remembered in spite of ourselves. No personal significance or insignificance can spare one or another of us. The fiery trial through which we pass will light us down in honor or dishonor to the latest generation. We say we are for the Union. The world will not forget that we say this. We know how to save the Union. The world knows we do know how to save it. We, even we here, hold the power and bear the responsibility. In giving freedom to the slave we assure freedom to the free–honorable alike in what we give and what we preserve. We shall nobly save or meanly lose the last best hope of earth. Other means may succeed; this could not fail. The way is plain, peaceful, generous, just–a way which if followed the world will forever applaud and God must forever bless.

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