The big news in the U.S. is that the House of Representatives is planning to vote on the Senate’s version of the health care reform bill and then a reconciliation bill that supposedly will reconcile the differences between the House of Representatives’ version and the Senate’s version of the health care reform legislation. Passage of these two bills today by the House of Representatives does not guarantee that health care reform is coming, but it represents a major step towards making it a reality.
I’ll throw in my views on the topic of health care reform because the passage of health care legislation has major implications on the America’s economic, financial, social, and political landscape. For full disclosure before I begin, I am opposed to the current health care reform legislation.
For those living outside the U.S., health care has been a major issue in American politics for the past several decades. Although many people are opposed to the current health care legislation that will be voted on today, many of these opponents likely would concede that some sort of reform is needed. Health care costs are rising in the U.S. each year at a pace much faster than inflation. In addition, Medicare, which is a government program that provides health coverage to retirees, is heading towards a fiscal train wreck. Some would even argue that the U.S. health care system needs to be reformed so everyone can have access to affordable health coverage (I don’t necessarily agree with that).
Last year the Democratic Party and Barack Obama decided that it was time for them to push for a complete overall of the health care system. While many Americans initially welcomed the push for health care reform, the push quickly became unpopular with Americans after the public learned that the reform would significantly increase the role of government in people’s lives (Americans hate being told what to do by the government). Health care reform morphed into inflammatory issue with a lot of political chicanery (i.e. the Democrats giving $300 million of taxpayer dollars to the state of Louisiana in exchange for the vote of Louisiana Senator Mary Landrieu).
The health care reform legislation being voted on today is unpopular among American voters. Today Rasmussen Reports that 41% of Americans favor the pending health care legislation while 54% of Americans oppose it.
It’s practically impossible for me to touch on what is exactly in the legislation because the legislation is several thousand pages long! Last week Speaker of the House Nancy Pelosi (Democrat) drew the ire of those who were unhappy with the lack of transparency when she said “We have to pass the bill so you can find out what is in it”.
Although I have not read all several thousand pages of health care reform legislation, this is what I believe the impact that the current health care legislation will have on the American political, social, and economic landscape if it is enacted into law in its current form.
Political Impact
The Democratic Party is going to get severely punished at the polls in the 2010 Congressional Election. I watched some Democratic Party pollsters admit that they are going to lose a lot of seats in the House of Representatives and in the Senate if the health care reform legislation is passed. I believe it is possible for the Democrats to lose control of the House of Representatives and/or the Senate for the following reasons.
- The Democrats were going to lose seats in the House of Representatives and the Senate even if they never dealt with the health care issue because the party of the President historically loses seats in Congress in the mid-term election (the major election that occurs in between the presidential election).
- The passage of health care legislation that a majority of Americans oppose will lead to many American voters seeking to punish those who voted for the bill despite their voters’ wishes. At this point it appears that only Democrats will vote for the health care bill legislation so those who voters take their anger out on will be Democrats.
- Despite what the U.S. government says, the economic state of the U.S. is still quite bad. Historically, the party in power gets punished by voters when the economy is bad even if they are not responsible for the economy’s poor performance.
Social Impact
I believe passage of health care reform will ignite a further ratcheting up in social instability in the U.S. There already was a growing movement of Americans who have had enough of the growing role of the government in their lives (the Tea Partiers). The passage of health care legislation will lead to many more Americans joining this movement because the legislation represents a major increase in the role that government plays in people’s lives. In addition, the fact that politicians are passing legislation that a majority of people oppose will be interpreted by many people as a sign that politicians do not care what the people think.
- You could also see a massive backlash from state governments against the U.S. federal government where states get together to sue the U.S. federal government to stop the bill.
Economic Impact
I believe health care reform has the potential to be toxic for the U.S. economy.
- First, if the legislation remains intact in 2013 there will be a 3.8% tax increase on all sorts of items, including capital gains and interest income, for people making above $200,000 and couples that make above $250,000. The last thing that should happen during a time of economic weakness is to raise taxes on anyone. These tax increases will hurt the economy because investors will have less incentive to invest their money in ways that encourage economic growth (by raising taxes you potentially reduce the rate of return below the cost of capital, which makes investing unprofitable).
- Second, although the government claims there is going to be a cost savings associated with the health care legislation over a 10 year period, my suspicion is that the reform’s cost is going to be much higher than what the government states. The U.S. government always understates the cost of programs so it should be no surprise that this legislation will make the U.S. fiscal situation worse.
I did not touch on how the health care legislation would affect the quality of health care coverage and other related topics. There’s so much to this health care legislation that it’s hard to truly know at this point without sitting down and studying the legislation in its entirety. I’m sure Americans will find out what’s exactly in this legislation if/when it is turned into law like Pelosi promised.
