Fixing a Rigged Game

“In fact, the best thing we could do on taxes for all Americans is to simplify the individual tax code. This will be a tough job, but members of both parties have expressed an interest in doing this, and I am prepared to join them.” — Barack Obama

The game is rigged against the regular guy in America today. And it's rigged in favor of big business, the politically connected, and the wealthy.

If Republicans and conservatives want to reform themselves, they need to begin with this fact. Admit it. Understand it. Declare it. Decry it. And start fixing it.

Here's the evidence the game is rigged:

Corporate profits soared to a record $1.73 trillion annualized rate in the first quarter of 2013, more than triple what they were in 2001, according to data from the Bureau of Economic Analysis.

Banks made a record $40.1 billion in profits in the first quarter, 16 percent higher than a year before, according to FDIC data. The big banks have grown much faster than the economy. Last year, Bloomberg News found that the five largest banks held assets equal to 56 percent of the economy, up from 43 percent in 2006, before the fiscal crisis the big banks caused -- and before the taxpayers bailed them out.

And how's the regular guy doing?

New business formation continues to fall to record lows. In 1980, nearly half of all firms were less than five years old. The latest data from the Kaufmann Foundation puts that number at about one-third.

And the working man isn't faring better. Unemployment, while improving, is still high. Maybe worse is the collapse of median household income -- down more than 7 percent since 2008, and it is not noticeably climbing.

Meanwhile, federal spending hit a record 26.9 percent of GDP in 2010. While it dropped a bit to 24.8 percent in 2012, that is still higher than any year between World War II and 2009 and 18 percent higher than the average year from the previous five decades.

So it's no surprise that seven of the 10 richest counties in the United States are in the Washington, D.C., area. Revolving-door lobbyists and government contractors are living the high life in McLean, Georgetown, and Great Falls.

Jeff Jacoby reports in the Boston Globe that Washington booms – thanks to other people’s money:

“In the months since President Obama signed the order to cut federal outlays by $85 billion, the Washington Post reported last week, the region has added 40,000 jobs. “Income-tax receipts have surged in Virginia, beating expectations. Few government contractors have laid off workers.” There is no sign of the economic hellfire and brimstone foretold by Fuller, who says it’s a “surprise” to him that Washington’s economy is still booming. “We’ve done better than I expected,” he confessed.

The real surprise is that anyone is still surprised by the affluence of the Washington area.

According to the most recent census data, seven of the nation’s 10 wealthiest counties surround Washington — including the only three counties in the United States with median incomes above $100,000: Loudoun, Fairfax, and Arlington, all in Northern Virginia. In 2010, there were six Washington-area counties in the Top 10; in 2007, there were five. The Great Recession may have left great swaths of America reeling, but it didn’t stop Washington from surging even higher in the income rankings.

If the worst recession in decades couldn’t tarnish Washington’s opulence, sequestration — a political budget maneuver designed to achieve merely a tiny reduction in the growth of federal spending over the next decade — isn’t likely to either.

Coverage of the D.C. area’s high-flying economy sometimes sounds like an episode of “Lifestyles of the Rich and Famous.” In a front-page article last weekend — “What Sequester? Washington Booms as a New Gilded Age Takes Root” — The Wall Street Journal described the extraordinary wealth of Washington’s “moneyed brain trust,” beneficiaries of a generation’s worth of soaring government budgets and immense political aggrandizement. Examples of extravagance are everywhere, from the flourishing Aston Martin dealership selling sports cars at $120,000 and up to the Georgetown hotel that charges $22 for a martini.

Washington hasn’t grown so rich because it is home to industries that produce wealth through commerce or manufacturing or invention. Unlike Silicon Valley or Manhattan or Houston or Hollywood, Washington’s primary activity isn’t the creation of goods and services that have intrinsic value in themselves, and that raise the national standard of living. Government doesn’t generate new income — it redistributes income that others have already generated. Through taxes, spending, and regulation, the federal establishment now dominates more of the private economy than ever, directly confiscating trillions of dollars earned in the private economy, and indirectly controlling the fate of tens of trillions more.

“Power is the great aphrodisiac,” Henry Kissinger famously claimed. It is also a great conduit to other people’s money. When a single tweak in the tax code can make or break a business, when fortunes are being doled out through federal bailouts and contracts, when regulations can decide the future of industries and interest groups, it stands to reason that so many will spend so much to get a piece of what government controls.

“Most federal activity involves taking money from some people, giving it to others, and keeping a big chunk as a transaction fee,” says the Cato Institute’s David Boaz. At its broadest, that “transaction fee” is reflected in everything from overpaid federal employees to Washington’s gargantuan lobbying industry to the clustering of America’s wealthiest counties in suburban Washington.”

Take account of total compensation - wages plus benefits - and the disparity is even more striking. In 2008, total federal civilian compensation averaged $119,982 - more than twice the $59,908 in wages and benefits earned by the average private-sector employee. Chris Edwards, a scholar at the Cato Institute, has documented the steady widening of the gap: In 1960, federal workers averaged $1.24 for every $1 earned by a private employee. By 1980, the federal advantage was up to $1.51; in 2000 it was $1.66. Now it is $2 - and climbing. When ranked alongside 72 industries that span the US economy, federal employees take home the seventh-highest average compensation. Among the workers they out earn, Edwards shows, are those in such fields as computer systems design, chemical products, and legal services.

A full-page ad in The Wall Street Journal several years ago was the clearest evidence yet of the approaching showdown. “We are the Private Sector. And we’ve had enough,’’ the ad proclaimed. It announced the launch of The Free Enterprise Nation, which describes itself as the first national organization intended to represent the interests of the majority of Americans who work in the private economy. Its message was blunt: “The private sector provides pay and benefits for public-sector workers that we cannot afford to provide for ourselves .We need to change public policy

The game is rigged, and conservatives can point out that the chief game rigger is government. The tax code is convoluted, regulations are terrifying, big businesses that fail get bailed out while small entrepreneurs get crushed by bureaucracy.

If you're already doing well, or if you're well connected and can hire a former congressman, senator, or Cabinet secretary — you're OK. Otherwise, you're not.

Conservatives and Republicans would do well to admit this, and declare it a serious problem. Attacking Obama for "hating success" or being "anti-business" is not only factually flimsy, it is a political loser. Such attacks don't appeal to the folks who have been suffering in our current economy.

Driven by the insight that the game is rigged in favor of the wealthy and well-connected, Republicans can push a free-market populist response. Free-market populism is, for one thing, a moral stance, manifested through rhetoric and action.

Republicans have become more comfortable lately denouncing "crony capitalism" and even "corporate welfare." After blaming politicians who use public power to enrich private interests, Republicans also ought to shame some of the "capitalists" and their lobbyists who demand handouts and protective regulations.

Republicans ought to abolish corporate welfare, including subsidies for exports and green-energy projects. Break up the big banks. Get rid of corporate tax credits.

Politically, these policies checkmate Democrats because corporatism is at the heart of President Obama's economic agenda. Subsidies for Boeing, Chrysler and General Electric are the building blocks of Obama's "New Economic Patriotism." ObamaCare was built in collusion with drug makers and the hospital lobby.

If Republicans destroy the stale myth of Washington versus Wall Street — and make it clear it's really K Street, Wall Street and Pennsylvania Avenue versus Main Street — Democrats lose much of their rhetorical advantage.

Ending federally granted privilege is politically helpful because clear moral stances are winners. But voters often want something tangible and immediate from politicians. In the short term, dismantling corporatism helps mostly the minority of voters that are or want to be entrepreneurs.

Many conservative reformers advocate a package of policies to aid middle-class families. This is dangerous territory because the Left can always out-Santa Claus the Right. Any conservative "gifts" to the middle class should be consistent with the message that Big Government isn't their friend.

So, here's one: abolish the payroll tax — totally and permanently. It's a tax on employment. It's a tax on someone's first dollar. And it's specious to say that it funds Social Security and Medicare — both entitlements are funded on the margin by general revenues. So give up the charade and abolish a regressive federal tax.

As a pointed out in a previous blog: How Did We Get in this IRS Mess? A flat tax would be a good way to accomplish this.

“For example, let the flat rate be 20%, and let the deductions be $20,000 per adult and $7,000 per dependent. Under such a system, a family of four making $54,000 a year would owe no tax. A family of four making $74,000 a year would owe tax amounting to 0.20 × (74,000 − 54,000) = $4,000, as under a flat tax with deductions. But families of four earning less than $54,000 per year would owe a "negative" amount of tax (that is, it would receive money from the government). For example, if it earned $34,000 a year, it would receive a check for $4,000. The NIT is intended to replace not just the USA's income tax, but also many benefits low income American households receive, such as food stamps and Medicaid. The NIT is designed to avoid the welfare trap — effective high marginal tax rates arising from the rules reducing benefits as market income rises. An objection to the NIT is that it is welfare without a work requirement. Those who would owe negative tax would be receiving a form of welfare without having to make an effort to obtain employment. Another objection is that the NIT subsidizes industries employing low cost labor, but this objection can also be made against current systems of benefits for the working poor.”

Consider this. A family of four making $60,000 will pay $4,490 (7.5%) in payroll taxes ($3,720 for Social Security and $870 for Medicare). The employer will pay a similar 7.5% amount. (The maximum earnings for Social Security is $113,700 and there is no limit for Medicare)

Now let’s look at the same family of four with a flat tax rate of 20%. That family of four making $60,000 would pay 0.20 x ($60,000 -$54,000) = $1,200. But the same family will have saved $4,490 in payroll taxes. If the family’s income were $100,000 the tax amount would be $9,200 and the payroll tax savings would be $7,650 for a total tax of $1,550. For $200,000 it would be $29,200 -$9,949 for payroll taxes for a total tax of $19,251.

Keep in mind that these commutations also apply to small businesses that create two-thirds of the jobs in the United States.

(These figures have been calculated using the Payroll Tax Calculator for 2013 from the Tax Policy Center.)

You will no doubt ask: Isn’t this going to reduce the amount of money the federal government will collect? The answer is yes, but isn’t that the point. Reduce the money, reduce the power.

In a 2012 article in Forbes Magazine by Addison Wiggin: “Flat Tax Is Fantasy In U.S. But Works Fine Behind Old Iron Curtain” Wiggin writes:

“The first comprehensive proposal for a U.S. flat tax came in the 1985 book The Flat Tax, by economists Robert Ernest Hall and Alvin Rabushka.

“Today, the flat tax idea is perhaps even more politically remote, in the United States, than it was in 1985,” Mr. Lewis says. “However, the rest of the world caught on to the idea. Today there are at least 40 governments with flat tax-type systems, most of which made the switch in just the last decade.”

A sizeable number of these countries used to lie behind the Iron Curtain. Messrs. Hall and Rabushka served as consultants to many of those governments as they implemented a flat tax.

The flat tax a panacea? Hardly. Central bankers can still muck up the works; thus, many of these countries were swept up in the Panic of 2008.

But “we could take 2007 as a representative pre-crisis year,” Mr. Lewis suggests. “How did the flat tax countries do then?

“For 13 countries for which information was available from the IMF, the average GDP growth rate was 10.0%, ranging from 6.2% (Slovakia) to 23.1% (Ukraine).”

Lewis further studied 10 countries from which International Monetary Fund data are available, examining the flat tax’s impact on overall revenues. Revenues rose an average of 17.7%… and that’s after throwing out Estonia’s outlier increase of 81%. Only the Czech Republic saw revenue fall — by a minuscule 0.5%, as crisis encircled the globe in 2008.

How about revenue as a percentage of GDP, a favorite measure of policy wonks? That looks good too. On average, the ratio was virtually unchanged in those 10 countries, down 0.1%.

“Most of the seemingly impossible promises of the flat-taxers–higher growth, stable revenue/GDP ratio, rising government revenue–are, in fact, common and repeatable,” Mr. Lewis concludes.

Meanwhile, back in Washington, the politicians argue about how to prevent automatic tax increases and spending cuts totaling $607 billion, which would barely cut the deficit in half.”

Theo Caldwell writes in the Daily Caller: Fair Tax or Flat Tax:

“But for all the hullabaloo around the IRS of late, with some claiming complaints against the agency are overwrought, and others going so far as to question the motives, intelligence, and parentage of those of us who have called for its abolition, there has not emerged any kind of reasoned argument in favor of keeping the tax authority just the way it is.

What has come to the fore, however, is a healthy competition between two credible, if not complementary, alternatives to America’s current tax system. That is, should we move to a Fair Tax or a Flat Tax?

Simply put, would a consumption tax on goods and services (Fair Tax), or a single, small rate of tax on income (Flat Tax) be a better way to fund our government? The short answer is that either would be preferable to the Byzantine, corrupt tax system America has now

Folks are fond of saying you can’t replace something with nothing. This is, of course, complete rhubarb, and if the U.S. government could learn to replace something with nothing, it would go a long way toward solving its monumental debt and deficit problems. But in this case, we do need to pay for our public sector somehow, and since it would defeat the purpose to replace something with two things, it behooves us to consider which of these worthy ideas would work best.

First, the Fair Tax: There is legislative support for this approach, as the Fair Tax Act of 2013 works its way through Congress, sponsored by Rep. Rob Woodall of Georgia as H.R.25 in the House, and by Sen. Saxby Chambliss, also of Georgia, as S.122 in the Senate.

The gist of the plan is to phase out the IRS over three years, replacing income taxes with a sales tax on new goods and services, excluding necessities, of 23 percent. This figure is reached by combining the 15% income tax bracket with 7.65% employee payroll taxes, both of which would be eliminated. As to that last, fairtax.org stresses that its plan eliminates the payroll tax, and this is not an insignificant feature.

Many workers, particularly those with lower earnings, feel the bite of payroll taxes when they collect their paychecks, even if they do not end up with a federal income tax liability for the year. If we mean what we say about simplifying the tax code, then whatever system and rates we settle on ought to be straightforward and clear, and should account for whatever effect, if any, payroll and Social Security taxes will have on take-home wages.

A Flat Tax of, say, 10 percent should mean exactly that — not 10 percent, plus additional levies for retirees, unemployment, etc., that are not normally part of the income tax conversation.

If that can be accomplished, there is much to be said for the simplicity and transparency of a Flat Tax. Sen. Ted Cruz of Texas and The Heritage Foundation are among those calling for this approach. Americans spend billions of hours and hundreds of billions of dollars trying to comply with the country’s impossibly complex tax code. The opportunity cost to the productive economy is extraordinary.

Something that is often lost in income tax discussions is that these rates also apply to small businesses, which create two-thirds of the new jobs in America, and almost all of which file at individual rates. If a Flat Tax can eliminate the expensive and time-consuming task of tax preparation, not only for individuals but for job-creators as well, that would be a boon to America’s beleaguered employment market.

…

The primary question of whether to abolish the IRS having been answered in the affirmative by both sides, disagreement between Fair Tax and Flat Tax proponents is akin to the quarrels of the Yooks and the Zooks in Dr. Seuss’ Butter Battle Book (to whatever extent Seuss intended the tome as a moral relativist metaphor for the Cold War, it was misbegotten — but it actually works here). In that tale, both sides enjoy toast, but are at loggerheads as to whether it should be buttered on the top or the bottom. The applicable lesson here is, having agreed on the big issue, residual differences can be worked out over breakfast.

And so they should be, with the American people as arbiter (though if everyone’s coming to the breakfast, making a reservation seems sage). Politics being the art of the possible, if there is an appetite in the land for a Fair Tax, and political leadership able to make it happen, Flat Tax folks should sign on, perhaps keeping personal lists of I-told-you-so’s, in case the system falters. Likewise, if the Flat Tax finds a market and effective champions, Fair Taxers should offer support.

Whichever option prevails, let us seize this opportunity to reform America’s tax system and change the country for the better.”

This reflects the heart of conservative reform: Level the playing field by getting government out of the game. If we can’t learn from the recent scandals and abuses of federal power and overreach such as the IRS targeting the Tea Party, the DOJ taping in to reporter’s e-mail and phone records, gun-running to Mexico, and the NSA’s data mining we will be doomed as a free society. The only true remedy is to close the taxpayer’s checkbook.

The Overton Window

“I believe, is our basic function: to develop alternatives to existing policies, to keep them alive and available until the politically impossible becomes politically inevitable." —Milton Freidman, Capitalism and Freedom, 1982

You've probably had this experience at some point: You've read about a great new idea for reforming government policy and thought, "This makes so much sense; why don't lawmakers just do it?" But months pass, and you don't hear politicians even discuss the idea, let alone act on it.

There's a reason: Ideas take time to produce changes in policy. This can be frustrating, but it also means that ideas policymakers refuse to countenance now may yet — with patience — become law.

The late Joseph Overton, of the Mackinac Center for Public Policy, observed that in a given public policy area, such as education, only a relatively narrow range of potential policies will be considered politically acceptable. This "window" of politically acceptable options is primarily defined not by what politicians prefer, but rather by what they believe they can support and still win re-election. In general, then, the window shifts to include different policy options not when ideas change among politicians, but when ideas change in the society that elects them.

The Overton Window of Political Possibility is a model developed to explain public policy change. When public policies in a given area, such as education or labor, are arranged from freest to least free, only a relatively narrow window of options will be considered politically acceptable. This window of politically acceptable policies is not defined primarily by what politicians would prefer; rather, it is defined by what they believe they can support and still win re-election. Hence, the window shifts to include new policies or exclude old ones not when ideas change among politicians, but when ideas change in the society that elects them.

Imagine, if you will, a yardstick standing on end. On either end are the extreme policy actions for any political issue. Between the ends lie all gradations of policy from one extreme to the other. The yardstick represents the full political spectrum for a particular issue. The essence of the Overton Window is that only a portion of this policy spectrum is within the realm of the politically possible at any time. Regardless of how vigorously a think tank or other group may campaign, only policy initiatives within this window of the politically possible will meet with success. Why is this?

Politicians are constrained by ideas, even if they have no interest in them personally. What they can accomplish, the legislation they can sponsor and support while still achieving political success (i.e. winning reelection or leaving the party strong for their successor), is framed by the set of ideas held by their constituents — the way people think. Politicians have the flexibility to make up their own minds, but negative consequences await the elected officeholder who strays too far. A politician’s success or failure stems from how well they understand and amplify the ideas and ideals held by those who elected them.

The Overton Window reflects what society believes, which can be as easily influenced by truth and facts as it can be by inaccurate or deceptive information. Even mistakes can shift the window. The massive underestimate of Medicare costs probably contributed to the program’s creation in the 1960s. The false belief that weapons of mass destruction would be found in Iraq contributed to support for that war. Click here for an interactive gadget of the Overton Window.

At any given moment, the “window” includes a range of policies considered to be politically acceptable in the current climate of public opinion, which a politician can recommend without being considered too “extreme” or outside the mainstream to gain or keep public office. Overton arranged the spectrum on a vertical axis of “more free” and “less free” in regard to government intervention. When the window moves or expands, ideas can accordingly become more or less politically acceptable. The degrees of acceptance of public ideas can be described roughly as:

• Unthinkable
• Radical
• Acceptable
• Sensible
• Popular
• Policy

The Overton Window is a means of visualizing which ideas define that range of acceptance by where they fall in it. Proponents of policies outside the window seek to persuade or educate the public so that the window either “moves” or expands to encompass them. Opponents of current policies, or similar ones currently within the window, likewise seek to convince people that these should be considered unacceptable. Overton feared that using a left-right scale would politicize the scale.

The example Joe Overton often used to illustrate his window theory was the Michigan school choice issue during the 1980s and ‘90s. The political spectrum for education ranges from full parental choice on the high end to a complete government monopoly without private schools, home schooling, charter schools or any other school choice on the low end. On this spectrum the politically possible range of options was very limited during the 1980s. Politicians could advocate minor, incremental changes for home schooling, and private schools were part of the status quo, but charter schools were definitely out of bounds for a politician to seriously contemplate.

As citizens became aware of education options and their success in other places, the political climate became more favorable and the window of political possibilities in Michigan began to expand to where politicians could advocate home schooling, school choice and even charter schools without losing at the polls. Not only was the upper limit of the window expanded, but the lower boundary has also moved upwards as well — making it politically unwise to push for restrictions on the education freedoms that have been gained.

Home schooling is here to stay, charter schools are well established, and school choice continues to gain ground. In fact, in some parts of Michigan it is now even possible to run for office on a platform that includes the Universal Tuition Tax Credit — another Overton innovation — a situation that was unthinkable just 10 years ago.

Perhaps the Overton Window theory is best summed up by a quote from Milton Friedman in his preface to the 1982 edition of Capitalism and Freedom: "That, I believe, is our basic function: to develop alternatives to existing policies, to keep them alive and available until the politically impossible becomes politically inevitable."

A long-term focus on shifting the Overton Window allows a think tank to follow its ideals and perform a genuinely positive public service, instead of being constrained to merely advocating those policies that are currently possible. When the window of political possibilities is moved along the political spectrum, the impossible becomes desirable and the simply desirable becomes imperative. This is the true influence of a think tank — shaping the political climate of future legislative and legal debates by researching, educating, involving and inspiring.

Today there are conservative think tanks such as the CATO Institute, Reason Foundation, Ayn Rand Institute, and the Heritage Foundation that are providing the public with information that is slowly moving the Overton Window in an upwards direction, a direction that would have been out of the question ten years ago. Also the rise of conservative talk radio throughout the country has added its influence to the Window.

Starting in 2009, with the advent of ObamaCare, the Tea Party movement sprung up all across the nation. The influence of the Tea Party movement was felt in the Congressional elections of 2010 with the Republicans, many of the candidates backed by the Tea Party, gained control of the House by picking up some 66 seats. This influence was also made known at the state level with over 650 republicans being elected to state legislatures and state houses across the nation.

In tonight’s CNN/Tea Party debate the first 30 minutes were devoted to the future of Social Security and Medicare. In past years these programs were considered untouchable by career politicians. While talking about the possible collapse of Medicare and Social Security politicians would not put forth any meaningful reform programs simply push the problem down the road. Issues such as means testing and raising the eligibility age were just not politically possible.

Now with the public’s increased knowledge of the issues with these two programs, knowledge that has been driven by the think tanks and radio talkers the Overton Window is beginning to move up the scale from Radical to Acceptable and Sensible and is approaching Popular. In the 2012 presidential campaign each political party will have to put forth solutions for saving these two programs.

There are other issues that are beginning to move up on Overton Window. Issues like Government regulations, government departments, education, government sending and government borrowing. Issues that were mere platitudes on the lips of politicians ten years ago are now demanding firm policy commitments from these same politicians by the public.

Over the past 100 years we have seen the Overton Window drop to the bottom of the scale where the public has been accepting more and more government control on their lives. The politicians have responded to this by creating laws, policies and governmental agencies to exert this control. Agencies such as the EPA, Department of Education, and Department of Energy were created to respond to the public’s need for more government, wealth redistribution, and something called social justice. These were the ideas that were being put forth by the left-wing think tanks, academia, unions, and progressives like Teddy Roosevelt, Woodrow Wilson, Franklin Roosevelt, and Lyndon Johnson. These politicians were merely giving the public what was acceptable to them in order to remain in power.

Today many conservatives and Libertarians are impatient with the progress being made towards more liberty and less government. They are looking for a candidate on a white horse that can lead them back to strict adherence to the Constitution. While this is a noble and desirable goal we cannot achieve it in one big step. It will take time and effort from conservatives, Libertarians, and Tea Party members to continually push the Overton Window upwards — the politicians will follow your lead.

Sarah Palin was Right on Death Panels

Sarah Palin was Right on Death Panels

“The punishment which the wise suffer who refuse to take part in the government, is to live under the government of worse men.” – Plato

On August 7, 2009 Sarah Palin posted the following on her Facebook page:

“As more Americans delve into the disturbing details of the nationalized health care plan that the current administration is rushing through Congress, our collective jaw is dropping, and we’re saying not just no, but hell no!”

“The Democrats promise that a government health care system will reduce the cost of health care, but as the economist Thomas Sowell has pointed out, government health care will not reduce the cost; it will simply refuse to pay the cost. And who will suffer the most when they ration care? The sick, the elderly, and the disabled, of course. The America I know and love is not one in which my parents or my baby with Down Syndrome will have to stand in front of Obama’s “death panel” so his bureaucrats can decide, based on a subjective judgment of their “level of productivity in society,” whether they are worthy of health care. Such a system is downright evil.”

“Health care by definition involves life and death decisions. Human rights and human dignity must be at the center of any health care discussion.”

“Rep. Michele Bachmann highlighted the Orwellian thinking of the president’s health care advisor, Dr. Ezekiel Emanuel, the brother of the White House chief of staff, in a floor speech to the House of Representatives. I commend her for being a voice for the most precious members of our society, our children and our seniors.”

“We must step up and engage in this most crucial debate. Nationalizing our health care system is a point of no return for government interference in the lives of its citizens. If we go down this path, there will be no turning back. Ronald Reagan once wrote, “Government programs, once launched, never disappear. Actually, a government bureau is the nearest thing to eternal life we’ll ever see on this earth.” Let’s stop and think and make our voices heard before it’s too late.”

When Palin posted her comments she received tons of hateful vitriol from the left. At the least she was called misinformed, at the most an outright liar. Palin stuck to her comments and last week she was vindicated by no other than the campaigner-in chief, Obama.

Contemplating the 2012 election that can already be seen looming on the distant horizon, the President's advisors were no doubt hoping that the "death panel" debate was… well… dead. But Obama himself inadvertently resurrected it when, in response to Republican budget proposals, he claimed that Medicare costs will be kept under control by the Independent Payment Advisory Board (IPAB). ObamaCare opponents have been screaming about this committee since it was first added to the "reform" bill. And, since that time, anyone with the temerity to call it by its proper name – death panel – has been vilified by the Democrats and the "news" media. Nonetheless, that's precisely what IPAB will be. Its sole purpose is to cut funding for some health care services seniors now take for granted. And those cuts will kill people.

One of President Obama’s key proposals to reduce skyrocketing Medicare costs is a so-called Independent Payment Advisory Board (IPAB). The IPAB would consist of 15 members appointed by the president (and confirmed by the Senate), empowered to decide what medical tests and procedures Medicare would cover and how much it would pay providers.

Giving this power to the IPAB would put tremendous medical decision-making in the hands of unelected officials with minimal accountability. We’ve already seen a foretaste of this when a federal government medical panel attempted to save money by restricting screening mammography to women over age 50, even though decades of medical research has shown clear benefits to starting annual mammograms at age 40. Although the Obama administration stated that the IPAB would not ration medical care, its power to set payments to doctors and hospitals would give it de facto rationing power.

IPAB was created pursuant to section 3403 of the ironically named Patient Protection and Affordable Care Act (PPACA), and its ostensible purpose is to "control costs." In reality, it will do nothing at all about costs. Instead, the board's fifteen "experts" will impose old-fashioned price controls. Before ObamaCare was signed into law in March of 2010, only Congress had the power to make changes to Medicare's reimbursement rates. But PPACA, for all intents and purposes, transfers that power to this tiny cadre of presidential appointees who will have no accountability to the voters. In theory, IPAB can only propose changes to Medicare's payment rates. In practice, however, the board's proposals will take effect automatically unless Congress passes contrary legislation and the President signs it into law.

This concentrates a huge amount of power in the hands of these fifteen people. As Obama's former Director of the Office of Management and Budget, Peter Orszag, phrased it last year in a discussion at the Economic Club of Washington: "This institution could prove to be far more important to the future of our fiscal health than, for example, the Congressional Budget Office. It has an enormous amount of potential power." This comment suggests that the Obama administration always intended to maintain the country's "fiscal health" by stinting on Granny's physical health. Hyperbole? Consider Orszag's description of the automatic implementation feature of IPAB's proposals: "So the default is now switched in a very important way on the biggest driver of our long-term costs, which is the Medicare program."

Considering that IPAB's mission involves Medicare cuts, one can't help but wonder if Obama's political team was comfortable with how much emphasis he put on it during last week's budget discussions. He made it abundantly clear that, if spending rises faster than expected, he "will give the independent commission the authority to make additional savings by further improving Medicare." But the relevant provision of PPACA was obviously written to keep IPAB below the radar until the President, and the Democrat majority in the Senate, have survived the 2012 election cycle. The law doesn't require the board to produce its first recommendations until 2014. Thus, a safely reelected Obama would have time to submit even controversial nominations for IPAB membership, which a friendly Senate would happily confirm.

Such political considerations notwithstanding, Obama probably wasn't worried. He no doubt sees PPACA's death panels as a feature rather than a bug. This sentiment is shared of most advocates of socialized medicine. In a piece titled, "Why 'death panels' are a necessary evil," columnist Jay Bookman captured this progressive consensus when he wrote that "Death panels exist, they will exist in any conceivable system of health-care delivery, and we all know they are necessary but prefer to ignore it." For these people, it's either us or Granny: "Somebody has to say no to the terminal patient who refuses to acknowledge that he or she is terminal and demands hopeless if expensive treatment. Somebody has to have the power to rule that Procedure A or Drug A is more cost-effective than Procedure B or Drug B. Even Heaven has a gatekeeper."

With this last snide flourish about St. Peter, Bookman inadvertently stumbles upon the thing that makes many people, of all political persuasions, uneasy about the amount of power that has been given to IPAB. The members of this board will be mere mortals, installed by a president whose choice of appointees thus far has shown little divine inspiration. Thus, even some Democrats have grave concerns. Rep. Allyson Y. Schwartz (D-PA), for example, is among the co-sponsors of a bill that would repeal IPAB. In a statement released last week she said, "Congress must assume responsibility for legislating sound health care policy for Medicare beneficiaries. Abdicating this responsibility, whether to insurance companies or an unelected commission, would undermine our ability to represent the needs of the seniors."

The tragic irony here is that costs can be controlled without pulling the plug on Granny. There are market-based alternatives to government rationing. Despite what we have been repeatedly told by progressive policy wonks, health care is not a unique universe in which economic forces fail to operate properly. It is, in reality, possible to utilize the market to control costs. One plan for doing so has been put forward by Budget Committee Chairman Paul Ryan, who would introduce competition among insurers, realign tax incentives and remove some of the regulatory morass that reduces the efficiency of health care providers. This market-based approach was used with success in the Medicare Part-D program, which was actually starting to drive down drug costs until the Democrats began meddling with it after retaking Congress in 2006.

Another alternative is the "Purple Health Plan," proposed by Boston University economist Laurence Kotlikoff. As David Hogberg reports at Investor's Business Daily, this plan seeks to "achieve the liberal goal of universal care via a market-oriented voucher." A lot of prominent economists have endorsed it, including Nobel laureates George Akerlof and Thomas Schelling. Kotlikoff's basic idea is to "trade in" outmoded ideas, like the employer-based tax exclusion and the major federal health programs, and use the money thus saved to provide Americans with vouchers that we would use to buy our own health insurance plans. There are features to this plan that will incur the displeasure of free market purists, including its own panel of physicians who would make arbitrary decisions, but the point is that it is another choice.

Unfortunately, choice is not a popular concept with the President and his health care apparatchiks at the Centers for Medicare and Medicaid Services (CMS). For them, "cost control" means government-imposed rationing of care to the elderly. Obama's CMS administrator, Donald Berwick, and lead health czar has often praised IPAB's deadly British prototype, the National Institute for Health & Clinical Excellence (NICE) and has famously claimed that "The decision is not whether or not we will ration care; the decision is whether we will ration with our eyes open." The problem is that ObamaCare's death panel, as Sarah Palin correctly dubbed IPAB in the Wall Street Journal, will end up closing a lot of aging eyes – permanently. Just because you don’t like someone doesn’t make them wrong, and this is what the main stream media does with Palin. Click here to hear Mark Levine’s comments about Donald Berwick on his May 13, 2010 radio show.

Obama’s Health Care Czar addressing the British Health Care System in a 2008 Speech

In a fully free market for health insurance, everyone would be free to purchase whatever level of coverage they desired according to their best rational judgment from any willing insurer. This would allow them to join voluntary insurance risk pools with others with similar preferences without imposing their choices on others with different priorities. Individuals have the right — and the responsibility –to make these important life decisions for themselves. The government should not be making these decisions for us.