Critical Condition

Big Favors for Big Labor

Just when we thought the health-care legislation could not possibly get any worse, any more damaging, or any more disgusting in its vote-buying kickbacks and special favors, then along comes this!

In marathon meetings at the White House, the president and congressional Democrats came up with the mother of all special deals for labor unions, exempting them from a new tax on high-cost health plans until 2018.

The so-called Cadillac tax is one of the many “revenue generating” parts of health-overhaul legislation, exposing high-cost health plans to a 40 percent excise tax. It would hit plans for non-union workers costing more than $24,000 a year for families and $8,900 for individuals. And the tax would be paid by insurance companies, who would simply pass it along in even higher premiums.

How is Congress going to make up the revenue? With another jobs-killing tax that would subject investment income to Medicare payroll taxes. This will hit small businesses and others that rely on investment income to build their businesses. Apart from the economic damage this would do, it is terrible policy to start thinking of Medicare taxes as yet another piggy bank to fund special political deals.

It is relatively clear that President Obama’s economic policy is strictly one-dimensional: Raise taxes everywhere and anywhere you possibly can to expand the size and scope of government. And the only people who will be exempt from these crushing taxes will be political friends who have cut special deals.

This is not a democracy. This is banana-republic politics. Unless you have political connections and lots of campaign cash, expect to get hit.

It’s clear that the winners are the powerful labor unions who’ve bought a place at the table with their huge campaign contributions and election spending. That bought them the deal that exempts union members from $60 billion in taxes on health benefits.

But who are the losers? For starters, workers in states that have fewer labor unions, such as Nebraska. Is Sen. Ben Nelson going to be able to defend a deal that would tax health insurance for workers in his state, most of whom are not unionized, at a higher rate than the more highly-unionized workers in Pennsylvania? This might be called the “Cornhusker Kick.”

This union payback exposes the same raw politics as an earlier deal in the Senate bill that would force construction companies with five or fewer workers to provide expensive, government-mandated health insurance to their employees. (For other industries, the mandate doesn’t kick in until a firm has 50 workers.) The unions had complained that exempting the small, non-union firms from the mandate put unionized companies at a competitive disadvantage.

This is disgraceful.

You know the world has changed when people around the country are looking to Massachusetts to stop expansion of a liberal social agenda. One member of Congress from a Western state told me his constituents are stopping him on the street to ask what they can do to send a message to Massachusetts voters, saying they are all that stands between them and passage of a health-reform bill that frightens them.

Political guru Charlie Cook writes today: “Honorable and intelligent people can disagree over the substance and details of what President Obama and congressional Democrats are trying to do on health care reform and climate change. But nearly a year after Obama’s inauguration, judging by where the Democrats stand today, it’s clear that they have made a colossal miscalculation.” 

Indeed.

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