Principled Ideas from the Centennial Institute Volume 4, Number 10 October 2012

Publisher, William L. Armstrong Editor, John Andrews

OUR TICKING DEBT BOMB: THE GRAVEST THREAT FACING AMERICA

By Senator Tom Coburn
America today faces one of the greatest threats to its existence since our founding. The threat does not come from any foreign army or terrorist network, but from our own government and its unsustainable spending. If we dont change course in the near futuremost likely the next two yearsAmerica as weve known it could soon be a shell of its former self.

HEALTH CARE EXCHANGES: THE WORST IDEA YOU NEVER HEARD OF

By Eric Novack
Danger ahead: with the passage of President Obamas health care law by Congress in 2010 and the affirmation of its constitutionality by the Supreme Court in 2012, our country is on track for a health care system that combines the spending indiscipline of the Pentagon with the utter unaccountability of our public schools.

Such will be the legacy of the sadly misnamed Patient We could face a sudden economic collapse Protection and Affordable Care Act Condition critical, (PPACA), barring a political U-turn in the worse than the Great Depression, or we could enter an era of managed decline change course now. future. Fortunately, that can occur. We still and waning influence. have an opportunity to get it rightbut this will require Americans to see past the smokescreen put What is certain is that maintaining our present course is a up by subsidy-seeking special interests and look carefully at mathematical impossibility. If we ignore this problem, we actual policies and their impact. will condemn future generations to a lower standard of living with less freedom and less opportunity. Sooner or later, our debt bomb will go off. Red Ink Rising Isnt Fiction Admiral Mike Mullen, former chairman of the Joint Chiefs of Staff, is not exaggerating when he calls our debt our greatest national security threat. What makes his statement so remarkable is that for most of Americas history, threats to our national security have been described in military terms: the size of opposing armies, the number of ICBMs, andin a post-9/11 worldthe determination of terrorists to kill civilians. Our military leaders, of all people, have no reason to downplay such threats, so Admiral Mullens decision to identify Americas greatest vulnerability in economic rather than military terms should be a wake-up call for every American. If Tom Clancy could capture our moment, he
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Obama Promised but Didnt Deliver

Remember the landscape before PPACA was enacted? For millions of our fellow citizens, access to quality health care had long been a problem. The cost of health care was a huge issue for everyone. And politicians promises about the future of Medicare and Medicaid were becoming ever more empty. So when Barack Obama pledged to make reforms that would address these exact issues, an overwhelming majority cheered. What the president delivered, however, is a series of policies that will demonstrably make access worse, especially for the needy; that will make costs skyrocket for families while
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Eric Novack (M.D., University of California) practices as an orthopedic surgeon in Phoenix and is chairman of the U.S. Healthcare Freedom Coalition. This essay is adapted from his speech at the Western Conservative Summit in Denver on June 29, 2012. Centennial Institute sponsors research, events, and publications to enhance public understanding of the most important issues facing our state and nation. By proclaiming Truth, we aim to foster faith, family, and freedom, teach citizenship, and renew the spirit of 1776.

Senator Tom Coburn (M.D., University of Oklahoma) is in his second term as a Republican Senator from Oklahoma. This essay is adapted from his new book, The Debt Bomb: A Bold Plan to Stop Washington from Bankrupting America, and his speech at the Western Conservative Summit in Denver on June 30, 2012.

Senator Tom Coburn Our Ticking Debt Bomb Continued

might call it Red Ink Rising. In a very real sense, the threat from borrowing from countries like China is greater than the threat of war with China. Sooner rather than later, a major fund or government will just decide one day that buying U.S. debt is a bad bet. And with one gust of wind, the house of cards will come crashing down.

Carmen Reinhart and Kenneth Rogoff call financial repression. Financial repression happens when, to solve a debt crisis, the government uses tools that rob working families. One of the time-honored tools of financial repression is the debasement of currency by inflation.

Inflation will make government debt seem smaller by We need to face the facts. America is already bankrupt. shrinking the value of the dollar. Yet for individual We may not believe it or feel it yet. But we are effectively Americans, inflation will be an insidious hidden tax increase bankrupt. Our debt now exceeds the size of our entire that will make everything you buy more expensive and economy. Our payments on our obligationsour everything you own worth less. If our government tries to unfunded liabilitiesexceed our income inflate its way out of a debt crisis, much as far as the eye can see. No amount of Ignoring the problem of your life savings will be wiped out. obtainable growth or tax revenue will be nations will see amounts to betrayal. Meanwhile, othermake what couldthis as enough. their chance to be a Reimagine What Government Can Do There simply is no possible way we can finance our long-term liabilities without fundamentally reimagining what government can do in the 21st century. If current patterns hold, well hear increasingly dire warnings and more earnest promises to do something, but no one will act decisively until we experience more economic pain. A debt crisis would likely move through four stages. Stage 1: Congress tries to maintain the status quo on spending and entitlements. Stage 2: The United States faces additional credit downgrades. Stage 3: Interest rates markedly increase, harming consumers and sending interest payments on the national debt soaring. Stage 4: Inflation soars, and the value of the dollar declines. In this final stage, borrowing enough money to fund our military and other programs will become much more expensive. Because we will be spending more on interest payments, it will be virtually impossible to balance our budget with spending cuts and revenue increases. The hole will be too deep and the sides too steep to climb out. Working Families, Watch Out Meanwhile, the so-called solutions that government would turn to at this point would make the problem much worse. Politicians would essentially try to save themselves by destroying the middle class with a tactic leading economists decisive move against the dollar, and the value of the dollar would fall even further.

Finally, the bottom would fall out of the middle class. Unemployment would soar while the cost of living would increase. Real wage growth has been stagnant for years. It will be the middle class and lower-income families that pay the price for Washingtons refusal to act. Statesmen Needed If Admiral Mullen is correct that our debt is our greatest national security threat, doing nothing is a recipe for mutually assured destruction. The reality is that doing nothing to solve the problem equates to both a tax increase and a benefit cut for seniors and the poor. Doing nothing violates the core principles of both parties, while solving the problem is consistent with those values. Doing nothing is the real betrayal and the heresy. The big question facing America now, and in the foreseeable future, is not who is going to win the next election but whether we are going to defuse a debt bomb that has put our very survival at risk. From my vantage point, having spent hundreds of hours with people who have a sacred responsibility to solve this problemfrom the president to congressional leadersI believe a consensus for a solution already exists in the country and in Washington. But a real solution will never fit into an election-year strategy. In Washington, the moment to do what is right is

CENTENNIAL REVIEW is published monthly by the Centennial Institute at Colorado Christian University. The authors views are not necessarily those of CCU. Manager, Jeannie Edwards. Designer, Danielle Hull. Illustrator, Benjamin Hummel. Subscriptions free upon request. Write to: Centennial Institute, 8787 W. Alameda Ave., Lakewood, CO 80226. Call 800.44.FAITH. Or visit us online at www.CentennialCCU.org. Please join the Centennial Institute today. As a Centennial donor, you can help us restore Americas moral core and prepare tomorrows leaders. Your gift is tax-deductible. Please use the envelope provided. Thank you for your support. - John Andrews, Director
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Senator Tom Coburn Our Ticking Debt Bomb Continued

never today. It is always a mirage just beyond the horizon of the next election. It comes down to a question of political will and courage. Will we be career politicians, or will we be statesmen? The good news is there is a growing cadre of members of Congress in Washington who are ready to go into battle and to lay down their political lives for their country. With a little leadership and courage, we can get there sooner than you think.

Eric Novack Health Care Exchanges Continued

enriching special interests from insurance companies to hospitals; that will imperil Medicares and Medicaids very existence; and that will place health care decisions that rightly belong to patients and families in the hands of politicians and their pals. Thanks for nothing.

The hated individual-mandate provision is the best known of PPACAs many bad features. But perhaps the most insidious of the laws provisions is the creation of health insurance exchanges as a state-by-state marketplace for purchasing insurance. It will place control Dollars over massive flows of federal, state, and personal dollars in the hands of a few into political power. But it gets worse because, stunningly, corporations with minimal oversight and the enormous sums being thrown at accountability. insurance and hospital companies will not even be close to This is why the insurance industry, hospital associations, state and regional chambers of commerce, and other probusiness groups avidly support the exchangesand have committed hundreds of millions of dollars to convincing state legislators and governors that somehow this is a freemarket solution for health care. Its nothing of the kind. Faux Markets, not Free Markets In the coming decade, insurance companies, along with hospital corporations functioning as insurance companies, stand to get $800 billion in taxpayer subsidies to sell policies through exchanges. Thats according to the Congressional Budget Office. But a more accurate ten-year price tag, since the program is not slated to begin until 2014 and takes several years to ramp up, may approach $2 trillion. In some states the amount of money flowing through the exchanges each year will rapidly become larger than the entire state budget. As this happens, since dollars translate directly into political power, the companies whose representatives legally hold majority (or even super-majority) control over the oversight boards of the exchanges will, for practical purposes, rule the state.

Once entrenched, these exchanges with their vast control over rulemakingincluding access to care, creation of new health care facilities, and the stifling of competition will be nearly impossible to displace. The subsidies are attached to patients and families, who will be treated (as they increasingly are already) as commodities worth government funds rather than, well, translate patients.

enough. Economist Austin Frakt, writing on Ezra Kleins liberal Washington Post blog, noted that the subsidies may be much lower than expected in terms of total insurance costs, and that many children may not be eligible for subsidies. Paying More for Less Under PPACA, after 2018, the subsidies allowed will be below the projected rate of rising health care costs. When this intentional shortfall is added to Obamacares 18 different tax increases (not including the individual mandate, now judicially certified as a tax in itself), the result will be that American families will be paying even more, for less. States that are moving forward to establish the exchanges as called for are already spending billions of federal dollars just to help begin implementing the complex bureaucracy and even more complex technology platform that will be required. Not only must policymakers integrate what is, in many states, a completely outdated Medicaid computer system with the exchanges, but the technology platform must also have the ability to collect and analyze eligibility data and then transmit that data to the federal government.
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Centennial Review
October 2012

Centennial Institute Double Issue: Dangers Diagnosed at Summit

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Two physicians sounded the alarm for Americas body politic at the recent Western Conservative Summit. Fiscal truth-teller Tom Coburn warned that the spending addiction in Washington is more dangerous than any foreign military threat. Surgeon-turned-reformer Eric Novack explained how health insurance exchanges will give away the store to corporate cronyism.

Thats because the IRS will need access to all the data from each state in order to advise the exchanges how much of a subsidy is available for insurance companies to buy down the cost of coverage for policyholders. This past August, President Obamas Department of Health and Human Services handed out another nearly $900 million to eight states working on implementation of their exchanges. California recently signed a $360 million contract with a company to help them just get an exchange up and running. Massachusetts spends over $30 million per year on administrative costs for their exchange.

Resistance by States Could Stymie Feds But heres a ray of hope: states that resist the lobbying onslaught and refuse to begin establishing these puppet exchanges may be taking a large step toward blocking PPACAs implementation, period. You see, the law does not appear to give a federal exchange the authority to offer subsidies to insurers, without which the whole scheme would collapse. While the administration will try to laugh this out of court, no one can predict how judges will rule. Scoffers should recall that litigation against the individual mandate and the Medicaid mandate was also deemed cronyism hopeless not long ago.

The kicker: due to administrative costs, an identical policy will be more expensive Say no to when purchased through an exchange and collectivism. We the people and our elected state than from outside. Even before the legislators should just say no to these marketexchanges begin, new insurance broker fees and other fixing, government-created, and ultimately government- and hidden taxes are being piled on families and businesses. corporate-crony-controlled health insurance exchanges. Lobbyists on the March Interest groups have deployed lobbyists to every crevice of state legislatures and governors suites, peddling the poll-tested language of free-market reforms, statebased control, keep power away from Washington, and wont our state do a better job of making decisions for our residents than politicians in D.C.? What they fail to reveal is thatin spite of everything states will have little control over the fundamental rules under which the health insurance exchanges function. State legislators and governors must have very short memories if they forget that Medicaid was supposed to be a state-based program toobut now states must go hat in hand to Washington, when controlled by either party, to make even minor changes to their Medicaid programs. If that is not enough, the checklist for states to comply with the exchange rules runs 27 pages long, with many tasks being so vaguely defined as to make it nearly impossible to know in advance if time and money spent will be adequate.
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This is a top priority for every American who believes that the Obamas health care law has put us on the wrong path everyone who wants decisions made by patients and families, not politicians and their pals. Cronyism and collectivism, to which both parties unfortunately are susceptible, must not go unopposed. Lets raise our voices accordingly.

COMPLETE PROGRAM ON DVD

Tom Coburn, Jan Brewer, Geert Wilders, Bill Bennett, and 15 other great speakers lit up the Rockies with Calling All Citizens, June 29-July 1. Experience all of it with this DVD set. Order yours today at www.westernconservativesummit.com or 303.963.3424