State of the Union Response from NCPA Experts

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Health Care, National Defense, Taxes, Education & Energy Analysis

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National Center for Policy Analysis (NCPA) public policy experts provide their insights below on the president’s State of the Union proposals.

Taxes and Employment: NCPA Senior Fellow Pam Villarreal

-- Obama’s “middle class economics” means paying others’ bills.
Redistributing income and promoting middle class dependence on government was the recurring theme in last night’s State of the Union address. During a time when the labor force participation rate is at its lowest in decades, a more important matter should be getting people back to work and policies to encourage long-term investments in jobs. But Obama’s version of “middle class economics” was more about paying people’s bills with other people’s money and less about fostering job creation and income growth.

-- Changing the tax code, not tax credits, is the answer to married couples’ woes.
In an appeal to the middle class, Obama proposed a $500 “second earner credit” for married households where both spouses work. He admits that two-earner couples face high costs associated with both of them working, including costs of transportation and child care. While he has the right premise, the solution is wrong. The marginal tax rate on a second-earner spouse (particularly in families where one spouse far outearns the other), is much higher and punitive for second earners. This would not be the case where an unmarried couple was living together and filing separate returns. The real solution? Forget the tax credit and change the tax code so that the marginal tax rate for a married couple is the same as the rate for an unmarried couple.
Imposing higher costs on employers will hurt employees and discourage hiring.

-- Employers are already faced with additional costs of hiring thanks to Obamacare and various minimum wages around the country, but president proposed mandatory paid sick leave for private firms. These additional costs to hiring will make employers less likely to hire. Instead, why not let firms offer packages of benefits that are tailored to the needs of their firm and employees? For instance, reducing the number of paid sick days provided in exchange for a monetary bonus, or a reduced wage in exchange for comp time.

Health: NCPA Senior Fellow Devon Herrick

-- Employees will end up paying the costs for paid sick leave.
The President emphasized the plight of the 43 million American workers who do not have paid sick leave. Many of them feel they cannot afford to take a sick day to convalesce after an illness or to care for a sick child. He proposes to mandate that employers provide seven days of paid sick leave to workers each year. The president didn’t mention that an estimated 100 million workers who have paid sick leave likely don’t get seven days annually. He also didn’t mention his own advisor, Jonathan Gruber, has research showing workers themselves wind up paying the cost of mandatory benefits through lower wages. Thus, if employers are forced to provide seven paid days off work for every worker, employers will adjust pay to compensate for the cost. This will inhibit pay raises, it will impact paid vacation days. The president should have called for expanding Health Savings Accounts (HSAs) to every worker, allowing workers to set aside funds for medical needs. The president could have also proposed to allow workers to use HSAs to compensate for income lost to sick days. Currently workers who have an HSA can use funds from the account to replace income lost due to sick days. However, this is considered a non-medical use and exposed the worker to a penalty of 20 percent plus ordinary income taxes.

-- Mandating health insurance coverage is limiting options, lowering wages.
The President touted the fact that millions more people are now covered through employer plans, and the state or federal health exchanges. Yet, research has shown that the exchange subsidies will cause employers to drop coverage. Moreover, firms are cutting back workers’ hours to avoid having to provide them with health benefits. Obama’s own advisor Jonathan Gruber has research showing workers themselves pay the cost of mandatory benefits in lower wages. Many of these newly covered individuals were not allowed to pick the coverage of their own choosing. The PPACA contains structural flaws that will have to be reformed. The NCPA has proposed solutions that would correct the problems.

-- Medicaid expansion is making it harder for enrollees to find doctors.
About 6 million additional people are now covered through Medicaid expansion. Yet, many of them are finding it difficult to find doctors willing to work for the paltry fees state Medicaid programs pay doctors who treat Medicaid enrollees. Moreover, the NCPA has outlined that states have alternatives to expanding Medicaid that will assist low-income residents access private coverage for very low fees. Obama’s own advisor Jonathan Gruber has research that found 50% to 75% of new Medicaid enrollees from past expansions were those who dropped private coverage.

-- Health care reform should strengthen consumer control of medical dollars.
The president is correct that healthcare inflation is as low as it has been in many years. The reason is because an estimated 32 million Americans either have Health Savings Accounts or Health Reimbursement Arrangements. Million more have high-deductible plans. The average deductible in an employer plan is now around $1000 — double that for a family plan. When more people have some ‘skin in the game’ and control more of their medical dollars, doctors and hospitals behave competitively. The president and Congress can build on this cost-conscious behavior. President Obama should make good on his pledge to work with Republicans when they send him bills to reform flaws in the PPACA, and reform the U.S. health care system.

-- Our veterans deserve better health care, suited to their needs.
The president is correct that every veteran deserves access to high-quality healthcare when they return. We should do more; the progress has been in adequate to fulfill this promise. Access to quality medical care for our nation’s veterans is inadequate compared to the need. The VA fails to curb suicide risks, for example. The VA has been plagued by fraud, waste and mismanagement. The system is failing those with post-traumatic stress, mental disorders and traumatic brain injuries. The President should have discussed how his administration would correct these deficiencies. The NCPA has solutions to assist with these problems.

-- Expanding personalized medicine calls for more competition in healthcare.
The president's proposal to expand personalized medicine is laudable. However, the best way to expand personalized medicine is to boost competition in healthcare. His Administration has routinely championed a top-down approach to medical innovation. They believe that engineering can devise the optimal approach to treating disease. Yet, innovation is best achieved in a competitive marketplace where providers compete to find a better solution. Providers — doctors and hospitals — can only achieve this in a marketplace where they are competing to attract consumers patronage when patients control their own health care dollars.

Education and Energy: NCPA Senior Research Fellow Lloyd Bentsen IV

-- “Free” College puts at $70 billion burden on taxpayers.
Instituting “free” college so that students do not incur more debt only shifts the costs to taxpayers. This proposal from the president will only increase the amount of government money in higher education, which is artificially raising college tuition and expanding the “student loan bubble.” Community college is not the answer. Out of the 40 percent of college bound students that choose community college, 60 percent of them do not finish their degree within 6 years of enrolling.

-- School should leave children prepared for the real world, not just to finish college.
According to the Program for International Student Assessment (PISA), our kids are not at all prepared for a competitive world. Finishing college is not the end goal. Getting a good job should be the goal.

-- Obama’s credit claiming on energy success falls flat in face of Keystone opposition.
The president can claim some credit for our nation’s energy successes only when he begins to finally support pro-energy legislation like passing Keystone XL. Our advances in renewable energies, like wind and solar, come with a very high direct cost to taxpayers and indirect cost to the energy market.

The President and National Defense: NCPA President & CEO Allen West

-- The “shadow of crisis” has not passed.
Just ask the two Japanese men being held under threat of beheading by ISIS if they are not given $200M. And if the shadow of crisis has been lifted, then why do we have three US Naval warships ready to evacuate the US Embassy in Yemen – the second US Embassy that will have been evacuated in less than a year.

-- Who defines what’s “fair” in Obama’s “middle class economics?”
I agree that everyone should contribute to America’s success – the top 1% of income earners pays 38.1% of taxes, the top 5% of income earners pays 58.9% of taxes, the top 10% of income earners pays 70% of taxes. So, if 90% of income earners only pay 30% of all taxes – what is fair about that? And I concur, we need everyone, all hands on deck, to contribute to the American success story. But it seems that Obama’s vision is that a few contribute more – his definition of fair – in order to redistribute fairness by way of “free” benefits. Truly not a principle of a Constitutional Republic, or a free market economy.

-- A minimum wage job is not a career, and no one should seek to raise a family on $15,000.
Perhaps if we did have real economic and job growth that would not be the case? What President Obama espoused last night is a disregard for the efforts of individuals to succeed over his desire to promote collective achievement. His vision is not an America based upon an equality of opportunity and the pursuit of happiness. Obama’s objective is one of equality of outcomes enabled by a government guarantee of happiness.

-- Obama’s speech was nothing about viable policy.
His speech was about defiant political posturing that he believes sets the conditions for his successor that forces the masses to vote for their own largesse from the public treasury. It is easy to stand up, go unchallenged, and promise everything to everyone – except hardworking Americans. Obama’s speech was brilliantly themed – but promotes that which is an abject failure. Middle class economics is just a spruced up way for progressive socialists to advance wealth redistribution – you cannot grow an economy without capital investment.

While the State of the Union address gives us a good idea of what’s on the President’s mind, all of the details of the President's proposals will be unveiled on February second when he submits his budget proposal. NCPA Legislative Director Brian Williams anticipates the appearance of “a personalized medicine initiative, two years of free college, middle-income economic programs, and cutting carbon,” among the items in Obama’s budget.

The National Center for Policy Analysis (NCPA) is a nonprofit, nonpartisan public policy research organization, established in 1983. We bring together the best and brightest minds to tackle the country's most difficult public policy problems — in health care, taxes, retirement, education, energy and the environment. Visit our website today for more information.

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Catherine Daniell
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