The death of Health Care Reform--over reaching

The focus of the health care debate has been very general--although very passionate. We have seen cries of "socialism, death panels, rationing" and many others. There is nothing wrong with these issues, but the real devil is in the detail.

Fundamentally, Americans do not trust the government about much of anything. The era of mistrust stems from Watergate, and extends all the way to WMD under Bush. It includes Democrats and Republicans. This is first major psychological hurdle for the President. Circumstance threw the President a major assist. We are living through an era in which the public is looking to its government for help as the country struggles through the financial crisis that has rocked confidence in the free markets. But as that panic cools, the mistrust will rise again.

But the real devil in the details is the individual mandate, combined with the vast subsidies for people over medicaid wage limits. This is going to create a firestorm like we have never seen. This is a major miscalculation by the Democrats. While it is good economics, it is terrible politics and perpetuates one of the worst aspects of the current crazy quilt of health care. The healthy subsidize the sick, even where the sickness is the result of lifestyle choices.

Let me unravel that a little. The individual mandates will smell like a tax and will fall on many people, particularly the young, that simply have decided that they don't want to buy health insurance. This is not like auto insurance, which offers discounts for good drivers. People can still chose not to drive (as I do). This will be a mandate across the board. It will smell like a redistribution of wealth from the middle class to the entitled classes when the massive subsidies are added into the equation. Little attention has been focused on the subsidies that are proposed for individuals above the medicaid wage limits. This is supposed to make health insurance more affordable. These are massive amounts of money; and who is going to pay. Of course, the rich are going to pay (the voiceless), but the American public is not that stupid. The "wealth dividend" form reversing the Bush tax cuts and returning to the Reagan tax levels, is being spent in multiple places and that still leaves a trillion dollar deficit to reduce. (and by the way, the fix on the "broken Medicare system"). The American public just smells one thing ---- higher taxes for all.