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Press Release

This Week on Capitol Hill


It is summertime, and for kids around the nation that means high dives and swimming pools. Congress, however, is cooling off by paddling in the red ink and by absolutely jumping off the cliff on Medicare. Mark this week in your calendar, folks-- you're about to witness the largest increase in government since the days of the Great Society and LBJ.


To his credit, earlier this year President Bush proposed a fairly solid Medicare reform bill. His plan, while granting a new prescription drug benefit, would have set up a parallel, a private system to bring innovation and competition to the broken Medicare system.

Congress, and the Washington establishment, though, would have nothing of such a concept, and trashed that idea within days. Unfortunately, the strong bipartisan commitment to creating a prescription drug benefit persists. That's despite the fact that the Medicare system is currently broken and running in multibillion dollar deficit. Yet Congress and the White House would add more fuel to fire. The question is how much damage they will do.

Even worse, it appears that Senator Ted Kennedy is calling the shots in the Senate. I don't want to sound too cynical, but any time Senator Kennedy lauds a health care bill, conservatives had better be wary. Yet, all indications are that Senator Kennedy remains the crucial player in the Senate Medicare debate, and he's been praising the Senate bill.

The plan currently on the table will greatly increase the size of government. While the proponents of the Senate Medicare "reform" plan claim that it will cost $400 billion over the next ten years, the actual cost could be much more. After all, this is an entitlement program, and there is no ceiling on the total amount of money that can be spent. Depending on how it is structured, some analysts estimate the true cost of the drug benefit at $700 billion over ten years.

Congress has to walk a very fine line here. It is very easy for policymakers to get the incentives wrong, and end up blowing up the entire budget. For example, if the benefits are too generous, and middle class Americans forgo private insurance (most seniors currently have their own insurance to pay for prescription drugs) in favor of public insurance, spending will spiral out of control. On the other hand, if Congress fails to make the program's benefits generous enough, they'll get hit by a political backlash for senior citizens receive that it will have to pay another time for prescription drugs. That's exactly what happened last time Congress waded into these waters, in 1988 with the catastrophic care expansion of Medicare. Outraged seniors nearly lynched Representative Dan Rostenkowski, and Congress repealed the changes it made the following year.

Hopefully, good leadership from the House (and timely pressure from the White House) will be able to reshape the Senate plan, so it's a little early to call Medicare reform a complete disaster. Indeed, there are some good signals from the House, where Ways and Means Chairman Bill Thomas is floating the idea of letting private insurers compete with the traditional Medicare fee-for-service program. No doubt, proper Medicare reform should include a drug benefit only for seniors who need financial help, and reform should include open competition between private insurers similar to the current system federal employees enjoy.

Death Tax

Three cheers, though, for the House of Representatives, which has been dogged in the pursuit of full repeal of the onerous death tax. A vote on full, permanent repeal is expected on Wedneday this week. Next stop-- the United States Senate.

Transportation and Davis-Bacon Repeal

Three cheers for Colorado freshman Republican Susan Musgrave, who continues to challenge the Washington transportation establishment with good, pro-taxpayer arguments and bills. This week, Congresswoman Musgrave will introduce a bill to make Davis-Bacon optional for states. In 1931 the Davis-Bacon Act was adopted to create a "prevailing wage," usually the union rate, for any construction contract over $2,000 funded in whole or in part by the federal government. This reduces competition and drives up the cost of road-building. According to the U.S. Chamber of Commerce, the Davis-Bacon Act costs taxpayers over $1 billion annually, in addition to the $100 million in government administrative costs per year.