If you live on Planet Earth, the Baucus bill is not deficit-neutral.

Yes, the Congressional Budget Office’s official score of the America’s Healthy Future Act of 2009 estimates that the $829 billion bill will actually reduce the federal budget deficit by $81 billion over 10 years form 2010-2019. The problem is that the Baucus bill assumes Congress will sit idly by while reimbursement rates for physicians that participate in Medicare get cut around $240 billion starting in 2012, which no one thinks will happen. The formula for calculating reimbursement rates, known as the Sustainable Growth Formula (SGR), is badly outdated, and there is a widespread consensus that it needs to be scrapped and replaced with something else. Yet Congress hasn’t addressed the SGR in any meaningful way, instead opting to reverse scheduled reimbursement cuts every year since 2004 with so-called “doc fix” legislation. Nothing suggests they wouldn’t do the same down the line when it comes to the Baucus bill, especially when told nicely by deep-pocketed interests such as the American Medical Association to make the change.

Future doc fixes alone prevent the Baucus bill from cutting the deficit, but there’s also a reality check needed on the revenue side of the equation. Already, many have complained that the 40% excise tax on high-premium (“Cadillac”) insurance plans, estimated to raise roughly $46 billion, will ensnare millions of Americans in the near future, since health inflation grows much faster than monetary inflation. There has already been plenty of talk on both sides of the aisle of paring down the annual medical device tax, estimated to bring in over $22 billion. Members with device manufacturers in their districts don’t want them to pick up the tab, and since the tax isn’t deductible from corporate income taxes, it will raise costs and stifle innovation. Annual fees on health insurance companies may be reduced as the bill is hashed out. Lastly, the tax for not complying with the individual mandate has already been scaled back. Most, if not all of these taxes will be reduced, increasing red ink.

So then, we can evaluate the claim that “In terms of the President’s outline for reform, it meets all mandatory points.” Off the top of my head, the Baucus bill violates: (1) the President’s promise not to raise taxes on those making less than $250,000 a year (see paragraph above) (2) the President’s promise not to sign a bill that “adds even a dime to the deficit” (3) the President’s promise to bend the cost curve down (see CBO score).

I place none of the blame on the staff of the Congressional Budget Office, who are hired to evaluate the bill as written (and do a fine job, I might add). Instead, I fault those who claim that the Baucus bill is deficit-neutral, when, in the real world, it isn’t.

By Jonathan Slemrod

On paper, the Obama administration cares deeply about America’s economic recovery, taking bold steps to rescue the failing financial system, helping to save the Big Three automakers, and spending nearly $800 billion to create jobs through an economic recovery package. The reality isn’t so sweet.

Last week, the administration announced they will slap a punitive tariff of 35 percent on tires imported from China, a move which makes no economic sense, other than merely as a gesture to the United Steelworkers Union, who have complained about the influx of cheap Chinese tires for months. The announcement has infuriated the Chinese, who are threatening to retaliate by raising tariffs of their own, or worse, refusing to buy further U.S. Treasury bonds to pay off our gigantic budget deficits. Already, China has announced an “anti-dumping” investigation into U.S. sales of chicken and automotive parts.

Regardless of the fact that Chinese tires coming to the U.S. make up a very small fraction of total Chinese exports, the Obama administration will make a grave mistake if it tries to pursue an agenda of economic recovery and trade protectionism simultaneously. Doing so will hurt investor confidence in U.S. markets, and damage relations between the world’s first and third largest economies. Politically, an administration hostile to trade will send the Democratic leadership in Congress a message to keep stalling two vital free trade agreements that are waiting in the docket; Panama and Colombia.

President Obama and Yang Jiechi

Another blow to economic recovery would be allowing passage of the deceivingly-named “Employee Free Choice Act (EFCA)” a labor-backed bill which would slant the rules of union organizing away from workers and towards union bosses. The bill easily passed through the House of Representatives, but has stalled in the Senate where moderate Democrats have been reluctant to embrace the controversial “card check” provision, which effectively eliminates the secret ballot elections for workers when voting whether or not to form a union.

It is possible that some version of the Employee Free Choice Act will emerge soon from Senate negotiators without any card check provision, a move which would be aimed at shoring up Democratic support and possibly luring some moderate Republicans who wouldn’t mind labor’s support in future elections. Yet a provision known as “binding arbitration” would be just as damaging as card check, allowing a government-picked arbitrator from the National Labor Relations Board to set the terms of an agreement (wages, benefits, etc.) if labor and business cannot reach a frivolous deadline for doing so. Arbitrators will likely be biased against employers, forcing business owners to spend a fortune on lawyers, rather than putting resources towards doing business. This drain on business means less profit, less economic growth, and undoubtedly less middle-class jobs in America.

The cliche Hippocratic oath “First, do no harm,” couldn’t apply more to the Obama administration’s wacky move to ramp up protectionism towards China and risk starting an all-out trade war. These tariffs, accompanied by labor legislation which threatens small business at the expense of the secret ballot for workers, should be quickly dismissed as nothing more than the populist, anti-growth measures that they truly are.