Jonathan Gruber, MIT professor and Affordable Care Act (ObamaCare) architect, faced the House Oversight committee earlier this week. Gruber was grilled over his comments pertaining to the passage of ObamaCare through Congress and the law’s mechanics. The professor has been caught on camera multiple times almost bragging about the deception used in engineering ObamaCare in order to circumvent the challenges presented by the “stupidity of the American voter.”
Gruber’s comments confirm most of the worst fears about ObamaCare held by its critics from the beginning, not just the fear that it had been written by someone like Jon Gruber—a man that fancies himself an intellectual yet apparently is stupid enough in his own right to pull off the heist of a century and then get caught on video confessing to it about a half-dozen times. Yet as illuminating as Gruber’s comments are about ObamaCare, one of his statements in particular offers a glimpse deep into the intellectual liberal psyche and reveals something astonishing: they know they’re wrong.
In polite political discourse, amongst family, friends, or colleagues, we may fiercely disagree with those across the aisle, however we assume that they truly believe in what they are saying and are only trying to attack society’s problems from an opposite angle shaped by a different perspective. In some of our most heated disagreements in politics, the truth is often that the debate is not between the correct and incorrect method, but instead between which is the most efficient and least efficient. Following Gruber’s comments, it may be time to throw out this assumption of innocence when dealing with the liberal political and intellectual elite.
One part of the amalgamation of economic policy mechanisms that is ObamaCare is a provision called the Cadillac Tax. This tax, which imposes a 40 percent tax on plans above a certain threshold, was designed to begin discouraging employers from issuing generous tax-free healthcare plans as employee compensation versus taxable wages. By diminishing the incentive to provide generous health benefits as compensation, a tax increase was effectively imposed on Americans with these plans. Yet that explanation was not politically feasible. Americans were not going to accept a tax increase in order to finance a bill already being met with broad skepticism and nationwide protests. Gruber thus constructed an alternate reality for the Cadillac Tax. In his own words, Gruber’s solution was, “mislabeling it, calling it a tax on insurance plans rather than a tax on people, when we know it’s a tax on people who hold these insurance plans…We just tax the insurance companies, they pass on the higher prices . . . it ends up being the same thing.”
Think about how profound that statement is for just a moment. While Gruber faced plenty of tough questions about these comments in reference to the Cadillac Tax and ObamaCare more broadly, the question that ought to have been asked pertains to another point of recent political contention: corporations and taxes.
In recent weeks, much has been made by the Obama administration and its allies about corporations using loopholes in the tax code to avoid paying the full US corporate tax rate, which is now the highest in the developed world at 35 percent. Some companies have been holding cash assets overseas; others are moving their companies’ official headquarters outside of the US altogether. President Obama has gone on the record calling these companies and their executives “unpatriotic” for refusing to “pay their fair share.” Yet economists have long argued against the corporate tax, not just because the US currently has the highest rate.
The corporate tax is widely considered the most economically destructive form of taxation. This is because corporations are simply a collection of individual people with common goals and pursuits. Thus, corporate taxation essentially amounts to double taxation on people at some level. Owners and employees of the corporations pay the tax through reduced incomes or the corporation’s customers pay the tax through higher prices for the goods and services the corporation sells. In open markets with high levels of trade, like the United States, the corporate tax puts companies at a distinct disadvantage compared to foreign firms, which can offer lower prices and more competitive employee pay. Foreign firms are also able to spend more of their corporate income on investments, which create jobs, lower costs, and perhaps result in important innovations.
It is for these reasons we see American corporations moving abroad or at least sheltering their money there. They are seeking to keep costs down in an increasingly globalized economy in order to maximize investments, hiring, innovation, and keep customer prices at a minimum. What could be more patriotic than that?
President Obama and his progressive allies would like us to think that these corporations, these groups of people, are being greedy. Yet, following the comments by Mr. Gruber, a man Obama himself admitted to having “stolen ideas from liberally”, it seems clear that the liberal intellectual elite is well aware that additional taxes on corporations are simply passed on to consumers, absorbed by reduced pay for their employees, and result in diminishing investments in the United States. All this is just to mask what effectively amounts to double-taxation. Gruber calls it, “a very clever exploitation of the lack of economic understanding of the American voter.”
I call it greedy and unpatriotic.