Tuesday, December 29, 2009

Damage from health care reform
reaches beyond health care boundaries

Commentary By James H. Shott


Opponents of so-called health care reform believe terrible things will happen if some version of it passes and gets signed into law. Most of the damage will occur in obvious places, such as to doctors and hospitals, to those who are happy with their existing health insurance, and to everyday Americans, whose taxes and cost of living will rise.

But it will also affect areas outside health care, like private charity.

“How can reforming the health care system and health insurance industry affect charities,” you may wonder? It may seem like a weird disconnect, but it does because, like so much of what liberalism attempts in pursuit of a “perfect” society, it produces consequences that either are unforeseen, or those consequences get written off as acceptable sacrifices in order to achieve what liberals see as the greater good. So, if charities suffer in taking over the health care system, that’s okay.

During formulation of the Senate Finance Committee’s health care bill, a group including Senator Jay Rockefeller (D-WV) and John Kerry (D-MA) proposed an idea that would raise billions of dollars in additional tax revenue to help offset the enormous costs of the health care takeover by limiting the value of itemized deductions, such as donations to charity. The proposal would hold the value of charitable deductions at 35 cents on a dollar, while the top tax rate rises to more than 39 percent when the Bush tax cuts expire in 2011.

And when Senate Democrats passed their unpopular health care bill in the middle of that snowy night on a strict 60-40 party-line vote, Democrats said “Merry Christmas” to America’s poor by reducing funding for charities that assist them by billions of dollars each year.

Howard Husock, the Vice President of Policy Research and the Director of the Manhattan Institute's Social Entrepreneurship Award, explained that “when a similar proposal was advanced early this year by President Obama, the long-time head of the National Bureau of Economic Research, Martin Feldstein, estimated it would lead to a $7 billion drop in charitable giving.”

Charities have already taken a big hit, according to the Chronicle of Philanthropy, which reported that six of ten United Way chapters saw a decline in giving last year, totaling $4 billion.

Indeed, a coalition of 15 major charitable organizations that are concerned about the situation wrote a letter to Senate Finance Committee chairman Max Baucus (D-MT) stating that “charities have seen an increased demand for their services as individuals and families struggle with financial uncertainty.”

The underlying assumption of the Democrat’s scheme seems to be that “we’ve got to get money from anywhere and everywhere to offset the exorbitant costs of our health care reform, and government can do a better job of spending charitable dollars than people can.” So, to pay for its takeover of one-sixth of the private economy, the federal government now will take money the people intended for the charities they deem important, and will substitute the judgment of individual Americans with the judgment of a federal bureaucracy in deciding how the funding should be used and which charities will get funding.

In preparation for this not-yet-collected treasure, the Obama Administration has already announced the establishment of a new White House Office of Social Innovation which will make grants directly from the White House to individual non-profit organizations.

And, just as some industries jumped on the health care reform and cap-and-trade bandwagons to insure their survival against an overly aggressive government, some non-profit organizations support this idea, putting themselves in the position to attract “government money” that will enable them to survive and thrive, even as charitable donations drop by billions of dollars a year.

When government calls the shots instead of the people, those intended charitable dollars will be used to support the administration’s purposes, not the people’s purposes, and certain “preferred” organizations and causes get a subsidy. “This government-led giving contrasts sharply with the wide-ranging, sometimes quirky, but historically creative nature of American philanthropy,” Mr. Husock said.

Roberton Williams, senior fellow at the Tax Policy Center, said it's impossible to calculate the exact effects of all the tax changes, but he said the overall result is clear – less philanthropic giving. "This will lead people to give less to charities if they behave the way they've behaved in the past," he said. "We've already seen a drop in giving as a result of the economic collapse. On top of that, this will just reduce the amount of giving."

Office of Management and Budget Director Peter Orszag has noted, however, that the recovery act calls for “$100 million to support nonprofits and charities as we get through this period of economic difficulty." Do Senate Democrats and the President really think that taking more money from those citizens with the most to give to charity, and reducing charitable giving, and then replacing billions of lost donations with a few million dollars controlled by the government will have no negative implications?

Will the American people recognize that the measures President Obama and the Congress are promoting will wreck their country in time to stop them?

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