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Bush's attempt to regain fiscal trust by vetoing SCHIP again could face some problems.

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SCHIP Round 2

Bush’s attempt to regain fiscal trust by vetoing SCHIP again could face some problems.

“Our Nation’s goal should be to move children who have no health insurance to private coverage — not to move children who already have private health insurance to government coverage.”

With those words, President Bush vetoed HR 3963, the “Children’s Health Insurance Program Reauthorization Act of 2007” also known as SCHIP, for the second time on Wednesday.

The President noted twice in his veto statement that the bill is “essentially identical” to the SCHIP bill he vetoed in October, leaving us to wonder of why House Speaker Nancy Pelosi (D-Calif.) sent such a bill back to the White House and whether she’s likely to achieve her goals.

The veto was no surprise. In a press briefing earlier the same day, White House Press Secretary Dana Perino said,“He will veto that today. This Congress failed to send the President legislation that puts children first, and instead they sent for a second time one that would allow adults onto the program, expand to higher incomes, and raise taxes. And so that’s why he’s going to veto it again.”

Just prior to the Bush veto, Pelosi’s office put out a press release saying the bill “would cover 10 million children in America at the cost of $35 billion. It was all paid for.”  Both of those assertions turn out to be highly misleading.

It is true that they propose to cover 10 million children, but SCHIP already covers over 6 million children, so the expansion actually proposes an increase of fewer than 4 million. The $35 billion number, on the other hand, represents the Democrats’ stated increase in the cost of the program not the total cost.  Some sleight of hand in the bill’s drafting removes certain payments into the system. But those will probably be restored and make the real cost much higher. 

Beyond that, it is historically implausible that a government entitlement program will not massively exceed its predicted cost.  In 1967, Medicare was predicted to cost $12 billion in 1990. The actual number was $107 billion, which ballooned to about $369 billion for FY2007.

Even assuming Pelosi’s cost estimate were correct, her claim that it “was all paid for” defies belief: it was based on a 61-cent per pack increase in the federal tobacco tax.  As the Heritage Foundation pointed out, given the expected expansion in SCHIP and the current trend away from smoking in America, “to produce the revenues that Congress needs to fund SCHIP expansion through such a tax would require 22.4 million new smokers by 2017.”

In Pelosi’s rationale in order to pay for health care, Congress needs more Americans addicted to nicotine.  And somehow creates an incentive for that increased addiction by raising its cost.  This is typical liberal thinking, if the word “thinking” is permissible in that context. 

Problems with the SCHIP bill have been well documented, including the “crowd-out” effect, meaning that anywhere from 30% to 60% of children added to the program will simply give up existing private coverage to get their “free lunch”.  We also know that some states are enrolling adults and people whose income would be decidedly middle-class, not poor. Also, the SCHIP bill may end up requiring taxpayer-funded contraception and “family planning programs” for covered children without parental consent or notification.

Pelosi says she wants to “continue the negotiations with our Republican colleagues” but clearly she believes this issue is a political winner (maybe better as an issue than as actual law)…after all, it’s for the children.  As Charlie Rangel (D-NY) put it, “Were you with the kids or were you not?”

And while Pelosi notes with some glee the “veto-proof majority” for the SCHIP expansion in the Senate (it passed 64-30, including 15 Republicans and interestingly without the votes of Senators Clinton, Dodd, McCain, or Obama), the veto is likely to be sustained in the House where fiscal conservatives seem to be realizing “it’s the spending, stupid.” 

Pelosi is going to try hard to convince 23 Republicans to change their positions which is why the House voted (by a narrower margin than the SCHIP tally) not to vote on a veto override until January 23rd, five days before President Bush delivers his final State of the Union address.

The President and those who vote to sustain his veto will have to explain why this expansion is not “for the children” but “against the taxpayer”.  Neither Mr. Bush nor House leadership has excelled in recent years in exercising or explaining fiscal conservatism, but Bush’s second veto of SCHIP shows that they may be finding those long-lost convictions. 

In the meantime, Senators whom we once considered conservative such as Orrin Hatch and ethanol subsidy king Charles Grassley will work for “a compromise by late January.”  Just as the President complained that a recent proposal for an omnibus spending bill is a “so-called compromise (which) would result in more excess spending than even the Democrats’ original budget included”, it would be nice to hope he keeps his veto pen handy for Socialized Medicine Expansion, Take 3. 

Unfortunately, as Ms. Perino said in the press conference, the President has said he could accept a proposal under which “we would expand, as he suggested, from — five years, for an extra $20 billion*; he’s willing to consider more money if that’s needed.” As if that quote didn’t bode badly enough for fiscal responsibility, if you check the footnote added to the press briefing web page, it has this tidbit: “* If enacted, the President’s SCHIP budget would spend $30 billion over five years.”  Great.  More increased spending, less principled conservatism from the Bush White House.

Written By

Ross Kaminsky has been a professional derivatives trader for over 20 years. Ross is a fellow of the Heartland Institute and writes about political economy and current events at Rossputin.com. He also contributes to blogs for the National Taxpayers Union and FreedomWorks among others.

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