Morning Must Reads -- Congress leaves a mess behind 

Wall Street Journal -- Companies Take Health-Care Charges

The sound you hear is Washington deflating.

The Easter recess (or I suppose we’re supposed to call it “Spring District Work Period”) is upon us and Congress is leaving town worn out and crabby.

The giddy thrill of tasting the forbidden fruit has faded for Democrats, and the Republicans are feeling more frustrated than ever.

Examiner colleague Susan Ferrechio, to whom I am so grateful for her insightful coverage and sheer endurance during the closing weeks of this drive to a national health plan, explains that with House approval of minor changes to the Senate bill, the nine-month legislative push to a national health plan is finally over.

But while official Washington may be decamping, everyone else is just starting to absorb what’s happened.

It’s like Democrats ordered two rounds of boilermakers for the bar in a coal camp and then left the folks behind to sort out the fist fights, clean up the mess, and, most importantly, pay the tab.

This week, the Treasury had to jack up interest rates on bonds because foreign investors became concerned about the sustainability of a country with $12 trillion in debt that managed to spend $2 trillion more.

This could be the start of the inflationary spiral we knew would begin eventually.

But we also saw the domestic reaction – companies are getting ready to exploit the parts of Obamacare they can and survive the rest.

Step one is charging off the end of a double subsidy provided to companies under the Bush Medicare prescription drug giveaway – companies got free money for retirees’ drug plans and then got to write off the outlays. Obamacare will take that money.

Hardest hit are employers in labor-intensive industries like manufacturing that provide good retirement benefits – e.g. Caterpillar and John Deere.

Other employers have already put workers on notice that their insurance premiums will rise sharply next year, perhaps the first step toward dumping high-risk workers onto taxpayer-supported plans.

Writers Kris Maher, Ellen Schultz and Bob Tita explain:

“Although the changes don't go into effect until 2013, companies say they have to take the charge to earnings now, to reflect the loss of the future tax deductions. In all, the S&P 500 companies will take a combined hit of $4.5 billion to first-quarter earnings, estimates David Zion, an analyst with Credit Suisse.”


Washington Post -- Obama readies steps to fight foreclosures, particularly for unemployed

Never in American history has unemployment been made so appealing by the government.

The old idea of stopgap unemployment insurance has turned into an ongoing welfare program for anyone who lost a job in the Panic of 2008 and its aftermath.

And now we’re going to say that the unemployed don’t have to pay their mortgages either. Most people would rather work, but just as we found before Clinton’s welfare reform, sometimes the government makes taking a job too expensive.

A new plan the president will roll out today will force banks to reset mortgage payments based on a debtor’s income. If you’re unemployed, that means you might have no payments at all.

Setting payments based on a borrower’s ability to pay rather than the size of the loan is crazy economics and a big moral hazard. So how did banks get into this mess where the president can impose such foolish rules?

The administration herded most mortgage lenders into a benign-sounding program called “Making Home Affordable” last year that offered free money to banks and borrowers that were trying to refinance onerous mortgages. Banks also volunteered because the administration warned that they could only protect them from public anger if they showed good faith.

But since the refis still mostly became foreclosures, the administration has decided that those involved are not making the right choices so the government will do the thinking for everybody.

Writers Renae Merle and Dina ElBoghdady explain:

“Banks and other lenders would have to reduce the payments to no more than 31 percent of a borrower's income, which would typically be the amount of unemployment insurance, for three to six months. In some cases, administration officials said, a lender could allow a borrower to skip payments altogether.”


Charles Krauthammer -- Obamacare's next trick: the VAT

Now that the costs of Obamism are starting to come clear, how will we pay for it all?

While we’ll see more than $500 billion in new taxes for the first decade of the president’s health plan, the deficits will so far exceed revenues that the government will have to have some new ways to get in your pocket.

The consensus among the technocratic class is that a European-style (Where else?) value added tax -- a levy applied at each step of wealth creation (when ore is sold to make the steel; when the car made from the steel is sold to the customer).

It’s a tolerable tax if imposed instead of an income tax. But it’s a crusher if imposed on top of taxing income – the feds zapping you when you make and spend is double jeopardy.

Krauthammer promises that a modest (at first) VAT will be recommended by the deficit reduction panel that’s making its recommendations after this year’s elections.

“For the politician, it has the virtue of expediency: People are used to sales taxes, and this one produces a river of revenue. Every 1 percent of VAT would yield up to $1 trillion a decade (depending on what you exclude -- if you exempt food, for example, the yield would be more like $900 billion).

It's the ultimate cash cow. Obama will need it. By introducing universal health care, he has pulled off the largest expansion of the welfare state in four decades. And the most expensive. Which is why all of the European Union has the VAT. Huge VATs. Germany: 19 percent. France and Italy: 20 percent. Most of Scandinavia: 25 percent.”


New York Ties -- Shelby Criticizes Reform Bill, Saying It Won’t End ‘Too Big to Fail’ Problem

The Dodd-Obama financial regulations will be the first order of business when members of Congress get back from the junkets and fundraisers.

Democrats are betting that they can pick off at least one Republican in the Senate and pass the plan, but will be consoled by a lot of no votes they can campaign against.

There’s much to dislike for conscientious liberals and conservatives. It rewards banks for irresponsible behavior and makes the bailout permanent. It also gives the government power to take over banks.

Sen. Richard Shelby, R-Ala., will be charged with making the case against the plan. Writer Sewell Chan passes along the argument.

“Mr. Shelby said that giving the Fed oversight over the largest and most interconnected financial companies would tarnish those firms by singling them out for scrutiny.

‘The market will view these firms as being identified by the Federal Reserve as ‘too big to fail’ and implicitly backed by the government,’ he wrote.”


Washington Post -- As U.S.-Israel rift continues, Netanyahu finds himself in a bind

The administration’s effort to embarrass Israeli Prime Minister Binyamin Netanyahu seems mostly aimed at forcing the creation of a new, more liberal government in Israel. It may be risky to get involved so intimately with another country’s politics, but hey, Obama almost sank Gordon Brown by unintentionally humiliating him. Imagine what he can do when it’s on purpose.

Writer Janine Zacharia explains:

“Some observers speculated that Netanyahu might be forced to consider bringing Kadima, the centrist party led by former foreign minister Tzipi Livni, his arch political rival, into his coalition to alleviate the tensions with the United States. But Gideon Ezra, a Kadima member, said that might not be possible because of resistance from within Netanyahu's Likud bloc: Incorporating Kadima would mean concessions such as halting construction in East Jerusalem and dismantling unauthorized settlement outposts in the West Bank, steps that Likud members oppose, Ezra said.

Others said Netanyahu would simply search for ways to buy time until the midterm U.S. elections in hopes that Obama would lose support and that more pro-Israel Republicans would be elected.”


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About The Author

Chris Stirewalt


Washington Examiner Political Editor Chris Stirewalt, who coordinates political coverage for the newspaper and in addition to writing a twice-weekly column and
regular blog posts.

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