CBO Releases Findings: Obamacare Will Lead to Increased Costs and Decreased Access.

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 by Sally Pipes -8/6/2012

The Congressional Budget Office (CBO) just rendered its latest opinion on the cost of Obamacare following the Supreme Court’s decision to uphold most of the law back in June.

The numbers aren’t pretty. Despite breathless media reports of additional “savings,” the government’s bean counters actually exposed several flaws in the law that will, in the long term, lead to higher costs and reduced access to insurance coverage.

The High Court upheld the contentious individual mandate on the grounds that it is constitutional under Congress’s power to tax but allowed states to opt out of Obamacare’s order that they expand Medicaid, the joint federal-state health insurance program for low-income Americans.

The law requires states to offer Medicaid to everyone making less than 138 percent of the poverty line — just over $30,000 for a family of four. In exchange, the federal government covers the cost of the expansion for the first three years — and 90 percent thereafter.

Sounds like a great deal for the states. But the administrative expenses involved in expanding the program will increase Medicaid costs for most states — even during the period when the government foots the bill, according to a new survey conducted by the Government Accountability Office.

Further, the federal “gifts” are only for the “newly eligible.” States would still have to pay for their share of the cost of coverage for those who were eligible for Medicaid before the passage of Obamacare but hadn’t enrolled. An estimated 14 million people fall into this category.

Thanks to the individual mandate, many of these previously eligible people will come “out of the woodwork” to sign up for Medicaid and comply with the law. That would add billions of dollars to already strained state budgets.

It’s this “woodwork effect” that scares states most. And it’s why several states have opted out of the expansion.

Texas Governor Rick Perry says he won’t be party to “bankrupting my state in direct contradiction to our Constitution.” Indeed, Texas would face $27 billion in additional costs through 2023.

Even a number of Democratic governors — in Delaware, North Carolina, Missouri, Kentucky, Montana, and West Virginia — have not yet decided whether to expand Medicaid in line with Obamcare’s dictates.

Virginia Governor Bob McDonnell has said that his state “simply cannot afford this expansion.” The Old Dominion would have to add 400,000 people to its Medicaid rolls.

If Virginia — which recently announced a $129 million surplus — can’t afford it, then how can states with huge deficits, like New York ($982 million) or Illinois ($43.8 billion)?

The rising number of states saying, “Thanks, but no thanks,” to Obamacare’s Medicaid money led the CBO to revise its estimate of the law’s costs. The agency estimates that the opt-outs will reduce federal spending by $289 billion.

Some of the folks that would have been eligible for Medicaid will seek coverage in the exchanges — where it’s 50 percent more expensive than under Medicaid. As a result, federal spending on subsidies for the exchanges will rise by $215 billion.

But only a third of those eligible for Medicaid under Obamacare’s intended expansion of the program will qualify for subsidies on the exchanges. The remaining two-thirds have incomes that are too low, according to the law.

That puts the Obama Administration in the uncomfortable position of subsidizing health coverage for the middle class — while leaving those with lower incomes to fend for themselves.

All told, the Supreme Court decision makes Obamacare $84 billion cheaper — a paltry 7 percent of the law’s total cost. Six million fewer people will be enrolled in Medicaid, and three million more will hit the exchanges. The three million remaining will be added to the uninsured rolls.

Obamacare’s champions have touted its efforts to expand access to health coverage, particularly for those at the bottom of the economic ladder.

The CBO report shows instead that the law subsidizes the health care of the middle class at the expense of those who are poorer — and spends a trillion dollars to do so. That sure doesn’t sound like the answer to our nation’s healthcare woes.

http://www.forbes.com/sites/sallypipes/2012/08/06/the-cbo-just-rendered-its-verdict-on-the-cost-of-obamacare-and-it-isnt-pretty/ 

The Role of Government

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The following is my post on The Political Insiders Report today:

“Sometimes you fall off of the ladder…there is a safety net there…liberals tend to believe that the safety net is a hammock, so you can stay there the rest of your life,” Rep. Allen West

It’s hard for me to find fault with the folks taking advantage of the government hammock. Whether it’s the generations of families living off of welfare, capable persons drawing unemployment longer than they need, or the wealthy taking advantage of tax loopholes; it is entirely legal, and human nature after all. The true fault lies with those who make it possible to live at other’s expense. Those who savor the “slavery” of making voters completely dependent for their basic needs because it equates to guaranteed votes.

What is the proper role of government? 

Objectivists believe the only role of government is to protect its citizens. A police to protect from criminals, an army to protect from foreign invasion, and courts to protect property and contracts from breach or fraud. However, altruists believe the role extends to caring for those citizens who aren’t capable of caring for themselves. This noble view pervades most of American politics today.

The structure of philanthropy in government.

Two primary beliefs exist on how to go about helpingAmerica’s needy. One side believes in charity while the other in a redistribution of wealth often to fund entitlement programs. The two contrast each other.

As Davies and Antolin state in Friday’s Wall Street Journal, “Charity can only be charity when it is voluntary. Coerced acts, no matter how beneficial or well-intentioned, cannot be moral. If we force people to give to the poor, we have stripped away the moral component, reducing charity to mere income redistribution.”

Certainly, redistributing wealth to the needy in the form of entitlements is an effective form of philanthropy, but what happens when the government runs out of wealth to redistribute?  This belief system eventually leads to a nation of poverty.  There is an inherit danger in viewing wealth as a finite resource that must be shared.  The “trickle down” philosophy is accurate.  Just as wealth can be and is created, so too can it be destroyed.  Progressive taxation aimed at redistributing wealth to the needy is well intentioned, but eventually succeeds only in destroying wealth and creating poverty.

The private sector does not flourish under high taxation.  As Sen. Marco Rubio stated, “I have never met a job creator who told me that they were waiting for the next tax increase before they started growing their business.” And as goes the private sector, so goes the economy. As is evident, the needy suffer more under a poor economy. Unemployment is up, and with it the need for more welfare. Food stamp rolls have met record highs as has “real unemployment”.

The creation of wealth is vital to caring for our needy. As former Omaha Mayor Hal Daub stated, “You need wealth to have charity.” Economic policies that lead to wealth creation, combined with social policies encouraging charitable giving through tax credits not only lead to more effective social assistance, but guarantee the sustainability of that assistance. They do so while respecting the potential of the individual and encouraging the pursuit of life, liberty and happiness.

While entitlement programs destroy personal accountability and breed generations of dependence, charities encourage and motivate the individual to strive to reach their full potential rather than enabling dependence. They provide a true safety net for America’s needy.

Catholicism and the Poor

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Acts coerced by government, no matter how beneficial or well-intentioned, cannot be moral.

By: ANTONY DAVIES AND KRISTINA ANTOLIN - August 17, 2012

Someone is twisting the Catholic Church's teachings on caring for the poor, but it isn't Paul Ryan. His controversial budgetary ideas demonstrate that he has a better grasp of Catholic social thought than do many of the American Catholic bishops.

The culmination of centuries of theological and philosophical thought, the church's teachings cannot simply be satisfied by a government edict to "feed the poor." Commanding "Let there be light!" works fine for God, but for mortal beings, edicts don't carry the same punch.

The U.S. Conference of Catholic Bishops has long supported government interference in the economy as a means to help the poor. But we suspect the bishops haven't fully thought this through: If God really did favor a top-down approach to poverty reduction, why wouldn't He establish a government with the power to wipe away poverty on demand instead of leaving things to chance and the possibility that someone like Mr. Ryan would come along and mess up His plans?

Perhaps we dehumanize the poor when we treat them as nothing more than problems to be solved, and we dehumanize the rich when we treat them as wallets to be picked.

Wealth and poverty are catalysts for bringing the rich and the poor together in community, and community is the hallmark of the church's mission on Earth. Government is not community. Government is one of community's tools, a coercive one we use when it is necessary to force people to behave in ways they would not otherwise behave voluntarily.

But that word—voluntarily—is key, and it's where Mr. Ryan's religious detractors go awry: Charity can only be charity when it is voluntary. Coerced acts, no matter how beneficial or well-intentioned, cannot be moral. If we force people to give to the poor, we have stripped away the moral component, reducing charity to mere income redistribution. And if one really is as good as the other, the Soviets demonstrated long ago that it can be done far more efficiently without the trappings of church and religion.

All people have the moral obligation to care for those who are less fortunate. But replacing morality with legality is the first step in replacing church, religion and conscience with government, politics and majority vote. Coercing people to feed the poor simply substitutes moral poverty for material poverty.

The bishops dance with the devil when they invite government to use its coercive power on their behalf, and there's no clearer example than the Affordable Care Act. They happily joined their moral authority to the government's legal authority by supporting mandatory health insurance. They should not have been surprised when the government used its reinforced power to require Catholic institutions to pay for insurance plans that cover abortions and birth control.

To paraphrase J.R.R. Tolkien (a devoted Catholic), the government does not share power. Paul Ryan knows this. The bishops would be wise to listen to him.

Mr. Davies is professor of economics at Duquesne University. Ms. Antolin is a Catholic theologian.
 http://online.wsj.com/article/SB10000872396390444375104577592892933747400.html 

Mutiny Planned at GOP Convention Over Rules Changes

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I wonder how many votes this will cost the GOP in November?! What should have been a positive convention that garnered a national spotlight and the opportunity to pick up lots of new votes is turning into anything but. I've been saying for quite some time now...it's time to come together!!! Paul should be speaking for the Ron Paulers, Palin should be speaking for the Tea Party, Herman Cain should be speaking, Col. Allen West should be speaking! Imagine the votes the GOP could have secured. This just doesn't seem very strategic to me. Giving up this election to shield the party from Ron Paulers in the future?

Texas delegates planning floor mutiny over RNC rules changes

By Liz Goodwin - 8/27/2012

TAMPA--On Monday morning, at a meeting of more than 100 Texan delegates and alternates at the Saddlebrook Resort 20 miles north of Tampa, one topic got the crowd more fired up than any other. Delegate Melinda Fredricks read aloud a letter condemning recent changes to the national Republican party's rules that would allow the GOP presidential candidate to veto and replace state delegates.
"Our delegates are in shock that such an amendment even would be presented before the Rules Committee much less passed into rule," Fredricks said. "Please know from the Texas delegation standpoint that the only way a floor fight can be avoided is for this rule to be stricken."
At that point, the entire Texas delegation stood up and applauded.
Texans don't necessarily want to have an ugly floor fight on the same day the party officially nominates Mitt Romney. But they're willing to do it if their concerns about the rule aren't satisfied. The changes, which Mitt Romney's top lawyer put forward last week and Gov. Haley Barbour along with some other Romney supporters have embraced, are seen by opponents as intended to significantly weaken the power of grassroots politics and insurgent candidates such as Ron Paul. Many against the move worry that it would give national candidates the power to replace delegates--often grassroots party faithfuls--with big-time donors or friends.
"We truly consider that an infringement on our rights," Fredricks, a member of the rules committee, told Yahoo News of the changes. Today, states generally choose their delegates at state conventions, and then those individuals travel to the national convention to cast their vote for a candidate based on the share the candidate won of the primary or caucus vote of each state. But, the changes could allow a candidate such as Mitt Romney to boot out any delegates who are assigned to vote for him and replace them.
While opposition to the rules began with Ron Paul supporters, it has spread to the entire Texas delegation and significant portions of those from South Carolina, Colorado, Virginia and Louisiana too. Mitt Romney's campaign lawyer Ben Ginsberg proposed the rule last week, but even some Romney supporters are staunchly opposed to the changes. Indiana delegate and Romney supporter James Bopp wrote in an email to RNC members that it's "the biggest power grab in the history of the Republican Party." Fredricks, a Romney supporter, says only 30 people of the more than 300 Texan alternates and delegates support Ron Paul, yet the delegation is "united" in its opposition to the rule.
At 2pm on Tuesday, the Rules Committee members will debate whether the new rule should be struck down. Fredericks thinks she has the 29 members necessary to start a debate about the change, and is hopeful she can resolve the issue before the committee adjourns and joins the larger convention floor.

"We like to fight behind closed doors...Most of us are reluctant to do a floor flight," Fredricks said.
RNC Chairman Reince Priebus told Salon Monday that he does not expect a floor fight, though he did not explain why.

Paulites are among the staunchest opponents of the new rule. It would prevent insurgent candidates such as Paul from raking up delegate votes in caucus states where party conventions instead of the statewide vote determine how many delegates are awarded. ABC's Chris Good points out that Paul would not have won a plurality of delegates in four states if this rule had been in effect during this primary.

Paul supporter Karen Skrill, an alternate delegate from Vermont, said she and her husband Stewart, a delegate, are upset about the changed rules.
"If this is how it's going to be, I don't want to be a Republican," Skrill told Yahoo News in a discussion on the floor Monday. The Skrills are retired farmers.
"Texas in general doesn't believe the national level should be picking delegates," added Jon Burgin, an alternate delegate from San Antonio who supports Paul. "It's pretty egregious."
http://news.yahoo.com/blogs/ticket/texas-delegates-planning-floor-mutiny-over-rnc-rules-225837647.html 
The following is a copy of the statement that was read in regard to the rule changes:

"We strongly oppose recently proposed changes to the party rules which would give the Republican National Committee unprecedented centralized authority over the presidential nomination process, overriding the autonomy of the states and their long established electoral traditions. We also object strenuously to new rules which would empower the Republican National Committee to change the rules under which it operates between conventions without approval of the body of delegates representing the party membership. These proposed rule changes are tyrannical, contrary to the principles of republican governance and hostile to the interests of the grassroots of the party. Together they constitute an attempt to shift the power in the party from the state parties and their members to an elite establishment which answers primarily to special interests and powerful politicians, a corruption of our party which we believe all true Republicans will find unacceptable."

Issued 8/27/2012

In U.S., Private Schools Get Top Marks for Educating Children

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Public schools score lowest in terms of perceived education quality

by Jeffrey M. Jones - August 29, 2012
Seventy-eight percent of Americans say children educated in private schools receive an excellent or good education, more than say that about four other types of U.S. schooling. At least 6 in 10 say parochial schools or charter schools provide a quality education, while far fewer say that about home schooling or public schools.

These results are based on Gallup's annual Work and Education poll, conducted Aug. 9-12. For the first time Gallup asked Americans to rate -- based on what they have heard or their own experiences -- the quality of education U.S. children receive in various schooling situations.

Public schools get a relatively poor rating, even though the vast majority of American children are educated in public schools. The poll finds 83% of parents with children in grades kindergarten through 12 saying their oldest child attends public school, compared with 9% who say private school, 4% home school, and 2% parochial school. The poll did not assess the percentage of children attending charter schools, a relatively new type of school.

Parents of school-aged children generally rank the various school types in the same order, although they are somewhat more positive about the quality of public school education -- 47% say it is excellent or good -- than the broader adult population (37%).


Democrats More Upbeat About Public Schools

There are political differences in how respondents rate the quality of certain types of schooling, with Republicans much more positive about home schooling and, to a lesser extent, parochial schools, than are Democrats. In turn, Democrats are more positive about public schools than are Republicans.


The net result of these differences is that Democrats are slightly more positive about the educational quality of public schools than of home schooling. However, Democrats still view private, parochial, and charter schools as providing better education than public schools.

Americans' Continue to Be Dissatisfied With K-12 Schooling in U.S.

The relatively low rating for public schools is likely an extension of Americans' broader dissatisfaction with kindergarten through grade 12 education in the United States. The Aug. 9-12 poll finds 44% of Americans saying they are satisfied with the quality of education U.S. students receive; 53% are dissatisfied. Only once in the 13-year history of this question, in 2004, have more Americans been satisfied than dissatisfied.


But American parents are always far more positive when asked to rate their own child's school -- with 75% this year saying they are satisfied. Seventy-five percent of public school parents are also satisfied with their child's schooling.


The percentage satisfied with their own child's education has never been lower than 68% since 1999, compared with a maximum satisfaction level of 53% for U.S. education more generally.

Implications

Americans are much more inclined to believe students in private, parochial, or charter schools receive a high-quality education than to say this about students in public schools and those who are home schooled. Americans in general are not highly satisfied with the state of public schooling in the United States, although that is probably not a commentary on their own child's school and schools in their local area because Americans have historically been quite satisfied with each of those. Rather, Americans may just have a general sense that U.S. public education is not where it needs to be, perhaps due to news media reports that American students lag behind students in other countries in basic academic skills.


Survey Methods
Results for this Gallup poll are based on telephone interviews conducted Aug. 9-12, 2012, with a random sample of 1,012 adults, aged 18 and older, living in all 50 U.S. states and the District of Columbia.

For results based on the total sample of national adults, one can say with 95% confidence that the maximum margin of sampling error is ±4 percentage points.

For results based on the total sample of 236 parents with children in grades kindergarten through 12, one can say with 95% confidence that the maximum margin of sampling error is ±8 percentage points.

Interviews are conducted with respondents on landline telephones and cellular phones, with interviews conducted in Spanish for respondents who are primarily Spanish-speaking. Each sample includes a minimum quota of 400 cell phone respondents and 600 landline respondents per 1,000 national adults, with additional minimum quotas among landline respondents by region. Landline telephone numbers are chosen at random among listed telephone numbers. Cell phone numbers are selected using random-digit-dial methods. Landline respondents are chosen at random within each household on the basis of which member had the most recent birthday.

Samples are weighted by gender, age, race, Hispanic ethnicity, education, region, adults in the household, and phone status (cell phone only/landline only/both, cell phone mostly, and having an unlisted landline number). Demographic weighting targets are based on the March 2011 Current Population Survey figures for the aged 18 and older non-institutionalized population living in U.S. telephone households. All reported margins of sampling error include the computed design effects for weighting and sample design.

In addition to sampling error, question wording and practical difficulties in conducting surveys can introduce error or bias into the findings of public opinion polls.

View methodology, full question results, and trend data.

For more details on Gallup's polling methodology, visit www.gallup.com.
http://www.gallup.com/poll/156974/private-schools-top-marks-educating-children.aspx?utm_source=google&utm_medium=rss&utm_campaign=syndication

Bush's agenda faces opposition from election-wary Republicans

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April 4th 2005 - The tightly disciplined, Republican-controlled Congress that gave President George W. Bush key pro- business victories in the first few months of his second term may now put political survival ahead of party unity.

Bush has outlined an aggressive agenda -- including restructuring Social Security, cutting a record budget deficit and easing immigration policies -- that he hopes will secure his legacy for posterity. His party's lawmakers have a simpler goal: winning re-election and maintaining or enlarging their House and Senate majorities in 2006.

``Bush sees himself as a consequential president in history who accomplished big things,'' says Bill McInturff, a Republican pollster. ``Most members of Congress can be very happy just strolling along saying, 'Here is all the money I delivered to my district.'''

Congressional Republicans are pushing for legislation to allow drug imports from Canada, a measure opposed by Bush and drug makers such as Pfizer Inc. and Merck & Co. Bush also faces resistance on his plan to ease immigration laws, which food- service companies such as Outback Steakhouse Inc. and Wendy's International Inc. support. And Wall Street analysts and economists hoping for measures to restrain the budget deficit are concerned that lawmakers facing re-election won't be inclined to cut spending.

``There are some great challenges,'' White House spokesman Trent Duffy says. ``This president is a big-game hunter. The process is just beginning.''

The Republicans, who gained expanded majorities in both chambers of Congress in the November elections, gave Bush some early successes this year with measures that curbed class-action lawsuits, rewrote bankruptcy laws and paved the way for oil drilling in Alaska's Arctic National Wildlife Refuge.

Easy Wins

These ``were easy wins that were left over from the last Congress,'' says Ethan Siegal, president of the Washington Exchange, which tracks policy for institutional investors. ``Everything else Bush has on the table is very difficult, and the discipline in his party is breaking apart.''

The first stirrings of dissent were heard when lawmakers took up Bush's 2006 budget, which calls for trimming federal benefits and other domestic programs while extending portions of his first-term tax cuts.

Last month, Senator Gordon Smith, an Oregon Republican, led six other Republicans in blocking Bush's plan to cut $14 billion from the Medicaid health program over five years. And when a Senate committee approved Bush's $284 billion highway bill, Senator James Inhofe of Oklahoma assured his fellow Republicans that the funding may be increased later.

Drug Imports

Republicans are also at odds with Bush's position on allowing Americans to import cheaper drugs from Canada. Senator Charles Grassley of Iowa, the powerful chairman of the Finance Committee, is pushing for legislation that would allow the imports, which Bush and drug makers oppose.

Representative Jo Ann Emerson, a Missouri Republican, says she is confident the bill allowing imports can clear the House. Lawmakers' ``constituents are saying, find any means possible to bring down the cost of drugs,'' she says.

Drug makers such as New York-based Pfizer, Whitehouse Station, New Jersey-based Merck and Madison, New Jersey-based Wyeth say the measure won't adequately address these concerns. ``We don't believe that re-importation is a solution to the problems of access and affordability of medications,'' Wyeth spokeswoman Natalie De Vane says. ``And it does pose a safety risk.''

Bush's call for a guest-worker visa program aimed at allowing migrants to fill low-skilled jobs may be the toughest to pass, because so many Republicans are opposed to it, says Bruce Josten, the head lobbyist at the U.S. Chamber of Commerce in Washington.

Opening Floodgates

Representative John Hostettler, an Indiana Republican who heads the House Judiciary Subcommittee on Immigration, said he wouldn't allow any bill easing immigration to be brought before his panel for a vote. ``It is my concern and others' concerns that if you legalize those who have illegally obtained residency here, you will open the floodgates,'' he said in an interview March 31.

The National Restaurant Association, which represents companies such as Tampa, Florida-based Outback Steakhouse and Dublin, Ohio-based Wendy's International, backs Bush's plan. The food-service industry is the largest U.S. employer of undocumented workers -- about 1.4 million of the nation's 8 million immigrants.

Second-Term Blues

These kinds of defections are common in a president's second term, particularly when his party is in power in Congress, says Stephen Wayne, a government professor at Georgetown University in Washington. In four of five second-term mid-term elections since World War II, the party that controlled the White House has lost seats in both chambers, says Jennifer Duffy, an analyst at the Cook Political Report, which tracks political races.

Most lawmakers are aware of this phenomenon, called the ``sixth-year itch,'' Duffy says, and Republicans will cast their votes on Bush's agenda items with this precedent in mind. ``It's a self-preservation issue,'' she says.

There are 15 Republican-held Senate seats on the ballot next year. In the House, where all members are up for re-election, 24 Republicans won their 2004 elections with 55 percent of the vote or less.

This dynamic is already evident in the voting behavior of Senator Rick Santorum of Pennsylvania, the No. 3 Senate Republican leader, who is expected to face a tough re-election contest in 2006 from Democrat Robert Casey Jr., the state treasurer.

Good for Pennsylvania

Santorum has parted ways with the president at least twice in the last month. He proposed a $1.10-an-hour increase to the $5.15-an-hour minimum wage, and voted in favor of an amendment to a 2006 budget plan that rejected Bush's call to cut nearly $2 billion from the Community Development Block Grant program and other economic development programs that are popular in his state.

``You're going to see him deviate on things that make sense for Pennsylvania,'' Duffy says.

Perhaps most significant for Bush's legacy, his plan to establish private Social Security accounts has failed to generate a critical mass of support. The proposal has proved unpopular in the polls, and Republican lawmakers including Representative Jim Nussle of Iowa and Representative John Mica of Florida have not made commitments to support it.

Wall Street Worries

Some Republicans share Wall Street's concern over the effect of the proposal on the budget deficit, which reached a record $412 billion last year. Any plan to create the accounts would add $1 trillion to $2 trillion to the deficit over the next 10 years, according to the Congressional Budget Office.

``The longer we continue to allow the public debt to rise, the more painful the ultimate cuts will be,'' says Lou Crandall, chief economist at Wrightson ICAP LLP, a research firm in Jersey City, New Jersey, that analyzes the effects of federal economic policies.

For many Republicans, though, concern about the deficit is mitigated by the desire to avoid the political pain that spending cuts or moderating Bush's tax cuts would entail.

During last month's Senate debate on Bush's request to extend his $1.85 trillion in tax cuts, only five Republican senators joined the chamber's 44 Democrats and one independent to demand that further reductions be offset by tax increases or spending cuts. While the Senate rejected, 50-50, an amendment to the fiscal blueprint requiring offsets, some Republicans plan to fight again this summer when party leaders advance the legislation.

Deficit cracking GOP's solidarity

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November 27th 2005 - More than a decade after the Republican Revolution, when Newt Gingrich became House speaker on the promise to downsize government, Republicans are facing another revolution.

This one is from within.

When Congress returns next month from its Thanksgiving recess, Republican leaders who have never failed to marshal their forces on big party-line votes face the prospect of defeat on tax cuts and spending restraint -- the core issues that have united the party since President Ronald Reagan and gave them their House majority in 1994.

They have lost some tax and spending votes already, and postponed others because of the specter of losing. After a five-year spending spree on everything from the Iraq war to Medicare, deficits are now jeopardizing the tax cuts that were the centerpiece of President Bush's first term.

A move to preserve tax cuts on capital gains and dividends -- the gemstone of the Bush tax cuts for conservatives -- is in trouble in both the House and the Senate. For the first time since George W. Bush took office, House Democrats are united against tax cuts, and Republican moderates are bucking their party leadership.

GOP leaders are pushing a measure to control entitlement spending by shaving Medicaid and food stamps for the poor. But the combination of investor tax cuts and reductions in poverty programs has already led to a series of embarrassing defeats in committee and on the House floor. Republicans are headed for a pre-Christmas showdown that could turn into a political disaster.

Hurricane topples plans

Hurricane Katrina last summer was a tipping point. The storm forced Republicans to ditch the estate tax repeal because it was deemed unseemly to end a wealth tax after poor people had lost their homes. Sensing a public relations disaster, Republican leaders also postponed extending the investor tax cuts until the end of the year.

Congress quickly passed $62 billion in emergency disaster relief. But Bush's promise to "do whatever it takes" to rebuild the Gulf Coast set off a rebellion among conservatives, who demanded spending cuts to pay the bill.

"I think they blinked after Hurricane Katrina," said Brad Woodhouse, a liberal activist who helped defeat Bush's Social Security overhaul and has turned his fire on the Republican budget, heading a liberal alliance called the Emergency Campaign for American Priorities.

"It was such an acknowledgment of how inappropriate these spending cuts to finance tax cuts are," Woodhouse said. "It was like blood dripping in the water for us."

The budget outlook -- and the problems facing the GOP -- promise to get much worse. Medicare's costly new prescription drug benefit, an $18 trillion unfunded liability sponsored by the White House and Republican leadership, starts in January. Just two years from now, in 2008, the enormous Baby Boom generation will begin retiring, ceasing income tax payments and starting to collect benefits, leading to a budget squeeze unprecedented in U.S. history.

"We're seeing the future," said Bruce Bartlett, a former Treasury official in the George H.W. Bush administration and tax-cut advocate. "The decisions that have been made over the last five years have resulted in the chickens coming home to roost."

Total spending increases under the current President Bush closely rival those of President Lyndon Johnson, a Democrat famous for conducting the Vietnam War while simultaneously increasing domestic spending.

Discretionary spending rose 48.5 percent in Bush's first term, according to an analysis by the libertarian Cato Institute, twice as much as in two terms under President Bill Clinton, when spending rose 21.6 percent. Adjusted for inflation, Bush has increased total spending at an annualized rate of 5.6 percent, compared with 1.5 percent under Clinton.

"It's only a matter of time before we stop talking about cutting taxes for a very long period of time and talk basically about increasing taxes," Bartlett predicted. "The end of the era of tax cutting is going to put tremendous strain on the Republican coalition, just as the end of the era of big spending put tremendous strain on the Democratic coalition" in the 1980s. "You're hearing more and more people on the Republican side talking about major losses in the congressional elections next year and about 2008 being a really, really bad year for Republicans."

In the two months since Republicans pulled their tax cut bills, the atmosphere has only gotten worse. Republicans lost two important off-year gubernatorial elections in Virginia and New Jersey. Bush's popularity has hit new lows, with the public now decidedly opposing the Iraq war. Leading GOP candidates, including Sen. Rick Santorum, a conservative member of the Senate leadership who faces a tough re-election fight in Pennsylvania, have refused to appear with Bush at campaign events.

"Republican members of Congress recognize that the president can't help them very much any more," said Cato Institute Chairman Bill Niskanen, a former Reagan administration economist. In addition, the indictment of former House Majority Leader Tom DeLay seriously weakened party discipline in the House and exposed deep divisions between fiscal conservatives and moderates.

"There is a substantial ideological split, particularly among House Republicans, on fiscal responsibility," Niskanen said. "A lot of them have gone along with a high rate of growth of spending but have done so without any enthusiasm."

As the post-Katrina conservative revolt gelled, the Republican leadership turned to Medicaid, food stamps and student loans for spending restraint. The Senate is proposing $35 billion in reductions and the House $50 billion; both chambers are also seeking between $56 billion and $59 billion in tax cuts.

Large gap to cross

There are enormous differences between the House and Senate on both measures. Reconciling them will be very difficult in the two weeks Congress has left before adjourning for Christmas.

Combined, the measures increase the deficit. The spending restraint appeased conservatives but provoked an outcry from Democrats and GOP moderates. Efforts to console moderates by dropping a measure for oil exploration in the Arctic National Wildlife Refuge and adding subsidies for home heating costs and dairy farmers have done little but stoke more controversy.

The Medicaid and food stamp cuts have attracted the most fire, and barely passed the House 217-215 before Thanksgiving, with no Democratic support. Republicans recessed before attempting to pass the tax cuts.

Much of the roughly $11 billion in cuts over five years proposed by the Senate for Medicaid, a health care program for the poor that many elderly use to pay nursing home costs, were recommended by state governors. They contend the program is becoming burdensome for the states, which must come up with money to match federal funding. Democrats have portrayed the reduction in the growth of Medicaid spending as dire, but even liberal analysts concede they are not severe. One provision would increase co-payments from $3 to $5, and another would allow elderly nursing home residents to shield $750,000 in home equity, raised from $500,000 after Republican moderates objected.

The cuts are "not awful," said Jason Furman, a former adviser to Democratic presidential candidate John Kerry now at the liberal Center for Budget and Policy Priorities.

"It's less about the magnitude and more about why should you be asking poor people to pay anything more for health care at the same time that you're giving brand-new tax cuts to the most fortunate," Furman said. "That is what is just completely wrong with this picture.

"A go-it-alone Republican strategy works when you're trying to cut taxes or increase spending, but when you're trying to make tougher choices, the only way to do it is to work together with the other party for shared sacrifice," Furman said. "Budget reality is starting to catch up with the Republican Party."

Heavy U.S. borrowing with much more on the horizon is stoking concern about a potential financial crisis. Any one of several big economic imbalances -- including looming pressures on the federal budget, the zero U.S. savings rate, the historically high trade deficit, a real estate boom that has supported consumer spending -- could provoke a sudden financial shift, economists say.

"It's not unrealistic to think that if we continue to delay -- and the Baby Boomers do start to retire as early as 2008 -- that sooner or later the lenders to this country may decide it's not the best place to park all their savings," said Maya MacGuineas, director of fiscal policy for centrist New American Foundation.

Bartlett warns of a "financial Katrina."

"It's just a matter of time before we have some kind of economic event that I think is just going to change the political situation 180 degrees and make deficit reduction the order of the day," he said. "I don't know what it will be. I just know that when you've got gasoline spilling onto the floor of your house, it doesn't really matter where the spark comes from."