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Bush Health Plan: "If You're Sick, It Doesn't Help"

Wednesday, 24 Jan 2007 | 3:29 PM ET

The American middle class is under fire according to many Democrats and they say it's getting worse. As we noted earlier, Sen. Jim Webb (D-VA) said as much in his response to the president's State of the Union speech last night--when Webb said there are "two different countries" when it comes to getting benefits from a good U.S. economy. The issue of how the middle class is coping may be no more focused that in health care--as costs keep rising.

In his speech last night, President Bush offered a tax reduction plan for health care costs. We've noted that the plan calls for health insurance premium to be taxed for the first time--but the Bush plan calls creates a $15,000 (the amount spent-see below) tax deduction for families and $7,500 for singles.

But can politics be put aside and the plan be taken on its merits? Maybe. Len Berman is from the Urban-Brookings Tax Policy Center and Chris Edwards is from the Cato Institute. Both appeared on "Street Signs."

Middle Class Miss?
Discussing what Bush's tax and budget policies have done to the Middle Class, with Leonard Burman, Urban-Brookings Tax Policy Center Co-Director; Chris Edwards, Cato Institute Director of Tax Policy Studies and CNBC's Erin Burnett

Edwards says it's a fantastic plan--and that it will help the 17 million Americans that currently buy health insurance and don't get a tax break. He says it's also good for the 47 million Americans who are without any coverage. He says it creates equal treatment for all.

Berman says he likes some of the plan--but says it needs fixing. He says small businesses will probably stop offering health insurance all together. He said some will benefit but others won't--primarily people who have chronic conditions and see their premiums rise because they're sick.

Edwards--took a wide swipe at this--saying it's not right to design a health care system for people with excessive costs.

"That's the problem," says Berman. "If you're sick--it doesn't help you. People with chronic illnesses are not well served." Berman says chronic patients will not be able to afford the health care they need.

Once again--here's the breakdown of the Bush proposal: The plan would give families a tax deduction on the first $15,000 in health costs ($7,500 for singles). Anything over the $15K would be taxed as income and that money would go to giving health care coverage to the uninsured (roughly 47 million in the U.S.). The amount "available' to the uninsured would be about $4.5k for a family of four.

FYI: The middle class is said to have an average income of around $85,000 a year. Earlier today on "Squawk Box" House Majority Leader Steny Hoyer (D-MD) said the the idea for the president's plan has been put before Congress in the past and failed--and will likely fail again.

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  • Brian Sullivan is co-anchor of CNBC's "Street Signs."

  • Co-anchor of CNBC's "Street Signs," Amanda Drury is based at the network's global headquarters in Englewood Cliffs, N.J.