“Is this an officer or an enlisted man?” the doctor barks at the surgical team.

“Enlisted.”

“Make the stitches bigger!”

The scene was all but replayed in January’s State of the Union address, when President Bush suggested that the way out of America’s escalating healthcare crisis was through tax breaks. Faced with a stretched and unraveling safety net—the millions of Americans who are either uninsured or underinsured—the president chose a plan that simply weaves the net a little looser.

Here’s how the president’s health insurance plan would work: Current premiums on employer-based health plans are exempt from individual income tax and payroll tax (including Social Security and Medicare taxes). Bush proposes an end to this exclusion, and he offers a tax deduction as the sweetener. Workers who purchase coverage through their employer or on their own would receive a $7,500 standard deduction for individual health insurance or a $15,000 deduction for family plans. So, for example, a worker who opts for a bare-bones, high-deductible single plan at $3,000 would receive something of a tax windfall: a deduction worth $7,500, even though he was only out $3,000 for health coverage.

The windfall deduction is the “carrot” but it pales by comparison with the “stick”: the long-term erosion of existing health plans and the continued neglect of the health insurance needs of low-income and unemployed workers. Tax deductions are only as good as the income you earn; they don’t help millions of uninsured Americans who are either out of work or employed at meager salaries.

That’s not to say the Bush plan wouldn’t be felt. It almost certainly would have a major and perhaps catastrophic effect on the millions of families that rely on health insurance benefits at work. Should anything like the Bush plan become law, expect employers to step up efforts to push all health insurance costs onto workers—this time under the banner “It’s deductible!”—or to jettison their plans altogether.

And the employees who manage to maintain coverage at work almost certainly will be facing stiffer costs. As more healthy people opt out, the “risk pool” for these plans will change. Increasingly, they will be populated by workers with an immediate need for health insurance—employees who can’t risk a bare-bones plan or afford to buy a decent plan on their own (assuming that one was even offered). With skyrocketing health prices and ever-increasing costs for traditional coverage through the job, it won’t be long before the cost of these plans exceeds the standard deduction. At that point, workers still in the plan will be paying more for extra coverage and higher taxes for the right to decent healthcare.

The administration is billing this as a tax on “Cadillac” health plans. Such descriptions ignore the fight of unions to preserve decent health benefits for workers—often at the cost of competitive increases in salary during contract negotiations. “There is indeed little evidence to suggest that only high earners consume costly plans, and there are good reasons to believe they do not,” the Economic Policy Institute writes in a recent analysis of the Bush plan. “Even blue-collar workers who have successfully bargained for benefits often pay higher premiums. What is billed as progressive may not necessarily be so.”

“Rather than undermine existing employer-provided health insurance for workers and their families,” says AFT president Edward J. McElroy, “we should move toward universal healthcare by expanding Medicare coverage to the uninsured—especially disadvantaged children.”

AFL-CIO president John Sweeney says the Bush proposal also plays a cynical generational card in a nation where two out of three Americans rely on employer-based health insurance. Younger, healthier workers would have more incentives to buy low-cost, bare-bones plans under the president’s proposal, leading to higher costs for those struggling to keep comprehensive coverage.

“Those more costly workers who remain in comprehensive plans take a double hit, since the arbitrary threshold means they’ll pay more in taxes too,” Sweeney warns, adding that we need universal health coverage to ensure that all Americans have “the security of knowing they can get affordable healthcare when they need it.”

House votes to slash student loan rates

Dozens of Republicans joined with the new Democratic majority in the U.S. House of Representatives on Jan. 17 to pass the College Student Relief Act of 2007, which will cut in half the current interest rate on subsidized undergraduate student loans. With passage of the student loan bill by a 356-71 vote, all three measures identified by the AFT as priorities during the first 100 hours of the new Congress have moved through the House.

As part of its ambitious early agenda, the House also passed an increase in the federal minimum wage and a bill that requires Medicare to negotiate with drug companies for lower prescription drug prices.

White House tries one-upmanship on Pells

The House approved its final FY 2007 spending bill, H.J. Res. 20, on Jan. 31. The appropriations measure funds most education and job training programs at FY 2006 levels but includes the first Pell Grant increase in five years—$260, or a 6 percent increase in the size of the maximum Pell Grant award. 

Not to be outdone, the White House announced the next day that it is budgeting for a bigger Pell Grant increase for its 2008 budget (but it didn’t say what programs will be cut to pay for it). In the Bush budget, the maximum award would rise by nearly 14 percent, or $550, next year, and by 33 percent, or $1,350, over the next five years. According to McElroy, touting increases in Pell Grants sounds promising, but this is a pledge the president has broken in the past.

As AFT On Campus went to press, the Senate was considering other legislation passed by the House as part of a Democratic agenda to get key legislation passed at the beginning of a new Congress. That legislation included the College Student Relief Act of 2007, the bill that increases the federal minimum wage and the bill that requires Medicare to negotiate with drug companies for lower prescription drug prices. All of these measures attracted substantial Republican support—and hundreds of AFT e-Activists contacted their members of Congress to urge their support.

Tuition tax break benefit is saved

The minimum wage bill being considered in the Senate nearly had a poison pill attached in the form of an amendment proposed by Sen. John Kyl (R-Ariz.). The amendment would have required college employees and their children to pay federal income taxes on tuition reductions they receive as a benefit from their institutions. Kyl wanted the tax revenue as a means to provide tax breaks for small businesses.