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Eric Cantor's Bold New Vision for America: No Medical Device Tax

His speech at the American Enterprise Institute was hardly what the press promised

Getty/Mark Wilson

Eric Cantor built up big expectations for his speech this afternoon at the American Enterprise Institute. Monday’s Wall Street Journal gave it a breathless preview under the headline, “A GOP Leader Aims to Change Party’s Message”: “Mr. Cantor plans to talk about a range of areas—from education to medical research to job training, as well as an overhaul of the tax code—in the context of how Republican ideas could benefit families across the nation, a top aide to the majority leader said.” This morning, it was Politico’s turn to give a drum roll for what it called “Cantor 4.0”: “House Republicans haven’t settled on an agenda yet, but Majority Leader Eric Cantor is ready to rebrand the party.” 

So it was with tremulous anticipation that I hurried back from lunch today in time to catch an online feed of Cantor’s big address. What grand ideas would be unveiled to get Cantor’s party out of its current rut and, more specifically, “benefit families across the nation”?  

Cutting the medical device tax. 

Ah, yes, the medical device tax. You may in fact have heard this one before. The new tax on medical devices was part of the Affordable Care Act—the thinking was that since the law would bring in so many more customers for the health care industry, each sector (insurers, hospitals, pharmaceuticals, and yes, device-makers) would kick in for part of the cost of expanding coverage. Barely had the ink dried, though, than the device industry started agitating to do away with the tax, which will raise $29 billion over 10 years. The tax, companies warn, will hinder innovation and drive business offshore. Never mind that some smaller device manufacturers I’ve spoken to scoff at this claim; the big device-makers have managed to get the ear not only of Republicans opposed to Obamacare but also Democrats from states where device-makers cluster, including Minnesota's Amy Klobuchar and Al Franken, and Elizabeth Warren of Massachusetts. Leading the charge on this push? Former Democratic Senator Evan Bayh. He’s now lobbying for the device-makers at McGuire Woods, the big D.C. firm that just happens to be Eric Cantor’s 7th biggest campaign donor. And so there was Cantor today, declaring: “President Obama’s health care law resulted in higher premiums and costs for families, and has made access to quality health care and innovation tougher. If we want to reverse this trend, we should start by choosing to repeal the new taxes that are increasing the costs of health care and health insurance, like the medical device tax.” Let me get this straight: The tax that is helping pay for vastly expanded health coverage has “made access to quality health care…tougher”? Okay.

Not much ground-breaking there. What else did Cantor propose? A quick survey (italics are direct quotes):

1. The San Francisco Public Schools adopted a funding mechanism according to what’s termed a “weighted student formula.” Under this policy, the more students a school attracts, the more money that school, its administrators and teachers receive. Low-income students are weighted heavier in the funding formula as are children with disabilities, and those learning English as a second language. So, there’s incentive for schools to seek the more vulnerable population, and reasons for schools to differentiate themselves and excel. 

Imagine if we were to try and move in this direction with federal funding. Allow the money we currently spend to actually follow individual children. Students, including those without a lot of money or those with special needs, would be able to access the best available school, not just the failing school they are assigned to. 

If Cantor is proposing that federal money follow students into whichever public or private schools they attend, as he seems to be, well, that idea’s been out there for a really long time. It’s called vouchers. If he’s suggesting simply that low-income schools get more federal money than other schools, they already do. It’s called Title I.

2. According to President Obama’s former jobs council, by 2020 there will be 1.5 million jobs without the college graduates to fill them. While there is a persistent unmet demand of 400,000 to 500,000 job openings in the health care sector alone. Recent reports indicate there are not enough applicants with the skills necessary to fill the jobs in the booming natural gas industry in America. Suppose colleges provided prospective students with reliable information on the unemployment rate and potential earnings by major. 

So colleges should be required to tell students that they’ll have a better chance getting work as physician’s assistants than as political philosophers. This will be much appreciated, I’m sure.

3. As in education policy, health care and all else, tax reform, should reflect the priorities of working families and the future they’re trying to shape for their kids. If nothing else, we must stop putting special interests ahead of our working families’ best interests.

Loopholes and gimmicks benefitting those who’ve come to know how to work the system in Washington, are no more defensible than the path of wasteful and irresponsible spending we’ve been on for decades. Working families should come first. Everyone agrees a fairer, simpler tax code would give us all more time. 

In our attempt to make the tax code simpler, we must continue to demonstrate support for young parents who invest in having kids and raising a family. They are America’s most valued investors. 

For the past five years or so, Cantor has been the chief defender of arguably the most egregious loophole of all, the “carried interest loophole” that allows private equity managers to have their compensation for investing other people’s money taxed as capital gains, not ordinary income. Not surprisingly, he has also been Congress’ top recipient of Wall Street largess in recent years. There was no mention today of the carried-interest loophole. If he’s willing to let it go, that would be fresh and new indeed. I doubt he is.

4. Under the Medicaid system the rules are set in Washington, but much of the bills are paid in our state capitals. Collectively states are spending more on Medicaid than they do on K-12 education. And states don’t have the flexibility to innovate in order to lower costs and provide better care.

As a result, in many cases, patients have been swallowed up by the system, and have become an afterthought. These programs are broken, and many patients are going without proper care. That’s not fair to the people who depend on these programs. We’ve got to fix them.

It’s true: Medicaid costs are now shared between Washington and the states, as was designed under law. But here’s the thing: under the Affordable Care Act, the federal government is going to be picking up nearly the entire cost of expanding Medicaid to 16 million people living below or just above the poverty level. It’s a great deal for the states. But that hasn’t kept many states—including Cantor’s Virginia—from so far refusing to accept the money and the expansion. It’s a bit rich to be claiming worry for the “people who depend on these programs” when you are against even letting needy people into the program.

5. There is an appropriate and necessary role for the federal government to ensure funding for basic medical research. Doing all we can to facilitate medical breakthroughs … should be a priority. We can and must do better. This includes cutting unnecessary red tape in order to speed up the availability of life saving drugs and treatments and reprioritizing existing federal research spending. Funds currently spent by the government on social science—including on politics of all things—would be better spent helping find cures to diseases.

In recent years, Republicans have repeatedly fought against higher spending on medical research—they fought against it in the stimulus package, and they are showing no qualms about letting research funding take a big hit in the impending budget “sequester.” Oh, and that nefarious spending on social science? It’s dwarfed by our spending on medical research and actually accomplishes a great deal of good.

To be fair, there was one truly new element in the speech: Cantor signaled that he could live with the core element of the American Dream Act, letting young people brought here illegally as children to stay here and apply for citizenship. But of course that is just another sign of the deliberate shift that Cantor’s party has made on the immigration issue. Other than that? It’s awfully hard to see what’s new about Cantor 4.0. True, he is no longer urging his House colleagues to use the nation’s credit rating as a threat against President Obama, as he was two years ago. And perhaps it’s a step forward for party leaders like Cantor to recognize that they are seen as out of touch with the concerns of a vast swath of middle-class voters. But a shout-out to Evan Bayh’s clients in the medical device tax industry probably isn’t going to cut it.

Follow me on Twitter @AlecMacGillis