Who's she kidding?

LITTLE ROCK — IT'S NO SECRET that economic illiteracy is widespread in this country, but it's particularly dangerous in high places, like the Senate of the United States. It also explains why someone like the senior senator from Arkansas can't be taken seriously when she proposes to help consumers by cutting the tax deduction that health insurance companies can take on their executives' salaries. Those companies can now deduct up to a million dollars a year of each executive's salary; the senator would cut the deduction allowed in half-to $500,000. She calls this making the insurance companies share responsibility for the costs of health care.

Oh, please. Her proposal just amounts to a higher tax on the insurance companies. And, like other businesses facing higher taxes, they may simply pass the higher cost of doing business on to the customer. Especially if the customer has no choice but to buy health insurance. And under the latest health-care bills making their way through the Senate Finance Committee, just about everybody would have to buy health insurance. Result: The government's tax revenue increases, the insurance company can continue to pay its executive a million a year, and the cost is simply passed on to the American consumer. That way, we all get to pay more for our insurance. Thank you, senator.

How does Senator Lincoln make her case for higher taxes on insurance companies? "My amendment evens the playing field," she explains, "so that consumers can be assured healthinsurance executives are not receiving a personal windfall from this new insurance-coverage mandate."

Or as businessperson who's clearly disgusted with this kind of flim-flammery in Washington wrote us: "Blanche Lincoln continues to disappoint in her lack of understanding of business and economics. Her latest proposal to let insurance companies deduct no more than $500,000 of executive compensation will not do anything to reduce the cost of insurance; it will only raise more revenue for the U.S. Treasury. For example, a drug company executive who now makes $1,000,000 and continues to receive a $1,000,000 salary will not be affected; he will continue to pay the same amount of personal taxes he has always paid.

"What will be different is that the company he works for will lose the deduction on $500,000 of his compensation. This means it will pay another 35 percent in taxes on the $500,000 in compensation it can no longer deduct.This raises the company's taxes, and hence its cost of doing business by $175,000. It can raise the price of its policies or reduce the coverage it offers. Either way, it's the consumer who gets stuck. Someone who has no more basic understanding of business and economics than Blanche Lincoln really shouldn't be a U.S. Senator."

Our valued correspondent may be too harsh on the senator. She's no dummy, and surely understands just how her proposal would work out in practice. What she may be counting on is that the rest of us won't. Here was an opportunity for her to do a little populist demagoguin' as she comes up for reelection next year, and she just couldn't resist. And as long as economic illiteracy remains endemic in this country, she just might get away with it.