• Tag Archives Obamacare
  • We’re on the Precipice of an Economic Crisis–and Everyone Knows It’s Coming

    Writing about federal spending last week, I shared five charts illustrating how the process works and what’s causing America’s fiscal problems.

    Most importantly, I showed that the ever-increasing burden of federal spending is almost entirely the result of domestic spending increasing much faster than what would be needed to keep pace with inflation.

    And when I further sliced and diced the numbers, I showed that outlays for entitlements (programs such as Social SecurityMedicareMedicaid, and Obamacare) were the real problem.

    Let’s elaborate.

    John Cogan, writing for the Wall Street Journalsummarizes our current predicament.

    Since the end of World War II, federal tax revenue has grown 15% faster than national income—while federal spending has grown 50% faster. …all—yes, all—of the increase in federal spending relative to GDP over the past seven decades is attributable to entitlement spending. Since the late 1940s, entitlement claims on the nation’s output of goods and services have risen from less than 4% to 14%. …If you’re seeking the reason for the federal government’s chronic budget deficits and crushing national debt, look no further than entitlement programs. …entitlement spending accounts for nearly two-thirds of federal spending. …What about the future? Social Security and Medicare expenditures are accelerating now that baby boomers have begun to collect their government-financed retirement and health-care benefits. If left unchecked, these programs will push government spending to levels never seen during peacetime. Financing this spending will require either record levels of taxation or debt.

    Here’s a chart from his column. Only instead of looking at inflation-adjusted growth of past spending, he looks at what will happen to future entitlement spending, measured as a share of economic output.

    And he concludes with a very dismal point.

    …restraint is not possible without presidential leadership. Unfortunately, President Trump has failed to step up.

    I largely agree. Trump has nominally endorsed some reforms, but the White House hasn’t expended the slightest bit of effort to fix any of the entitlement programs.

    Now let’s see what another expert has to say on the topic. Brian Riedl of the Manhattan Institute paints a rather gloomy picture in an article for National Review.

    …the $82 trillion avalanche of Social Security and Medicare deficits that will come over the next three decades elicits a collective shrug. Future historians—and taxpayers—are unlikely to forgive our casual indifference to what has been called “the most predictable economic crisis in history.” …Between 2008 and 2030, 74 million Americans born between 1946 and 1964—or 10,000 per day—will retire into Social Security and Medicare. And despite trust-fund accounting games, all spending will be financed by current taxpayers. That was all right in 1960, when five workers supported each retiree. The ratio has since fallen below three-to-one today, on its way to two-to-one by the 2030s. …These demographic challenges are worsened by rising health-care costs and repeated benefit expansions from Congress. Today’s typical retiring couple has paid $140,000 into Medicare and will receive $420,000 in benefits (in net present value)… Most Social Security recipients also come out ahead. In other words, seniors are not merely getting back what they paid in. …the spending avalanche has already begun. Since 2008—when the first Baby Boomers qualified for early retirement—Social Security and Medicare have accounted for 72 percent of all inflation-adjusted federal-spending growth (with other health entitlements responsible for the rest). …

    Brian speculates on what will happen if politicians kick the can down the road.

    …something has to give. Will it be responsible policy changes now, or a Greek-style crisis of debt and taxes later? …Restructuring cannot wait. Every year of delay sees 4 million more Baby Boomers retire and get locked into benefits that will be difficult to alter… Unless Washington reins in Social Security and Medicare, no tax cuts can be sustained over the long run. Ultimately, the math always wins. …Frédéric Bastiat long ago observed that “government is the great fiction through which everybody endeavors to live at the expense of everybody else.” Reality will soon fall like an anvil on Generation X and Millennials, as they find themselves on the wrong side of the largest intergenerational wealth transfer in world history.

    Not exactly a cause for optimism!

    Last but not least, Charles Hughes writes on the looming entitlement crisis for E21.

    Medicare and Social Security already account for roughly two-fifths of all federal outlays, and they will account for a growing share of the federal budget over the coming decade. …Entitlement spending growth is a major reason that budget deficits are projected to surge over the next decade. …The unsustainable nature of these programs mean that some reforms will have to be implemented: the only questions are when and what kind of changes will be made. The longer these reforms are put off, the inevitable changes will by necessity be larger and more abrupt. …Without real reform, the important task of placing entitlement programs back on a sustainable trajectory will be left for later generations—at which point the country will be farther down this unsustainable path.

    By the way, it’s not just libertarians and conservatives who recognize there is a problem.

    There have been several proposals from centrists and bipartisan groups to address the problem, such as the Simpson-Bowles plan, the Debt Reduction Task Force, and Obama’s Fiscal Commission.

    For what it’s worth, I’m not a big fan of these initiatives since they include big tax increases. And oftentimes, they even propose the wrong kind of entitlement reform.

    Heck, even folks on the left recognize there’s a problem. Paul Krugman correctly notes that America is facing a massive demographic shift that will lead to much higher levels of spending. And he admits that entitlement spending is driving the budget further into the red. That’s a welcome acknowledgment of reality.

    Sadly, he concludes that we should somehow fix this spending problem with tax hikes.

    That hasn’t worked for Europe, though, so it’s silly to think that same tax-and-spend approach will work for the United States.

    I’ll close by also offering some friendly criticism of conservatives and libertarians. If you read what Cogan, Riedl, and Hughes wrote, they all stated that entitlement programs were a problem in part because they would produce rising levels of red ink.

    It’s certainly true that deficits and debt will increase in the absence of genuine entitlement reform, but what irks me about this rhetoric is that a focus on red ink might lead some people to conclude that rising levels of entitlements somehow wouldn’t be a problem if matched by big tax hikes.

    Wrong. Tax-financed spending diverts resources from the private economy, just as debt-financed spending diverts resources from the private economy.

    In other words, the real problem is spending, not how it’s financed.

    I’m almost tempted to give all of them the Bob Dole Award.

    P.S. For more on America’s built-in entitlement crisis, click hereherehere, and here.

    Reprinted from International Liberty.

    Daniel J. Mitchell

    Daniel J. Mitchell is a Washington-based economist who specializes in fiscal policy, particularly tax reform, international tax competition, and the economic burden of government spending. He also serves on the editorial board of the Cayman Financial Review.

    This article was originally published on FEE.org. Read the original article.

  • Single-Payer Health Care Would Be Even Worse than Obamacare

    The late, great Nobel laureate economist Milton Friedman said it best: “There’s no such thing as a free lunch.”

    Friedman’s pithy proverb reminds us that there is also no “free health care.” It’s a timely reminder, as Sen. Bernie Sanders, I-Vt., is making a public push for his “Medicare for All” bill.

    While liberals have long advocated “single-payer” systems for health care, what’s new this time is that they are coalescing around a plan. Sixteen Senate Democrats are co-sponsoring Sanders’ bill, and 120 Democrats in the House have signed on to a similar approach.

    Free Care?

    This latest push for “single-payer” features the provision of “free health care” at the point of service from doctors, hospitals, and all other medical institutions.

    The Sanders bill provides a comprehensive set of medical benefits and services, combined with “first dollar” coverage and outlaws all patient “cost-sharing,” meaning no deductibles, no co-insurance, no copayments of any kind. Zero.

    Sounds great, right? Well, P.J. O’Rourke, a prominent political humorist, improves on Friedman: “If you think health care is expensive now, wait until you see what it costs when it’s free.”

    Make no mistake: If Americans were ever foolish enough to take Sanders’ “single-payer” prescription, they would suffer a fiscal fever the likes of which they have never even imagined.

    Last year, two separate analyses – one from the Urban Institute and another from professor Kenneth Thorpe at Emory University – outlined in dreadful detail the fiscal consequences of Sanders’ 2016 proposal.

    Though the analysts differed on their assumptions and calculated conclusions based on different models, they both came to the same conclusion: The Sanders “single-payer” bill is going to cost the American people far more than the senator and his academic and congressional allies claim, and the taxes to finance this massive enterprise are going to be huge.

    Last year, Sanders estimated that over 10 years (2017 to 2026), new federal spending for his “Medicare for All” proposal would amount to $13.8 trillion.

    By getting rid of all private insurance, including the unnecessary marketing and administrative costs and simplifying the system by junking today’s public-private mélange of payment and delivery, ordinary Americans would see big savings compared to their current health care spending.

    Well, not quite. Thorpe, a former policy adviser to President Bill Clinton, projected that the full, 10-year cost of the plan would be $24.7 trillion.

    Scholars at the Urban Institute, a prominent liberal think tank, estimated a stunning 10-year cost of $32 trillion. According to the Urban analysts, the Sanders plan would come up $16.6 trillion short of the revenues necessary to fully pay for it. Socialism is expensive.

    ‘Feeling the Bern?’

    While the Urban analysts did not model the tax impact of Sanders’ 2016 proposal, Thorpe did. He concluded that the senator’s 6.2 percent payroll tax, plus a 2.2 percent income-based premium tax, plus a whole series of special taxes on investments, dividends, “wealth,” and the hated “rich,” would not be sufficient to pay for the program.

    There are just not enough rich people to pay for socialized medicine.

    Taxes would have to be higher – much higher. So Thorpe concluded that to fully finance Sanders’ plan, as the senator outlined it in 2016, would require a combination of higher payroll and income-based premium taxes, amounting to a 20 percent tax on income.

    As for the promised savings for ordinary Americans? Forget it. Taxes on working families would be substantial.

    To fully fund Sanders’ single-payer plan, Thorpe estimated, 71 percent of working families would end up paying more than what they pay now under current law.

    Loss of Freedom

    There are other costs beyond the dollars and cents. As we have noted in a recent Heritage Foundation analysis of Sanders’ updated version of his bill, Americans would lose big chunks of their personal and economic freedom.

    Recall that when former President Barack Obama was campaigning relentlessly for Obamacare, he promised – falsely – that, “If you like you like your health plan, you will be able to keep your health plan.”

    In fact, under Obamacare, you never really had the freedom to keep what you liked. In 2013, on the eve of the very first year of Obamacare’s full implementation, 4.7 million health insurance policies were canceled across 30 states, whether enrollees liked them or not.

    Over the last three years, Obamacare’s health insurance costs exploded while personal choice and market competition collapsed. By 2016, Americans in 70 percent of U.S. counties were left with only one or two options.

    Sanders and his 16 Senate Democratic colleagues deserve applause for their refreshing honesty. They make no pretense whatsoever that you can keep your health plan, regardless of your personal wants, needs, or preferences. You don’t count.

    Under the Sanders bill, almost all private health insurance would be outlawed, including your employment-based health coverage. Today, nearly 60 percent of working-age Americans get their health insurance through private, employer-based plans.

    Likewise, persons enrolled in existing government health programs – Medicare, Medicaid, and the Children’s Health Insurance Program – would be absorbed into the new government health plan.

    The Sanders bill not only abolishes private plans in the Obamacare exchanges, but kills off the popular and successful Federal Employees Health Benefits Program, which provides benefits to over 8 million current and former federal employees. For military dependents, Tricare would also be gone.

    Curiously, the scandal-ridden Veterans Administration program and the troubled Indian Health Services would remain. Of course, both are ideologically correct: They are “single-payer” systems.

    The Sanders bill would concentrate enormous power in the health and human services secretary, far beyond the already expansive administrative discretion that the secretary exercises today under Obamacare.

    The secretary’s power would extend to the establishment of a national health care budget for all health care spending, provider payment, standards for provider participation, and the quality of care delivery.

    Taxpayer funding of abortion, among other things, would be compulsory, and, at least from the language of the text, it appears that there would be no traditional conscience protections for doctors and patients opposed to unethical or immoral medical procedures.

    The bill would allow for very limited private contracting between doctors and patients for medical care outside of the government system.

    If a doctor and a patient wanted to contract privately for medical services, the doctor would have to give up treating all other patients enrolled in the government health plan and receiving reimbursement from the government for one full year.

    Curiously, such an absurd restriction on personal freedom does not even exist in Britain’s National Health Service, the granddaddy of socialized medicine, where doctors freely practice in both the government program and the private sector.

    Sanders and his colleagues have outlined a clear direction for America’s health policy: a government monopoly with centralized power over American health care financing and delivery; a massive increase in federal spending combined with promised savings that will not materialize; enormous tax increases that will reach deep down into the working class; new restrictions on personal and economic freedom; and, for patients who want or need something new and better, virtually no avenue of escape.

    Sanders and his colleagues have put their vision – profoundly authoritarian – into legislative form. It is touted in the media and elsewhere as a viable alternative only in the wake of the Senate Republicans’ monumental failure to come together and enact an alternative to Obamacare.

    Sen. John Barrasso, R-Wyo., recently asked the Congressional Budget Office to score the cost of the latest version of Sanders’ plan.

    Meanwhile, the president and the Congress should explain to the American people how a patient-centered, market-based set of reforms will reduce health insurance costs, improve access to quality care, and expand their personal freedom.

    In short, they should outline their vision – and fight for it.

    Reprinted from the Daily Signal.

    Robert E. Moffit

    Robert E. Moffit, a seasoned veteran of more than three decades in Washington policymaking, is a senior fellow in The Heritage Foundation’s Center for Health Policy Studies. Read his research.

    This article was originally published on FEE.org. Read the original article.