Tag Archives: Budget

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Elizabeth Warren’s health care plan: how much will it cost, how much will your taxes rise?

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Elizabeth Warren seems to be the likely Democrat nominee, so it it makes sense for us to take a look at her policy proposals and count the cost. Her signature proposal is a plan to outlaw private health insurance and move everyone to government-run health care, paid for though mandatory taxation. How much will that cost, and how much will the taxes on the middle class go up in order to pay for it?

Before we go too far with that, take a look at the budget numbers. I got these from the web site of the Democrats in the House of Representatives:

The 2019 federal budget, according to House Democrats
The 2019 federal budget, according to House Democrats

According to the House Democrats budget web site, the 2019 federal budget has $3.451 trillion in revenue, $4.411 trillion in spending, for an annual deficit of $-960 billion. And keep in mind that we are $23 trillion in debt already. This would be like saying that your annual income is $34, 510. You’re spending $44, 110 per year. You are adding $9,600 to your debt every year. And you are already $230,000 in debt (and paying interest on that).

In other words, America is in no position to be spending more money. We’re already in debt, and adding to the debt each year. So how much more money would you have to spend for Elizabeth Warren’s health care plan?

For months, Sen. Elizabeth Warren (D—Mass.) has hedged on the question of whether she would raise middle class taxes to pay for Medicare for All, the single-payer health care plan she says she supports. Warren has stuck with a talking point about total costs, saying that the middle class would pay less, while critics, political rivals, and even liberal economists friendly to single payer have argued that the enormous additional government spending required by such a plan would inevitably hit the middle class.

Today, Warren released a plan to finance Medicare for All at a total price tag of nearly $52 trillion, including about $20 trillion of new government spending (an estimate that is probably low). Although her plan declares that no middle-class taxes will be necessary to finance the system, it includes what is effectively a new tax on employers that would undoubtedly hit middle-class Americans.

So , Warren admits that the total cost of her plan is $52 trillion over 10 years. Warren needs to come up with $5.2 trillion per year to pay for her plan. Is there that much money available by taxing only the wealthy?

The wealthiest Americans don’t have enough money to cover even $2 trillion in additional spending – assuming they continue to work in America as much as they did before the government took MOST of their earnings:

CRFB reinforced their prior work indicating that taxes on “the rich” could at best fund about one-third of the cost of single payer. Their proposals include $2 trillion in revenue from raising tax rates on the affluent, another $2 trillion from phasing out tax incentives for the wealthy, another $2 trillion from doubling corporate income taxes, $3 trillion from wealth taxes, and $1 trillion from taxes on financial transactions and institutions.

Several of the proposals CRFB analyzed would raise tax rates on the wealthiest households above 60 percent. At these rates, economists suggest that individuals would reduce their income and cut back on work, because they do not see the point in generating additional income if government will take 70 (or 80, or 90) cents on every additional dollar earned. While taxing “the rich” might sound publicly appealing, at a certain point it becomes a self-defeating proposition—and several proposals CRFB vetted would meet, or exceed, that point.

So, Warren is going to have to lean on the middle class for the remaining $3.2 trillion, even if the rich hold still while the government takes 70-90 percent of what they earn. (Unlikely)

Warren likes to tell everyone that her plan will make costs go down. I guess she thinks that government oversight of health care will be more efficient than private sector oversight of health care. Maybe she believes that people in government are more careful about spending taxpayer money than people in private businesses are about spending their own money? In any case, studies from centrist and center-left think tanks disagree with Warren:

Warren and her defenders will likely try to shift the discussion back to total costs, but that’s just a way of repeating the dodge that has dogged her campaign for much of the year. Warren will no doubt claim that costs would go down under her plan, but there are reasons to doubt this, including an analysis from health care economist Kenneth Thorpe finding that under a Sanders-style plan, more than 70 percent of people who currently have private insurance would see costs increase, as well as an Urban Institute analysis projecting that single-payer plans would raise national health care spending by $7 trillion over a decade.

All we have right now to weight against these studies is Warren’s own words, as a candidate wanting to win a popularity contest.

Warren herself says that there would be enormous job losses in the health care industry:

Democratic Massachusetts Sen. Elizabeth Warren admitted Wednesday that Medicare for All could result in two million lost jobs.

In an interview with New Hampshire Public Radio, the Democratic presidential contender said she concurs with a study from the University of Massachusetts-Amherst that said socialized medicine would probably have a devastating impact on the those working in the current private health care industry.

This would create similar health care shortages and waiting lists (with people dying on waiting lists) that we see in single-payer systems such as Canada and the Veteran’s Affairs health care system. Except far worse.

And keep in mind that the middle class pays for health care in Canada:

Socialized medicine in Canada anything but free. The [Fraser Institute] think-tank reported that the average Canadian family spends over $12,000 in taxes on government-funded health care.

That is how single-actually works. We need to look at how single-payer health care works in reality, and not form our opinions of it based on a candidate’s WORDS during an ELECTION CAMPAIGN. Let’s look at evidence, and not just vote for things that sound good and make us feel good and make our friends like us.

News

What will the Republican and Democrat plans for the economy mean for you?

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Pretty soon, our mandatory expenses will consume all of our tax revenues
Pretty soon, our mandatory expenses will consume all of our tax revenues

I found two very good articles about the Republican and Democrat plans for taxing and spending. On the one hand, there’s an article about the effects of the Trump tax cuts, posted at the Washington Times. On the other hand, there’s an article posted at the radically leftist Vox, about the cost of Democrat party spending plans. I wonder which one is better for you and your family?

First, let’s look at the effects of the Trump tax cuts:

Almost immediately, numerous employers — including Boeing, AT&T, FedEx, CVS, and others — began offering bonuses to their employees. Nearly 200 companies, including Walmart, announced wage hikes due to the 2017 tax cut. Still others enjoyed higher contributions to their retirement plans.

The benefits soon went beyond that, however. The tax cut contributed to the strong economy we’ve been enjoying, leading many businesses to hire more and more workers. The United States added more than 2.6 million new jobs in the year following the passage of the tax cut — nearly a 25 percent increase from the previous year.

Unemployment is way down, with jobless claims at their lowest since 1969, thanks in large part to the tax cut.

[…]The Heritage Foundation used IRS data to produce a special report last year that shows how widespread the tax benefits truly are.

They found that in 2018 taxpayers would save an average of $1,400. Even better, married couples with two children would save more than twice that: $2,917.

So, that sounds pretty good if you’re a taxpayer. You got to keep more of the money you earned, and spend it on the things you wanted for yourself and your loved ones. If that money had gone to government, then government employees would have taken half for their own salaries and benefits, and then the rest might have been spent in a wasteful way by someone who never earned it.

By the way, you might think that taking less money from the people who earn it would cause tax revenues to go down. But that’s not the case. Whenever you allow job creators and workers to keep more of what they earn, they work harder and take more risks developing better products and services. This naturally results in more revenue to the government from increased economic activity. In Feburary of 2018, after the tax cuts were in effect a whole year, federal revenues were $1.4 billion HIGHER than the previous year.

But let’s see what the Democrats can do for the taxpayer, by looking at this article in the far-left Vox.

It says:

Sanders has proposed a Social Security expansion, including higher cost-of-living adjustments and higher minimum benefit levels, that the liberal Tax Policy Center estimates will cost $188 billion over the next decade.

The Tax Policy Center also scores the Sanders “free college” proposal at $807 billion over the next decade. (Note that free college benefits students from wealthy families and those whose tuition is currently affordable.)

Next, the center estimates that Sanders’s proposal of up to 12 weeks of paid family leave for new parents and for people with serious health conditions would cost another $270 billion.

Those costs, however, pale beside the cost of replacing private insurance, including copayments, with a Medicare-for-all plan. The liberal Urban Institute estimates that Sanders’s single-payer health plan would add $32 trillion in federal costs over the decade.

[…]Ocasio-Cortez and Senate Democrats also want to guarantee a job for anyone who wants one, at $15 per hour plus benefits. The liberal Center on Budget and Policy Priorities, commissioned a report by outside scholars Darrick Hamilton, William Darity, and Mark Paul that estimates the cost of a more modest proposal along these lines (with a lower wage, for example). It suggested the cost would be $56,000 apiece for 9.7 million enrollees, for a total of $6.8 trillion over the next decade.

[…]Finally, Senate Democrats have promised $1 trillion for new infrastructure, and House Democrats are rallying around legislation to pay off all $1.4 trillion in student loan debt — both of which the far left generally supports. I will exclude vague promises such as universal pre-K and expanded special education funding.

Total cost: $42.5 trillion in new proposals over the next decade, on top of the $12.4 trillion baseline deficit.

OK, that does sound like a lot of money, but the rich are just sitting on trillions and trillions of dollars that they aren’t even using, right? So the total cost of all this spending is only $42.5 trillion of new spending and $12.4 trillion of existing spending, for  a total of about $55 trillion dollars over the next 10 years. I’m sure that if we just raised taxes by 5% on the rich, we could easily raise 10 times that amount, right?

Not quite.

In 2011, the Tax Foundation explained that even if you taxed ALL THE INCOME from all the people who make $200,000 or more, you would only raise $1.53 trillion dollars:

So taking half of the yearly income from every person making between one and ten million dollars would only decrease the nation’s debt by 1%. Even taking every last penny from every individual making more than $10 million per year would only reduce the nation’s deficit by 12 percent and the debt by 2 percent. There’s simply not enough wealth in the community of the rich to erase this country’s problems by waving some magic tax wand.

Finally, to put everything in perspective, think about what would need to be done to erase the federal deficit this year: After everyone making more than $200,000/year has paid taxes, the IRS would need to take every single penny of disposable income they have left. Such an act would raise approximately $1.53 trillion. It may be economically ruinous, but at least this proposal would actually solve the problem.

Now, if I were a rich person making over $200,000 a year, and someone came along and told me they would take all of it, I would not continue to work. And I doubt they would either. But taking all this money from “the rich” would just barely cover the BASELINE deficit of $12.4 trillion over the next 10 years. It would not cover the new $42.5 trillion of Democrat spending plans.

Think about that. What that means is that can’t pay for their spending even if they take every penny from “the rich”. Do you know what that means? It means they’re going to have to take money from YOU, the ordinary middle class American taxpayer. Something to keep in mind.

News

Alexandria Ocasio-Cortez explains how she will pay for $40 trillion in new spending

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Young people seem to think that implementing socialism in the United States won’t cost them a thing. The truth is, the rich don’t have enough money to cover all the spending that socialists want to do. It’s going to be young people who are stuck with the bill, and they’ll have to scale their lives down to third world levels to pay for what they voted for.

Here’s a socialist (former bartender) to explain how she would pay for $40 trillion in new spending, over 10 years:

The Daily Wire reports:

TAPPER: “Right. I get that. But the price tag for everything that you laid out in your campaign is $40 trillion over the next 10 years. I understand that Medicare for all would cost more to some wealthier people and to the government and to taxpayers, while also reducing individual health care expenditures. But I am talking about the overall package. You say it’s not pie in the sky but $40 trillion is quite a bit of money. And the taxes that you talked about raising to pay for this, to pay for your agenda, only count for two [trillion dollars]. We’re going by left-leaning analysts.”

OCASIO-CORTEZ: “Right. When you look again at how our health care works, currently we pay — much of these costs go into the private sector. So, what we see, for example, is, you know, a year ago I was working downtown in a restaurant. I went around and I asked how many of you folks have health insurance? Not a single person did. They’re paying — they would have had to pay $200 a month for a payment for insurance that had an $8,000 deductible. What these represent are lower cost overall for these programs. Additionally, what this is, it’s a broader agenda. We do know and acknowledge that there are political realities. They don’t always happen with just a wave of a wand but we can work to make these things happen. In fact, when you look at the economic activity that it spurs — for example, if you look at my generation, millennials, the amount of economic activity that we do not engage in. The fact that we delay purchasing homes, that we don’t participate in the economy as purchasing cars as fully as fully as possible is a cost. It is an externality, if you will, of unprecedented amount of student loan debt.”

TAPPER: “I am assuming I won’t get an answer for the other $38 trillion. We’ll have you back and go over that.”

Some people are going to vote for her just because she’s young, female, and sounds so passionate. But let’s take a look at some numbers so we can understand how feasible her plans are.

First, the rich don’t earn enough money to be able to pay for trillions of dollars in spending.

In 2012, John Stossel wrote this in Forbes:

If the IRS grabbed 100 percent of income over $1 million, the take would be just $616 billion.

In 2011, the Tax Foundation explained that even if you taxed ALL THE DISPOSABLE INCOME from all the people who make $200,000 or more, you would only raise $1.53 trillion dollars:

There’s simply not enough wealth in the community of the rich to erase this country’s problems by waving some magic tax wand.

[…]After everyone making more than $200,000/year has paid taxes, the IRS would need to take every single penny of disposable income they have left. Such an act would raise approximately $1.53 trillion. It may be economically ruinous, but at least this proposal would actually solve the problem.

Socialists want to spend $40 trillion more over 10 years, or about $4 trillion per year. Taking most of what the wealthy earn would make up less than half of that spending.

Anyway, we’re not in a position to be doing any spending, because the costs of our existing socialist programs will be increasing going forward.

Pretty soon, our mandatory expenses will consume all of our tax revenues
Pretty soon, our mandatory expenses will consume all of our tax revenues

USA Today explains:

After averaging 35 percent of national income from the mid-1950s through 2008, the national debt has surged to 78 percent today and is projected to reach 100 percent within a decade, and 200 percent by 2050. Even these scary estimates rest on rosy assumptions — no new military or economic crises and creditors willing to accept record-low interest rates from a government heading towards a debt crisis.

Just to be clear, he’s talking about the debt-to-gdp ratio. When ours gets too high, interest on the debt will rise, be ause lenders aren’t sure they’ll be getting their money back. This will put us into a debt death spiral.

More:

The cause of this coming debt deluge is no mystery: Social Security and Medicare are projected to run a staggering $82 trillion cash deficit over the next 30 years. We are adding 74 million retiring baby boomers to a system that provides Medicare recipients with benefits three times as large as their lifetime contributions and pays Social Security benefits typically exceeding lifetime contributions (even accounting for inflation and interest on the contributions).

We can’t afford the spending we’re already committed to right now:

Politicians promise changes to avoid cuts in Social Security and Medicare, but their alternatives are plainly insufficient. Democrats favor tax hikes on the rich, but even doubling the highest two tax brackets to 70 and 74 percent would close just one-fifth of these programs’ shortfalls — and even that assumes people keep working at 90 percent tax rates when including state and payroll taxes. Slashing defense spending to European levels would close just one-seventh of the gap. Single-payer healthcare proposals are projected by even liberal economists to increase the debt. Republicans favor cuts in antipoverty and social spending, but even the unimaginable elimination of all anti-poverty spending would close barely half of the shortfall.

So, who’s going to pay for all this? It will be the people who have to work and pay income taxes for the next 30 years. The very same young Americans who are voting for socialists today. They’re the ones who are going to have to survive on a fraction of what their parents earned.

But there’s more. The truth is that raising taxes on the wealthy will cause enormous damage to job creators. If you look at socialist countries, the unemployment rate among young people is astronomical compared to the USA today. Why? Because these other countries have taxed and regulated businesses so much that they simply don’t have money to hire people, and if they do hire people, they pay them less than what they can earn for the same work in America.

Reuters explains:

Last December, the most recent full figures available, 25 million of the EU’s workforce of 240 million were unemployed and actively looking for jobs, producing an unemployment rate of 11 percent.

An additional 11 million were unemployed but had stopped looking or were not immediately available to start work, and were therefore not classified as unemployed. Adding them to the total would bump the jobless rate up to 15 percent.

Then there were more than 9 million part-time workers who wanted to work more hours but had no opportunity to do so – they were counted as employed but felt underemployed.

And finally there were those who were overqualified for their jobs and might well have been making more money elsewhere if they had found the right match for their skills.

European socialism is a kind of hybrid of socialism and capitalism, so it’s not too bad.  In places like Cuba, and Venezuela, you get the real thing. I doubt that most young people really understand what is going on right now on the streets of Cuba and Venezuela. If they did, maybe they wouldn’t be voting for socialism here.