Unwise to Tax the Rich to Pay for Health Care

Democratic leaders were very pleased to see the latest Congressional Budget Office scoring of the House of Representatives health insurances reform package. After running the numbers, the CBO determined that the measure would cost $1 trillion over ten years and would result in nearly all Americans being covered. A pretty good deal, most agreed.

And yet, coming up with $1 trillion in new revenue is still a challenge, but it's one legislators seem to have met. After considering a number of potential revenue raising measures—from a Value-Added Tax to new levies on unhealthy food and beverage items—lawmakers turned to the most reliable source of funds: the rich.

House leaders have unveiled a new surtax proposal, which essentially creates three new upper income tax brackets that will be charged a surtax beginning in 2011, which will increase in 2013 if expected cost saving measures in the bill don't work out. The initial surtax rates are 1% for households earning from $350,000 to $500,000, 1.5% for those earning from $500,000 to $1 million, and 5.4% for households earning over $1 million per year. These are marginal rates, so a household earning $400,000 would pay $500 in additional taxes—1% multiplied by the $50,000 in income above the $350,000 threshold. A household making $1 million in a year would be responsible for an additional $9,000 in taxes. In all, 1.2% of American households will be affected.

What to say about this? Well, it's a shame that Congress missed out on opportunities to use more efficient taxes. And while those of us comfortably under the surtax threshold may roll our eyes at an additional $9,000 burden for a family earning $1 million in a single year, these measures will probably act to discourage some economic activity among high earning families. Greg Mankiw estimates that for top earners, this may push the total tax burden to near 55%—not awful by either European or historical standards, but not ideal, either.

For me, the biggest concern is that Congress seems to have followed the path of least resistance here and it may do so again in the future. Recall that America has a fairly significant structural deficit, which will only grow as the population ages. America also has fairly significant need for large-scale investment in things like infrastructure and education. Revenues are going to have to rise to avoid a budget crisis somewhere down the road. And that means that taxes will have to rise.

It would be extremely unwise to try and stick all of the additional tax burden on the rich. Unnecessary, too—there are many opportunities out there to tax negative externalities, and the use of a broadly shared tax burden to fund fairly progressive social safety nets in Europe seems to work well. It's a lot easier to raise taxes on 1.2% of the population than on the majority, but that's a game which begins to have diminishing returns very quickly. There are ways to raise revenues without placing a very large drag on economic activity, and Congress needs to figure out how to find the political mojo to make it happen.

This article originally appeared on The Economist.com

Comments

[Michael Clark:]

Pay by what one can afford to pay. Those who would allow their poor cousin to die because they have no money and are sick need to check to see where they have misplaced their soul. Yes, the mind can argue ANYTHING, and convince itself it is right. But the soul KNOWS what is right. All you Christians arguing with Saint Paul that those who don't work (there are millions in that category now, who don't work even though they want and need to work) should check the words of the founder of the religion, who counseled sharing and generosity, not the Stalinist disciple.

It would be an utter tragedy in Bill Gates and Warren Buffet had to pay a bit more in taxes. Yes; no question about it. At least Gates and Buffet have demonstrated that they have a soul. What about the Walmart family? They can pay more without disturbing anything in their life except a line in their accountant's spreadsheet.


On Jul 16 05:41 PM bricki wrote:

> Depends on how you define 'fair share'. Is it fair to tax the income
> of somebody at a poverty level at the same rate as Bill Gates of
> Warren Buffet? That's what a 'fair share' of 50% of the income paying
> 50% of the taxes implies.
>
> We don't do that in this country, thankfully, but we do have a pretty
> flat tax rate structure right now. The argument for that is that
> it rewards the successful, and thereby grows the economy as a whole
> benefiting all. The problem with that is that we haven't been getting
> that benefit and now the economy is a mess.
>
> This is why there is sympathy for increasing the progressiveness
> of the tax structure.

Jul 17 01:57 AM

[Reactionary:]

Health care is not a right, and it is not an unlimited resource that all can enjoy to the fullest. It. Can't. Happen. Let the market allocate resources to this, and let the chips fall where they may. We need less government intervention in health care, not more. If the all-glorious State wants to help, then let them get some much needed and long overdue tort reform going. That will do more good than anything else they can hope to accomplish.

All these leftist crying out for other people's money in order to grant the wishes of the "poor" always fall back on the same crap. They cry out how wonderful lovely taxes pay for schools, the military, roads, etc, creating the impression that every desire is of equal merit and public interest. Those also happen to be the first items cut when leftists need some more money to hand out to the nonproductive who keep them in power. Liberals are running public education into the ground. They cut the military every chance they get. An irrationally large "stimulus" package meant largely for infrastructure has either been handed out to cronies or left unspent until the next election cycle to buy more votes. Don't listen to their mewling. They are a pack of theives.

The worst problem is that any government run health system will be terrible. Quality of care will plummet. Rationing based on the whims of social engineers will be the rule. Anybody claiming "better outcomes" in Europe and Canada is either uninformed or a deliberate liar. Those who say how inexpensive it is don't mention the fact that you can't spend money when there is nothing to spend it on - health care certainly is cheaper when there's no MRI or CT scanner to pay for. Besides - what government program has EVER cost anything close to what it was budgeted for? This will cost at least double the estimate - count on that. They also fail to mention that virtually every new medical device and drug (yes, including those few drugs that actually work) are funded by US consumption. If the US goes commie on health care, innovation will HALT, because no government will pay for research. Price controls in those countries leaves the development burden on the shoulders of the American public - yet another handout to the ungrateful Eurotrash and Canadians. Further, the smart kids will avoid medicine and go into more rewarding fields of work. Many of us will be stuck with the dregs of the third world "medical schools" that we now have the freedom to avoid in a free market.

This will not end well.

Jul 17 08:14 AM

[Pat C:]

I realize that this is article about taxing the rich. But the real concern in this Health Care reform is taxing/penalizing small business to the tune of at least 8%. Where do you think all the jobs are going to come from to dig us out of our economic hole? Please lets focus on the right hill to die on.

Jul 17 08:32 AM

[dave_onju:]

Who ya gonna tax the poor ? Sorry we no longer have any money . The rich already have it ,

Jul 17 08:42 AM

[Search4Truth:]

Who ever thinks these taxes will NOT stop with the so called "rich", but will continue in time to be applied to every working citizen, raise their... thumb.

Jul 17 08:59 AM

[Evaluator:]

Right on the money comment!!!! It hits the nail squarely on the head.


On Jul 15 07:54 PM Steve in Greensboro wrote:

> "...After running the numbers, the CBO determined that the measure
> would cost $1 trillion over ten years and would result in nearly
> all Americans being covered. A pretty good deal, most agreed..."
>
>
> No. No they didn't.
>
> "...an additional $9,000 burden for a family earning $1 million in
> a single year, these measures will probably act to discourage some
> economic activity among high earning families.."
>
> No. No it won't. It will just cause them to move their economic activity
> offshore. No problem. Raise tax rates all you want. Tax receipts
> will go down in the U.S. and go up in China.
>
>
> "...American also has fairly significant need for large-scale investment
> in things like infrastructure and education..."
>
> And don't forget turtle underpassess. And, and nationalized bikepaths.
> And, and subsidies to vote-fraud organizations like Acorn. Don't
> forget them!
>
> "...Revenues are going to have to rise to avoid a budget crisis somewhere
> down the road. And that means that taxes will have to rise..."<br/>
>
> You get zero credit for this answer. The correct answer is: "...Spending
> will have to be reduced to avoid a budget crisis down the road. And
> that means Social Security retirement age will have to be raised
> to a modest 98 years old..."
>
> And now the mask comes off. Obama will increase taxes on the poor
> and middle class.
>
> "...the use of a broadly shared tax burden to fund fairly progressive
> social safety nets in Europe seems to work well..."
>
> Yep. It works great for the drones in the political class.
>
> You poor Leftists. You voted for Obama to reduce foreign military
> expeditions. What did you get? A huge, Iraq-Petraeus-like surge in
> Afghanistan of all places. You voted for Obama to tax the rich. And
> you get a VAT tax, you get a carbon tax, etc. all of which are horribly
> regressive. The Germans have a word for what I am feeling. Es ist
> Schadenfreude.

Jul 17 09:22 AM

[Evaluator:]

Girls, could we end the tax arguement. How would it suit all if we went to a flat tax. No deductions, no shelters, no offsets, just pay ___% of your income. Lock in that amount, without constantly increasing the percentage. That's the amount of money the government has to operate on, period. In that manner, All taxpayers would pay a proportionate amount of their income as taxes. Being retired, I'M ON A FIXED INCOME. I have to prioritize my needs, I suspect the government can do the same. Now the aurguement becomes, but we all have different needs!!! Hey, I'm just addressing the aurguement of who should pay the most income tax, I don't have all the answers!!!


On Jul 16 02:27 PM LeoTheDog wrote:

> Interesting tact. As their tax rates (and total taxes paid) dropped,
> their percentage of total taxes collected went up. Nice use of statistics
> to distract from the fact that the wealthy have done quite nicely
> over the last decade, and have seen their incomes and, yes, wealth,
> increase far more than for the middle-class. Contrary to what you
> might believe, few people enjoy the imposition of new taxes, even
> among liberals. We just understand that there are some things we
> need that we don't currently have, and those things cost money. We
> think it makes sense to have those who can most afford to pay, pay.
> Crazy thinking, I know.
>
> Of course, looking to your tables one can see that the House's reform
> bill, which seeks to increases taxes on the top 1.2% (not 10 or 25%
> as you erroneously suggest) would affect only those whose taxable
> incomes exceed $400,000. Do you understand this fact? Really, do
> you? Nearly 99% of the country will see no tax increase under this
> proposal, but you've got your panties in a bunch over the increase
> for the top 1.2%.
>
> So, cry me a river. If you make $400k and you can't or won't pony
> up an extra $40 per month to help address the embarrassment of having
> 50 million uninsured (and tens of millions more underinsured), then
> I'm not terribly sympathetic.
>
> Of course, there is a simpler, more effective and FAR less costly
> option available: it is called single payer and it would actually
> save the federal government money over the next decade rather than
> cost us $1 trillion. Tell you what, you agree to single payer and
> I'll agree to cut taxes FOR THE RICH by the amount of the savings
> generated by our new system. Deal?

Jul 17 10:25 AM

[Erik B.:]

@LeoTheDog

Where is it stated that health care is a right of citizenship in America?

"As Senator and doctor Mr. Ron Paul so pleasantly reminds us the, "constitution only guarantees citizens 'life, liberty and (the right to) keep the fruits of my labor.'"

Anyone who is following this debate should watch this interview with Senator Paul:

finance.yahoo.com/tech...

Yeah, and your honorable Senator, like the rest of them, are happy to collect their lifetime health care benefits while at the same time chirping about it not being a right for the average citizen. A very untenable position I believe.

Jul 17 11:05 AM

[Michael Clark:]

Reactionary: I can at least smile at your username.

You say health-care is not a right. I say it is. The right to bear arms is not God-given -- it's given by men in society. The right of free speech is not God-given -- it's given by men in society. The right to vote is also not God-given -- it's given by men in society. ALL of our rights are given by our fellow-men (ancestors, in this case) since public opinion decided these 'rights' were important for a great society. How do we define a 'great society' -- I'm assuming you would like to live in a great society, and have history judge America as being a great society. Sink or swim? Dog-eat-dog? Are these the values of a great society? Do we care about our neighbors, or only about ourselves? Can America really become a great society with the philosophy that 'its every man for himself and God against all'? Do you think we MUST have prisons full, murder, rape, and robbery a contagion? Does a great society value only the accumulation of money by individuals? Are there other values that would help develop our sense of humanity. My parents generation knew their neighbors and cared about them. This all changed in my generation. Me-me-me: nothing else matters. Is this blind egoism what makes a great society?


On Jul 17 08:14 AM Reactionary wrote:

> Health care is not a right, and it is not an unlimited resource that
> all can enjoy to the fullest. It. Can't. Happen. Let the market
> allocate resources to this, and let the chips fall where they may.
> We need less government intervention in health care, not more. If
> the all-glorious State wants to help, then let them get some much
> needed and long overdue tort reform going. That will do more good
> than anything else they can hope to accomplish.
>
> All these leftist crying out for other people's money in order to
> grant the wishes of the "poor" always fall back on the same crap.
> They cry out how wonderful lovely taxes pay for schools, the military,
> roads, etc, creating the impression that every desire is of equal
> merit and public interest. Those also happen to be the first items
> cut when leftists need some more money to hand out to the nonproductive
> who keep them in power. Liberals are running public education into
> the ground. They cut the military every chance they get. An irrationally
> large "stimulus" package meant largely for infrastructure has either
> been handed out to cronies or left unspent until the next election
> cycle to buy more votes. Don't listen to their mewling. They are
> a pack of theives.
>
> The worst problem is that any government run health system will be
> terrible. Quality of care will plummet. Rationing based on the
> whims of social engineers will be the rule. Anybody claiming "better
> outcomes" in Europe and Canada is either uninformed or a deliberate
> liar. Those who say how inexpensive it is don't mention the fact
> that you can't spend money when there is nothing to spend it on -
> health care certainly is cheaper when there's no MRI or CT scanner
> to pay for. Besides - what government program has EVER cost anything
> close to what it was budgeted for? This will cost at least double
> the estimate - count on that. They also fail to mention that virtually
> every new medical device and drug (yes, including those few drugs
> that actually work) are funded by US consumption. If the US goes
> commie on health care, innovation will HALT, because no government
> will pay for research. Price controls in those countries leaves
> the development burden on the shoulders of the American public -
> yet another handout to the ungrateful Eurotrash and Canadians. Further,
> the smart kids will avoid medicine and go into more rewarding fields
> of work. Many of us will be stuck with the dregs of the third world
> "medical schools" that we now have the freedom to avoid in a free
> market.
>
> This will not end well.

Jul 17 02:10 PM

[Michael Clark:]

Erik:
Where is it stated that the ownership of slaves is no longer a right? Where is it stated that women have the right to vote? Whre is is stated that black Americans have the same rights as white Americans?

In the legislation passed by the congress and signed in to law by the President of the U.S. That is how our democracy works. Rights are granted by law -- the will of the people .

ALL our rights come from the mutual consent of the democratic process. (Sometimes you support these rights; and sometimes you don't.) But that is how 'rights' are granted -- they are not handed down from God -- or from some other providential source. When Ron Paul is saying health care is not a right -- he is just stating his opinion.

The government has a right to draft the poor boys and girls into the military who fight our wars for freedom and the spread of democracy and the triumph of capitalism and old money families. But the government doesn't have a right to provide these same poor people with reasonably priced health care? I think this is the crux of the argument. If the rich want the poor to fight and die so that they can keep their money -- and expand their system of capitalism in the world -- then they have to give something back. If not, let Paulson's children, and Greenspan's children, and Bernanke's children, and Bush's children fight the next war, without the help of those families they feel are disposable.


On Jul 17 11:05 AM Erik B. wrote:

> @LeoTheDog
>
> Where is it stated that health care is a right of citizenship in
> America?
>
> "As Senator and doctor Mr. Ron Paul so pleasantly reminds us the,
> "constitution only guarantees citizens 'life, liberty and (the right
> to) keep the fruits of my labor.'"
>
> Anyone who is following this debate should watch this interview with
> Senator Paul:
>
> finance.yahoo.com/tech...
>
> Yeah, and your honorable Senator, like the rest of them, are happy
> to collect their lifetime health care benefits while at the same
> time chirping about it not being a right for the average citizen.
> A very untenable position I believe.

Jul 17 02:28 PM

[Keltorttruth:]

Almost anywhere. The U.S. has the highest corporate tax rate to any developed country other than Japan. Who do you think owns most of the businesses in America? The "poor" people? Give me a break.

I am truly shocked and appalled at some of what I'm reading. I thought Obama got elected on his marxist platform b/c people thought he was just grandstanding for the left and didn't believe he was actually that far left. However, after reading many of these comments, I think far more people DID get him and are in agreement. We didn't become the world's super power by stifling growth and punishing risk takers; it simply doesn't work that way!

A few basic questions that I hope will open some of your eyes. For those of you who say, "tax the rich, go get those evil doers who have been smart, worked hard, gotten lucky and been productive", when's the last time you ever worked for a poor person? Do you think if your boss makes less money he/she is more likely to pay you more money? Do you think he/she is somehow less likely to lay you off? If the marginal returns on TAKING RISK to open a new plant/office/store or anything else that might employ you are now less because of a lower expected return due to higher taxes, is that going to make these evil rich people more likely to take that risk? Wake up! It's very simple, unless you want to live off the government, you want the most productive members of society (and yes, your boss and the multitude of similar risk takers whose income depends not on a salary but on successful business plan execution are by definition more productive than you) to have MORE capital to put to work rather than less. The way out of this mess can only be through more private sector jobs which lead innovation and increase real productivity, not through more government wasteful spending.

I've seen the tired argument that the gap between the rich and the poor is growing so therefore capitalism doesn't work and we should push towards all people earning the same amount (which is exactly what taxing the "rich" more and having larger negative real tax rates for the "non-rich" equates to - wealth redistribution). Fist of all, that (to its ultimate end) is called communism. Remember that? We had a cold war that nearly got us all blown up because, at least back then, we believed in personal freedoms and the right of an individual to reap what he/she sows and we didn't want the infectuous spread of communism to pervade our individual liberties. Please don't fool yourselves; by your "tax the rich" rhetoric, you are headed, idealogically, down that exact path. Maybe that's what you want, but I still have faith that the America I grew up in and my relatives fought and died for still exists.


On Jul 16 02:49 PM bricki wrote:

> The top 5% of earners in the US also earn nearly 50% of the income,
> so the 50% of the taxes doesn't exactly seem out of line.
>
> A lot of the comments propose that these wealthy people would move
> offshore. Other than China where exactly would they move that would
> offer a better tax rate than the US?
>
> On Jul 16 02:29 PM User 449150 wrote:

Jul 17 03:41 PM

[Keltorttruth:]

Quite simply, I can not disagree with you more. The incentive of individual properity creates the drive to produce at the most efficient and effective possible levels if it is understood that others have the same right to the same freedoms by following the same set of unchanging rules - fair competition drives innovation. When one introduces a government competitor who plays by a completely different set of rules which are highly slanted in the government's favor, that drives individuals away from taking risk and investing in their beliefs.

In my opinion, a great society is one where the individual, to as large an extent as possible, determines his/her own outcome. This leads to people taking risks on ideas/products/franchi... - basically anything entreprenuerial. When these ideas work, they often lead to mass hirings of those who may not have the ideas or the capital to pursue their ideas but who can help implement the ideas. The pursuit of individual betterment has the side effect of dragging others up along with it b/c they can compensate others when their ideas work.

Everyone working for the benefit of everyone only ensures that very little potential job-creating, real productivity increasing capital risking will take place. If I'm only allowed to earn the same as the guy next to me, why on earth would I put one extra ounce of effort into my job? Why would I even think about taking any sort of risk with my capital? You propose a very slippery slope. Maybe you think 55% of one's income is not too much; maybe the next guy thinks 65% is not too much (and maybe even you after you've had time to grow comfortable with the previous level) and on and on it goes. Where does it stop and who decides? The point is that the guiding principle you seem to believe in rings of pure communism which you seem to imply is a the hallmark of a "great society" - sounds like Utopia to me. My guiding principle, and the guiding principle our forefathers used to take a dramatic risk in breaking away from the Brits and their "confiscatory" 12.5% tax rate is the right of the individual to pursue life, liberty and the pursuit of happiness. They went as far as to call these rights God given, not government given as you would suggest.

There are plenty of places in this world for your ideaology, I just don't want America to transform into one of them.

On Jul 17 02:10 PM Michael Clark wrote:

> Reactionary: I can at least smile at your username.
>
> You say health-care is not a right. I say it is. The right to bear
> arms is not God-given -- it's given by men in society. The right
> of free speech is not God-given -- it's given by men in society.
> The right to vote is also not God-given -- it's given by men in society.
> ALL of our rights are given by our fellow-men (ancestors, in this
> case) since public opinion decided these 'rights' were important
> for a great society. How do we define a 'great society' -- I'm assuming
> you would like to live in a great society, and have history judge
> America as being a great society. Sink or swim? Dog-eat-dog? Are
> these the values of a great society? Do we care about our neighbors,
> or only about ourselves? Can America really become a great society
> with the philosophy that 'its every man for himself and God against
> all'? Do you think we MUST have prisons full, murder, rape, and robbery
> a contagion? Does a great society value only the accumulation of
> money by individuals? Are there other values that would help develop
> our sense of humanity. My parents generation knew their neighbors
> and cared about them. This all changed in my generation. Me-me-me:
> nothing else matters. Is this blind egoism what makes a great society?
>

Jul 17 04:22 PM

[User 357705:]

Libertarianism is a terrible disease. Its soulless and devoid of compassion. Its an excuse to be a jerk. Its a joke.

Jul 17 04:40 PM

[Keltorttruth:]

Wow. You never stop. Let me fill you in on a little secret. Private charities and church donations do much more with much less than the government could ever hope to do. Your ideaology has actually led to your president calling for an end to deductions for charitable donations! Who is the heartless egoist now? The more money I make, the more I give to charity. How about you? By simple statistics, I would bet you don't give any money to charity. Look at any census poll and the donations by self-identified Republicans are consistantly more than charitable donations by self-identified Democrats:

"Although liberal families' incomes average 6 percent higher than those of conservative families, conservative-headed households give, on average, 30 percent more to charity than the average liberal-headed household.

-- Conservatives also donate more time and give more blood.

-- In 2000, brows were furrowed in perplexity because Vice President Al Gore's charitable contributions, as a percentage of his income, were below the national average: He gave 0.2 percent of his family income, one-seventh of the average for donating households. But Gore "gave at the office." By using public office to give other peoples' money to government programs, he was being charitable, as liberals increasingly, and conveniently, understand that word.

On Jul 17 01:57 AM Michael Clark wrote:

> Pay by what one can afford to pay. Those who would allow their poor
> cousin to die because they have no money and are sick need to check
> to see where they have misplaced their soul. Yes, the mind can argue
> ANYTHING, and convince itself it is right. But the soul KNOWS what
> is right. All you Christians arguing with Saint Paul that those who
> don't work (there are millions in that category now, who don't work
> even though they want and need to work) should check the words of
> the founder of the religion, who counseled sharing and generosity,
> not the Stalinist disciple.
>
> It would be an utter tragedy in Bill Gates and Warren Buffet had
> to pay a bit more in taxes. Yes; no question about it. At least Gates
> and Buffet have demonstrated that they have a soul. What about the
> Walmart family? They can pay more without disturbing anything in
> their life except a line in their accountant's spreadsheet.

Jul 17 04:40 PM

[David in D:]

user344210, actually I've spent a significant amount of time serving the poor and homeless. You clearly are the one that is disconnected with the plight of poor people in America.


On Jul 16 12:16 PM user344210 wrote:

> Spoken like a typical guy who doesn't know anyone poor. Yeah, they're
> just CLAMORING to buy some tofu burgers, but have to settle for Jimmy
> Dean sausage.
>
> "While many would like to buy healthy foods and eat well, they simply
> can't afford it. Thus, some sort of socially acceptable "food stamp"
> for things like fresh vegetables and fruits at the grocery store
> actually makes good sense."
>
>

Jul 17 07:17 PM

[Michael Clark:]

I don't disagree with everything you say. I think America has taken many steps in the right direction to become a great society – we just need to take some more. And falling back on old myths won’t necessarily help us get there, especially considering the more savage world into which we are heading, which has been brought upon us by the excesses of the corporate greed. I am not an anti-capitalist – I voted for Reagan gladly; and I voted for every republican candidate since Reagan UNTIL I voted for Obama last year. Why did I vote for Obama? Because it became increasingly obvious to me that the lead capitalists in the world (led by Greenspan and the Goldman Sachs ilk and others) had destroyed the global economy out of short-sighted greed and an inability to police themselves, a willingness to sacrifice the future through an insatiable lust for more wealth, more property, and more power today.

We are heading in to a major global depression (death of the world) because we’ve idealized an imbalance between individual freedoms to exploit economic opportunities and societal limits on criminal selfishness and corporate law-breaking. This imbalance seems destined to flow into an opposite imbalance, that of too much social restraint on individual enterprise. That seems to be how history works.

If you have an interest in my development of these themes, you can look at a draft of the book I’m writing “Turn Out the Lights’ at the web address below which looks at the metaphysical causes of economic/social cycles. The view of this book is that history manifests in day and nights; days represent an expansion of debt/credit and of rational energy, enterprise, creation, negentropy (higher levels of organization); nights represent a contraction of debt/credit, deflation, entropy (higher levels of disorganized energy) and the replacement of individual dreams with group destiny.

www.hoalantrangallery....

I also agree that the great society does favor individual freedoms. But, in terms of health care, which we are discussing, we also have a situation today wherein bubbles have driven up prices of health-care to a point that families can't afford to get sick, even if they have insurance; and businesses can no longer afford health insurance as a benefit for employees because the insurance cartel (insurance companies, doctors, pharmaceutical companies) – and their adversaries, the malpractice lawyer cartel, a factor but a less significant factor-- have pumped up the price of medical services so that they are no longer sustainable, and must collapse.

George Will, hardly a communist, wrote about this same thing, saying that one of the main reasons GM went bankrupt was because of rising medical costs guaranteed to workers. Japanese companies are at an advantage because their government provides universal healthcare for its citizens and the businesses don't have to deal with it. Will writes:

--GM says health expenditures -- $1,525 per car produced; there is more health care than steel in a GM vehicle's price tag -- are one of the main reasons it lost $1.1 billion in the first quarter of 2005. Ford's profits fell 38 percent, and although Ford had forecast 2005 profits of $1.4 billion to $1.7 billion, it now probably will have a year's loss of $100 million to $200 million. All this while Toyota's sales are up 23 percent this year and Americans are buying cars and light trucks at a rate that would produce 2005 sales almost equal to the record of 17.4 million in 2000.

In 1962 half the cars sold in America were made by GM. Now its market share is roughly 25 percent. In 1999 the Big Three -- GM, Ford, Chrysler -- had a 71 percent market share. Their share is now 58 percent and falling. Twenty-three percent of those working for auto companies in North America now work for companies other than the Big Three, up from 14.6 percent just five years ago.

The Big Three have cut 130,394 North American hourly and salaried workers since 2000, while the "transplants" -- foreign automakers with American assembly plants -- have added 27,183. In the first quarter of 2005 the Big Three operated 64 assembly plants, down from 70 in five years, during which time the transplants' factories have increased from 19 to 23, with more coming.

GM says its health care burdens, negotiated with the United Auto Workers, put it at a $5 billion disadvantage against Toyota in the United States, because Japan's government, not Japanese employers, provides almost all health care in Japan. This reasoning could produce a push by much of corporate America for the federal government to assume more health care costs. This would be done in the name of "leveling the playing field" to produce competitive "fairness." --

Universal health-care would not be such a big issue to me IF the medical cartel had not inflated their costs to the point of making their services unaffordable and even crippling for the society and for American business. Health.com reports that about 60% of American bankruptcies are caused by medical emergencies:

-- (Health.com) — This year, an estimated 1.5 million Americans will declare bankruptcy. Many people may chalk up that misfortune to overspending or a lavish lifestyle, but a new study suggests that more than 60% of people who go bankrupt are actually capsized by medical bills. Bankruptcies due to medical bills increased by nearly 50% in a six-year period, from 46% in 2001 to 62% in 2007, and most of those who filed for bankruptcy were middle-class, well-educated homeowners, according to a report that will be published in the August issue of The American Journal of Medicine.

“Unless you’re a Warren Buffett or Bill Gates, you’re one illness away from financial ruin in this country,” says lead author Steffie Woolhandler, MD, of the Harvard Medical School, in Cambridge, Mass. “If an illness is long enough and expensive enough, private insurance offers very little protection against medical bankruptcy, and that’s the major finding in our study.” --

In no other developed country in the world does this happen, in the name of the 'free market system'. My argument is that it is foolish to allow the 'free market' ideology to allow the medical cartel to inflate healthcare prices so that they bankrupt the society, American business, and enrich only insurance companies, doctors and drug companies. Healthcare has long been a knee-jerk republican issue, like abortion, gun-ownership, school-prayer…as if continuation of the American dream was dependent upon the enrichment of doctors and insurance companies at the expense of everyone else.

Dave Schuler writes about inflation in the health-care sector:

-- From 1965 to 1981 national expenditures on health care more than doubled from $201 billion to $507 billion in real 2009 dollars. Most of the increase in costs in healthcare can be explained by three factors: increased utilization, particularly immediately after the enactment of Medicare and Medicaid during the period 1965-1972, higher prices, particularly during the period 1972-1981, and inflation. Most of the increases after 1981 can be explained by inflation alone.

In the period 1965-1972 use increases accounted for 45.8% of the increase in healthcare spending and price increases accounted for 45%. In the period 1965-1972 57.5% of the increase in spending for physician services can be accounted for by price increases and 32.2% accounted for by increased utilization.

Hospital expenses and physician services account for the majority of healthcare costs and both of those are other words for people’s incomes. Rent, insurance, equipment, and so on are a pittance by comparison with wages as components of both of those.

Here’s my alternative explanation for what has happened to healthcare costs. In the immediate aftermath of the enactment of Medicare and Medicaid in 1966 there was an increased utilization of healthcare. That is what was supposed to happen: old people and poor people were supposed to get more healthcare. In a fee for services environment, the model that prevailed at the time and still has considerable force, that means that physicians and hospitals made significantly more money. Their incomes increased. When utilization levelled off (as should also have been expected) they continued to increase their incomes by raising prices. They had become accustomed to increasing incomes.

In the late 1970’s and early 1980’s the increasing healthcare expenditures capturing of such a quickly rising proportion of the federal budget finally caught the attention of the Congress and a number of steps were taken to slow the increase. But the harm had mostly been done. A high cost basis had been built into healthcare, healthcare was a major component of total GDP, and inflation alone (of which rising healthcare costs are one of the largest components) was enough for healthcare costs to grow unsustainably.

I am not blaming healthcare providers for acting this way. I believe it was a natural human response and they responded as anyone else would have under the circumstances.

However, it means that simple cost control won’t achieve what we need to accomplish. The primary components of healthcare costs are hospital costs and physician services which comprise the majority of costs, insurance administrative costs which comprise something like 30% of costs, pharmaceutical costs which comprise something like 10% of costs, and other factors which comprise very small proportions of the whole. All of these costs are other words for wages, somebody’s income. Healthcare costs are high because wages in the sector are high. --

I would much rather have the forces of deflation drive down the price of healthcare to a point that hard-working Americans can again afford to get sick and recover without being bankrupted. Now they can’t. I do believe that the deflation we’ve entered (the night-cycle) WILL eventually save us from inflated salaries and pricing in health-care. Until this happens, we need a combination of actions, including taxes on the rich, and government-sponsored health-care system. If our founding fathers were alive today, I have no doubt they would not support a system that rewards very few and impoverishes so many. The Founding Fathers may have called the Bill of Rights to be God-given...the right to free speech was clearly 'man-given' as an interpretation of values they assumed an all-just divine being would expect of man. In my mind the right to affordable medical treatment is also a right an all-just divine being would expect a great society to provide.

The Day-Cycle inflates the bubbles; the Night-Cycle deflates the bubbles. The Day-Cycle favors the Rich; the Night-Cycle favors the Poor.

I am not a perennial socialist. I believe we need less socialism and more individual risk and entrepreneurialism during the energy-expansion Day-Cycles and more socialism during the deflationary bubble-popping Night Cycles when group survival becomes much more difficult and the cost of this difficult must be shared more abundantly by those who benefited the most during the less-regulated Day-Cycle of bubble inflation.

The great society helps those in need especially during a time of crisis. A great society develops its soul -- as well as business acumen, military skills, scientific genius, practical expertise. The great society generates the Donald Trumps and the Bill Gates – but also the Albert Einsteins, the Johannes Bachs, the William Shakespeares….entrepre... are only part of the picture.

On Jul 17 04:22 PM Keltorttruth wrote:

> Quite simply, I can not disagree with you more. The incentive of
> individual properity creates the drive to produce at the most efficient
> and effective possible levels if it is understood that others have
> the same right to the same freedoms by following the same set of
> unchanging rules - fair competition drives innovation. When one
> introduces a government competitor who plays by a completely different
> set of rules which are highly slanted in the government's favor,
> that drives individuals away from taking risk and investing in their
> beliefs.
>
> In my opinion, a great society is one where the individual, to as
> large an extent as possible, determines his/her own outcome. This
> leads to people taking risks on ideas/products/franchi... - basically
> anything entreprenuerial. When these ideas work, they often lead
> to mass hirings of those who may not have the ideas or the capital
> to pursue their ideas but who can help implement the ideas. The
> pursuit of individual betterment has the side effect of dragging
> others up along with it b/c they can compensate others when their
> ideas work.
>
> Everyone working for the benefit of everyone only ensures that very
> little potential job-creating, real productivity increasing capital
> risking will take place. If I'm only allowed to earn the same as
> the guy next to me, why on earth would I put one extra ounce of effort
> into my job? Why would I even think about taking any sort of risk
> with my capital? You propose a very slippery slope. Maybe you think
> 55% of one's income is not too much; maybe the next guy thinks 65%
> is not too much (and maybe even you after you've had time to grow
> comfortable with the previous level) and on and on it goes. Where
> does it stop and who decides? The point is that the guiding principle
> you seem to believe in rings of pure communism which you seem to
> imply is a the hallmark of a "great society" - sounds like Utopia
> to me. My guiding principle, and the guiding principle our forefathers
> used to take a dramatic risk in breaking away from the Brits and
> their "confiscatory" 12.5% tax rate is the right of the individual
> to pursue life, liberty and the pursuit of happiness. They went
> as far as to call these rights God given, not government given as
> you would suggest.
>
> There are plenty of places in this world for your ideaology, I just
> don't want America to transform into one of them.
>
> On Jul 17 02:10 PM Michael Clark wrote:

Jul 18 02:30 PM

[Keltorttruth:]

You kind of had me going until, almost as if a non-sequitor, you threw in "tax the rich". I was weighing in my mind, perhaps spreading healthcare costs amongst all is a positive NPV project? Maybe?

But then you did it again. Why disproportionately take $ out of the hands of the most productive members of society? The first place we should start should be to CUT spending, it is absurd how much $ the gov't wastes (which, incidentally, is why I am so against giving them any more of my $ - when I choose charities, I look at the efficiences, how much of every $ actually goes to the people that are meant to be helped - on that basis, one would not give one penny to the gov't b/c they are by far the worst).

How about everyone pays for their fair share? How about a consumption tax instead of an income tax? And, to me, you underplay, the importance of lawsuites. You have an unbelievable natural conflict of interest because lawmakers are lawyers.

Jul 20 01:08 PM

[Alan Young:]

Author: "discourage some economic activity among high earning families" -- um, yeah, they might have less surplus to invest in schemers like Madoff... and have to think about using their ample money to add real value to something, instead.

Every civilized country in the world EXCEPT the US provides ehalth care for everyone. We spend TWICE AS MUCH money to cover only 70% of the need. It's crazy! WHATEVER scheme is used to finance the transition to a more equitable system, the value will be recovered in short time through more productivity and less administrative waste devoted to PREVENTING care.

Jul 22 03:54 PM

[keithfeather:]

Health care is a right? Take the $ exchange out of that argument and we get, "I (the poor) have the right to make you (a doctor, who studied for 12 years to hone a unique skill, miss out on bars, parties, and youth) take care of me regardless of how I arrived at this condition." How kind of you to offer to give away that which you worked so hard to achieve.

Health care is a rational expense of the state in so much as there is a valid return for the investment. Beyond that it is charity, which I wholeheartedly encourage to those who will feel better by offering it.

Jul 28 06:19 PM

[keithfeather:]

Health care is a right? Take the $ exchange out of that argument and we get, "I (the poor) have the right to make you (a doctor, who studied for 12 years to hone a unique skill, miss out on bars, parties, and youth) take care of me regardless of how I arrived at this condition." How kind of you to offer to give away that which you worked so hard to achieve.

Health care is a rational expense of the state in so much as there is a valid return for the investment. Beyond that it is charity, which I wholeheartedly encourage to those who will feel better by offering it.

Jul 28 06:19 PM