With a score or more Democrats entering the 2020 presidential race, there has been no shortage of bad policy ideas under discussion. The “Green New Deal” is the 2.0 version of Hillary Clinton’s imaginary “green jobs” combined with John Kerry’’s “green Manhattan Project.”
Another idea that all Democrats seem to agree on is government-funded healthcare. It isn’t just a bad idea but a ridiculous and irresponsible one that seems possible only as long as its adherents avoid all details.
The biggest obstacle is math. According to a Mercatus analysis of Sen. Bernie Sanders’ version of the program, “Medicare for all” would cost $32 trillion over 10 years. And that’s based on very conservative assumptions. For example, it assumes that doctors and other providers simply accept an immediate 40 percent pay cut without blinking, bargaining, or quitting medicine. In reality, $32 trillion is probably half the real cost. Recall, as though anyone awake could forget, that Medicare is already unsustainable and headed for insolvency by 2026.
Large increases in spending require large increases in revenue. Some bright-eyed and air-headed members of Congress will turn to the mainstay of imposing ever-higher taxes on the rich. Some are advocating a return to the 70 percent top income tax rate that took effect in 1965, or even the 90 percent top rate that preceded it. What they don’t understand is that even with those punishingly high rates, which discourage entrepreneurship, business formation, and wealth creation, income taxes actually generated less revenue — 7.7 percent of GDP in 1957 and 7.3 percent in 1967. Today, with rates less than half as high, income taxes bring in 8.3 percent of GDP.
Could the payroll tax generate that extra $32 trillion? Not likely. Unlike the Social Security tax, which high-earners stop paying after their first $133,000 in annual income, the Medicare tax already applies to every dollar of income earned by employees and contractors. But it still isn’t generating enough money even to continue paying for the old folks’ Medicare program, let alone Medicare for everyone.
Left-wing Democrats have always had a difficult, not to say hostile, relationship with budget math and economics. Yet, they promote this program anyway on the theory that federalizing medicine will somehow result in better care. It has not done so elsewhere in the world.
Sen. Kamala Harris, D-Calif., in promoting “Medicare for all” in a CNN town hall event this week, argued that greater government involvement would somehow solve the problem of excessive bureaucracy in private insurance companies.
“The idea is that everyone gets access to medical care,” Harris said. “And you don’t have to go through the process of going through an insurance company, having them give you approval, going through the paperwork, all of the delay that may require.”
One can infer from this comment that Harris’s older relatives enjoy very good health or, at least, that she has never had to deal with Medicare on their behalf. For not only is the program every bit as bureaucratic as any insurance company, but there are many things it does not cover, just like any other health plan.
It turns out that one cannot change the basics of healthcare just by making government pay for it. One would hope that Democrats might have learned their lesson after Obamacare made insurance less affordable. Those who aspire to positions of authority should learn from their mistakes instead of seeking to compound them.
