Defusing the debt bomb before it blows up in millennials’ faces

But in those two years, we learned that everything the Tea Party promised us was a lie.

Like most millennials, I’m no fan of President Trump, but these weren’t his promises to break. With the most talented presidential primary field in modern American history, Trump stood alone as the only candidate to promise to leave entitlements untouched. He’d spout off the right talking points about repealing and replacing Obamacare, but his promise to the people was to secure the southern border, end a generation of “forever” wars, and to appoint stalwart conservative justices to the federal judiciary.

But what about the rest of the party, which swore to save us from the federal Leviathan, our impending deficit crisis, and a socialist agenda that’s materialized in earnest, not just from freshmen congresswomen from the Bronx and Detroit but within the vast majority of the 2020 Democratic presidential field?

A $32.6 trillion Medicare For All package, a federal job guarantee as a part of a $93 trillion Green New Deal, and embracing the legalization of abortion up until the point of a baby’s birth represent the tip of the iceberg. There’s also the vow to cancel trillions of dollars of student debt, offer free college sans major or degree stipulations or means-testing. So, make no mistake: The Democratic Party is in a race to see who can march the United States off of a moral and fiscal cliff at light speed. At least they’re honest. The Republican Party has spent the better part of a decade lying to its electorate, abdicating its responsibility and careening us toward the same crisis that Democrats willingly embrace.

Before we dig into the reasons that have caused this crisis, it’s worth taking a looking at what it might look like down the road. First, there’s the obvious meltdown: healthcare.

Consider a few key statistics. The U.S. comprises 4.4% of the world’s population, yet produces 44% of the world’s medical research and development as well as the majority of the world’s medical patents. The United States only accounts for a quarter of the world’s income, yet pays for three-quarters of total pharmaceutical profits. It’s only possible due to our profit-motivated system. The federal government funds just one-fifth of the $171 billion annual medical R&D bill, with private industry footing the overwhelming majority of the cost. By eliminating the private healthcare sector, we would soon become reliant on the next most significant global contributor to medical research and development: China.

But even if medical research stagnated, as it mostly has in every other single-payer country, that country couldn’t rely on international trade, our healthcare would at least be comparable to the care we receive today, right? Nope. The valuation conducted by the Mercatus Center that conservatively found Medicare For All to cost $36.2 trillion in its first decade alone assumes that the government would pay out reimbursement rates 40% lower than private insurance rates. In our current and admittedly broken system, private insurance effectively subsidizes Medicare, which pays hospitals just 87 cents for every dollar of its costs, and insurers pay hospitals for inpatient admissions a rate 90% higher than current Medicare Fee-For-Service. The logical conclusion of this balance sheet is the gradual closure of hospitals and, more significant, a generational decline in the number of physicians in the marketplace.

The nonpartisan Congressional Budget Office, which notoriously makes its predictions assuming we face no major recession in the future, said the following about Medicare For All: “If the average provider payment rate under a single-payer system was significantly lower than it currently is, fewer people might decide to enter the medical profession in the future. The number of hospitals and other health care facilities might also decline as a result of closures, and there might be less investment in new and existing facilities. That decline could lead to a shortage of providers, longer wait times, and changes in the quality of care, especially if patient demand increased substantially because many previously uninsured people received coverage and if previously insured people received more generous benefits.”

But that’s your standard fare, Soviet-style healthcare crisis. Assume that our $1 trillion (and growing) annual deficit continues apace, and the federal government continues to spend more and more on interest costs and paying banks. First, the private sector would surely notice, the country would face a credit crunch, and interest rates would rise. Everyday Americans would no longer be able to get loans, and businesses would lose investment capital. The federal government would feel the full force of its entitlements drying up. Following that, our entire public healthcare sector would devolve into a rationed, dystopian system, reliant on a private sector if one still exists.

Some foretold the consequences.

Conservatives who warned Obamacare would consolidate the insurance industry into a cartel leaving single-payer all but inevitable were written off as fearmongers at best, and racist fantasists at worst. But look at where we are today. Premiums have more than doubled in under a decade, and of the 529 insurers in America in 2013, more than 200 have entirely left the market.

The healthcare industry was bad before Obamacare. It just exacerbated the problem created initially by President Franklin D. Roosevelt: the employer-based insurance system.

FDR’s New Deal set specific wage and price controls, which rendered it nearly impossible for employers to compete for better talent in the labor pool with more competitive pay. But the IRS under Roosevelt made the pivotal decision to refuse to tax health insurance for employees. Employers then used health insurance as a hiring incentive, and save for a single blip in 1953, the system has remained the norm ever since.

Now, for all its flaws, the overwhelming majority of Americans are OK with their healthcare coverage and don’t want it taken away. But the employer-provided model incurs plenty of moral hazards and perverse incentives that bring about higher prices and worse care.

For one thing, employers can safely bet that the odds of them having to foot the bill for any significant health problems that occur down the road are low. Millennials switch jobs more than any other generation, and by the time the majority of Americans face expensive health problems, they have Medicare coverage. So private insurers can play a game of musical chairs with their clients’ care, refusing to cover the preventative care that would make the overall cost of covering a person over their entire lifetimes cheaper.

Furthermore, the insurance model itself severs patient demand from supply. With a total absence of price transparency for procedures, appointments, and medicine, patients wind up with wildly inelastic demand and at the mercy of insurers and care providers.

It doesn’t have to be like this. Take, for example, one industry where insurance has no role at all: plastic surgery.

From 1998 to 2016, with inflation increasing by 47%, the prices for hospital services rose by 177% and the costs of medical care services doubled. In that same time, the nominal price of plastic surgery increased by just 32%. The answer is not more insurance, but less. And despite a decade of Republican lies, there may be some hope on the horizon.

Bright conservatives such as Rep. Chip Roy of Texas have sought to expand tax-free health savings accounts to empower more Americans to forgo our broken insurance cartel entirely and instead focus on what may prove to be the future of healthcare: direct primary care.

Colloquially referred to as “concierge care,” direct primary care models began as subscription-based programs where, for thousands of dollars annually, your doctor is on retainer. Direct primary care models boast shorter wait times, fewer patients per practice, and increased focus on preventative care and in some cases including risk reducers such as dietetics. But while the cost has historically been prohibitive, startups such as One Medical and Forward are rapidly reducing the costs and accessibility of direct primary care plans. Some, such as One Medical, require out of pocket fees, just a few hundred dollars, and accept insurance to cover some of the costs, all of which are reduced by a mixture of physicians, nurses, and physician’s assistants as well as apps that allow patients to receive virtual care. Others cut out insurance entirely. Forward doesn’t accept insurance, charging a flat $150 fee every month with no other costs.

There’s a theoretical future where Americans purchase a uniform, high-deductible, low-premium catastrophic insurance plan and spend the bulk of their health expenses on quality and preventative concierge plans. The direct primary care industry hasn’t had what Mercatus refers to as its “Uber moment,” but with telemedicine on the rise and concierge startups taking Silicon Valley by storm, we could be approaching that future, and with President Trump’s elimination of the individual mandate, this hypothetical scenario would become a reality — if Congress allows it.

Medicare For All would all but require a mandate for physicians to accept Medicare, and even the less extreme Medicare buy-ins or public options touted by some Democratic candidates would render such a plan impossible without HSA and insurance reform. But Republicans need to take the narrative back while it’s still possible to make these changes.

Another concern is the looming debt crisis. It’s a different beast because the seeds of destruction have already been planted. Assuming we manage to circumvent the socialist struggle for Medicare For All, our student and leveraged loan bubbles don’t implode, inflation and unemployment remain at historic lows, and we somehow avoid a recession, it won’t matter. The spending math still proves catastrophic.

The $22 trillion national debt has had us reach our highest debt-to-GDP ratio since World War II, and our annual deficit is now more than a trillion dollars annually. That’s not the worst part.

The common refrain among the Left is that we can slash defense spending and tax the rich to pay for our way through a laundry list of progressive policies. But the math isn’t there. Among the current proposals from Democrats are the following:

• Alexandria Ocasio-Cortez wants a 70% top marginal income tax rate. That would accrue somewhere between $300 and $700 billion per decade, or roughly 2% of Medicare For All.

• Bernie Sanders has a death-tax plan that he says would raise $2.2 trillion, but, according to Sanders’ staffers, “over an unknown period of time, because it would only take effect once they die.”

• Of all the progressive tax plans announced by Democratic leaders, Sen. Elizabeth Warren’s would accrue the most revenue. Her wealth tax on those with assets surpassing $50 million would raise $2.75 trillion in its first decade. The only problem — ignoring the wealth flight it would inevitably instigate, as seen in nations such as France — is that it probably violates the Constitution as it is not a tax on income but net worth.

We cannot tax our way out of the budgetary discrepancies that already exist, and we certainly can’t if the Democratic Party gets their way because it all rests in entitlement spending.

U.S. defense spending, only comes to $600 billion annually — just 3% of GDP and a mere 30% of what we spend on entitlements. But it’s not the current levels of entitlement spending that should shock you. It’s the projections.

Social Security spending will rise from 4.9% of GDP in 2014 to 5.6% in 2024, and federal healthcare spending, including Medicare and Medicaid, will increase from 4.8% of GDP to 6.1%. In the next decade, Social Security and Medicare will drive a whopping 90% of our rising deficit. Social Security becomes insolvent by 2035 and Medicare, the overwhelming majority of federal healthcare spending, goes bust just one year after that. And then, from 2018 to 2048, Social Security and Medicare are responsible for $59.4 trillion in principal costs and $40.6 trillion in interest costs.

And all of this is before Medicare For All.

Democrats may be attempting to catapult us off the cliff, but Republican hands aren’t clean. When Democrats call for an average of a 2% expansion of Social Security, Republicans don’t take to Twitter to decry the program that will have a negative return-on-investment for my generation. Instead, they introduce a paid family leave bill that would tack yet another entitlement onto Social Security. Republican mismanagement of our entitlement crisis is even worse than their Obamacare plotting and plodding because they don’t even pay lip service to the matter.

It’s time for the GOP to buck up and do two things: reel in Medicare spending while planning an Obamacare replacement, and permit us millennials a Social Security buyout.

Social Security has always been structured like a Ponzi scheme. The first recipient received a 92,000% return on investment, but today it issues a single-digit return on investment. Soon, it will become a negative.

Washington must cut millennials a deal and give us a chance to jump ship before it sinks. Congress ought to pass a Social Security buyout for anyone who wants it.

The government has promised Social Security payments to Americans who have spent a lifetime paying into the system. Given the structure of the program, that requires taxes from Americans working today. A buyout that required Americans to pay double or triple the amount of Social Security taxes for a finite amount of time in exchange for being released from the program for the rest of their lives could circle the square. Current retirees would be funded by increased Social Security taxes on Americans taking the buyout, and millennials could avoid a lifetime of paying into a broken system.

For all the free stuff Democrats and Republicans alike wish to give millennials, the greatest gift of all would be freedom from the nation’s most absurd entitlement program and a lifetime of taxation issued under the lie that we’ll ever see that money again.

The promise of the Tea Party was noble, and the problems it sought to solve are those that will plague my generation the most. Yet silly socialists have seduced millennials. And if you see how Republicans spent the past decade of messaging, it makes sense. It’s high time for the GOP to pull their heads out of the sand and reclaim the Tea Party mission. The United States is the wealthiest and freest nation in human history. But we require political courage to keep it that way.

Tiana Lowe is a commentary writer for the Washington Examiner.