Both Sanders and Warren have come up with viable plans for funding Medicare for all. The neoliberal establishment and the conservatives have been going after Sanders’ approach by raising the specter of-middle class tax increases. Sanders seems to trust that people will understand that if the tax increase is less than what they’re paying now for health care, they’ll come out ahead. One hopes he’s right, but after a four-decade long propaganda campaign against government in general and taxes in particular, it’s an uphill fight.
Both plans have their advantages, but the establishment needs a different tack to take on Warren’s proposal, since she’s taken middle-class tax increases off the table.
A recent op-ed by Megan McArdle in the Washington Post was one of the early assaults, and the others that have followed echo her criticisms in one way or another. Essentially, she claims that Warren’s math works out, but the political and economic assumptions are “ludicrous.”
McArdle has two main problems that she claims make the assumptions in Warren’s proposal ludicrous. First, she says Warren’s estimates for cutting costs under Medicare for All are politically and economically unachievable and second, she says that Warren’s plans for raising revenue are even “… more exquisitely incredible.” Together, she says they are “crazier than keeping a pet rhinoceros.”
Let’s take a moment to make an observation – Did you ever notice that the less substance a pundit has to bring to the debate, the more hyperbole, figures of speech and adverbs and adjectives he or she uses? If you want to see this phenomenon brought to its logical – or illogical -- conclusion, just listen to Trump.
But now to the substance of the arguments, themselves.
The first disagreement Mc Ardle has with Warren is how much can be cut from existing costs. Warren (and most folks who study the issue, as opposed to those pontificating about it) says we can cut nearly a third of the current costs. Uniformed critics scoff at this. But are they right to? No, it turns out.
Private health insurance charges between 12 percent to 18 percent overhead on top of health care costs, and experts suggest it’s about 14.4 on average. Since Medicare cuts overhead to less than 2 percent, there's a savings of 12 percent without even touching current prices or costs.
The US pays twice what Canadians do for pharmaceuticals and three times what the Brits do. Since drugs make up 20 percent of health care costs, that's another 10 to 13 percent cut, bringing our reductions to about 24 percent, and so far, no one in the medical care provider community has suffered a single cut. Essentially, we’re there.
But even if we needed further cuts to make it pencil out, they’re easily achievable.
For example, according to a study by the non-partisan Congressional Budget Office on average, Medicare patients pay about half what those on private insurance pay for hospital admissions, and since hospital care makes up about a third of all health care costs, that means we could cut another 16 percent or so from the costs of hospitalization. CBO found that there were similar saving available from physician compensation. In fact, even if payments to doctors weren’t cut, there are substantial savings available because a single payer approach simplifies billing and cuts administrative costs. One estimate suggests that for every ten doctors providing care, it requires seven additional people doing billing related activities.
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The point is, there’s so much fat in our current system, we could easily cut the 30 percent that Warren proposes cutting, and still have enough to keep a pet rhinoceros – in just about every Americans living room. Nothing ludicrous here.
Now how about Mc Ardle’s criticism of Warren’s plans for raising the remaining revenue needed to fund MFA?
For starters, she claims that the net effect of Warren’s revenue proposals would be that billionaires would be taxed at a rate of 66% -- something that doesn't actually pencil out, but let's give it to her. According to Mc Ardle, this would "destroy" their wealth. Really? The very worst this would do is make someone who’s earning a billion dollars a year into someone who is earning 333 million dollars a year. Oh, the pain! And it’s worth remembering that the top earners were taxed at between 70 and 90 percent in the 50’s and 60’s during the most rapid and equally shared period of economic growth in US history.
But this criticism ignores what we know about the multiplier effect of putting money in the hands of those who are most likely to spend it.
As any economist worth his or her salt will tell you, on net, society-wide, taxing wealth, corporations and the rich doesn’t destroy wealth, it creates it, if it puts more money in the hands of the middle class and the poor. Here's why. Not surprisingly, a consumer economy does best when consumers have and spend money. And the more money that the middle class and the poor have, the higher the proportion of money in the system that gets spent. Billionaires -- or even millionaires -- simply can't spend all their money. There's only so many yachts and jets they can buy. So, the higher the proportion of money in their hands, the less in circulation, and the less economic growth we experience. Oh, and these days, the rich pay a lower percent of their income on taxes than the bottom half of households so the current system isn’t only economically inefficient, it’s morally wrong.
This is why the CBO rated programs that put money in the hands of those who would spend it – the poor and those with limited credit -- as one of the most powerful economic stimuli we have in our fiscal arsenal, and why tax cuts for the rich and corporations have negligible or even negative effect on economic growth.
One other thing ... the financial transaction tax proposed by Warren will also create wealth, although it could have an effect on liquidity. Here's why. Flash trading and rapid churning of securities means companies lack patient capital. Volatility has costs in terms of planning and investing in capital improvements. Applying a transaction tax reduces flash trading and rapid churning of securities and this, too can be good for the economy.
If Ms. McArdle and her fellow critics are serious about their critiques, they’re guilty of having sharp pencils, but dull minds. But one suspects, however, that their criticisms have more to do the other “isms,” such as a blind devotion to capitalism, or an unreasonable fear and loathing of socialism.
Either way, Americans should be neither surprised, nor fooled when corporate shills, those motivated by ideological “isms,” or those on the take from corporations or the ultra-rich attempt to discredit Medicare for All. It’s not about the math; it’s not about the cost to the middle class. It’s about greed, ideology, ignorance or an unholy alliance of all three.
By the way, you know what is ludicrous? The wealthiest country in the world, having 30 million people uninsured, and another 50 million underinsured, paying twice as much for inferior care. Sanders and Warren have both shown we can afford to do better.