"Medicare For All" and Free College Tuition: What’s Next, Government-Paid Vacations?

November 13, 2018

Do you think the US government has unlimited resources? Elected members of congress who belong to the Democratic Socialist Party do. The two latest government entitlements being proposed by the Socialist wing of the Democrat Party will increase overall federal spending by at least $3.2T. These two entitlements are “Medicare for all” and free tuition at public colleges and universities. These two new giveaways would be in addition to the eighty plus entitlement programs currently in place. To put this number in context, $3.2T is roughly the total amount of all taxes collected by the federal government. The rest of the $4.4T federal budget is borrowed. This $3.2T price tag would result in a 73% increase in overall government spending.

Hardly a word has been spoken by Senator Sanders, and his merry band of budget busting socialists, as to how they plan to pay for all this government largess. These socialists are nothing if not very good at coming up with ways to take your hard-earned money away from you. They’re also very good at giving it to other people. There are multiple options available to the left to fund these new entitlements. In addition to the usual suspects of higher individual and corporate income taxes, these Socialists are also planning to impose a carbon tax, which is a tax on energy, a new tax on all sales of financial instruments such as stocks and bonds, and also a value added tax (VAT), which is a national sales tax. What’s next, a toilet paper tax?

According to the Tax Foundation, total government revenue from both individual and corporate income taxes was $2.274T. It is estimated that collections for these same taxes in 2018 will be $2.427T. This would be an increase of 6.7% despite the fact that President Trump’s tax reform bill lowered tax rates across the board. This increase in government revenue would not be enough to cover even a small down payment on the $3.2T needed to fund this proposed new entitlement. That said, in order to even consider spending an additional $3.2T, income tax rates would need to rise significantly. Use taxes like those mentioned above would also have to be imposed.

We all know that the favorite targets of the left are those “greedy” corporations and also those “penny-pinching” one-percenters. According to those on the left, those two groups never ever pay their fair share. The problem, as I see it, is that people like Bernie Sanders never define just exactly what the amount of that fair share is. Well, after spending countless hours in the lotus position, meditating, I became enlightened. The answer came to me in a meditative trance. The definition of “fair share,” according to liberals, is whatever they say it is. It’s so simple, I’m surprised I didn’t think of it sooner.

During my research, I came across a very relevant piece of information. It is simply that 40% of all personal income taxes are paid by the one-percenters. The other 60% are paid by the remaining 99% of taxpayers. Does that sound like a “fair share” to you?

As I wrote above, the government would need a massive increase in tax revenue, from multiple sources, to fund these government giveaways. One of the areas that would be targeted by the left would be corporate and individual income taxes. In order to generate sufficient revenue these increases would approach levels that, in this country, would be considered confiscatory. This would make Nancy Pelosi very happy. She would get her crumbs back.

A tax on energy is also being considered. This tax would be levied on every gallon of fuel and every kilowatt hour of electricity sold in the US. Every person, rich or poor, and every business entity would be taxed. This type of tax is a regressive tax. This means that it would negatively affect lower income families more than those in middle income and higher income households.

Another tax that was mentioned to help pay for these new programs is a tax on financial instruments sold in the US. These would include shares of stock, debt instruments, and derivatives. This type of tax was proposed by the state of New York and I believe also by New York City some years back. Rather than submit to being bled by these government entities, the stock exchanges in question threatened to move their facilities across the river to Jersey City, New Jersey. Such a move would have devastated the financial district in New York. A significant number of high paying jobs would also have moved to New Jersey, resulting in the loss of a substantial amount of tax revenue. Rather than suffer the loss of this tax revenue, not to mention the political backlash and bad press (back then the press was bipartisan), the government acquiesced.

If this tax on financial instruments was passed, it would be a national tax. This being the case, moving to Jersey City wouldn’t cut it. Our stock exchanges would most likely relocate to London. There is already a large financial community in London so my feeling is that American stock exchanges would adapt quickly to their new surroundings. With the internet and the speed at which information is able to travel worldwide, I would anticipate a very smooth transition.

The value added tax (VAT) is just another name for a national sales tax. Isn’t it amazing how many different taxes these Socialists are able to propose? Thank God we have people like Bernie Sanders and his ilk to tell us how to spend our money. What would we do without them? We would have more money in our pockets, that’s what. The unintended consequences of this tax, as with other taxes, are less money in the pockets of consumers, resulting in less spending, and less economic growth, which would result in less jobs. If there are less jobs, there would also be less upward pressure on wages and salaries.

In addition to raising taxes, there are other options open to the left to fund these new entitlements. The worst of these was suggested by the new darling of the left, Alexandria Ocasio-Cortez. Her idea was to cut the defense budget and also funding for Homeland Security. I was shocked when I heard this nonsense come out of her mouth. This woman has degrees in economics and international affairs. You would think that someone with a background in these areas would know better than to suggest that we lower our defenses given the very dangerous world in which we live. In my opinion, it shows a very poor understanding of the dangers which we currently face from every corner of the world. These threats are military, economic, and cyber in nature.

For example, the Chinese are expanding and improving their military every year. They are doing this for one reason: to become a military superpower and to challenge the US for military supremacy on the world stage. Until recently their military was confined to the Western Pacific. They have now begun to open military bases in other areas of the world. During the eight years of the Obama Administration, the US sat on its hands waiting for these problems to resolve themselves. That never happened.

To give you an example of just how dire our situation is, the Joint Chiefs just recently made public a report that stated flatly that if we were to engage the Chinese in a military conflict, the possibility exists that we could lose. This is what happens when our elected officials choose not to properly fund our military. Not only does Congress need to stop neglecting our military, it needs to actually start rebuilding it.

In addition to China, which is our main threat and largest adversary, we are also facing threats from Russia, Iran, and North Korea. We are also confronting terrorism on several different fronts. With all that we are thus asking of our military, it seems that we should at least be able to provide sufficient funding for them to carry out their mission. Cutting defense spending and lowering our guard would be suicide.

There are a couple of very large negatives that are inherent in single-payer healthcare which is exactly what “Medicare for all” is. It is also socialized medicine. One problem is the cost. It is more than double the cost of Medicare and Medicaid combined. According to Barack Obama, there were 30 million people who were without health care insurance. That means that roughly 290 million Americans were covered by health insurance. Why would the US want to spend $3.2T to cover the health care costs of 30 million people?

Another issue that should be discussed is the negative effect Medicare for all would have on the economy. Taxes will have to be raised substantially to pay for this $3.2T debacle. The massive increase in taxes would take money, lots of money, out of people’s pockets. Because consumers will have less money to spend, consumer demand will decrease. If consumer demand decreases, economic growth will decrease. Less economic growth means less jobs and less government revenue. If there is less government revenue, there will be more borrowing and higher deficits. Higher deficits means a larger national debt. As we will probably never be able to pay for the debt that we currently owe, it makes no sense to plunge the country deeper into debt.

 In addition to the problems stated above, the main problem with “Medicare for all” will be that the quality of healthcare will deteriorate and eventually become sub-standard. There are a couple of reasons for this. First of all, healthcare providers are currently reimbursed for their services by the federal government in the form of Medicare and Medicaid payments. They are also reimbursed by private insurance companies. These private insurance companies reimburse healthcare providers at a higher rate than the federal government. If not for these private health insurance companies paying claims at this higher rate, the government could reimburse healthcare providers at an even lower rate. The only reason that this is not done is because of competition from these private insurance companies. Private insurance companies pay these higher rates because they want healthcare providers to accept their insurance, which means they have to compete with other insurance companies and with the federal government. If the federal government were to reduce reimbursement rates too low, healthcare providers would stop accepting Medicare patients—making Medicare insurance useless.

If Medicare for all were to be implemented, all private health insurance companies would be put out of business. The entire country would be reduced to only one choice, and that would be government-run single-payer healthcare. In other words, government-funded healthcare would be the only game in town. If this situation were to occur, the government could set reimbursement rates as low as they want with no threat from competitors. This monopoly would make it more difficult for health providers to be financially viable. This, in turn, would cause at least some of these providers to discontinue being in business.

Another consequence of single-payer healthcare is that pay scales for healthcare professionals would decline. This would deter individuals from pursuing careers in the healthcare field. This would happen because the financial reward for entering the healthcare field would not be sufficient to warrant the massive investment needed for college and medical school. Over time there would be less and less medical professionals to care for more and more patients. Eventually, we would have a situation similar to that of England where it was reported just recently that there were about 5 million people waiting for appointments or medical treatment. In addition to the situation in England, I have personal knowledge of similar problems in Canada. There are obviously a lot more people here in the US than there are in England, which means that there would be a much larger problem here.

The next issue I have with “Medicare for all” will be of particular interest to seniors. The problem as I see it is that if this new single-payer healthcare system were to be implemented, Medicare as we know it would be eliminated. All the money that the working citizens of this country have contributed to this fund over their working careers will be taken away and not be used exclusively for seniors. The Medicare program will be defunded and it will be virtually impossible to ever reinstate the program. Medicare will be dead.

My final problem with this new government giveaway goes to finances. What would happen if the economy were to contract and we went into a recession? How would the country cover the $3.2T expense? The short answer is that we would borrow it. We may not have to borrow it all bur there could be a significant shortfall. We’re already $22T in debt. We are already running deficits of $750B or more every year. It would be a huge mistake to add to those deficits, maybe our final one.

The other government giveaway that Senator Sanders and his merry band of Socialists are pushing is free tuition at all public colleges and universities. Cost estimates for this program range from $50B to $75B per year. Here again taxes would need to be raised or the amount of the benefit would have to be borrowed. We don’t need more debt. My suggestion is to let the states cover the cost of this tuition for their students. If taxpayers in those states are willing to fund this program, let them do it. The federal government already has enough debt and enough interest expense on that debt.

There’s an old adage that says, and I’m paraphrasing, “Those who do not study history, are doomed to repeat it.” It’s been about 100 years since the first socialist/communist state was formed. That was Russia. Since then, there have been many others. Many of them have been overthrown and new free and more capitalist societies have emerged. Those that remain are economic and political disasters. Let me name just a few of my all-time favorites. The first two are located right in the western hemisphere. Of course, I’m talking about those bastions of civil rights and economic opportunity: Cuba and Venezuela. Venezuela, which has some of the largest oil reserves in the world, is doing so well that its citizens are slaughtering zoo animals to feed their families. In addition to that, the country is experiencing an inflation rate of one million percent. It doesn’t get any better than that. The Cuban people are not faring much better. For years the government of Venezuela, led by Hugo Chavez and now Nicholas Maduro, supported the government of Cuba. Venezuela has since fallen on hard times and is no longer able to help Cuba financially. Life in Cuba has become a struggle but they have free tuition and healthcare. Well, at least it’s not all bad.

Another one of the great people’s republics of the world is North Korea. In this country there’s not a lot to eat so many people just die young. The good news is that Chairman Kim is obviously not missing any meals and neither is his large military. I guess when you have dangerous enemies like Japan and South Korea, you have to be prepared. It’s better that thousands of your citizens should starve to death than to have your military be unprepared to repel invaders. Really? 

Finally, there is China, the largest country in the world and our most dangerous adversary. China is more of a hybrid economy. It makes its money by employing capitalism and then distributing its funds using a government-controlled socialist system. For the most part, the citizens of these countries are not treated particularly well. Here again, they probably get free healthcare and free tuition but who cares—they have no freedom. I’ll pass.

The United States is flirting with disaster. The more entitlements that taxpayers are forced to pay for, the faster we will approach fiscal ruin. Our current budget for FY 2019 is roughly $4.4T with a deficit of $985B. We are borrowing almost 25% of our yearly budget. This is really dumb. With interest expense on our national debt growing every year, annual deficits will only go up. If interest rates continue to rise, interest on our debt could reach $1.1T per year by the year 2029. Other things being equal, our yearly deficits will reach at least $2T per year by then. By the way, this does not include any of the new entitlements proposed by Senator Sanders. The $2T deficit is without any new entitlements. The only way some of our elected officials can get reelected is by promising their voters “free stuff.” These people have nothing else to offer. They are political animals. They bring nothing to the table because they are devoid of creative thought and therefore unable to solve the serious problems that our country is facing. In some cases, they are unable to even discuss these issues intelligently. If the country continues down this path, the country and its citizens will pay a horrific price.

The two giveaways discussed in this post are neither the last of the proposed giveaways nor the largest. There has been talk from some of the potential 2020 presidential candidates of the Democrat Party proposing Universal Basic Income. As originally discussed, it would give tax-free money to every man, woman, and child who is a citizen of the United States. My feeling is that it will be modified so that only those in lower income brackets would receive these benefits. Even with this modified version, the program will still cost taxpayers at least $1.5T and probably much more. There are no offsets associated with this program. The cost of this program, along with the two programs mentioned above, would more than double the amount of federal spending. It would bankrupt the country. In my opinion, this would be the final nail in the coffin. 

I’m going to leave my bleeding heart, liberal/socialist friends with this parting thought. What will happen to all these illegals that you want to let into our country when the government runs out of money? The answer is that they will probably return to where they came from. Government handouts will no longer be forthcoming and jobs will probably be scarce. You left-wingers will have succeeded in doing what Donald Trump had promised to do, which was to stop illegal immigration. I guess it’s better late than never. It would be better to do this without having to go bankrupt first.