Paying less in taxes excuses paying more out of pocket?

Monday, June 13th, 2011 @ 1:19 pm | Clueless Conservatives, Deficit, Health Care

Andrew Sullivan and his readers have been speculating about the precise moment where America became a decadent nation. The Lewinsky impeachment hubbub, Bush vs. Gore, torture legalized, etc. have all popped up. Let me nominate one, as much as I was happy with the result: “Read my lips: No new taxes.”

Now Bush I got rightly cornholed for getting caught violating a very explicit campaign promise. Except two things: He shouldn’t have made such an irresponsible promise, and the anger directed at him over lying to the public was transmutated into a dogmatic commandment on the far right that spread throughout the entire Republican party that taxes must never be raised, and whenever possible should be lowered ever further.

Today? Massive deficit spending because our political establishment has lost all will to adjust tax rates in any direction but down, while demand for government services remains the same or larger.

Republicans dogma constructs this as some kind of moral failure, where poor scumsuckers siphon off the wealthy heroes of capitalism to provide for them. All increased spending is intrinsically bad, while all lowered taxes are intrinsically good. Moral certitude has replaced accounting.

Yet health care spending is something nobody can get away from, and so it makes no sense to make a moral distinction between health care paid for with taxes vs. health care paid for with private dollars. Almost everybody, even the well off, pays for their healthcare out of a collective insurance program, whether private or public. The question is, which is a better use of the money?

The idea of Medicare as a money-saving program may seem hard to grasp. After all, hasn’t Medicare spending risen dramatically over time? Yes, it has: adjusting for overall inflation, Medicare spending per beneficiary rose more than 400 percent from 1969 to 2009.

But inflation-adjusted premiums on private health insurance rose more than 700 percent over the same period. So while it’s true that Medicare has done an inadequate job of controlling costs, the private sector has done much worse. And if we deny Medicare to 65- and 66-year-olds, we’ll be forcing them to get private insurance — if they can — that will cost much more than it would have cost to provide the same coverage through Medicare.

By the way, we have direct evidence about the higher costs of private insurance via the Medicare Advantage program, which allows Medicare beneficiaries to get their coverage through the private sector. This was supposed to save money; in fact, the program costs taxpayers substantially more per beneficiary than traditional Medicare.

Krugman nods to Bruce Bartlett, who notes that Americans have lower taxes but most of the benefit is really due to health insurance costs being handled privately. The article contains a lot of numbers, but this stood out:

The impact on the tax burden can be dramatic if one views family allowances as negative taxes. For example, in Luxembourg, an average married worker with two children pays a nominal income tax rate of 16.5 percent (including state and local income taxes), while an American in the same situation would pay 5.2 percent. But once family allowances are subtracted from the Luxembourg worker’s income-tax payment, the effective tax rate falls to just nine-tenths of 1 percent.

More importantly, almost every other country has some form of national health insurance that covers, on average, 72 percent of all health costs. The comparable figure in the United States is 46.5 percent, and almost all of that is accounted for by Medicare and Medicaid, which largely benefit the elderly and the poor.

Average American workers must pay for health care out of their pockets, or through their employers in the form of lower wages. Europeans prefer to pay higher taxes and get government health care for every resident in return.

Conservatives universally believe that whenever the government provides a service it will be vastly more costly than if the private sector does so. This is why they support the plan offered by Representative Paul D. Ryan, Republican of Wisconsin and chairman of the House Budget Committee, to essentially privatize Medicare. Conservatives believe competition will drive down health costs for the elderly.

But O.E.C.D. data show that Americans pay vastly more for health care than the residents of any other major country. In 2008, we paid 16 percent of G.D.P. in total health care costs, public and private combined. The people with the next heaviest health care burden were the French, who paid 11.2 percent of G.D.P. Indeed, at 7.4 percent of G.D.P., the governmental share of health spending in the United States is about the same as total health care costs in many other countries, including (as a percentage of G.D.P.) Luxembourg (6.8 percent), Israel (7.8 percent), Japan (8.1 percent), Britain (8.4 percent) and Norway (8.5 percent).

Indeed, the American experience in the last decade is best summed up as: Hey, nice tax cut! Hey, my health care costs doubled! Hey, I got fired and have a crappy job with no health insurance!

Americans are paying through the nose for health care. Why should they be happy to pay more in premiums than they would in taxes? Or pay the ultimate price by not being able to afford health care at all?

Are taxes inherently evil? Of course not. You’re either getting your money’s worth or you’re not, and few people have the luxury of feeling better about paying more just because it’s going to Aetna and not Uncle Sam.

-hw

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