Our Deficits and Single-Payor System

Our country is brilliantly based on three independent branches of government (executive, legislature and courts) because a division of power is critical.  The division has been critical to our success because of the fundamental human weakness that power corrupts.

We require a separation of church and state in order to maintain freedom.  Allowing a religion to run our country would undermine the freedoms we cherish, as proven repeatedly in human history -- power corrupts.  Either the person with the power or his/her staff or her/his successor inevitably abuse power.

Likewise, enterprise and government were intended to be separated, but we've been eroding this important distinction.  We need governmnent to monitor enterprises (whether for-profit or non-profit), creating rules that allow a thriving free market with clear disclosures.  When the government runs enterprise, we lack effective monitors because it does not work to put the fox in charge of the henhouse (power corrupts). 

What better proof than Medicare and Social Security?  These programs have consistently been run irresponsibly.  The government requires sound accounting principles from enterprises, but there is no authority that can demand sound accounting from the government. 

President Obama's health care program was touted as being funded on a sound basis, but it:

•  Involved Ponzi-scheme financing, foisting costs on to future generations
• Check-kiting-type of activity, counting money for more than one purpose (i.e., huge amounts of Medicare savings were allocated to cover the cost of the health care program and also counted as reducing the unfunded Medicare liability)
• Ignoring significant administrative costs
• Creating unfunded mandates for states and employers
• Duplicitous claiming of savings that were intended to be reversed (doctor's fees for Medicare services)
• Incorporating totally separate items (like student loans) to make it look as though it was a break-even program.  (That could work if we were not so deep in debt.  But with our great debt, we need to allocate cost savings to reduce the debt and unfunded liabilities.  Applying such savings to new expenditures simply makes it that much harder to fix our financial problems.)

The government trumpeted that it was creating laws to keep the big, bad insurance companies from discriminating against people who are already sick when they apply for insurance.  But, to its credit, the government realized that it, like the insurance companies, could not permit people to get health insurance only when they are sick.  So the government mandated insurance coverage.  This is similar to mandating automobile insurance (but automobile insurance is mandated at the state, not the Federal, level).  Mandating insurance coverage could solve the discimination issue without other government involvement.  If insurance is to be mandated, it would have to be done by a state or federal government because private industtry can't mandate coverage.  That is an example of the government creating rules. (Of course, people differ on whether that was an appropriate rule to create.)

Two articles of interest:
Terry Savage on the Payroll Tax Holiday (see exchange below)
My separate post on the principles of health care funding approaches.  Unfortunately, my efforts to engage our politicians in discussion on these principles over the years was entirely unsuccessful.  They never asked me for writings I offered and never commented on writings that I sent.

Sent: Sunday, February 19, 2012 10:27 PM
To: Terry Savage

Dear Terry,

Excellent article!   Here are some thoughts beyond what you wrote:

1.     Not only is the accounting circular (transfers from the general account to OASDI, then reinvested back into the general fund), but the payroll tax waiver will probably NOT be recorded as increasing our published deficit.  That’s because OASDI is an off-ledger account.  What a great way to do business – spend money but don’t report it as a deficit.

2.     The OASDI and Medicare under-funding is grossly understated even by watchdog web-sites because of the “75-year cliff” accounting that is used.

3.     Weren’t reduced Medicare fees for doctors a significant element of the funding of PPACA?  The accounting for that bill was so duplicitous, extending beyond Ponzi schemes to the equivalent of check-kiting.

4.     With the huge debt we have, especially in off-ledger items, savings, particularly in those programs, must be used to reduce those deficits.  Even when the politicians tell us that they have found savings that offset their expenditures, they are digging our holes deeper because they are removing some of the ways we could extricate ourselves from this mess.  Once those savings are spent on something else, how do we solve the problems?

5.     Their efforts are changing the nature of Social Security and Medicare and exposing the reality of those programs:

a.     Analysis has traditionally been inconsistent as to whether these “payroll taxes” have been included in analyzing the income tax burden and comparing the burden for different economic strata.

b.    It is becoming more obvious that these programs consist of:

                                  i.    Forced savings for the less-affluent, with the politicians’ intent to buy their votes by returning more money to them than their contributions justify

                                 ii.    A hidden income tax on the more affluent.

1.     People with more income have paid a lot more Medicare tax (because it is proportionate to income and because business owners have paid half the cost), but do they consume proportionately more services?  They also pay a lot higher Medicare Part B premiums, although they don’t consume proportionately more services.

2.     Now the Medicare tax is being increased to a higher rate for the affluent.

3.     The portion of Social Security being paid by employers has been increased, by breaching the 50/50 rule, creating a mischievous precedent.

4.     Social Security’s cap on income that is exposed to the tax is also likely to be raised “out of fairness”

6.     You noted that the Unemployment Extension and the doctors’ fees do not create jobs or ease taxes.  I think it is unlikely that the payroll tax waiver will create many jobs.  There appears to be NOTHING in this bill regarding job creation.  Perhaps you disagree because you seemed to limit your jobs comments to the other provisions.

7.     By the way, I think few young people really understand or care about what is being done to them.  I have found it very hard to arouse their indignation on such topics.

Thanks for your efforts and best wishes,

Claude Thau

From: Terry Savage [mailto:Terry@TerrySavage.com]
Sent: Saturday, February 25, 2012 9:19 AM
To: Claude Thau 

Claude -- THANK YOU for your incredible analysis of the situation.  And you are truly watching this with an eagle eye.  Yes, you caught my slight diversion re the impact of this bill.  That's because I want people to read - -and if you start talking about the benefits of tax cuts in creating growth, half my audience automatically shuts down.  Since this SS mess impacts EVERYONE -- from young to old, from poor to wealthy, I want them to focus on this "game" being played by both parties in Washington.  I think that's the only way to get Americans to unite to force the politicians to be "honest" -- Gosh, had to put that in quotes!  Is honesty that tough??

Thanks again for your comments.  I think I'll copy my bosses on this one!  Terry

Terry Savage