The administration’s chaotic reversals on Obamacare could deprive millions of coverage.
Meanwhile, the administration’s latest budget, released in mid-March, stands behind legislation known as “Graham-Cassidy,” which was pushed by Republicans in 2017 but never won enough support to be brought to a vote.
The Trojan horse of health care reform, the proposal provides for relatively small initial cuts in federal funding and then huge reductions starting in 2027.
According to a Brookings Institution report, Graham-Cassidy would cost 32 million Americans their health insurance by 2027, just as full repeal would. That’s Donald Trump’s idea of a “beautiful,” “terrific” and “unbelievable” health care plan.
.. The administration’s recent decision to submit a brief in a Texas case asking the court to declare all of Obamacare unconstitutional was well publicized.
Slipping by almost unnoticed was Mr. Trump’s instruction last June to the Justice Department, which was defending the A.C.A., to argue instead that certain key provisions — notably, the requirement that Americans with pre-existing conditions be treated equally — be declared unconstitutional.
A win by Mr. Trump in this case could mean that nearly 20 million Americans would lose insurance, according to the Urban Institute.
Their incomes are flat. Their wealth is down. And Washington is aggravating future threats.
For Americans under the age of 40, the 21st century has resembled one long recession.
I realize that may sound like an exaggeration, given that the economy has now been growing for almost a decade. But the truth is that younger Americans have not benefited much.
Look at incomes, for starters. People between the ages of 25 and 34 were earning slightly less in 2017 than people in that same age group had been in 2000:
The wealth trends look even worse. Since the century’s start, median net worth has plummeted for every age group under 55:
.. Why is this happening? The main reason is a lack of economic dynamism. Not as many new companies have been forming since 2000 — for reasons that experts don’t totally understand — and existing companies have been expanding at a slower rate. (The pace of job cuts has also fallen, which is why the unemployment rate has stayed low.) Rather than starting new projects, companies are sitting on big piles of cash or distributing it to their shareholders.
This loss of dynamism hurts millennials and the younger Generation Z, even as baby boomers are often doing O.K. Because the layoff rate has declined since 2000, most older workers have been able to hold on to their jobs. For those who are retired, their income — through a combination of Social Security and 401(k)’s — still outpaces inflation on average.
But many younger workers are struggling to launch themselves into good-paying careers. They then lack the money to buy a first home or begin investing in the stock market. Yes, older workers face their own challenges, like age discrimination. Over all, though, the generational gap in both income and wealth is growing.
Given these trends, you’d think the government would be trying to help the young. But it’s not. If anything, federal and state policy is going in the other direction. Medicare and Social Security have been spared from cuts. Programs that benefit younger workers and families have not.
.. The biggest example is higher education. Over the past decade, states have cut college funding by an average of 16 percent per student. It’s a shocking form of economic myopia. In response, tuition has risen, and students have taken on more debt. Worst of all, many students attend colleges with high dropout rates and end up with debt but no degree.
And as badly as the government is treating the young today, the future looks even more ominous.
First, the national debt, while manageable now, is on pace to soar. The primary cause is the cost of health care: Most Americans receive far more in Medicare benefits than they paid in Medicare taxes. The Trump tax cut also plays a role. It is increasing the debt — and it mostly benefits older, affluent households.
A few Republicans have managed—really—to work successfully with the president. Here’s what the new speaker could learn from them.
But there’s no formula for successfully negotiating with this mercurial, ad hoc chief executive. Pelosi’s first attempt to do so, an agreement in September 2017 to protect the Dreamers from deportation in exchange for border security funding, fell apart not long after it was announced.
Still, there’s no reason to think Pelosi, or anyone in the nation’s capital, can’t find a way to a win with Trump. Here’s what we’ve learned about the art of making a deal with Trump from the few successful people in Washington who have figured out how to get what they want out of the president.
Convince Him He’ll Be Loved
Trump may want nothing more than to be well-liked and appreciated. The bipartisan criminal justice reform bill seems to have been sold to him as an opportunity to do just that. Versions of the First Step Act, a major reform that liberalizes federal prison and sentencing laws, had floundered in Congress for years. The policy already had support from across the political spectrum—but it needed a Republican president who could provide political cover to bring enough members of the GOP on board.
Trump wasn’t an obvious champion for sentencing reform. He ran a campaign promising “law and order” and selected the tough-on-crime Jeff Sessions as attorney general. Sessions’ Justice Department had issued reports critical of the bill. The president has suggested that convicted drug dealers deserved the death penalty. To get his support, the criminal-justice reformers would need to conduct a conversion.
The evangelist was White House adviser Jared Kushner, who, all accounts say, worked hard to persuade his father-in-law. Kushner met with everyone from members of the Congressional Black Caucus to Koch-funded interest groups to the news media to bolster an already large coalition. It helped that Kushner was able to deliver plenty of groups and individuals on the right.
“I think the broad popularity of the policy was the gateway,” says one of the bill’s advocates, who watched the process at the White House up close. “The president was also given a booklet of dozens of conservative organizations and individuals making supportive statements on the bill to show grassroots political support. And then it took some convincing that law enforcement was on board.”
The last piece proved crucial, because there’s perhaps no interest group Trump cherishes more than law enforcement. The marquee names—the
- Fraternal Order of Police, the
- International Association of Chiefs of Police, the
- National District Attorneys Association—
were enough to get the president on board. With seemingly few people opposed (Tom Cotton, otherwise a devoted Trump ally, the most prominent) and even staunch critics in the media like Van Jones making the trek to kiss Trump’s ring at the White House, Kushner and his partners succeeded in selling Trump on the most important provision of the First Step Act: Mr. President, you will be loved for signing it.
It won’t be easy for Pelosi, but the Democratic speaker may be able to use similar tactics to goad Trump into supporting some bipartisan health-care initiatives. The administration has already begun proposing some form of federal intervention to lower prescription drug prices, while Democrats have long argued that Medicare should negotiate with Big Pharma on bringing down drug costs. Some kind of compromise bill could get the support of both Capitol Hill and the White House. Your older, Medicare-using base will love you for it, Pelosi might tell the president. That would get his attention.
Remind Him of His Campaign Promises
Earlier this month, Trump and Kentucky Senator Rand Paul were having one of their frequent conversations about the American military presence in both Syria and Afghanistan. Paul, a persistent, longtime critic of the continued deployment of troops in the Middle East, has found the strongest ally of his political career on the issue with Trump.
After their discussion, Paul sent the president some news articles supporting his view that the time was right to withdraw from Syria, says top Paul aide Doug Stafford, who says Trump sent back a note alerting him that he would “see some movement on this soon.” On December 19, Trump announced the forthcoming withdrawal of the roughly 2,000 U.S. troops fighting ISIS in Syria. The move was resisted by just about everyone around Trump, inside and outside the administration, including John Bolton, Jim Mattis and Lindsey Graham. All, except Paul.
“I think people mistake it like Rand is trying to get him to do what Rand wants. But this is what Donald Trump ran on,” says Stafford. “Rand sees his role more as keeping the president where he wants to be and where he said he would be against some people who are inside of the White House and other senators who are trying to push him off of his beliefs and his position.”
After Democrats lost the 2016 presidential election, a certain conventional wisdom congealed within the pundit class: Donald Trump’s success was owed to the Democratic abandonment of the white working class and the party’s emphasis on identity politics. By failing to emphasize a strong economic message, the thinking went, the party had ceded the election to Trump... the meantime, Trump’s administration has seen that economic message almost entirely subsumed by the focus of congressional Republicans on tax cuts for the wealthy and plans to shrink the social safety net. But even as the message has shifted, there hasn’t been a corresponding erosion in Trump’s support. The economics were never the point. The cruelty was the point... Nevertheless, among those who claim to oppose identity politics, the term is applied exclusively to efforts by historically marginalized constituencies to claim rights others already possess... Trump’s campaign, with its emphasis on state violence against religious and ethnic minorities—Muslim bans, mass deportations, “nationwide stop-and-frisk”—does not count under this definition, but left-wing opposition to discriminatory state violence does... A November panel at the right-wing Heritage Foundation on the threat posed by “identity politics,” with no apparent irony, will feature an all-white panel... But the entire closing argument of the Republican Party in the 2018 midterm elections is a naked appeal to identity politics—a politics based in appeals to the loathing of, or membership in, a particular group. The GOP’s plan to slash the welfare state in order to make room for more high-income tax cuts is unpopular among the public at large. In order to preserve their congressional majority, Republicans have taken to misleading voters by insisting that they oppose cuts or changes to popular social insurance programs, while stoking fears about
- Latino immigrants,
- Muslim terrorists, and
- black criminality.
.. In truth, without that deception, identity politics is all the Trump-era Republican Party has.
.. Trump considers the media “the enemy of the people” only when it successfully undermines his falsehoods; at all other times, it is a force multiplier, obeying his attempts to shift topics of conversation from substantive policy matters to racial scaremongering.
.. The tenets of objectivity by which American journalists largely abide hold that reporters may not pass judgment on the morality of certain political tactics, only on their effectiveness. It’s a principle that unintentionally rewards immorality by turning questions of right and wrong into debates over whether a particular tactic will help win an election... In the closing weeks of the campaign, the president has promised a nonexistent tax cut to the middle class after two years in which unified Republican control of government produced only a windfall for the rich.. Trump’s nativism, and the Republican Party’s traditional hostility to government intervention on behalf of the poor, have had a happier marriage than some might have expected.
.. But that wasn’t what Trump promised—rather, his 2016 campaign pledged both generous social-insurance benefits for working-class white Republicans and cruelty for undeserving nonwhites.
.. Republicans are scrambling to insist that they will cut taxes on the middle class, offer robust health-care protections, and protect Medicare, Medicaid, and Social Security, even as GOP leaders in Congress plot to slash all three to cut the deficit created by their upper-income tax cuts.
.. When armed agents of the state gun down innocent people in the street, when the president attempts to ban people from entering the U.S. based on their faith, or when the administration shatters immigrant families, these are burdens that religious and ethnic minorities must bear silently as the price of their presence in the United States.
And in the impoverished moral imagination of Trumpist political discourse, any and all white Americans who also oppose such things must be doing so insincerely in an effort to seek approval.
.. America is not, strictly speaking, a center-right or center-left nation. Rather, it remains the nation of the Dixiecrats, in which the majority’s desire for equal opportunity and a robust welfare state is mediated by the addiction of a large chunk of the polity to racial hierarchy. It is no coincidence that the Democratic Party’s dominant period in American history coincided with its representation of both warring impulses and ended when it chose one over the other. The midterms offer a similar choice for the American voter, in rather stark terms.
The next big change came in 1992 with the nomination and election of Bill Clinton. His moderate platform was similar to his peers’, but his political style was a departure. The concept of a permanent campaign came to the White House. Every move was measured against its short-term political value to the president. The Clinton team launched personal attacks against policy dissenters and against women who brought charges of sexual misconduct against the president. In 1996, Mr. Clinton accused Republican nominee Bob Dole of “trying to destroy Social Security and Medicare” through his support of a bipartisan entitlement-reform effort Mr. Clinton himself had previously praised. By 2001, when Mr. Clinton left the scene, say-anything attack politics had become the normal order of the day in the Democratic Party.
President Obama brought hope of a more tolerant, less deeply partisan politics. But he was surrounded by Clinton alumni who, for the most part, kept on as before. His signature legislation, the Affordable Care Act, was introduced and passed only by Democrats—a sharp contrast to the bipartisan approaches taken by Johnson with his Medicare and Medicaid proposals, and by Ted Kennedy with his Medicare prescription-drug legislation. To pass ObamaCare, the White House and its allies launched a full-court press against all House Democrats, including moderates with doubts about its cost and coverage. The legislation passed narrowly, but 63 House Democrats lost their seats in the 2010 midterm elections. That left the body sharply divided between Republican and Democratic partisans, stalling the administration’s legislative agenda for the remaining six years of Mr. Obama’s presidency.
The advocates of tax cuts are relentless, even fanatical. An indication of the movement’s fervor — and of its political power — came during the Iraq war. War is expensive and is almost always accompanied by tax increases. But not in 2003. ”Nothing is more important in the face of a war,” declared Tom DeLay, the House majority leader, ”than cutting taxes.” And sure enough, taxes were cut, not just in a time of war but also in the face of record budget deficits. Nor will it be easy to reverse those tax cuts: the tax-cut movement has convinced many Americans — like Tinsley — that everybody still pays far too much in taxes.
.. A result of the tax-cut crusade is that there is now a fundamental mismatch between the benefits Americans expect to receive from the government and the revenues government collect. This mismatch is already having profound effects at the state and local levels: teachers and policemen are being laid off and children are being denied health insurance. The federal government can mask its problems for a while, by running huge budget deficits, but it, too, will eventually have to decide whether to cut services or raise taxes. And we are not talking about minor policy adjustments. If taxes stay as low as they are now, government as we know it cannot be maintained. In particular, Social Security will have to become far less generous; Medicare will no longer be able to guarantee comprehensive medical care to older Americans; Medicaid will no longer provide basic medical care to the poor.
.. The reason Tinsley’s comic strip about the angry taxpayer caught my eye was, of course, that the numbers were all wrong. Very few Americans pay as much as 50 percent of their income in taxes; on average, families near the middle of the income distribution pay only about half that percentage in federal, state and local taxes combined.
.. In fact, though most Americans feel that they pay too much in taxes, they get off quite lightly compared with the citizens of other advanced countries. Furthermore, for most Americans tax rates probably haven’t risen for a generation. And a few Americans — namely those with high incomes — face much lower taxes than they did a generation ago.
.. In the United States, all taxes — federal, state and local — reached a peak of 29.6 percent of G.D.P. in 2000. That number was, however, swollen by taxes on capital gains during the stock-market bubble.
By 2002, the tax take was down to 26.3 percent of G.D.P., and all indications are that it will be lower still this year and next.
This is a low number compared with almost every other advanced country. In 1999, Canada collected 38.2 percent of G.D.P. in taxes, France collected 45.8 percent and Sweden, 52.2 percent.
.. Meanwhile, wealthy Americans have seen a sharp drop in their tax burden. The top tax rate — the income-tax rate on the highest bracket — is now 35 percent, half what it was in the 1970’s. With the exception of a brief period between 1988 and 1993, that’s the lowest rate since 1932. Other taxes that, directly or indirectly, bear mainly on the very affluent have also been cut sharply. The effective tax rate on corporate profits has been cut in half since the 1960’s. The 2001 tax cut phases out the inheritance tax, which is overwhelmingly a tax on the very wealthy: in 1999, only 2 percent of estates paid any tax, and half the tax was paid by only 3,300 estates worth more than $5 million. The 2003 tax act sharply cuts taxes on dividend income, another boon to the very well off. By the time the Bush tax cuts have taken full effect, people with really high incomes will face their lowest average tax rate since the Hoover administration.
.. Yet a significant number of Americans rage against taxes, and the party that controls all three branches of the federal government has made tax cuts its supreme priority. Why?
3. Supply-Siders, Starve-the-Beasters and Lucky Duckies
It is often hard to pin down what antitax crusaders are trying to achieve. The reason is not, or not only, that they are disingenuous about their motives — though as we will see, disingenuity has become a hallmark of the movement in recent years. Rather, the fuzziness comes from the fact that today’s antitax movement moves back and forth between two doctrines. Both doctrines favor the same thing: big tax cuts for people with high incomes. But they favor it for different reasons.
One of those doctrines has become famous under the name ”supply-side economics.” It’s the view that the government can cut taxes without severe cuts in public spending. The other doctrine is often referred to as ”starving the beast,” a phrase coined by David Stockman, Ronald Reagan’s budget director. It’s the view that taxes should be cut precisely in order to force severe cuts in public spending. Supply-side economics is the friendly, attractive face of the tax-cut movement. But starve-the-beast is where the power lies.
.. So the standard view of economists is that if you want to reduce the burden of taxes, you must explain what government programs you want to cut as part of the deal. There’s no free lunch.
What the supply-siders argued, however, was that there was a free lunch. Cutting marginal rates, they insisted, would lead to such a large increase in gross domestic product that it wouldn’t be necessary to come up with offsetting spending cuts.
.. The other camp in the tax-cut crusade actually welcomes the revenue losses from tax cuts. Its most visible spokesman today is Grover Norquist, president of Americans for Tax Reform, who once told National Public Radio: ”I don’t want to abolish government. I simply want to reduce it to the size where I can drag it into the bathroom and drown it in the bathtub.” And the way to get it down to that size is to starve it of revenue. ”The goal is reducing the size and scope of government by draining its lifeblood,” Norquist told U.S. News & World Report.
.. Edwin Feulner, the foundation’s president, uses ”New Deal” and ”Great Society” as terms of abuse, implying that he and his organization want to do away with the institutions Franklin Roosevelt and Lyndon Johnson created. That means Social Security, Medicare, Medicaid — most of what gives citizens of the United States a safety net against economic misfortune.
.. The starve-the-beast doctrine is now firmly within the conservative mainstream. George W. Bush himself seemed to endorse the doctrine as the budget surplus evaporated: in August 2001 he called the disappearing surplus ”incredibly positive news” because it would put Congress in a ”fiscal straitjacket.”
.. to starve the beast, you must not only deny funds to the government; you must make voters hate the government. There’s a danger that working-class families might see government as their friend: because their incomes are low, they don’t pay much in taxes, while they benefit from public spending. So in starving the beast, you must take care not to cut taxes on these ”lucky duckies.” (Yes, that’s what The Wall Street Journal called them in a famous editorial.) In fact, if possible, you must raise taxes on working-class Americans in order, as The Journal said, to get their ”blood boiling with tax rage.”
.. The supply-side movement likes to present itself as a school of economic thought like Keynesianism or monetarism — that is, as a set of scholarly ideas that made their way, as such ideas do, into political discussion. But the reality is quite different. Supply-side economics was a political doctrine from Day 1; it emerged in the pages of political magazines, not professional economics journals.
.. That is not to deny that many professional economists favor tax cuts. But they almost always turn out to be starve-the-beasters, not supply-siders.
.. And they often secretly — or sometimes not so secretly — hold supply-siders in contempt. N. Gregory Mankiw, now chairman of George W. Bush’s Council of Economic Advisers, is definitely a friend to tax cuts; but in the first edition of his economic-principles textbook, he described Ronald Reagan’s supply-side advisers as ”charlatans and cranks.”
..Douglas Holtz-Eakin .. his conclusion was that unless the revenue losses from the proposed tax cuts were offset by spending cuts, the resulting deficits would be a drag on growth, quite likely to outweigh any supply-side effects.
.. since the 1970’s almost all of the prominent supply-siders have been aides to conservative politicians, writers at conservative publications like National Review, fellows at conservative policy centers like Heritage or economists at private companies with strong Republican connections. Loosely speaking, that is, supply-siders work for the vast right-wing conspiracy.
.. What gives supply-side economics influence is its connection with a powerful network of institutions that want to shrink the government and see tax cuts as a way to achieve that goal. Supply-side economics is a feel-good cover story for a political movement with a much harder-nosed agenda.
.. Irving Kristol, in his role as co-editor of The Public Interest, was arguably the single most important proponent of supply-side economics. But years later, he suggested that he himself wasn’t all that persuaded by the doctrine: ”I was not certain of its economic merits but quickly saw its political possibilities.” Writing in 1995, he explained that his real aim was to shrink the government and that tax cuts were a means to that end: ”The task, as I saw it, was to create a new majority, which evidently would mean a conservative majority, which came to mean, in turn, a Republican majority — so political effectiveness was the priority, not the accounting deficiencies of government.”
.. In effect, what Kristol said in 1995 was that he and his associates set out to deceive the American public. They sold tax cuts on the pretense that they would be painless, when they themselves believed that it would be necessary to slash public spending in order to make room for those cuts.
.. But one supposes that the response would be that the end justified the means — that the tax cuts did benefit all Americans because they led to faster economic growth. Did they?
.. skeptics say that rapid growth after 1982 proves nothing: a severe recession is usually followed by a period of fast growth, as unemployed workers and factories are brought back on line. The test of tax cuts as a spur to economic growth is whether they produced more than an ordinary business cycle recovery. Once the economy was back to full employment, was it bigger than you would otherwise have expected? And there Reagan fails the test: between 1979, when the big slump began, and 1989, when the economy finally achieved more or less full employment again, the growth rate was 3 percent, the same as the growth rate between the two previous business cycle peaks in 1973 and 1979. Or to put it another way, by the late 1980’s the U.S. economy was about where you would have expected it to be, given the trend in the 1970’s. Nothing in the data suggests a supply-side revolution.
.. Does this mean that the Reagan tax cuts had no effect? Of course not. Those tax cuts, combined with increased military spending, provided a good old-fashioned Keynesian boost to demand.
.. While the Reagan tax cuts didn’t produce any visible supply-side gains, they did lead to large budget deficits. From the point of view of most economists, this was a bad thing. But for starve-the-beast tax-cutters, deficits are potentially a good thing, because they force the government to shrink. So did Reagan’s deficits shrink the beast?
.. In response to these deficits, George Bush the elder went back on his ”read my lips” pledge and raised taxes. Bill Clinton raised them further. And thereby hangs a tale.
.. Clinton did exactly the opposite of what supply-side economics said you should do: he raised the marginal rate on high-income taxpayers. In 1989, the top 1 percent of families paid, on average, only 28.9 percent of their income in federal taxes; by 1995, that share was up to 36.1 percent.
Conservatives confidently awaited a disaster — but it failed to materialize. In fact, the economy grew at a reasonable pace through Clinton’s first term, while the deficit and the unemployment rate went steadily down. And then the news got even better: unemployment fell to its lowest level in decades without causing inflation, while productivity growth accelerated to rates not seen since the 1960’s. And the budget deficit turned into an impressive surplus.
.. By the end of the 1990’s, in other words, supply-side economics had become something of a laughingstock
.. the most striking example of what skillful marketing can accomplish is the campaign for repeal of the estate tax.
.. the estate tax is a tax on the very, very well off. Yet advocates of repeal began portraying it as a terrible burden on the little guy. They renamed it the ”death tax” and put out reports decrying its impact on struggling farmers and businessmen — reports that never provided real-world examples because actual cases of family farms or small businesses broken up to pay estate taxes are almost impossible to find. This campaign succeeded in creating a public perception that the estate tax falls broadly on the population. Earlier this year, a poll found that 49 percent of Americans believed that most families had to pay the estate tax, while only 33 percent gave the right answer that only a few families had to pay.
.. the public rationale for tax cuts has shifted repeatedly over the past three years.
.. During the 2000 campaign and the initial selling of the 2001 tax cut, the Bush team insisted that the federal government was running an excessive budget surplus, which should be returned to taxpayers. By the summer of 2001, as it became clear that the projected budget surpluses would not materialize, the administration shifted to touting the tax cuts as a form of demand-side economic stimulus: by putting more money in consumers’ pockets, the tax cuts would stimulate spending and help pull the economy out of recession. By 2003, the rationale had changed again: the administration argued that reducing taxes on dividend income, the core of its plan, would improve incentives and hence long-run growth — that is, it had turned to a supply-side argument.
.. So what were the Bush tax cuts really about? The best answer seems to be that they were about securing a key part of the Republican base. Wealthy campaign contributors have a lot to gain from lower taxes, and since they aren’t very likely to depend on Medicare, Social Security or Medicaid, they won’t suffer if the beast gets starved. Equally important was the support of the party’s intelligentsia, nurtured by policy centers like Heritage and professionally committed to the tax-cut crusade. The original Bush tax-cut proposal was devised in late 1999 not to win votes in the national election but to fend off a primary challenge from the supply-sider Steve Forbes, the presumptive favorite of that part of the base.
.. the selling of the tax cuts has depended heavily on chicanery. The administration has used accounting trickery to hide the true budget impact of its proposals, and it has used misleading presentations to conceal the extent to which its tax cuts are tilted toward families with very high income.
.. The most important tool of accounting trickery, though not the only one, is the use of ”sunset clauses” to understate the long-term budget impact of tax cuts.
.. But, of course, nobody expects the sunset to occur: when 2011 rolls around, Congress will be under immense pressure to extend the tax cuts.
.. the administration has carried out a very successful campaign to portray these tax cuts as mainly aimed at middle-class families. This campaign is similar in spirit to the selling of estate-tax repeal as a populist measure, but considerably more sophisticated.
.. the 2001 tax cut, once fully phased in, will deliver 42 percent of its benefits to the top 1 percent of the income distribution.
.. It might seem impossible to put a populist gloss on tax cuts this skewed toward the rich, but the administration has been remarkably successful in doing just that.
.. One technique involves exploiting the public’s lack of statistical sophistication. In the selling of the 2003 tax cut, the catch phrase used by administration spokesmen was ”92 million Americans will receive an average tax cut of $1,083.’‘ That sounded, and was intended to sound, as if every American family would get $1,083. Needless to say, that wasn’t true.
.. About half of American families received a tax cut of less than $100; the great majority, a tax cut of less than $500.
.. David Stockman famously admitted that Reagan’s middle-class tax cuts were a ”Trojan horse” that allowed him to smuggle in what he really wanted, a cut in the top marginal rate.
.. If a couple had multiple children, if the children were all still under 18 and if the couple’s income was just high enough to allow it to take full advantage of the child credit, it could get a tax cut of as much as 4 percent of pretax income. Hence the couple with two children and an income of $40,000, receiving a tax cut of $1,600
.. But while most couples have children, at any given time only a small minority of families contains two or more children under 18 — and many of these families have income too low to take full advantage of the child tax credit. So that ”typical” family wasn’t typical at all. Last year, the actual tax break for families in the middle of the income distribution averaged $469, not $1,600.
.. through a combination of hardball politics, deceptive budget arithmetic and systematic misrepresentation of who benefits, Bush’s team has achieved a major reduction of taxes, especially for people with very high incomes.
.. Alan Auerbach, William Gale and Peter Orszag, fiscal experts at the Brookings Institution, have estimated the size of the ”fiscal gap” — the increase in revenues or reduction in spending that would be needed to make the nation’s finances sustainable in the long run. If you define the long run as 75 years, this gap turns out to be 4.5 percent of G.D.P. Or to put it another way, the gap is equal to 30 percent of what the federal government spends on all domestic programs. Of that gap, about 60 percent is the result of the Bush tax cuts. We would have faced a serious fiscal problem even if those tax cuts had never happened. But we face a much nastier problem now that they are in place. And more broadly, the tax-cut crusade will make it very hard for any future politicians to raise taxes.
So how will this gap be closed? The crucial point is that it cannot be closed without either fundamentally redefining the role of government or sharply raising taxes.
.. Politicians will, of course, promise to eliminate wasteful spending. But take out Social Security, Medicare, defense, Medicaid, government pensions, homeland security, interest on the public debt and veterans’ benefits — none of them what people who complain about waste usually have in mind — and you are left with spending equal to about 3 percent of gross domestic product. And most of that goes for courts, highways, education and other useful things. Any savings from elimination of waste and fraud will amount to little more than a rounding-off error.
.. Let’s assume that interest on the public debt will be paid, that spending on defense and homeland security will not be compromised and that the regular operations of government will continue to be financed. What we are left with, then, are the New Deal and Great Society programs: Social Security, Medicare, Medicaid and unemployment insurance. And to close the fiscal gap, spending on these programs would have to be cut by around 40 percent.
.. It goes almost without saying that the age at which Americans become eligible for retirement benefits would rise, that Social Security payments would fall sharply compared with average incomes, that Medicare patients would be forced to pay much more of their expenses out of pocket — or do without. And that would be only a start.
.. All this sounds politically impossible. In fact, politicians of both parties have been scrambling to expand, not reduce, Medicare benefits by adding prescription drug coverage
.. I think within a decade, though not everyone agrees — the bond market will tell us that we have to make a choice.
In short, everything is going according to plan.
.. Some supporters of President Bush may have really believed that his tax cuts were consistent with his promises to protect Social Security and expand Medicare; some people may still believe that the wondrous supply-side effects of tax cuts will make the budget deficit disappear. But for starve-the-beast tax-cutters, the coming crunch is exactly what they had in mind.
.. In Norquist’s vision, America a couple of decades from now will be a place in which
- elderly people make up a disproportionate share of the poor, as they did before Social Security. It will also be a country in which
- even middle-class elderly Americans are, in many cases, unable to afford expensive medical procedures or prescription drugs and in which
- poor Americans generally go without even basic health care. And it may well be a place in which only
- those who can afford expensive private schools can give their children a decent education.
Reforms that eliminate barriers to hospital competition are a much smarter option.
.. In an attempt to quantify the rough fiscal impact associated with having the federal government take up all health-care costs currently borne by private insurers, employers, and individuals, Blahous accepted the assumption made by Senator Bernie Sanders and other single-payer proponents that the reform could save billions by purchasing services from hospitals at Medicare rates.
Although Blahous’s study estimated that Sanders’s “Medicare for All” proposal would impose a fiscal burden of $32 trillion (yes, trillion) over ten years and a likely annual tax increase of $26,000 per American household, single-payer advocates have been thrilled by its publication, seizing on its comparison between the estimated cost and expected private health-insurance spending over that ten-year period to argue that it would actually save Americans $2 trillion.
This “finding” is merely the result of a preposterous assumption: that because Medicare currently pays 40 percent less than private insurers for hospital services, the cost of delivering hospital services to the privately insured could be proportionately reduced simply by having the government rather than insurers pay hospitals for them.
.. Hospital prices do not reflect marginal costs involved in treating each patient, so much as attempts to spread daily running costs over all patients. It is therefore possible for Medicare to pay hospitals 87 percent of their average costs so long as private insurance pays 144 percent of their average costs. But such an arrangement would clearly not be sustainable if all rates were brought down to Medicare levels, as Medicare rates are below average costs at two-thirds of hospitals.
Although it is true that hospitals are often able to reduce their costs across the board when payment rates are cut, reducing costs means cutting staff and closing departments, which unsurprisingly tends to come at the expense of quality and access to care. For instance, following the reductions in hospital-payment rates made by the 1997 Balanced Budget Act, relative heart-attack mortality rose at the facilities subjected to the steepest cuts. Hospitals across rural America are already struggling financially, and it is fantastical to imagine that substantial savings can be gained without widespread closures. Americans, 77 percent of whom are happy with their own health-care arrangements, are unlikely to tolerate the collapse of services at their local hospitals... While it is hard to imagine that a majority of the House and Senate will ever vote for a comprehensive rationing scheme that would also more than double federal taxes for most households, incremental proposals such as a Medicaid buy-in may be likely if there is a Democratic landslide in 2020.