The bad news is, Elizabeth Warren has some barmy ideas about raising your taxes. The good news is, she’s a proven coward. She says she likes to “nerd out” on the policy details. Okay, let’s do that.
Warren estimates that her health-care scheme would cost about $2 trillion — every year, forever. As often is the case when we are talking about the federal budget, the numbers sound incomprehensible to many people: millions, billions, trillions, squidillions, whatever. To put that $2 trillion a year into perspective, a comparison: That is more money than the federal government collects annually in all of the personal and corporate income taxes combined. Put another way, even if the federal government were able to successfully double the revenue it gets from personal and corporate income taxes, the additional revenue would not pay for Warren’s health-care plan.
In fiscal year 2019, all federal tax revenue from all sources combined amounted to $3.4 trillion. If a Warren administration and a Democratic Congress were successful in raising Americans’ taxes by 50 percent, the extra revenue still wouldn’t be enough to fund Warren’s health-care program.
And that does not take into account the rest of the fiscal scene, which is pretty grim. While Warren talks about Medicare for All, as it is the unfunded liability of Medicare over the next 75 years already tops $42 trillion, or just over twelve years’ worth of total federal tax revenue. Put another way: If the federal government continued collecting taxes at the current rate, stopped spending even a nickel on anything else, and put all of that money into Medicare, it would have to do so for twelve years just in order to cover the difference between what Medicare already has promised to pay out and what dedicated Medicare taxes will actually fund.
And never mind, for the moment, that there are lots of things Warren and the other Democrats want to spend money on besides expanding Medicare: trillions of dollars in subsidies for college students and student-loan forgiveness, alternative-energy subsidies, etc. Warren proposes the better part of another trillion dollars a year in new spending on top of the $2 trillion a year for expanding Medicare.
To pay for that, she would have to raise federal tax revenue by around 80 percent — and that still would do nothing about the trillion-dollar deficits we already have or the unfunded liabilities of Social Security and other entitlement programs that already are piling up even faster than the official national debt.
Writing at Slate, Jordan Weissmann describes Warren’s plan to pay for her health-care proposal as “not entirely realistic.” Indeed. And it is worth keeping in mind that all of the above relies on Warren’s own estimates of the cost of her program. Other analysts have put the number much higher — about 50 percent higher, in fact. If those estimates are closer to the truth, then paying for all this means doubling or more than doubling federal tax revenue.
And here it is worth reminding ourselves that tax rates and tax revenue are not the same thing. Progressives like to point out that during the Eisenhower years, the top tax rate was radically higher than it is today. And that is true. But tax revenue today is about what it was then: From 1950 to 1960, federal tax receipts averaged 15.9 percent of GDP, whereas in 2018 they were just a tad higher than that, at 16.2 percent of GDP. So don’t let anybody sell you the story that we could pay for all this with the tax rates of the 1950s or 1960s.
And don’t let Elizabeth Warren sell you her story, either.
The last time Democrats had a big idea about reorganizing U.S. health care — the grievously misnamed Affordable Care Act — they proposed to pay for part of it with a piddly little tax on manufactures of medical devices and the so-called Cadillac tax on expensive health-care plans. The Cadillac tax never has been implemented, because it annoys government workers, labor unions, and other important Democratic constituencies that have gold-plated health-care plans — paid for by somebody else, usually, often taxpayers. The medical-device tax was suspended, too. Does anybody remember who led the charge to repeal it? None other than Senator Elizabeth Warren. In theory, Senator Warren represents Massachusetts; in reality, she represents Boston and its wealthy suburbs, which are home to a number of medical-device companies.
A politician who cannot stand up to a relatively minor special-interest demand back home — while serving as an elected Democrat in one of the most reliably Democratic states in the country — is not going to oversee the doubling of the federal tax burden in pursuit of a new welfare program that also would strip most Americans of the private insurance they already have and mostly want to keep. It’s not going to happen.
It’s a fairy tale — or, properly understood, a lie.
As the aforementioned Jordan Weissmann writes, the point of Warren’s nonsense story about how she’ll pay for her Medicare expansion is to “deflect unpleasant questions from debate moderators and journalists.” It does not have anything to do with the actual facts of the case — only with the contours of the fiction that is the Warren presidential campaign. One more piece of evidence that political partisans enjoy being lied to, if they are skillfully lied to.
Give me the power now — we’ll work out the details later.
There is only one reason that Elizabeth Warren would proceed in this manner: She thinks her voters are stupid.
There isn’t any obvious reason to think she’s wrong about that.