Two wearying themes that need opposing crop up.
1. “Not paying for tax cuts.” Over the past week, I’ve heard the rumblings of this recurring meme of the left, which is apparently being dusted off for another gimpy trot around the racetrack. Chris Wallace pressed Mike Pence (R-IN) on it on Fox News Sunday on the 18th, asking him why Republicans insist this summer on paying for the extension of unemployment benefits (instead of assuming it as debt), but didn’t care if the Bush tax cuts were “paid for.”
The answer is short and simple: because these two situations are not the same thing. Unemployment benefits are an expenditure of the government. Tax rate cuts are not. The government either taxes us by a higher rate or taxes us by a lower one, but it does not “own” a certain absolute cash flow, nor is a reduction in the tax rate equivalent to “spending” part of that cash flow.
This is validated in practical, empirical terms as well as theoretical ones. Cutting tax rates increases the absolute amount of revenue. Cutting the tax rate is not cutting the government’s income, and it is certainly not increasing the government’s spending.
This has been demonstrated in each of the four major tax cuts of the last century, under Harding, JFK, Reagan, and Bush II. (See here, here, and here.) During the latter three periods of relatively low taxes, however, federal spending rose; in the cases of Reagan and Bush II, spending increases on social programs and earmarked projects were the pact with the devil required to get the Democrats to agree to key elements of their agendas for fiscal and national security policy. Conservatives differ on how defensible this dynamic was for the GOP presidents (and in the case of Bush II, they correctly blame the GOP-run Congress he had during six of his eight years for excessive compromise with Democrats, on deficit spending and ruinous public-debt policies). But there has been no revenue shortfall with the tax rate cuts – what there has been is uncontrolled spending that outstripped the increase in revenues.
The garbled “tax cuts are revenue losses are spending increases” meme needs to be slammed down hard. Aspiring “Fair and balanced” anchors like Chris Wallace need to at least show some neutrality or skepticism in framing the point, when they ask Republicans how they would respond to it. And Republicans need to get their act together (better than the normally articulate Pence did on Sunday) and not accept the question in the terms posed by the Democrats’ narrative.
That’s harder to do, the longer we go on being taxed as a percentage of our incomes. We haven’t been taxed to pay for federal government spending for almost 100 years now. If spending goes up, we still pay a percentage of our incomes, whatever they are; and even if it were to go down, we’d pay a percentage of our incomes, whatever they happened to be. We have accepted the divorce between the basis for our taxation and what the government proposes to spend, by agreeing to the perpetual, percentage-based income tax (or, for that matter, any other perpetual, percentage-based tax).
But if we can get it straight in our heads that a tax rate cut is not a cut in revenues – it never has been – there may be some hope for us. It will be essential, however, to cut actual spending if we ever expect to get our spiraling national debt under control.
2. Waste is rampant in our medical system. This is one of the most sneaky yet simplistic bait-and-switches in the entire panorama of our public dialogue. Almost everyone would agree, at a superficial level of thought, that there is waste in our medical system. But on the major sides of the health care issue, we mean two very different things by this claim.
The pretext for raising it in recent weeks is Obama’s recess appointment of Donald Berwick, an open and passionate advocate of government-dictated medical-care rationing, to head the Center for Medicare and Medicaid Services, or CMS. In a June 2010 article, Berwick was quoted by the New York Times as follows:
“I have said before, and I’ll stand behind it, that the waste level in American medicine approaches 50 percent,” he said in an interview in the journal Health Affairs in 2005.
The NYT article, while not precisely hagiographic, evinced little criticism of Berwick’s positions as outlined here:
Long before the uproar over “death panels” last year, Dr. Berwick was urging health care providers to “reduce the use of unwanted and ineffective medical procedures at the end of life.”
“Using unwanted procedures in terminal illness is a form of assault,” he said in 1993 at the annual conference of his institute. “In economic terms, it is waste.”
On more than one occasion, Dr. Berwick has suggested a need for a cap on total health spending, with limits on annual increases.
In speeches and articles celebrating the 60th anniversary of Britain’s National Health Service in 2008, Dr. Berwick said he was “in love with the N.H.S.” and explained why it was “such a seductress.”
“The N.H.S. is not just a national treasure,” he wrote; “it is a global treasure.”
Among its virtues, he told a British audience, is that “you cap your health care budget.”
These and other public utterances by Berwick (see here) make clear that when he speaks of 50% waste in the U.S. health care system, he is referring to medical procedures he doesn’t think it’s worth paying for. But that’s not what a huge number of us have in mind when we think of “waste in our health-care system.” I venture to say the majority of Americans are thinking of the mundane things that manifest themselves as apparent “waste” when we have to get medical care for ourselves, like hospital charges of $10 for two Tylenol, or $25 a day for a pillow on the hospital bed, or $1100 a month for prescription medications that are unquestionably being mass produced and sold widely, and that (we think) can’t possibly really cost that much.
The well-informed understand that these charges are levied as part of an intricate game in which providers bill insurance companies for inflated amounts to cover the costs they (the providers) incur for underpaying patients; i.e., those on Medicare and Medicaid. The whole game is not just recognized by the government, it’s enforced and supervised by the government, which set it up in the first place, in a combination of national (Medicare) and state-implemented regulatory schemes. These schemes require not only the billing and pricing game, but the employment of hundreds of thousands of private and government specialists to sort it all out for the providers and insurers involved. The cost of employing all these people – people who have nothing to do with the actual provision of health care – is tremendous, and is mandated by law.
When most of us speak of waste in our health care system, we are thinking of some combination of these factors, which we basically pay for through our insurance premiums and taxes.
But that’s not what Donald Berwick means when he speaks of waste. What he means is that 50% of the resources in American health care are being expended on things that he thinks don’t need doing, because the “return” on the investment isn’t high enough. Penetrate his thoughts further, and we find that he’s speaking of procedures that battle disease or improve the quality of life for the elderly. The figure 50% is a very, very big one; I urge you to think about it for a minute. In the overall context of all U.S. health care, it means Berwick thinks most of what is routinely done for elderly patients is a “waste.”
In this sense, I absolutely and categorically disagree with him that there is 50% waste in America’s health care system. From hip replacements to pacemakers to coronary bypass surgery, blood thinners, cancer treatment, and medications for Alzheimer’s, there is no such thing as “waste”; there are only situational decisions about prioritization and cost. The extent to which those decisions are in the public realm is not dictated to us by anything: we have discretion over it, and we can choose to reduce their impact as a public issue by getting government out of health care.
But Berwick doesn’t want to do that. His beef isn’t with the public funds being spent on health care for the elderly, it’s with there being any expenditure, period. That’s why Berwick calls it “waste” when a procedure is performed that every American thinks ought to be available to himself, such as a joint replacement for an 85-year-old, or a cancer treatment that is going to give a 75-year-old only 5 more years of life rather than 20 or 30. Berwick isn’t willing to let other people make their own decisions about whether to “use up the resources” that go into these procedures. He wants government control so he can make the choice for them.
We must keep that in mind, and point it out often, as this debate goes forward.
Cross-posted at Hot Air.