Tuesday, December 20, 2022

Utopia’s Price

By Brian Riedl

Thursday, December 15, 2022

 

The progressive movement, we are often told, represents the future of American politics. It boasts millions of passionate (mostly younger) activists and generally dominates universities, think tanks, Hollywood, and the media. Progressive politicians such as Bernie Sanders, Elizabeth Warren, and Alexandria Ocasio-Cortez are hailed as national celebrities, fawned on in traditional media, and able to command a massive social-media presence.

 

The progressive movement has energy and numbers. It has bold ambitions and rhetoric. What it does not have is coherent policy proposals. This is the inescapable conclusion after one carefully reviews leading progressive bills and proposals to nationalize health care, tax the rich, slash defense, and reduce net carbon emissions to zero. The issue is not that their blueprints are misguided or would shift policy in the wrong direction, but rather that they contain virtually no policy substance whatsoever. They are vaporware: empty gimmicks and messaging bills that lack the minimum specificity to be implemented even if enacted. Most proposals make brash and expensive promises and then appoint a future commission or government agency to figure out how to make it all work.

 

A movement filled with millions of committed activists and led by ambitious academics, economists, scientists, think-tank fellows, and politicians cannot simply have forgotten how to turn aspirations into legislative proposals. Such attempts at policy entrepreneurship seem instead to have collapsed under the weight of their internal contradictions, operational unworkability, political infeasibility, and even disregard for basic arithmetic. Let’s examine four prominent issues.

 

Health care. Medicare for all, which is perhaps the central aspiration uniting America’s progressive movement, is less a policy than a talking point: “If Europe and Canada can do it, why can’t we?” In reality, no country provides the progressive vision of timely and nearly unlimited access to a wide array of health procedures and technologies that are completely free at the point of service. Every universal-health-care system imposes some combination of care-rationing, technology limitations, out-of-pocket expenses, and major coverage exclusions such as that of prescription drugs.

 

Nor is the American medical infrastructure compatible with single-payer health care. Nations such as the United Kingdom nationalized health care when it was a small portion of their economy and then contained costs by building a modest infrastructure over several decades. No country first built a massive, sprawling health system that consumes nearly 20 percent of the economy — with large and roomy hospitals, widely used and expensive technologies, and an extensive drug — research sector — and then decided to save money by drastically reducing payments below the cost of running this vast system. In short, Medicare for all would be far more complicated than simply pasting the Canadian system into legislation.

 

The two leading Medicare-for-all bills, authored by Senator Bernie Sanders (I., Vt.) and Representative Pramila Jayapal (D., Wash.), must solve two fundamental challenges: achieving efficiency savings to avoid expanding national health expenditures, and shifting health-care financing to the federal government.

 

Reining in national health expenditures is especially important because the two proposed bills also expand health-care access, at a cost of roughly $7 trillion over the decade. So, even maintaining today’s level of national health expenditures requires building a substantially cheaper and more efficient system of paying doctors and hospitals. This endeavor (including the pricing of more than 10,000 medical procedures) is enormously complicated and controversial. Paying providers too much would surrender the efficiency savings required to make health care affordable; paying them too little would drive them out of business, causing shortages that would require rationing.

 

By what magic payment formula do the Sanders and Jayapal bills achieve the trillions of dollars in promised health-care savings? They provide no formula. They punt. The bills simply assign the Department of Health and Human Services to figure out a new provider-payment system, with no innovative guidance.

 

An analysis published in the journal Health Affairs reveals the sheer emptiness of these bills. It explains how the Jayapal bill promises countless new benefits yet fails to specify the “policies, procedures, guidelines, and requirements related to eligibility, enrollment, long-term care eligibility, provider participation standards and qualifications, levels of funding, provider payment rates, planning for capital expenditures and health professional education, and regional planning mechanisms.” In other words, the bill distributes new benefits like candy, with barely any consideration of how to operate or finance this generous new health-care system.

 

The second challenge is replacing the $32 trillion scheduled to be spent over the decade by state governments and by the private sector on health premiums, co-pays, and out-of-pocket expenses with an equal federal tax to fund health care. Again, the Sanders and Jayapal bills punt. They have no finance sections. They would dump the $32 trillion cost into the national debt, absurdly pushing annual budget deficits past $5 trillion within a decade.

 

Omitting the required new tax is essentially a white flag. Last decade, Vermont enacted and then had to repeal a single-payer health law when its elected officials failed to come up with a tax that was remotely acceptable to voters even in the state that elected Bernie Sanders to the Senate. The Committee for a Responsible Federal Budget has calculated that financing a Sanders-style Medicare-for-all system nationally would require choosing between options such as a new 32 percent payroll tax, a 25 percent income surtax, and a 42 percent value-added tax. No wonder these bills are silent on pay-fors: “Free” health care is quite expensive.

 

Without a new provider-payment system that brings the promised massive efficiency savings and a new federal tax to replace state and private — sector health spending, these leading Medicare-for-all bills are mere wish lists for universal benefits — without any plausible system of delivering or financing them.

 

Tax the rich. Progressives aggressively demand dramatic tax increases on upper-income families and corporations as a matter of economic justice and to finance their extravagant agenda. Limiting all new taxes to the elite allows progressives to promise the middle class European-size social — welfare benefits as a free lunch. This promised tax-the-rich utopia, however, has no basis in mathematical reality, which is why most progressive spenders never back up the rhetoric with specific, scored tax-hike proposals.

 

None of the leading Democratic presidential candidates in 2020 presented tax plans that would have approached paying for their exorbitant spending promises. President Biden has already enacted $4.8 trillion more spending than new taxes. Even the $116 trillion cash shortfall faced by Social Security and Medicare over the next three decades is often dismissed as solvable by taxing the rich — again, in the absence of a specific proposal to support it.

 

This is because the math is unforgiving. Let’s consider every popular progressive tax proposal. On the individual side, let’s combine eliminating the wage cap for Social Security taxes with eliminating all itemized tax deductions and imposing a 50 percent income-tax bracket on families earning more than $400,000. For investors and corporations, let’s include taxing millionaire capital gains as ordinary income (and at death), restoring the 35 percent corporate-tax rate, taxing financial transactions, and imposing a new “bank tax.” Add Senator Sanders’s proposed 8 percent wealth tax and 77 percent estate-tax rate. This overall agenda would layer tax upon tax and hit upper-income families, investors, and corporations with the highest tax rates in the developed world. Yet the total revenue — optimistically estimated at $10.8 trillion over the decade, before any economic drag — would not even close the $15.7 trillion projected ten-year deficit, much less provide the tens of trillions of dollars necessary for progressive priorities such as Medicare for all, job guarantees, a Green New Deal, and new social programs.

 

Progressives continue to sell American socialism as a free lunch to be provided by the wealthy, but this tax-the-rich utopia will remain an empty talking point because the numbers do not add up.

 

Defense. Progressive proposals to aggressively shift defense spending toward other priorities are even less serious. Defense spending adjusted for inflation has been falling since 2008, and it is now just 13 percent of total federal spending (compared with 19 percent during the 1990s). So, rather than just reversing recent increases, the Congressional Budget Office notes that trimming $1 trillion from the projected $9 trillion ten-year defense spending would require fundamentally reorganizing, repurposing, and reimagining America’s military apparatus and national-security strategy. This includes abandoning full-ground-war counterattack capabilities, skipping a generation of weapons technology, revisiting international-security commitments, and even laying off 400,000 active-duty personnel.

 

For all the progressive calls to slash defense spending by 10 percent, 20 percent, or more, no serious proposal exists. Congressional Democrats formed a Defense Spending Reduction Caucus to draft the People over Pentagon Act of 2022. This bill comprises just 333 words and offers no specific defense savings. Instead, it mandates that the U.S. military immediately cut $100 billion annually ($1 trillion over the next decade) and completely overhaul national security. It instructs the defense secretary — I am not kidding — to check the CBO website for ideas about how to do so. With the possible exception of Senator Sanders’s 140-word proposal to slash defense spending by 10 percent by cutting each relevant account equally, a lazier or less serious bill is difficult to imagine. Progressives have not done their homework on military reform.

 

Climate. While the climate crisis may be real, the progressive movement to combat it is mostly hot air. Its lawmakers, leaders, and activists can cite climate-doomsday scenarios chapter and verse. Yet when pressed for specific climate solutions, including methods to manage economic impacts and estimates of effects on global temperatures, the progressive movement is rarely able to answer. The plan is to assign someone to come up with a plan.

 

The infamous Green New Deal resolution merely set goals of net-zero carbon emissions by 2050. The House’s 100% Clean Economy Act of 2019 and the Senate’s Clean Economy Act of 2020, with 170 and 33 co-sponsors, respectively, offer no blueprint either. They also simply direct the federal government to design a plan to achieve net-zero emissions by 2050.

 

In 2019, Congress established the House Select Committee on the Climate Crisis to “investigate, study, make findings, and develop recommendations on policies, strategies, and innovations to solve the climate crisis.” This 16 — member bipartisan congressional committee held dozens of hearings over the next three and a half years. One would hope that such a committee, with significant financial resources and the ability to summon the nation’s top experts, would come up with specific, feasible legislation to solve the climate crisis. Instead, the committee wrote a report recommending that someone else draft legislation to set a nonbinding goal to reduce emissions. This would presumably be followed by federal agencies’ finally looking for ideas of exactly how to reduce emissions to meet that goal. To sum up, Congress created a special committee that wrote a plan to assign someone to draft a legislative plan that would ask someone else to come up with a plan. There is still no legislative blueprint to achieve progressives’ long-standing climate goals.

 

Serious policy scholars understand that if there were painless “easy answer” solutions, they would have been enacted by now. Most policy options involve balancing costs and benefits and using our political values to assess those trade-offs. The progressive movement largely rejects this framing, selling astonishing fantasies as straightforward and obvious solutions that have no drawbacks and are opposed only by a cabal of sinister bad-faith actors. But Congress cannot enact empty slogans, and progressives’ utopian proposals cannot become legislation because they are contradictory, unworkable, or mathematically impossible.

No comments: