Moderate Democrats need to answer for the cost of their welfare plans
The latest Democratic presidential debate, this time in South Carolina, was probably the worst one so far. The CBS moderators could not control the candidates, and they all constantly talked over each other. On several occasions, it was hard to tell who was saying what.
Still, perhaps the most important topic of discussion policy-wise was the welfare state. The moderators and other candidates attacked Bernie Sanders over the question of how he would pay for his welfare programs — but the argument was an incomprehensible mess. Unfortunately, nothing was clarified about the choices facing the American people.
The main question was cost: How would Sanders pay for his supposedly-costly upgrades to the janky American welfare state? But this approach is completely backwards. In fact, it is moderates who should answer for their ideas, which are more expensive than what Sanders proposes.
As an initial matter, the candidates and the moderators kept mixing up single-year figures for the cost of social programs and highly uncertain 10-year estimates. But don't let that trip you up. What matters is the programs that are available to a citizenry, and the overall level of spending (through taxes, private monies, and other funding mechanisms) that are used to fund them.
The moderators and Sanders' opponents simply assumed that Sanders' proposed welfare state upgrades would represent a huge cost for the American people — as if you were buying a new wide-screen television. In that case it would matter a lot whether or not one could come up with the cash. But in reality, most of Sanders' ideas would almost entirely be shifting current payments to universal programs that provide the same service. For instance, it is total health-care spending that matters, both public and private, because all of it comes out of the pockets of the American people.
Let's take Medicare-for-all — by far the largest program in the Sanders agenda. As I have written, the latest research shows that universal Medicare would decrease the amount that Americans spend on health care. Sanders would eliminate premiums, deductibles, co-pays, and so on, and make up most of the difference in taxes — leaving the vast majority of Americans money ahead. The estimates differ greatly (and as I explain here the amount of savings will depend heavily on how the policy is designed) but overall this should not be surprising. The United States spends tremendously more than any other country on a patently mediocre health-care system — on the order of 5 points of GDP, or about $1 trillion every year, in pure waste. That is because of our fragmented administrative system, and our hideously overpriced payments to drug companies and medical providers.
Medicare-for-all will address all three of those problems. It will drastically cut administrative bloat by setting up a single streamlined billing system (saving hospitals perhaps 10-15 percent on admin costs), it will reduce drug costs by allowing the government, with its huge bargaining leverage, to negotiate prices (which is currently illegal in existing Medicare), and it will reduce provider payments by mandating Medicare procedure rates across the board.
Proposed moderate reforms that would preserve some role for private insurance will be more costly to the American people than Medicare-for-all. Without a single insurance system, administrative complexity — and therefore cost — will be higher. Without everyone on Medicare, leverage for drug and provider prices will be lower, and therefore costs also higher. One could logically hound Pete Buttigieg, Amy Klobuchar, Mike Bloomberg, and Joe Biden on how they will pay for it, but the answer is obvious: It is the American people who will pay through their premiums, deductibles, co-pays, and employer withholdings, as they currently do.
Or take child care and pre-K education. Sanders recently released a plan to provide these services for free to all Americans with children, funded by a tax on the top 0.1 percent. As written, that would be a simple freebie for almost every American. Young families today are spending eyewatering sums on child care across the country.
But even if it were funded by a wider tax, this would still be a good bet for any American that wants to have a family. As Sanders points out, people need child care and pre-K when they are young and at the start of their careers, when they are making little money. It makes perfect sense to levy taxes on older workers in their top earning years to support the young families coming up behind them — and then those children will pay Social Security taxes when they come of age and get jobs, and thus support retired pensioners that paid for them as children. Solidarity is how advanced countries work.
Broadly speaking, the American state has tons of room to raise taxes. According to the Organization for Economic Co-operation and Development, the U.S. government only takes up about 24 percent of the economy in tax, as compared to 46 percent in France. That money doesn't go into the garbage disposal in France. It funds a vast panoply of social services catering to the basic needs of every French citizen. Those needs — for health care, higher education, retirement, and so forth — still exist in the United States. They are just often funded privately in a dysfunctional and inefficient archipelago of tiny accounts and bureaucracies (and the poorest are left out altogether). Sweeping all that into one clean, universal system would be a huge improvement for almost all Americans.
Moderate Democratic candidates should explain why it is worth preserving our current ridiculous hodgepodge of welfare systems. Funneling every social program through individuals and the marketplace is more expensive, not less.
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