The 2012 budget talks have been ongoing for just a few days now, and they’re already full of distortion, exaggeration, hyperbole, partisanship and lies – on both sides. Such is the way of the world in Washington where telling lies to the general public is really just ‘focusing on their core competency’.
But if you are interested in cutting through the BS I think I can summarize this pretty well. There is a real choice here after all. The Republicans would like to go one direction with our future and the Democrats, another. So here is my attempt to describe the two options that American people will have, absent any ‘commentary’ – which I will exclude from the primary discussion of competitive visions, but throw in afterward.
In essence, this is about a difference in how we view medical care. Both sides agree that the tax code is unfair and needs changing, and even social security isn’t a real mystery on how to cope with. Increase the retirement age, apply means testing and social security is fixed. The only difference is in where to draw the lines. Even the rest of the budget can be fixed with a nip and a tuck. Democrats want to eliminate aircraft carriers, and Republicans want to eliminate ethanol subsidies. These are not intractable problems.
But Medicare, and Medicaid are real issues. They are the primary drivers of our federal insolvency, and between left and right we have two very different visions on how to address them. And this budget debate is really about that. Both sides agree that something has got to give – but that’s not politics it’s mathematics. And Obamacare for all the BS we went through over it, was never a real plan. It was just a way for Democrats to move the starting line for the debate about the budget. The money was always the real discussion. So here then are the two visions of America’s fiscal future.
The Democrat Vision
The Democrats plan (as defined by the President’s speech) is to raise taxes substantially on ‘the rich’. That group will naturally include many people who are not actually rich, but it will focus on increasing the tax burden on the upper end of income earners. The president believes he can do this without having any negative affect on economic growth. All past evidence honestly examined, would indicate that isn’t the case, but even if the President is right, ‘the rich’ don’t have nearly enough income to make up the full difference.
And since that’s so, there is a second portion to the President’s plan which involves controlling medical costs. The president will empower a panel of government employed ‘experts’ to decide what medical procedures should cost, and who should be allowed to get them. They will examine who gets what, when and how much, and then fix the prices for various procedures, and ration some others to make sure that the government doesn’t let it’s costs get out of control. In essence what the Democrats imagine for our future, is an America where the government makes the medical decisions for everyone and pays for them by taxing upper income earners. They want to make politics the central issue in decision making instead of money.
The Democrat and Republicans both agree the tax code is unfair as it is, but they see ‘unfair’ very differently. The Democrats think the way to make the tax code more fair is to increase the top rates on the top earners, making it more ‘progressive’. Since this will really only be taking money from ‘the rich’ and giving it to the poor and middle class, they do not believe this will have any net negative economic consequences for the country as a whole.
The Republican Vision
The Republican plan, as defined by the ‘Ryan’ proposal, deals with medical costs very differently. It operates on the central belief that since cost is not a part of any medical decision under the current plan, there has been no market pressure to keep prices low. They believe that if the market is brought to bear through competition, it will put downward pressure on prices.
They make competition a part of medical decision making by making government medical insurance a voucher system. People will no longer have an unlimited supply of money for medical care, and because that’s so, they will manage their own costs like they do with the food they buy or the energy they consume. The Republican plan can be characterized in this way: Not everyone will be eating filet mignon for every meal anymore, but no one will be going hungry. It’s their belief that in this way they can force prices down enough so that everyone can get what they need, and costs will be controlled.
Like the Democrats, the Republicans also think the tax code is ‘unfair’. They look at our progressive tax code and see that the top 10% pay 70.3% of the income taxes and the bottom 40% pay nothing. Paying very little (or sometimes nothing) also, are those large corporations like GE and Goldman Sachs who have close ties to Washington. And since the people actually paying the top rates are often small business owners, they believe that the higher tax rates at the top end act as a disincentive for economic growth, and therefore hurt everyone else too.
They believe that a ‘fair’ system would be one which eliminates the kind of tax loopholes that let a company like GE pay nothing in 2010, and which applies the same simple rules to all citizens, more or less equally. Top earners will still pay more than those at the bottom, but no one will pay nothing. They are proposing a greatly simplified income tax, and an elimination of both the tax loopholes at the top, and the excessive transfer payments at the bottom. In this way they hope to broaden the tax base, while lowering the rate. They will collect the same amount of money, but they will get it from different sources. GE and Goldman Sachs will pay a lot, small businesses owners will pay more, the middle class will pay a little, and the poor will pay something. But because everyone is paying, they will each have to pay less.
So there then is the difference. The Republicans want to let market competition control costs, while the Democrats want to have those costs controlled by government experts. This is the real difference in the future of America that we voters are being asked to decide.
Commentary:
For those liberals reading this, I’m trying to be fair minded about this so please give me a chance and read on.
By now I’m sure you can imagine that I prefer the Republican view – let me tell you why.
Central to the Democrat vision of medical cost control is price fixing. And the reason they believe that plan will meet our needs is because they honestly and sincerely believe that ‘this time it’s different’. But in exactly 100% of the uncountable times that top down price controls have been tried - in all of human history from the dawn of time to now - it has failed to do so. There are no exceptions. Price controls ‘do not work’. I don’t view that as a political opinion, but as a fact, supported by 100% of all the available evidence. And that pushes me toward the regrettable conclusion that the Democrat vision, however hopeful and ‘feel good’ it may be, is inevitably doomed to failure.
I say regrettable, because the Democrat view is loaded with hope. They hope to find a way to take a limited resource and divide it so expertly that everyone will have all of it that they need. But any honest view of past evidence would indicate that this won’t work. It never has – and worse than that, it’s the same basic idea that has gotten us in the fiscal position we’re in today. Their top down ‘empowering the experts’ plan has resulted in more innocent human suffering than virtually any other idea. It will do for American medical care, what centralized farming did for the Chinese.
On the upside however, the Democrat plan allows us to pretend that everything will work out just fine for everyone, and that allows us to feel like we're making a 'better' choice. It will involve dramatically increasing taxes, and many of the people it will be increasing taxes on wouldn't be called rich by most people. But according to the Democrat vision, while 'the rich' (and to be honest probably much of the middle class) will pay much much more taxes, they will still have ‘enough’ as defined by government Democrats. They don't want to make people destitute, they just don't want them to have nearly as much as they do now. And in the meantime, the poor will still get all the medical care they ‘need’ (again - as defined by government Democrats).
The Republican plan offers no such illusions. It doesn't empower us feel wonderful about ourselves. In fact, the first thing the Republican plan does is remind us what we ‘cannot do’. Central to its vision is the belief that we cannot divide a limited resource into equal portions, each of unlimited size. The Democrat plan won’t let us do this either – but since it pushes the expert rationing out into some future decision, it allows us to temporarily delude ourselves into believing that that we actually will.
But while the Republican plan takes away our ability to feel good about ourselves, it has the advantage of actually meeting our needs. The Republican plan will work because it takes the sentence ‘money is no object’ out of medical decision making, and that will put downward pressure on prices. The Democrats believe that this will be unfair somehow, and will mean that poor people get nothing while the rich get everything. They don’t trust the market to solve this problem. But in exactly 100% of the uncountable times that markets have been tried - in all of human history from the dawn of time to now - it has succeeded in doing so. It doesn’t sound as politically appealing as getting anything you want while presenting the bill to someone else, but it will work.
In essence then, I view this decision about our future as a referendum on the morality of the American people. We can choose what makes us feel good about ourselves but is absolutely doomed to failure, or we can choose a less self congratulatory view that will achieve all of our goals. And I believe that if we are a moral people, we’ll be more worried about meeting our needs than rewarding our egos. If however we choose to simply ‘feel good’ about our decision making, then we no longer really deserve to be a free people anymore. We'll be voting to put the chains on ourselves. And that will irrevocably lead to exactly the kind of failure as a nation that we right deserve.
I don’t honestly know if we are a moral people anymore. Actually, based on my own observations, I’m a little afraid to even ask the question. But history won’t wait for my apprehension. One way or the other – for better or worse - we’re now going to finally find out what we Americans are really made of.
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