Category Archives: Unintended consequences

“Medicare For All” is more appealing when you hide the enormous tax increase

According to the Washington Post, the “dam is breaking on Democrats’ embrace of single-payer” for healthcare as a fourth member of Congress co-sponsored Bernie Sanders’s “Medicare for all” bill. But the Post makes no mention of the cost for this bill.

Why, you ask, would they only discuss the benefits to be received without mentioning the cost? Hmm…

Heading over to Bernie Sanders’s Medicare for All website, one finds that the cost is estimated to be $1,380,000,000,000. That’s $1.38 trillion.

Bernie Sanders then lists seven ways to raise the required revenue–new taxes, tax increases, and closing loopholes. The largest source of revenue would be a “6.2 percent income-based health care premium paid by employers,” in other words a 6.2% tax on income to be paid by employers, as if employers will just eat the tax increase without passing it on to employees or customers. On top of this is a “2.2 percent income-based premium paid by households,” i.e., a 2.2% tax increase.

Given that all but one of these additional sources of revenue involves directly or indirectly a tax on income, lets just look at the tax increase in aggregate. This year, the federal government is expected to generate revenue of $3.46 trillion. A $1.38 trillion tax increase is the equivalent of all tax rates rising by 40% (40 percent, not 40 percentage points). In other words, social security taxes would have to rise from 6.2% to 8.7%. The lowest tax bracket would have to jump from 10% to 14%. The 25% tax bracket, in which most American probably reside, would need to leap to 35%. And the top tax bracket would have to go from 39.6% to 55.4%.

Bernie Sanders wants to pay for his Medicare For All by taxing the rich. He raises the top tax bracket from 39.6% to 52%, but only on those earning over $10 million. Other high-income people see smaller increases in their income taxes.

How do lower-income earners fare in his proposal? Probably even worse than their high-income counterparts. Although Bernie Sanders tries to hide it by calling one new tax a “6.2 percent income-based health care premium paid by employers” and another a “2.2 percent income-based premium paid by households,” these are, in effect, tax increases of 6.2% and 2.2%, the first to be paid by the employer, who will surely pass all or most of the cost along, and the second to be paid by the earner. If one looks at one’s income tax rate as the total of his income taxes plus social security taxes plus medicare taxes, the lowest tax bracket will go from a current 25.3% to 33.7%, a 33% increase. That may not be the portion paid by the individual, but it’s the amount the government takes and it is the amount paid by earner either directly through his taxes or indirectly through lower wages or highest consumer prices.

The Medicare For All website also claims that a typical family earning $50,000 would save $5,800 in healthcare spending. He does not mention that the new taxes of 2.2% and 6.2% total $4,200. So the saving as much smaller. But the website also points out people currently receive “tax breaks that subsidize health care” to the tune of $310 billion. These would be eliminated under the plan. The website does not say much does a typical family earning $50,000 receive in these “tax breaks.” I wonder why. Needless to say, that $5,800 in savings all but disappears when one accounts for the tax increases and the removal of tax breaks.

Now it’s clear why the Washington Post does not mention the cost of this “Medicare For All” bill. It’s also clear why the Medicare For All website gives a clear picture of how much a typical family saves but not how much it will cost them.

It’s much easier to give away goodies when people think they are free or someone else is paying for them rather than tell them how much it will cost them. If politicians were required to disclose the costs in addition to the benefits (much like a drug advertisement is required to reveal the side-effects), socialist proposals like Medicare For All would surely gather less support than when everything appears to be free.

First they banned sugar, then salt, then fat, then…

With apologies to Martin Niemöller.

First they came for the sugary treats,
and I didn’t speak out because I didn’t eat sugary treats.

Then they came for the salty snacks,
and I didn’t speak out because I didn’t eat salty snacks.

Then they came for fatty foods,
and I didn’t speak out because I didn’t eat fatty foods.

Then they came for my meat and processed grains,
and there was nothing tasty left for me to eat.

Gay marriage hurts states’ population growth

With the addition of New York this week, six states permit gay marriage. Looking at the data, those states that permit gay marriage are growing more slowly than the rest of the country.

Below are the population growth rate between 2000 and 2010 for those states that permit gay marriage. Data from the 2010 census.

Connecticut: 4.9%

Iowa: 4.1%

Massachusetts: 3.1%

New Hampshire: 6.5%

New York: 2.1%

Vermont: 2.8%

Additionally, Washington, D.C. permits gay marriage.

District of Columbia: 5.2%.

In contrast, the United States population grew 9.7% between 2000 and 2010. Every singe state that allows gay marriage has grown more slowly than average.

Now, I don’t imply that gay marriage reduces a state’s growth rate, though that could be a logical conclusion because heterosexual couples are much more likely to reproduce. Nevertheless, I think the number of people in the LGBT community is too small to effect the population number to that extent.

Instead, it is the other policies of the liberal states, especially their tax policies, that drive migration between states. Notice how low-tax New Hampshire was the fastest growing of all the states listed above. It is the overall effect of liberal policies that are driving people out of these states into more conservative states.

Obama the Luddite

Barack Obama believes that unemployment is high, in part, because of ATM machines.

Our President is totally right. It’s totally the ATMs fault. I think we should go around destroying all ATM machines. Think about how many jobs we’ll create by destroying all those machine.

Luddites of the world, unite!

Taxing the rich to death hurts everybody involved

Robert Price writes in The Wall Street Journal about The Price of Taxing the Rich:

Nearly half of California’s income taxes before the recession came from the top 1% of earners: households that took in more than $490,000 a year. High earners, it turns out, have especially volatile incomes—their earnings fell by more than twice as much as the rest of the population’s during the recession. When they crashed, they took California’s finances down with them.

Maybe, instead of villainizing the rich, the people should pray for their success. And instead of taxing them to death, the government should enable and encourage them to prosper.

Federal Reserve discovers that paying people not to work equals fewer people working.

In case you didn’t know, the Chicago Fed reports:

A research paper published by the Chicago Fed has concluded that extra jobless benefits — unemployed workers can now get up to 99 weeks of benefits — may be contributing up to 0.8 percentage points to the current unemployment rate, which was 9% in January. The Chicago Fed paper said the extra benefits may still be worthwhile, given that in their absence workers may be forced to take jobs that represent poor matches for their skill levels. Also on Thursday, Minneapolis Fed President Narayana Kocherlakota said the natural rate of unemployment — basically, the smallest rate of unemployment that won’t lift inflation — ranges between 5.9% and 8.9%.

For those who are not economically literate, let me summarize: If the government pays people not to work, fewer people will work.

I don’t know why the Fed had to do a study to determine that. Maybe they were just trying to figure out not if it had an effect but how large the effect is. Or maybe it was just a study devised to keep a few economics employed during the recession.

What I really don’t understand is this line:

The Chicago Fed paper said the extra benefits may still be worthwhile, given that in their absence workers may be forced to take jobs that represent poor matches for their skill levels.

So the Chicago Fed thinks it is better to have people sitting around doing nothing rather than do a job below their current skill level? These people really do live in ivory towers.

Is There a Fed in Your Kitchen?

By Marcia Sielaff

Have you been wondering why your dishes and glasses don’t look as clean as they once did? Wonder no more. There’s an environmentalist in your dishwasher.

While you were preoccupied with showers, toilets and light bulbs, the environmentalists were having their way with your state legislature.

The January 31 issue of The Weekly Standard explains it all started in Washington State. The short version is that the Spokane River was polluted largely due to phosphorous run-off from a variety of major sources (industrial and water treatment facilities to mention a few) and from phosphorous in the form of phosphates in dishwasher detergents. The idea was launched to ban dishwasher detergents containing phosphates which is what the Washington legislature did in 2006.

Then the environmentalist lobby went to work getting similar laws passed in other states, although no one knows for sure how much dishwasher detergent really contributed to the pollution problem. When phosphorous gets into fresh water it stimulates algae growth. When the algae die, oxygen needed by plants and fish is depleted.

Although not all states banned the sale of detergents containing phosphates for home dishwashers, enough did so that manufacturers quietly altered their detergent formulas. It just wasn’t feasible to make detergents with phosphates for some states but not others. Householders, unaware that detergents no longer contained phosphates to help soften water, prevent particles from adhering to dishes, or give dishes that sparkle extolled in commercials, assumed their dishwashers were to blame.

Even National Public Radio reported irate home owners’ complaints that, “…pots and pans were gray, … aluminum was starting to turn black, … glasses had fingerprints and lip prints …   and they were starting to get this powdery look to them.”

As is the case with light bulbs that require a hazmat team for safe disposal, this green dream also turned out to have unintended environmental consequences. As the Standard explains, “It was the phosphorus in detergents, after all, that allowed modern dishwashers to function well using smaller amounts of cooler water.”

If more people revert to hand washing dishes to get them clean, more water and more fossil fuel to heat it will be required. Some people put vinegar in an extra rinse, or run their dishwashers twice, using more water and electricity. So, you may ask, exactly what environmental gains have been achieved by the bans.

Well, you can ask, just don’t expect an answer. It turns out that the science behind banning dish detergent is a bit iffy. The Standard points to a 2003 Minnesota study showing only 1.9 percent of the phosphorous there was due to household dish detergents.

However, as Sean Hannity likes to say, “Let not your heart be troubled.” Paper plates and plastic glasses are (still) an option…as are landfills to put them in. Or, since restaurants are excluded from the ban, some people suggest buying dish detergent from restaurant supply houses. But lest the phosphate police come knocking, you didn’t read it here.

Marcia Sielaff writes for What Would the Founders Think.com.

Britain on the path to tyranny?

The title of my book and the blog is The Path to Tyranny. The book describes how the demand for free gifts from the government leads to tyranny. But this road does not always lead straight to tyranny. It often falls into anarchy first.

Today’s headline at Drudge Report:

ANARCHY IN THE UK: PROTESTERS ATTACK ROYALS!So how exactly does anarchy lead to tyranny? First, I’ll share a couple of quotes from some people much smarter than me.

John Adams in A Defence of the Constitutions of Government of the United States of America:

The moment the idea is admitted into society that property is not as sacred as the laws of God, and that there is not a force of law and public justice to protect it, anarchy and tyranny commence.

Plato’s Republic:

And so the probable outcome of too much freedom is only too much slavery in the individual and the state… from the height of liberty, I take it, the fiercest extreme of servitude.

Montesquieu explains exactly how anarchy leads to tyranny in his Considerations on the Causes of the Greatness of the Romans and their Decline:

For in a free state in which sovereignty has just been usurped, whatever can establish the unlimited authority of one man is called good order, and whatever can maintain the honest liberty of the subjects is called commotion, dissension, or bad government.

I already expounded upon this quote in a previous blog post:

This is the real reason so many today advocate anarchy and anti-globalization. They do not really want anarchy. Instead, they want to establish a situation which would call for immediate order, to be established by the government and “intellectual elites.” First stage is anarchy, second is totalitarianism. These “anarchists” hope they can direct events towards socialism, as they successfully did in Russia in the 1910s and attempted to do in Italy and Germany, though other collectivist regimes beat out the socialists and communists, though both the Fascists and Nazis adopted socialist platforms to win favor among the people.

The ultimate result of the anarchy spreading through Europe is not yet known. History shows that this often, but not always, leads to tyranny.

The situation reminds me of Germany in the 1920s, except that all of Europe and the United States is in a similar situation to the Weimar Republic with huge deficits and debts that cannot be paid off. That led to the tyranny of the Nazis. Will we be able to avoid the mistakes of the past?

Doctor Evil’s solution to the sovereign debt crisis

There are three stories out this morning regarding the sovereign debt crisis in Europe.

First off is Ireland:

Ireland is likely to end up tapping a loan worth “tens of billions” of euros as a result of talks between the government and officials from the European Commission, European Central Bank and the International Monetary Fund, the head of Ireland’s central bank said Thursday.

The talks aren’t about a bailout, but will lead to a loan to Ireland that the government would have to accept, Central Bank of Ireland Governor Patrick Honohan said in an interview, according to Irish state broadcaster RTE.

The yield on the 10-year Irish government bond fell to around 8% this morning from 8.3% Wednesday, strategists said. European equity markets rallied, with the Irish ISEQ stock index gaining 1.4%.

I don’t see how this changes anything. It may stave off immediate default, but Ireland is simply borrowing more money, exactly what got it into this mess in the first place. This simply buys them time to get their house in order, but will they?

Now, over to Spain:

Spain sold 3.654 billion euros ($4.943 billion) in 10- and 30-year bonds, but was forced to pay higher yields than two months ago as worries about fiscal problems on the periphery of the euro zone push up borrowing costs. The Spanish Treasury offered 3 billion to 4 billion euros of 10- and 30-year bonds. The government paid an average yield of 4.615% on the 10-year bond, up from 4.144% at a September auction, Dow Jones Newswires reported. The 30-year bond auction produced an average yield of 5.488% versus 5.077% in September. The 10-year auction produced a bid-to-cover ratio of 1.84, versus 2.32 in September, the report said.

The market is relieved that Spain was able to sell its bonds. Again, great news that Spain was not forced to default, but it doesn’t change Spain’s fiscal situation. In fact, one can argue that by lending to Spain is simply enabling one is enabling their addiction.

And over to Greece:

The Greek government on Thursday submitted to parliament a budget plan that it said would allow to stick to its target of reducing its deficit to 7.4% of gross domestic product in 2011 despite a sharp upward revision to its 2009 and 2010 deficit levels. The European Union statistics agency Eurostat earlier this week upwardly revised Greece’s 2009 deficit by nearly two full percentage points to 15.4% of GDP. The government raised its estimate of the 2010 deficit to 9.4% of GDP. The finance ministry said it would further cut spending and boost revenues to meet the 2011 deficit target, taking measures that include a rise in the lower value-added tax rate to 13% from 11%, a levy on highly-profitable firms, cuts in government operating expenditures and a nominal pension freeze.

Greece was forced to take more austerity measures because the economy did worse than expected. I am not surprised by this because the austerity itself hurts the economy, like a medicine that tastes bad but is required to kill an infection. I expect more such bad news over the following years. Government forecasts of narrowing deficits in Europe’s at-risk countries and here too in the United State rely on solid economic growth over the next three to four years. Yet, this optimistic economic outlook will only reduce their deficits, or so they hope, to about 3 percent of GDP. Why aren’t they trying to eliminate their deficits entirely? Why are they relying on optimistic economic growth rates? Has government never heard of “expect the worst, hope for the best?” Instead, they hope for the best and trap themselves in a corner if that does not occur.

All this reminds me of a scene from Austin Powers. Doctor Evil finally captures his nemesis Austin Powers:

Dr. Evil: Scott, I want you to meet daddy’s nemesis, Austin Powers.

Scott Evil: What? Are you feeding him? Why don’t you just kill him?

Dr. Evil: I have an even better idea. I’m going to place him in an easily escapable situation involving an overly elaborate and exotic death.

Later in the scene:

Dr. Evil: Come, let’s return to dinner. Close the tank.

Scott Evil: Aren’t you going to watch them? They’ll get away!

Dr.Evil: No, we’ll leave them alone and not actually witness them dying, and we’ll just assume it all went to plan.

Scott Evil: I have a gun in my room. Give me five seconds, I’ll come back and blow their brains out.

Dr.Evil: No Scott. You just don’t get it, do you?

These bailouts, loans, and austerity measures in Greece, Spain, Portugal, and Ireland are “an easily escapable situation involving an overly elaborate and exotic death.” Instead of eliminating the deficit immediately, they have convoluted plans to reduce it over a five-year period. Will these plans work? Nobody knows. But that’s okay because “we’ll just assume it all went to plan.”

Our governmental leaders may not be evil like Dr. Evil, but they certainly are as naive in assuming their plans will work. And they think we are too naive to notice their plans’ inadequacies.

The Absurdity of Minimum Wage Laws

The current minimum wage in the United States is $7.25 per hour. However, many states have imposed their own minimum wages because living in those states is more expensive. California, for example, has a minimum wage of $8.00. So why not get rid of the national minimum wage and let the states set their own? The Constitution gives the federal government no such power and this should be left to the states.

But even the states have a problem with minimum wages. Within a state, it may be more expensive to live in one city than another. For example, it is much more costly to live in San Francisco, where the minimum wage is $9.79, than in Fresno. So why not have each city set their own minimum wage as is being done in San Francisco? Why hasn’t New York City raised its minimum wage as it is certainly more expensive to live in  New York City than in Buffalo.

But wait. Even within cities there can be a big disparity in the cost of living based on neighborhood. It is much more expensive to live in Manhattan than it is in Queens. Even within Manhattan, it is more expensive to live in the Upper East Side than in Washington Heights. Even within neighborhoods, the cost of living in different buildings varies.

All this may seem quite absurd, but so is the minimum wage. Each person is an individual with their own needs and wants, their own cost of living. Broken down logically, each person has their own minimum wage at which they are willing to work. In other words, no government law can boost the minimum wage of all people. Or more accurately, we would need millions of minimum wage laws to help each state, each city, each neighborhood, each street, and each person or small group of people.

In reality, minimum wage laws creates winners and losers. Those whose incomes increase will benefit from the minimum wage, but at the same time those who can no longer produce enough profit at the increased wage will lose their jobs because of the minimum wage. And all consumers will pay more for goods and services as the government forces up wages.

The minimum wage sounds great in theory (for employees, not employers). Unfortunately we live in a reality where a minimum wage does more harm than good.