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Politics : Idea Of The Day -- Ignore unavailable to you. Want to Upgrade?

To: IQBAL LATIF who wrote (44316)	8/7/2003 3:41:23 AM
From: IQBAL LATIF	Read Replies (1) \| Respond to of 50167

The Long-term Budget Outlook In testimony before the House Budget Committee, William Gale of the Brookings Institution says, there is another big part of the problem: namely, the sunsets that are in the tax code. If all of those sunsets were removed, revenue would fall by 2.4 percent of GDP on a permanent basis. If, in addition, the alternative minimum tax is reduced so that only 3 percent of taxpayers stayed on it—about the current level—revenues would fall by about 2.7 percent of GDP. ...The notion that federal spending can be held to its post-WW II norm of about 18 or 19 percent of GDP seems virtually impossible to maintain without severely cutting the major entitlement programs or eliminating the rest of government. In future years, spending on Social Security, Medicare, and Medicaid alone is anticipated to exceed 19 percent of GDP. The unpleasant implication is that a long-term resolution of these issues that does not destroy the role of the federal government in American society will have to include significant increases in tax revenues as a share of the economy. In an essay, I argue that whether the economy can grow fast enough to supply tax revenue for entitlements depends on the outcome of a contest between Moore's Law and Medicare. I believe that if we have both Medicare reform and success with Moore's Law, then the economy will win its race with government decisively, leading to what I call Capitalist Utopia... At the other extreme, if Moore's Law fails and Medicare is not reformed, then the tax burden on the working population will increase beyond anything that has been seen in a viable economy, which means that we could see an Economic Implosion. Many of the most creative, hard-working people will be driven out of the mainstream economy. Some may go abroad, to take advantage of low-tax havens. Others will work underground, in a growing black-market sector. This in turn will force the government to raise tax rates further, driving more productive workers away, in a vicious downward spiral. Health care is rationed, and its quality deteriorates for everyone. For Discussion. Gale and I agree that existing programs imply a need to increase tax revenue in relation to GDP. He sees the increase as necessary. I see it as potentially catastrophic. The pundits seem to be more radical than the politicians these days. The Washington Post's Steven Pearlstein writes, First, in a rich country with an employer-based system, firms should have to provide a basic health insurance plan to all employees and their families... Second, all but the poorest among us have to get used to paying a greater portion of routine medical bills out of our own pockets. It should be no surprise that when something looks as if it's free, people consume too much of it -- and don't bother shopping around for the best value. Reason's Ron Bailey writes, Should the federal government require all Americans to buy private health insurance? ...[mandatory health insurance] offers a way out of the dysfunctional employer-financed third-party-payer system that is so grievously distorting our current health insurance system. Employers would eventually devolve responsibility for health insurance to their employees by giving them the money the companies currently pay out to insurance agents. Employees would then have a strong incentive to shop around for the best health care deals, putting pressure on insurance companies to keep costs low. Bailey cites the proposals of the New America Foundation. There, Ted Halstead and Laurie Rubiner write, There are essentially only two ways to overcome this and achieve universal health insurance. One is to adopt a single-payer, government-run system, which is the norm in Canada and most of Europe... The other -- and far more promising -- path to universal coverage is to approach health insurance as we approach car insurance: Make it mandatory. In essence, all Americans should be required to purchase their own health insurance from among competing private providers, with the government providing subsidies to those who need them. Of course, I continue to believe that the path to health care reform is blocked by mental illness. econlog.econlib.org