With plans by the Government to take over healthcare finally emerging in legislative form under the care of Senators Edward M. Kennedy (D-MA) and Christopher J. Dodd (D-CT), the Hudson Institute has already begun asking the hard questions about what this policy will entail. Here’s a hint: it involves new taxes, and the plan’s liberal supporters admit as much.
James Capretta, of the Ethics and Public Policy Center, took a guarded position in the discussion, informing the audience that “Medicare has grown, on average, 2.4 percent faster than GDP growth” and that it was “probably wise to assume the pace of this 30 year trend is likely to continue.” The main implication of such an assumption, Capretta said, was that while already existing healthcare spending accounts for four percent of GDP currently, it will account for ten percent of GDP by 2040, making it a bigger entitlement than Social Security at that time. Moreover, Capretta warned that the Kennedy-Dodd bill would consume roughly 6.7 percent per year of GDP on top of the amounts consumed by Medicare and Medicaid.
The implications of this sort of spending, as Alice Rivlin, former director of the Congressional Budget Office (CBO) explained in her talk, are discouraging for taxpayers. Rivlin pointed out that, even if taxes were raised to the level of a European welfare state to pay for it, it would still be insufficient, as “you have to raise rates continuously.” Rivlin served as director of CBO when Democrats controlled both Houses of Congress.
In other words, in order to pay for health care fully, taxes would have to be raised to account for the 6.7 percent per year growth already outlined by Capretta. To compensate for this problem, Rivlin suggested creating a “trigger system” in which—if certain costs were not met by a certain year—Congress would be forced to act.
But by far the most blunt statement of the panel came from Eugene Steuerle of the Peter G. Peterson foundation, who told the audience point-blank that, in order to pay for universal coverage for the current generation, “There will be higher taxes put on the young without [their] necessarily accruing any of the benefits.” Steuerle has also never been known as a particularly right-wing economist.
One such tax which Steuerle mentioned was a “value-added tax,” (VAT) though he was cautious about the prospect of taxation, as “it is a system that discourages investment among the young.”
Meanwhile, Center on Budget and Policy Priorities Senior Fellow Paul van de Water brushed off long-run concerns, urging his fellow panelists to “spend a little more time thinking about the short run before we go about the long run problems.” He later suggested taxing “high sugar soft drinks” and “reversing the erosion in alcohol taxing” as potential sources of funding.
A member of the audience asked a question about whether the panel’s suggestions to cut Medicare and Medicaid encouraged death by spreadsheet, a practice the questioner likened to Hitler’s practices of extermination. The panel dismissed the question entirely. “No one is talking about that,” said Capretta.