Even Obama Econ Adviser Larry Summers Says Warren's 'Medicare for All' Is 'Dangerous'
The two great things about “Medicare for All” are that a) I’ll never live to see it implemented and b) it’ll hang like a millstone around the presidential candidacies of several Democrats I find thoroughly repellent.
As for the positives, that’s really about it.
Given the wild differences between campaign estimates, studies and what counts as existing spending, the “Medicare for All” plans could cost taxpayers anywhere from $20 trillion to $52 trillion over the next decade, astonishing figures that are still probably too low because this is the Democratic Party and magical thinking has been baked into any major liberal initiative since LBJ was sitting around the Oval Office in his bathrobe quaffing whiskey.
I mean, never mind the truism that any major government initiative will be at least one-third more expensive than its proponents claim. Sen. Elizabeth Warren’s plan, the most detailed of the proposals thus far, relies on double-counting, chimerical savings, the assumption that doctors and other health care providers will take dramatically reduced payments, the belief that the 2 million health insurance workers it’ll render jobless can find work hawking auto insurance or becoming government employees, and how this will all be paid by a wealth tax that wouldn’t even cover the most of her “Medicare for All” plan assuming the tax could actually be collected and was remotely constitutional. (Spoiler alert: It can’t be and it isn’t.)
Sen. Bernie Sanders has decided he’s not even going to bother telling America how he’s going to pay for it. Squirrelly? Sure. Duplicitous? Most likely. Prudent? Absolutely.
So, TL;DR, “Medicare for All” isn’t workable, at least when it comes to the two most notable proponents of the plan in the Democratic field.
But don’t buy my take. I’m just a cantankerous millennial pundit. Take the opinion of Lawrence Summers instead.
Summers, a noted economist, was the director of the National Economic Council under President Barack Obama in 2009 and 2010. He was also Treasury secretary under President Bill Clinton and former president of Harvard University. In short, you can search his walk-in closet high and low and you’re not going to find a MAGA hat.
So, all right, perhaps he’s not exactly Pikettyean in his outlook; you’re not going to find him writing papers in praise of modern monetary theory.
That said, the title of his Washington Post Op-Ed published last week is a pretty significant hint that he’s not exactly lukewarm on “Medicare for All”: “Warren’s plan to finance Medicare-for-all pushes into dangerous and uncharted territory.”
It’s not that Summers is opposed to single-payer, either. In fact, he said he “could easily imagine supporting a well-designed Medicare-for-all plan.”
This, according to him, isn’t it — particularly when it comes to Warren’s claim that it can be paid for by taxing the rich and leaving everyone else alone.
Summers noted that “no other country offers as broad coverage as Medicare-for-all would or claims to provide universal health insurance without taxing its middle class. With respect to the admirably detailed plan the Massachusetts senator laid out, there will, I suspect, be serious questions about the accuracy of her arithmetic, the impact on labor markets, the feasibility of applying Warren’s full set of proposed taxes to the rich, and the financial and economic impacts of the plan.
“Campaign arithmetic is always optimistic, but errors are highly consequential with respect to a program that on some measures is eight times as large as the Trump tax cut. Warren estimates the revenue potential of increased Internal Revenue Service enforcement as being about 65 times as large as the Congressional Budget Office’s enforcement proposal.
“The University of Pennsylvania’s Natasha Sarin and I have been working to make the case that the CBO is far too pessimistic in its estimates of the potential for better enforcement to generate revenue. But the most optimistic scenario we can envision is still more than $1 trillion short of the Warren estimate.”
Warren, Summers said, overestimates how wealthy the very wealthy are. This is already a problem until you look at the potential for tax avoidance, something the very wealthy are able to do; Summers said Warren underestimates this avoidance, which is a bit like saying Napoleon underestimated the English and Prussian forces at Waterloo.
Summers also said Warren’s plan, instead of helping low-skilled workers, would discourage companies from hiring them, particularly since many smaller firms would have to get under the 50-employee threshold; more than 50 employees would subject the company to a $500,000 tax.
“These firms will face the most burdensome taxes when they increase hiring and will gain the greatest cost savings by laying off workers. In addition, workers’ incentives to take jobs will be dulled because they will no longer be compensated with health benefits (which will become available regardless of what they do),” Summers wrote.
Even if Warren’s tax increases only target the very wealthy, Summers said, the cumulative effects are far more onerous than she takes into account.
“Here is a suggestive comparison: The total after-tax adjusted gross income of all those earning more than $1 million or more, as last reported by the IRS in its Statistics of Income publication, was under $1.1 trillion,” Summers wrote.
“The sum of all the new taxes on the wealthy proposed by Warren is of comparable magnitude: adding together around $310 billion a year in new wealth taxes; $330 billion a year in corporate taxes from her new proposals and her previous real corporate profits taxes; $240 billion a year from her new capital gains and finance tax proposals; at least $90 billion from her across-the-board 14.8 percent taxes of labor and investment income; and $190 billion in increased compliance,” he said. “This totals nearly $1.2 trillion — more than millionaires’ total after-tax income.”
Then there’s the hit to the stock market that “Medicare for All” would inflict. And, just in case you were wondering, this isn’t Milton Friedman talking. If we were to make any sort of direct comparison, Summers mines Paul Krugman territory. (Summers is occasionally correct, however.)
“For decades, I have emphasized that corporate profits and the market do better when progressives are in power and have dismissed conservative fear-mongering about progressive policies,” Summers wrote.
“This time seems different,” he said. “Judged relative to gross domestic product, the Medicare-for-all program dwarfs the federal spending hikes of the New Deal and the Great Society. Presidents Franklin D. Roosevelt and Lyndon B. Johnson emphasized that their new benefits would be paid for by contributions from their middle-class beneficiaries. With Warren’s plan, it is the combination of vast new entitlements with total reliance on the top 1 percent for revenue that puts us in uncharted and, I fear, dangerous territory.”
I never thought I’d be using these words with Lawrence Summers, but I couldn’t have said it better myself.
Warren’s assumptions are erroneous and dangerous.
She assumes administrative costs can be slashed to levels no analyst believes are reasonable.
She believes she can negotiate drug prices down to a level that’s below what Canada pays.
She thinks we can reimburse doctors across the board at the same level we currently do under Medicare — an artificially low price that is subsidized by passing the cost on to insured patients.
And this isn’t even addressing the fact it would all be paid for via a wealth tax that’s probably unconstitutional, can easily be avoided and wouldn’t even cover the exorbitant cost of the program.
Bernie Sanders had the right idea: Just don’t say how you’re going to pay for it. I mean, sure, it’s horribly disingenuous, but at least he acknowledges this is a campaign stunt. In other words, he has no intention of implementing it.
Warren, on the other hand, seems 100 percent serious about implementing it.
Thankfully, when even inveterate liberals like Lawrence Summers think her plan isn’t just unworkable but dangerous, you can bet this isn’t going anywhere, no matter who gets elected.
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