Tuesday, October 02, 2007

Brooks On Entitlements


I don't know if it's worth the effort or not, but... a few days ago David Brooks wrote a rather silly piece on entitlement spending:
They [does he mean "I"] bombard you with alarming statistics about unsustainable entitlements. The U.S. government has $43 trillion in unfunded liabilities, or $350,000 for every taxpayer. Standard & Poor’s projects that in 2012, the U.S. will lose its AAA bond rating.
Okay... so how exactly is this "alarming" statistic derived? What period of time does it represent - a century? What assumptions does it rely upon? Is it a deliberately alarmist "worst case scenario"? And what does it mean for an entitlement to be "unfunded", anyway? I'm all for fiscal responsibility, but based on facts, not silly made-up numbers.
Presidential candidates vow to offset the cost of health care plans through “cost savings” measures, and everybody pretends those savings are actually real. Republicans promise tax cuts and people pretend those pledges are not absurd. Democrats vow to pay for their grand spending plans by raising taxes on the rich, even though each one percent increase in the top tax rate only produces $6 billion in revenue.
We're returning to reality, with some valid concerns about present tax policy and promises... although why does Brooks think that the rich (a class notorious for not paying income taxes, as their revenues are derived largely from other means) can only be taxed on their income? Has he somehow missed the furor raised by the wealthy any time somebody hints at, for example, a capital gains tax increase?
These habits infect everything they touch, even a straightforward and successful program like the State Children’s Health Insurance Program, or S-chip. According to the Centers for Disease Control, the number of uninsured children has been declining steadily for years. It shouldn’t be that costly or hard to insure the ones that are left.
The number of uninsured children has been declining... since the 1997 introduction of SCHIP. A modest expansion of SCHIP should help insure even more of them. So, of course, recognizing the success of the program, David Brooks opposes any expansion.
First, it perpetuates a smoke screen of obfuscation between who pays and who chooses. States have an incentive to ramp up benefits because they know that most of the cost will be borne by taxpayers somewhere else. Second, it entices children out of private and into public insurance, even though after 2012 it cannot cover the cost.
So which is it, David - will states use the additional money to increase the benefits offered, or to insure more children? Which children are enticed out of private insurance (answer: not many), and why would SCHIP be preferable to private insurance for those children? There's a category of insured people commonly described as "underinsured". If Brooks can demonstrate that the private insurance coverage is comparable or superior to SCHIP coverage, he has a point. If not, there should be no surprise in that people will leave an inadequate private health plan for another (from any source) which is superior and comes at the same or a lower cost. Sad to say, private health insurance plans are often grossly inadequate.

And suddenly Mr. "Oh no, don't tax the rich!" is concerned about regressive taxation:
Third, it creates a fund-raising mechanism cowardly in the extreme. Politicians in Washington like to talk in the abstract about shared sacrifice. They could go to the American people and say: We need to insure more children and to do that we’re going to raise broad-based taxes slightly.

But that’s honest and direct, and therefore impermissible. Instead, this program is funded by raising taxes on smokers, who generally are much poorer than average Americans and much less educated. High school dropouts smoke at roughly three times the rates of college graduates.
Let's see... Congress could ask the President G.W. Bush to make a statement about "shared sacrifice" and sign into law a bill which modestly increased taxes. (Have you stopped laughing yet?) And Brooks' new-found concern for regressive taxation.... has he ever before complained about the regressive nature of cigarette taxes? Has he ever proposed cutting or eliminating those taxes due to their effect on the poor? Let's see where he stands on tax policy....
Seventh, raise taxes on carbon emissions and use the revenue to make the tax cuts on capital gains and dividends permanent.
He is consistent on the whole - don't raise income taxes for the rich; cut capital gains taxes for the rich; cut tax on dividend income for the rich. His concern about tax on the poor is situational - there's no evidence that he cares a whit about regressive taxation, but here he thinks a feigned concern will help his argument. (Cruch the numbers and... even an analysis meant to support Brooks' claim of regressive taxation demonstrates that, in fact, the benefits of SCHIP inure to the poor at a level which vastly exceeds their share of the increased cigarette tax - making the tax regressive in the abstract, but progressive in implementation.)
Deficits, obfuscations and trickeries that were once unthinkable are now the norm.
But enough about the New York Times editorial page.

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