By Dan Kervick
Imagine that the US Congress someday decides that as a matter of national security it is imperative for each American adult to be in possession of a smartphone. (Perhaps they believe that we might all need to receive an important text message from Homeland Security in the event of a major terrorist attack.) Suppose also that at the time of this decision there are 100 million American adults still without smartphones, and that the average smartphone costs $200.
According to the Supreme Court of the United States, here is a procedure Congress is permitted to follow:
Step 1: The government levies a one-time $200 tax on everyone who does not possess a smartphone.
Step 2: The government purchases 100 million smartphones from companies of its choosing.
Step 3: The government delivers the 100 million smartphones to the people without smartphones.
But here is something Congress is not permitted to do:
Step 1: The government mandates that everyone without a smartphone buys a smartphone from the company of their own choosing.
Step 2: Nothing else. All done.
Now isn’t this restriction ridiculous? For one thing, the extra steps in the first procedure add pointless bureaucratic costs to accomplish the very same end result accomplished by the second procedure. Also, in the second procedure, American adults without a smartphone get to choose their own smartphone company. But if the first procedure is followed, the government buys the phones for them from the companies the government chooses. What sensible country would permit the former procedure but prohibit the latter?
Suppose we don’t want to make everyone buy a smartphone, but wish to impose that requirement on only those who can afford to purchase a smartphone themselves, while providing smartphones for the less advantaged at public expense. Suppose Congress decides that 80% of American adults without smartphones should buy their own smartphones, while the remaining 20% should have phones purchased for them by the government. Following the first procedure, Congress can then impose a one-time $250 tax on the 80% of Americans without smartphones who can afford to buy them. It thus raises the same revenue as in the first scenario: $20 billion dollars. It then purchases smartphones for all 100 million adults who don’t have one.
Now back to the real world. The Affordable Care Act contains a provision mandating that people who can afford health insurance purchase it, and it also contains a provision imposing a financial penalty on those who fail to obey the mandate. Chief Justice Roberts has cast the deciding vote to uphold the Affordable Care Act mandate, but did so by reinterpreting the penalty as a conditional tax and the mandate as an optional act. Now I am personally glad that the health care mandate was upheld. But I think Roberts’s reasoning is somewhat ridiculous. In his effort to strike a Solomonic balance and make the court look apolitical, he only succeeded in making it look absurd.
First, why not just say that the mandate itself is covered under the Tax Clause? Compelling some person to buy a product – to tender payment to some third party in exchange for a good or service tendered in return – is functionally the same thing as compelling them to pay a tax to the government while the government purchases the good or service, and then delivers it to the person who paid the tax. Since the latter combination of actions is clearly permissible, then it seems to me that compelling the citizen to buy the product directly is constitutionally justifiable simply as a means of executing in a more economically efficient and less wasteful way a manifestly permissible, but more complex action.
Instead, as I understand his decision, Roberts decided to say that the penalty – the “shared responsibility payment” – can be viewed as a tax, and was thereby forced to engage in a much more extensive rational reconstruction of the statute. The mandate is re-interpreted as an optional act, and the penalty is then reinterpreted as a conditional tax levied on people who do not perform that optional act. This makes mincemeat of the plain language of the statute, which is replete with terms like “mandate” and “penalty”. But Roberts argued that the plain meaning of Congress’s intent is less important in this case than the functional effect of the act, because “every reasonable construction must be resorted to, in order to save a statute from unconstitutionality.”
But how far does this technique of functional reconstruction go? Suppose the legislature had passed a law requiring each American to pay a tithe to a church, and to pay the government a non-tithing penalty if they fail to pay the tithe. Would Roberts apply the same principles of construction and say that Congress had left tithing optional, while reinterpreting the non-tithing penalty as a tax?
Suppose Congress had imposed a law prohibiting people from entering a nuclear weapons installation, and had attached a mandatory five-year jail sentence to the act as the penalty for trespassing on the facility. It would be natural to say that the legislature had forbade or prohibited entering the installation, and that the jail sentence was a punishment for violating that prohibition. Now suppose a sitting jurist comes along and issues a ruling that reinterprets the decision to enter or refrain from entering the nuclear facility as an optional choice, rather than as an action the refraining from which had been mandated by the government. And then suppose the jurist upheld the jail sentence as a “time tax” imposed on those who choose the option of entering the facility. Wouldn’t we agree this is a preposterous interpretation and defense of the statute? But isn’t this reasoning very close to Roberts’s reasoning?
I wish that Roberts had just swallowed another few morsels of conservative pride, embraced some common sense, and recognized that a democratic government that has the power to tax money from citizens, and purchase things for citizens, ought to be recognized as having the option of skipping the bureaucratic middleman and requiring the citizen to make the purchase directly.
In any case, Congress now has a road map – convoluted though it may be – for enacting constitutional workarounds for any purchasing mandates it wishes to enact. All it needs to do is impose a tax on people for the amount it would otherwise compel them to spend on the good in question. Then Congress can purchase that good and deliver it to the people who would have received it anyway if they purchased it themselves in compliance with a straightforward mandate.
Now here’s one last step: suppose Congress designates the sellers of the good in question as official tax collection agents, and also as delivery agents for the good. Referring back to our smartphone example, imagine the government has pre-purchased a large quantity of smartphones from Apple stores around the country, but has told the stores to hold the phones on site, rather than deliver them to any government office. The stores have invoiced the government, but the government has not yet paid. The government has also pre-authorized the delivery from the store of government-owned smartphones to people who pay their smartphone tax at the store. A citizen in need of the smartphone then walks into an Apple store. Instead of purchasing a smartphone, they pay the smartphone tax to the government-designated agent – that is, to the store owner. The store then delivers to that taxpayer, by hand, a government-owned smartphone that has been stored on the premises. By pre-arrangement with the Federal government, the store uses the $200 tax it just collected to credit off part of the invoice it has sent to the government, and the government credits the store as having duly delivered the tax revenues they were authorized to collect.
Mission accomplished. Mandate enacted, but appropriately gussied up using the Roberts formula to look like a tax. The Republic marches on.
Dan, is the difference with PPACA that you have the CHOICE of NOT receiving health insurance, with the penalty being the tax (which is also less than the cost of health insurance)? This is different from your 2nd scenario, in which you are mandated to get some form of healthcare, without option, presumably going to jail if you don’t.
“Compelling some person to buy a product – to tender payment to some third party in exchange for a good or service tendered in return – is functionally the same thing as compelling them to pay a tax to the government while the government purchases the good or service, and then delivers it to the person who paid the tax. ”
In other words, ACA doesn’t have the govt deliver insurance to the person who paid the tax. They just have them pay the tax (and it also happens to be less than the cost of health insurance, from what I have read).
Well, suppose in accordance with option #1, the government taxes a few thousand dollars from you, and then purchases a health insurance policy which it gives you as a gift – a transfer payment. There is nothing to prohibit that, is there? I suppose you could decline the policy, if you want. But how is that different from being compelled to buy a policy, but then declining to submit any claims on that policy? In both cases, you are compelled to fork over the same amount of cash; and in both cases you can exercise your choice by declining the good that has been delivered to you. It just seems weird to me that a government that is permitted to do the first thing should be prohibited from doing the second thing.
I agree it is a bit tortuous. Bed now. Think more about it later.
Can you elaborate on why you support the mandate, in the context of MMT? Aren’t people already overtaxed given the level of unemployment in this country? Wouldn’t taxing the uninsured (members of the “99%”) further economic inequality by taking money away from the people who need it the most?
I support the general principle that the US Congress should have the power to mandate that people buy certain kinds of things, and I don’t want the Supreme Court to judicially legislate a restriction on Congress’s power in this area. That’s why I am glad the mandate was upheld, but am disappointed that a straightforward mandate+penalty must be reconstructed (apparently) as a tax-and-spending operation to pass constitutional muster.
In the matter of health care specifically, I would support a more extensive and egalitarian public program, and I am disappointed that what was passed instead is an extension of our current system that does little to attack costs.
No one seems to understand the importance of what Chief Justice Roberts did when he insisted that the ‘mandate’ be a tax. Why? Because no one bothered to read the damn Act two years ago. If anyone had–starting with our spectacular overpaid media–we would know that what Roberts confirmed today is that there is no penalty for not buying health insurance, there is no individual mandate, and the IRS (via the Secretary of the Treasury) is specifically barred from levying a penalty or fine on anyone who refuses to buy one, and under no circumstances can the IRS levy against any form of taxpayer property should the taxpayer refuse to buy health insurance.
In other words, the issue is great big zero.
Rather than bore you, I’ll let Lawrence O’Donnell explain it to you.
Right, but Roberts decision had no impact on this issue. The statute had already specified that the “shared responsibility payment” was not to be enforced. So whether Roberts had defended the PPACA direction to buy health insurance as a justifiable mandate with a penalty that was not going to be enforced, or only a requested option with a tax that was not going to be enforced, makes no difference to the outcome.
Ah, but Dan, there is a difference. Because the Supreme Court is precluded from ruling on the constitutionality of a tax until the first dollar in tax has been paid. That won’t happen until after December 31, 2013. That will be a year after the next President is voted in, whoever that might be. The only way the issue can be revisited in S. court, as it has been now, is if it is a tax.; he wiped up Congress with his ruling on the Commerce and the Necessary and Proper Clauses. I’m a lot more cynical, and derisive, about this two-step than you are, obviously. The case should never have reached the Supreme Court. The Mandate was the Big Cheese, the huff and puff behind the public’s ire. They had enough in the Act to throw it out before it started by telling people what they didn’t know was in there.
Rumor has it, and who the hell knows, that Roberts changed his opinion in the last days. Should that be true, why?
Actually he didn’t, he wrote the opinion for the Court, but the four justices joining in the decision did not join in his opinion. That is, Ginsberg, Sotmayor, Kagan, and Briar, don’t agree about the Roberts rejection of the Commerce clause. Roberts will try to use his reasoning with the rightist wing of the Court in future decisions; but all that has to happen to make this ineffective is an appointment in the next four years — if Obama wins, and if the “liberal” four stay healthy.
You are right. The bill does not allow for levy or criminal sanction for not paying the penalty. However, what the IRS is allowed to do is to apply any refund you are due to the charge. Then guess what? Next year when they cut your paycheck for taxes, it is applied to the penalty–and when you come up short on your taxes, well, need I say more? While O’Donnell is “”telling you the truth, in fact, the end result is not what he is claiming. Clever devil, that one. Let’s face it, when they can take your money out of your check and tax you for your labor,i.e., your right to make a living, you are a frickin slave in your own country. What’s a little more slavery in a nation of sheeple?
BS. If you don’t pay the penalty, they will withhold your refund. If you don’t qualify for a refund this year, the penalty will carry forward to your next year’s tax return, and so on, until they finally catch up with you.
Regardless of what the law says today, it can be changed tomorrow.
About the Lawrence O’Donnell video:
The actual text in the Patient Protection and Affordable Care Act kicks it at 2:25 minutes and the text O’Donnell refers to is copied in the video description notes on YouTube.
The reasoning sucks by virtue of the fact that the court decided to hear the case in the first place. I think Roberts was not expecting the kind of backlash the court would have received had they struck down the law – so at the last minute he was forced into a bind- upholding the law in order to save the court while at the same time defending the conservative ideology whose absurdity this case so clearly exposed.
Thanks for posting that, MRW.
Missing the point. The 5-4 supreme court decision was political theater. It was never in doubt that a policy which, far from being ‘socialism’, would force average Americans to buy overpriced health insurance from private concerns, and tax the hell out of the upper-middle class while doing nothing to the super-rich, would pass. Obama could have gotten a majority vote if he had really needed it.
The issue was never whether this was constitutional. The issue has always been whether it was a good deal for most of us. If, as looks likely, we have more and more Americans paying massive premiums, and paying maybe 30% copays and not actually getting decent care (remember, insurance is not the same as health care), well, we’ll see.
Yes, the health care system remains broken and wasteful. My piece isn’t really about health care or the economics of heath care. It’s about the question of whether or not we should be able to pass laws that require people to purchase something.
My first main point is in the fourth to last paragraph. There is something absurd about claiming that while the government has the right to force you to send it a dollar, and the right to spend one dollar to buy a banana, and the right to send you the banana it bought, it does not have the right to force you to buy a banana.
My second main point is in the second to last paragraph: Despite the conservatives’ unwillingness to permit a straightforward mandate, they have seemingly left open the possibility of a workaround that is a mandate in everything but name. Instead of requiring you to buy a banana from a fruit vendor, they can deputize the fruit vendors as tax collectors and deliverers of “government” bananas. You go to the banana store, pay your banana tax, and get a banana. The government pre-purchases the banana so you are not officially buying the banana from the banana store. You’re juts paying the tax and getting a government banana as a transfer payment from the government at the same time. But the store is then permitted to use the collected tax to credit off the government’s banana bill.
I have to agree with Timothy. Unfortunately for us, Congress is in the business of making sure that business is benefited directly. If Congress was representing us, they would pass a bill that makes the most sense for consumers and then release the private sector animal spirits to deliver the best products as efficiently as possible to those consumers. Instead, Congress sits down with lobbyists and they figure out how to mold law that directs as much money as possible to private sector rent seekers.
The government is forced to follow a torturous path because it doesn’t acknowledge that it now is Monetarily Sovereign, and therefore has the unlimited ability to create dollars. The true solution would be for the federal government to provide free Medicare to every man, woman and child in America. See: http://rodgermmitchell.wordpress.com/2011/09/10/the-next-speech-a-courageous-president-obama-will-give/
Since every developed country has a national health system (except the US) and since, based on the evidence, this is the cost-effective and just way to do this, once it was clear Obama would not even try to implement one I lost any interest at all … it’s just too depressing to contemplate the stupidity.
Yes, that was a disappointment. Even if we had only gotten a public option, that would have at least been a foot in the door. When Obama traded away the public option, he traded away the leverage to use the great purchasing power of the public sector as a tool to drive down health care costs aggressively.
Overall, a very bad deal for 99%er Americans.
Here’s a hint, and I hope these figures are correct: take the circa $1,500 tax penalty and add it to the $2,000 penalty for businesses, throw in an extra $500 – and the $4,000 you get is a bit more than what Canada spends per person each year to insure everyone. But the corporations that feed off of the Obama-Romney-Roberts “Let’s let America insure the profits of the big insurance and big pharm co’s” Act wouldn’t stand for it. No single payer for you. And not even a waiver for Vermont from the Obama Administration. Some progressive he is.
Roberts’ reasoning, of course, is absurd but it got the job done, and afterall, that’s what counts. But he’s in no way a “conservative”, whatever that means anymore. He works for the corporations and he hears his master’s voice.
Sunday is Canada Day up here. Our system has issues, but I know of no Canadian personally who would trade places with the Yanks on this on. Also, I personally know of no Canadian who complains about paying for the medical care of “someone else’s kid” as you see so often on many American blogs.
Overall, a very good deal for the 99%ers. See the facts at: http://rodgermmitchell.wordpress.com/2012/06/28/the-facts-about-obamacare-without-all-the-political-bs-what-you-really-need-to-know/ (including the 4 referenced links)
Question One: are you paying, will you be paying, more or less than we do per person? If you are paying more, then it’s not a good deal.
Question Two: who’s pocketing the difference? You know, the economic rent? That should tell you who benefits and what this Act is really all about?
Question Three: Is it really good for your country-economy to pay twice the amount as anyone else?
Question Four: Why are Americans overwhelmingly against this Act if it’s so great? Are they all just stupid or is it merely a political marketing failure? Perhaps people realize this Act is all about forcing people to buy junk insurance from corporations which they hate than about real reform.
Wrong Dan. Reducing the cost of doing business and preventing the free lunch by monopoly rent extractors is not pointless. It is the point – limiting the Free Lunch in the economy.
Road to Bangladesh is a Tollroad
This new law is one more step leading to the Toll Booth Economy – Where a corrupted ‘captured’ government shills for the same special commercial ‘for profit’ monopolies (rent extractors) that have paid for its election campaigns, by forcing its citizens to face its toll booth monopoly sponsors as individuals with little or no group leverage.
What is needed is for government to drive the rent extractors out of business so the ‘real’ non-FIRE economy can prosper.
I don’t know if I follow you completely John C.
The first three steps are the proper approach to move towards not only a healthier citizenry but also a healthier economy. A public health care that is not-for profit lowers the cost of doing business. This is a benefit for all businesses that actually produce the goods and services that create real value. The FIRE sector is a value extractor on the economy. Eliminating the health insurance industry is first step.
The second two steps force individuals to deal with private insurance companies (the I in FIRE) directly. This will serve to the further entrenching a wealth extracting health insurance industry in an already financially indebted economy.
So my point is that the first steps and the second steps are not equivalent.
OK, I get you. And I think that would be an excellent move. I just don’t know why Roberts thinks it is constitutionally OK for the government to impose a health care tax and then buy insurance from private insurers, but doesn’t think it is OK to compel people to buy from the private insurers themselves.
I’m not talking in this post about the economic and public merits of different ways of delivering health care. I’m talking about what seems to me to be some very strange legal reasoning.
You already are taxed for not buying health insurance. It’s the lack of a deductible from your income taxes, when you don’t buy health insurance. The lack of a deductible = a tax.
Fantastic comments here.
If it’s such a ridiculous scheme to tax people so that the government can buy something for them, why don’t we just abolish that scheme entirely. Instead of taxing people and buying aircraft carriers, for instance, we could just require that each adult purchase a share of an aircraft carrier from the manufacturer. Makes sense to me.
oops. I didn’t mean “so that the government can buy”, I meant “and have the government buy”.
It’s just as ridiculous as forcing people to pay FICA to a government that, being Monetarily Sovereign, has the unlimited ability to create dollars.
The real solution: The government should provide free Medicare to every man, woman and child in America.
That’s right, RMM. Medicare for All.
But just let’s remember that under MMT, although the government does have an unlimited power to print dollars, it thereby also has an unlimited ability to devalue what it prints to practical worthlessness. That’s a practical limitation if not a formal one.
But yes. America certainly has the real wealth to provide every person first world levels of medical care. But unfortunately, like many third world countries it’s corrupt elite needs to get it’s “take” first. In this case, 50% of the total costs of medical care in the country.
Since the U.S. became Monetarily Sovereign on 8/15/71, there has been zero relationship between federal deficit spending and inflation. See: http://rodgermmitchell.wordpress.com/2010/04/06/more-thoughts-on-inflation/
I did not say the word deficit. But if you print money, you create claims on real wealth. Those claims in the form of dollars do tend to drive up the nominal price of objects of real wealth, or devalue the dollars. That’s why it’s necessary to tax dollars out of existence.
I do agree that it’s not necessary to have FICA in order to fund SS. But remember that the flip side of printing money, is to tax it out of existence so as to reduce overall purchasing power and thus avoid undo inflation. The real issue in taxes is who’s purchasing power is reduced in order to avoid inflation. Taxes concern, not deficits, but the distribution of purchasing power among the various actors in the economy.
In the case of FICA, the elites decided to reduce the present purchasing power of FICA payers in order to pay for future SS benefits and not to reduce their own. Now they want to further reduce the purchasing power of FICA payers and SS recipients by reducing SS benefits. Watch both Obama and/or Romney do exactly that after the election.
Unna, you said, “if you print money, you create claims on real wealth.” That is true only for NET money, i.e. dollars created minus dollars taxed, i.e.deficit spending.
Your hypothesis about money “printing” causing inflation is a popular belief, but it is not in accord with the facts: http://rodgermmitchell.wordpress.com/2010/04/06/more-thoughts-on-inflation/
Right. Net money. So if you increase the net money all things being equal – by printing (issuing) it – it’s value falls also devaluing savings which is the investment of choice for “the little people” as the 1%ers understand them. Point is, there is a very practical limit to money issuing (printing). Now I’m certainly not a conservative, so don’t be confused.
Witness Obama-Ronmey’s perceived need to cut SS benefits and social spending generally because expanding money supply for that does not benefit them. In fact it would inhibit their ability to cut taxes i.e.(increase purchasing power) for the 1%. They do understand this limit and act on it. Because of the reality of this limit, the more they issue money for things that benefit the 1%, the more they need to reduce the purchasing power of the 99% either through less spending on the 99% or higher taxes on the 99%.
The conservatives are right about one thing. You can’t print wealth – or issue it. But printing and taxing vs. not taxing do certainly redistribute purchasing power to favoured economic players. Which is why Obama has been sure to increase defence spending every year and has has pushed expensive rent bloated Obamacare rather than medicare for all.
” if you increase the net money all things being equal – by printing (issuing) it – it’s value falls “
One thing I’ve learned after 15 years of studying and discussing economics: It’s almost impossible to argue against someone’s intuition, even when the facts are clear. I send you a link that demonstrates how, in the 40 years since we became Monetarily Sovereign, there has been zero relationship between federal deficit spending and inflation. And this, despite massive deficits.
Here it is, again: http://rodgermmitchell.wordpress.com/2010/04/06/more-thoughts-on-inflation/
It’s as though the facts just passed through you, without even being noticed. Your intuition says otherwise, and facts be damned.
I’m not saying that at some future time federal deficit spending couldn’t be so great as to cause inflation, but it hasn’t happened, and we have had some mind-boggling deficits. Anyway, those are the facts you are free to ignore.
Rodger Malcolm Mitchell
Running deficits in periods of deflation does not prove your argument. One balances out the other. The basic problem for you is that you appear to have the (mis)understanding that MMT would permit you to disregard economic costs. You seem to believe that a government which issues it’s own fiat money can print so as to buy what it wants, and as much as it wants, and without any economic consequences in the real world.
The most basic idea of economics is the reality of scarcity along with the potentially unlimited human desire for goods and services. That’s not just a “popular belief”.
I wish we could simply conjure into existence, with childlike simplicity, a suite of doctors, nurses, and servants for each individual person – like say the president has. But where would their labour come from and which other industries would suffer?
As to your charts: I applaud your observation that “deficit spending” in periods of deflation, and otherwise during a long period of world deflationary forces, does not cause inflation – although home buyers and consumers of medical and educational services and other professional services might, for some very good economic reasons, argue otherwise. The “look how cheap i pads are” argument, you know. But from that, it’s a sophomoric argument at best to conclude that the government can create any level of demand it wants for real things without causing harm. Sorry, you want the impossible via a theory. Either that, or you’ve been hanging out too much in first year law school classes. Masters all of them of the argument as an instrumentality of magic.
On why Obamacare is likely to have an unhappy ending see:
Obamacare is OMG economically unsustainable. America is now spending close to 18% of GDP on medical care. When some day in the future you are spending 20-25% of GDP you’ll finally understand why your argument is incorrect. As I like to tell my conservative friends, it’s not an issue of taxes and spending, it’s an issue of GDP. I’ll say the same thing to my progressive friends.
Anyway, tomorrow is Canada Day. Get a bottle of Newfie Screech and have some fun.
It’s not necessarily a ridiculous scheme. It’s just seems ridiculous to me for the court to say that forcing people to send the government money and then buying something for them is constitutional, but forcing them to buy it themselves is not.
The aircraft carrier is not such a good analogy, because the aircraft carrier that is purchased by the government is public property. A better analogy might be something like this: Suppose Congress decided that we need an active citizen militia, and as a result mandated that each adult citizen purchase a gun. My understanding is that the conservatives on the court think that is unconstitutional. But they don’t think it would be unconstitutional for the government to tax people for the price of the gun, buy a bunch of guns, and then send each person a gun.
They force them do a lot of things, but its a good thing the Marine Corps does not force their recruits to buy their ‘personal’ M16 themselves. They couldn’t afford it! Check out the prices on the private market for these modern high tech rifles and their optics today. The government buys them in bulk through competitive biding, thereby lowering the cost. Not only initial costs would be unworkable, it would be a logistical maintenance nightmare.
When the government decides to make its soldiers and marines buy their top quality small arms themselves, it would be a boom time (no pun intended) for the military small arms companies. Just like it will now be a boom time for the insurance industry to have a captive customer base.
My point: Natural monopolies must be regulated in a healthy economy.
I agree. But this business isn’t over. We will be revisiting the health care issue in every administration and every Congress from now until the end of time.
Eventually, as a last resort, Congress and the President will do the right thing: Have our Monetarily Sovereign government (which has the unlimited ability to create dollars) provide free Medicare to every man, woman and child in America.
Rodger Malcolm Mitchell
Nothing is free, Rodger. There are inherent limits on real material and human resources. Even after we have a more egalitarian and socialized system, we will be arguing about what percentage of our total resources to dedicate to health care, about which health care services should be provided, about how many doctors we should have, about what kinds of care to provide at the end of life, about the priorities we should assign to different kinds of care, etc. Since our society and technology our always changing, and since decisions over life and death are the most important ones we make, I suspect these political arguments will never go away and will always be intense.
Dan, what shortage of resources is responsible for 30 million (est.) people not having health insurance?
As you ponder this, you will see it boils down to dollars.
Rodger, I don’t think there is a significant shortage of resources. But turning resources into health care goods and services is a complex process that involves significant costs, even if the resources are available. A lot of resources and effort are required to produce more hospitals and hospital beds; to produce more medical equipment and medicines; to train more doctors and and nurses; to transport patients and equipment; to clean up people’s blood, shit and vomit. If we decide to expand the delivery of health care goods and services in the aggregate, then that means our society needs to produce more health care goods and services. These goods don’t just fall off trees or from the skies.
Money is just an instrument for organizing purchasing power. Simply creating more money doesn’t make these elements of real wealth appear automatically. It can help, as as a component of a program of public investment, or as a means for redistributing purchasing power without passing additional taxes. But it’s not as though simply increasing the quantity of money in our society by 10% makes our society 10% richer in real terms.
There are two alternatives:
1. “turn (more)resources into health care goods and services”
2. Not to provide more health care goods and services.
So which alternative are you suggesting?
The first. But I try to avoid suggesting to people that because we have monetary sovereignty, that means we can have “free” health care.
Dan, I agree with the later part of your comment:
“. . . because we have Monetary Sovereignty, that means we can have ‘free’ health care.” That is a benefit of Monetary Sovereignty. You should not avoid telling it to people. It’s a fact.
Sorry, Rodger. But I think that is to confuse money – a mere instrument for exchange – with the real wealth consisting of the goods and services that are exchanged. The production of health care goods and services incurs very substantial costs. Some fortunate individuals might be able to receive it for free. But for our society as a whole it will certainly never be free.
When you say health care never will be free, do you mean doctors will actually have to cure people and nurses will have to tend people and pharmaceuticals will have to create medicines and companies will have to invent machines? Is that what you mean? If so,that’s called “an economy.”
But, if that’s your meaning, I’ll rephrase: Medicare for Everyone can provide health care at no money cost. I suspect that will satisfy most people.
Or would you rather not have doctors, nurses et al doing that stuff?
Roger, what I mean is that the actual cost of things is determined by the expenditure of human labor and real material resources that enter into the production of those things. If as a society we want to produce, deliver and consume more of some kind of thing, we need to devote up more human and material resources in the production of that thing.
Money is just one tool for conveying purchasing power – an indefinite claim on real, non-monetary goods and services. We can opt for a variety of different ways of bestowing health care purchasing power on people. We can use market oriented systems or socialized systems. We can redistribute the money we have, or we can redistribute purchasing power by creating more money and giving it to some people for the purchase of health care, or we can create and distribute health care vouchers, or we can just say that each person with a Social Security card is entitled to unlimited amounts of health care of a certain kind, as needed. But doing any of these things does not by itself solve the social problem of health care provision. It certainly doesn’t mean that health care provision is free.
“. . . But doing any of these things does not by itself solve the social problem of health care provision. It certainly doesn’t mean that health care provision is free.”
What is the “health care provision” that is not solved by giving people free health care insurance?
” . . . what I mean is that the actual cost of things is determined by the expenditure of human labor and real material resources.”
The actual cost of things is determined by supply and demand, which may not relate to the amount of human labor or real material resources involved. Something that requires virtually no minimal human labor or material resources can be quite costly.
A story is told of Picasso, who owed someone a large amount of money, but gave him only one peso. When the man objected, Picasso signed the peso (minimal human labor or material resources), and said, “That should cover it.”
He was right. That peso now was worth thousands of pesos. Today, especially since dollars themselves have no physical reality, human labor and material resources no longer are a value measure. In economics, the only value measure is money.
While love, beauty, loyalty, intelligence et al have value, they are not economics.
Dan, Roberts is contorting about because he knows the mandate IS unconstitutional. The Constitution gives Congress the right to tax but it restricts HOW it may tax, and that gets complicated. Because the colonists had been abused by the previous government, they did not want this one to get out of hand. So they were careful how they allowed it to tax. If it taxed a person directly, it had to do so uniformly, by basing it on a census. Placing a capitation or “head tax” on a person by virtue of the fact that he was alive, could easily be an act of tyranny, so direct taxes were limited. A direct tax was something directly on the person, and he could not avoid it. Some taxes can be avoided–for example, if you don’t drive an automobile, you don’t have to pay a gas tax. Now, Congress may raise taxes for the general welfare under the general welfare clause, but it is still restricted in HOW it may raise those taxes. Direct vs. indirect taxation is very import. At the turn of the century there were some cases brought where people were objecting to taxes on income “derived” from certain activities. It is my understanding that “income” meant “gains or profits” from money invested. Labor was not seen as “income” because no gains were had–and in addition, it was early on considered repugnant to tax a person for engaging in common, ordinary labor–whereas, it was considered ok to tax income from trades given special preferences and special licenses. It was not Constitutional to tax some forms of income so test cases were taken to the Supreme Court. In one such case, a person claimed his profit and gains were from land, and that taxing income from his land amounted to a tax on the land itself and was a direct tax which must be apportioned amongst the states. Another claimed that taxing his profits from railroad stocks was also a “direct” tax on his property. Because the Supreme Court ruled that the land and the income from it could not be severed, the income derived from his land, was indeed, an direct tax and had to be apportioned. This made Congress angry because it meant that no income generated from vast estates could be taxed unless apportioned among the states. That is why they passed the 16th Amendment– (some claim it never was properly ratified) but, be that as it may, “income” and “derived” become two important terms when you understand what was happening at the time. Now people just dismiss this difference and say “well, the 16th amendment says they can tax income from whatever source derived.” And it does say that, but those are legal terms, defined in cases brought before the Supreme Court over the years.
I am not a lawyer, but I have been trying to understand the income tax laws–just as I am no economist, but have been “trolling” this site trying to learn something about economics. So, I only put these thoughts out so that others can do their own research and comment on this.
Roberts knows that the commerce clause cannot be applied to someone who does not actively engage in commerce, i.e. they are not engaged in business–open to the public as it were. The federal government is supposed to regulate “commerce” amongst the states–settle disputes, etc. It is not supposed to force someone to buy a product from a private entity.
Under the taxing clause, it may tax citizens, but if it is a direct tax, it is supposed to be apportioned. They can, for example, tax some tangible something like soda pop, and claim it is for health care, and then provide the service. But this gives the individual the right not to buy soda pop–i.e., he may avoid the thing being taxed.
But as some other poster commented here, this isn’t really about healthcare. It is about funneling more and more money to Wall Street. Most banks own insurance companies or vice-versa. If they wanted to provide health insurance for everyone, they could, but then the CEOs could not get filthy rich. Also, big pharma will also make out like a bandit. So I suppose discussing the Constitution is just an academic exercise. I mean, they send drones out to kill people. What part of this are we not getting? But still it is kind of fun to discuss it.
So now under our “voluntary” tax code, the IRS will collect a “tax” that isn’t a tax for purposes of the Anti-Tax Injunction Act, but is rather a “penalty” but it isn’t a “penalty” because no penalty can be had on a private person engaging in no commerce under the Commerce Clause, so it is now a “tax” but it isn’t a “direct” tax as it doesn’t tax the person directly because rather it “penalizes” him so is not a tax under direct taxation of the Constitution and isn’t a penalty because, according to Lawrence O’donnell, no levy results, but they are to collect it just as they do any past due or unpaid taxes. I’d take them at their word if I knew what their words meant.
Ruthie, you already pay a tax for not buying health insurance: It’s called the deductible. If you don’t pay for health insurance, you don’t get the deductible.
You also pay a tax for not owning a home. It also is called the deductible. If you don’t own a home, but instead are a renter, you can’t deduct property taxes from your income tax, but your landlord can.
If you own a business, you pay a tax for not taking clients out to dinner and for not providing health insurance to your employees. Again, deductibles.
Rodger, homeowners also get to deduct the interest payments on the home. Seem like all roads lead to the bankers and insurance companies. Bankers create the money (credit) out of thin air–you spend the next thirty years paying them back with interest–yet they never create the interest at the same time they create the principal, so isn’t this why everyone is always chasing fewer dollars to pay back the bankers–musical chairs of debt?
Ruthie, speaking of the so-called “mandate,” You gotta see this: http://www.youtube.com/watch?v=MHiz4hazV94
Well worth your 3 minutes
Every time I’ve done my taxes I find some pencil pusher has figured out everything before I was even born. If you are an ordinary working stiff, they know if you make, say, $40,000 with a family of four that you will spend so much on sales taxes, so much on this and that. When I’ve saved every sales receipt for purchases, every tax receipt, and then I add it up, unless it is something catastrophic, you might as well take the standard deduction–they have it figured it out to the penny. Taxes are just a form of slavery for the working person. Your labor is all you have, and every year it is diminished. This is why money obtained from labor was an even exchange and was not “income” in the legal sense. You have only so much time on earth and only so many skills. When you swap that for money, you are expending capital, yet you are not deriving gain. So, government taxes (and diminishes) your capital, while it does not take the capital of the wealthy, just a portion of the income generated thereby.
Rodger, I watched the vid and did some research. This is my reply to Dan above who also posted this O’Donnell:
You are right. The bill does not allow for levy or criminal sanction for not paying the penalty. However, what the IRS is allowed to do is to apply any refund you are due to the charge. Then guess what? Next year when they cut your paycheck for taxes, it is applied to the penalty–and when you come up short on your taxes, well, need I say more? While O’Donnell is “”technically” telling you the truth, in fact, the end result is not what he is claiming. Clever devil, that one. Let’s face it, when they can take your money out of your check and tax you for your labor,i.e., your right to make a living, you are a frickin slave in your own country. What’s a little more slavery in a nation of sheeple?
WHQ, I think you meant the discussion with Unna about “printing money.” While I would love to be considered right about something, I was momentarily delighted and then confused when you said you agreed with me–as the “printing money” and “all things being equal” quotes aren’t mine (I don’t think, although old age is creeping upon me and who knows, I might have said it!). I, too, was slightly confused by the “deductible/deduction” thing, but figured it out from the context. I do stuff like that sometimes, too.
You forgot the $200 tax credit–since we shouldn’t have to be obliged to do any such ridiculous thing.
Deductible is the amount you have to spend out of pocket before your insurance starts paying. When you don’t get taxed on some portion of your income because you spent it in a particular way, that is a deduction, at least in the US. (Not to be nitpicky, but I was momentarily confused by the use of “deductible” for “deduction,” since insurance is very much part of the discussion.)
Anyway, Ruthie is right about “printing” money, even if there has been no correlation between net spending and inflation since 1971. That is because she used the phrase “all other things being equal.” Since government deficits are driven mostly by net importing and private-sector aggregate saving (or debt reduction), all other things are not equal.
I agree with RMM that what matters in the affordability of health care is real resources moreso than money. I also agree with Dan, in that real-resource constraints are, um, real.
Somehow, I find myself agreeing with RMM, Ruthie and Dan all at once, despite the apparent disagreement. I love and hate when that happens.
WHQ, I think you meant the discussion with Unna about “printing money.” While I would love to be considered right about something, I was momentarily delighted and then confused when you said you agreed with me–as the “printing money” and “all things being equal” quotes aren’t mine (I don’t think, although old age is creeping upon me and who knows, I might have said it!). I, too, was slightly confused by the “deductible/deduction” thing, but figured it out from the context. I do stuff like that sometimes, too. Heck, I even posted this in the wrong spot above!
Oops! Yes, Unna was the one. So you were right about that, Ruthie!
Kervick presents us with a false dichotomy, that either the government must tax us individually to pay for an item and then give us the item, or else the government must mandate that each individual buy the item.
There are other choices. The government could provide the item for free or for a low nominal cost, and “pay for” it through general revenues and/or deficit spending.
This is how we pay for schools, roads, libraries, etc., and it worked fine until the NEOLIBERALS came along.
The NEOLIBERAL preference is to make users pay for things, instead of paying for them with general revenues. User fees tend to be regressive, and that’s a feature, not a bug.
The ACA is most definitely a NEOLIBERAL plan, and I for one will not defend it.
If SCOTUS had shot down the individual mandate, as they should have, the government would have had to fund health care through general revenues instead of through individual premiums and penalties. By upholding the mandate, SCOTUS has given NEOLIBERALISM a green light.
What’s next, a mandate that we send our kids to a private, for-profit school, or else face a tax penalty ? A mandate to pay tolls on private, for-profit roads, instead of having public roads financed by general revenues ?(it’s already happening, isn’t it ?). A mandate to buy for books from Amazon, instead of checking them out at a public library ? A mandate to buy our water from a private, for-profit water company, instead of a public utility ? (that’s already happening, too !). A mandate to use a parking meter owned by for-profit foreign investors ? (that’s already happening, too!)
The SCOTUS decision wasn’t just about health care. It was about whether we want to have a New Deal type of government, or a NEOLIBERAL government. It was about whether government has a responsibility to provide for the public good, or whether the responsibility rests on the individual. It was about values. And I don’t agree one bit with the the ACA/SCOTUS/Heritage Foundation values.
You are absolutely correct. ACA is a result of the false belief that federal taxes are necessary to fund federal spending.
Because the federal government is Monetarily Sovereign (as of 8/15/12), it now has the unlimited power to create dollars. It does not need to ask anyone for dollars — not you, not me, not the Chinese. If federal taxes were completely eliminated, that would not reduce by even one dollar, the federal government’s ability to pay any bills.
The federal government could and should provide free Medicare for every man, woman and child in America. Trying to creep up on universal coverage with some sort of “revenue neutral” plan demonstrates abysmal economic ignorance.
Those who do not understand Monetary Sovereignty do not understand economics.
The supreme law of the land is supposed to be the Constitution–I realize government renegades do not want to abide by it, that we don’t go by it (free-speech zones?–give me a break!). Anyway for the sake of argument, Roberts tried to hide his decision by giving it color of law, so let’s pretend he really cares and that we do too.
The Constitution is a grant given to the government by We the People, giving government certain permissions. What did We the People say about taxing–we said taxes must fall into one of two categories: a direct or indirect tax. A tax on property or person is a direct tax, requiring apportionment (based on census), and a tax on privileged and avoidable activities is an indirect tax, requiring uniformity. So what is this tax/penalty thing? Roberts claimed it was not a “direct tax” falling directly on a person or property so it did not require apportionment. Well, is it an “indirect tax” falling on something I can avoid? To say that someone can avoid working is, in reality, an absurdity. Yes, he may live under a bridge (until the cop comes by for as Anatole France said the law being equal forbids the rich as well as the poor from sleeping under bridges). I do not believe a reasonable person would say that one could, in most instances, avoid labor of some kind.
And if it is an “income tax” well, that is a whole different ballgame as “income” which is not defined by the IRS in any way shape or form to mean wages from labor in their documents (they leave it vague so that if you construe your wages as taxable, well you reported it as such didn’t you, slave?–and if you don’t report it, have they got a special tax court for you!) Anway, “income” HAS been defined by the previous Supreme Courts as being GAIN or profit DERIVED from a source –said source must still must fall under direct or indirect taxation. I hate to repeat myself at the possibility of being accused of spam, (I posed this explanation in another thread) but the 16th Amendment which did away with the need for apportionment had a very specific meaning for “income” and “derived from” behind that decision. To tax a man’s labor (taxing a woman’s labor might be misconstrued here so I stick with “man” to mean all people) was repugnant to people. A man’s labor is his only means to acquire property if he is not born into it; therefore, expending one’s labor is no “gain”; it is an even exchange. If I exchange an hour of my life, where is the “gain”? There is none. However, if I take money I have earned at labor and invest it in railway stock and receive “income” therefrom, that is GAIN DERIVED from my labor. This is an important distinction, and one the IRS hopes you never realize; just as bankers hope you never realize that money is created out of thin air.
So, yes, I can see how a government can tax soda pop, or beer, or lug nuts in order to fund a healthcare system; they may do so under the indirect taxation. If they tax me directly, however, they have to apportion it; which I believe means, base it on the census–send the bill to the states and let them collect it for each state.
But we were being hypothetical. In a nation of lawless politicians, lawless bankers, lawless courts, why nitpick?
“..it also contains a provision imposing a financial penalty on those who fail to obey the mandate..”
And that’s one of the many major problems: it sets the legal precedent for the privatization of taxation — and that is bad, very, very bad.
The whole crux of this bill is that it may help a few more people, while sending more and more money to the health insurance companies, not capping insurance premiums, and not addressing the top two cost drivers of health insurance:
(1) hedge fund speculation across the entire healthcare sector; and,
(2) private equity leveraged buyouts across the entire healthcare sector.
And these will only continue to be the top two cost drivers as it is a for profit, fee-based system.
Single payer or else. . . .same old stuff.
Correct: Free Medicare for all is the sole, sensible solution to our health insurance problems.