Editor’s note: Brian Riedl responds to Senator Elizabeth Warren’s recently announced “Medicare for All” plan.
Senator Warren deserves enormous credit for abandoning her earlier dismissals of the $30 trillion financing question and producing a plan that spells out the required new taxes. However, promising to shield middle-class families from new taxes forces Sen. Warren to propose an unrealistic level of health care savings, as well as new taxes on businesses and investors that are nearly unprecedented in the modern economy. A more realistic accounting of this plan likely leaves a substantial funding hole, not to mention questions about how the economy would respond to this avalanche of taxes.
Warren defines “full-financing” as funding only the added federal cost of Medicare-For-All – not the underlying $72 trillion shortfall Medicare faces over 30 years. Perhaps candidates should figure out how to pay for the current Medicare system before expanding it. Further, most analyses assume Medicare-For-All will increase national health spending. Yet Sen. Warren assumes that it will fall by $9.5 trillion relative to the baseline, through a combination of highly unrealistic savings estimates.
In order to shield the middle-class from taxes, Sen. Warren proposes hitting businesses, investors, and investment with the largest tax increase in American history. Imposing one or two of these large new tax proposals on businesses and investors would burden the economy. Piling all of them on top of each other would substantially reduce business investment and competitiveness, taking much of the new aspirational tax revenue with it. Furthermore, most of the business taxes would be passed on consumers and workers, violating the promise of shielding them from costs.
In short, the plan assumes unrealistic levels of health care savings and nearly impossible tax increases on businesses and investors. Neutral analyses would likely show a large budget shortfall that would have to be filled by large middle-class taxes.
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