How To Pay For It

So a couple of days ago, this tweet from one of the newest members of Congress drew a great deal of attention.

$21 TRILLION of Pentagon financial transactions “could not be traced, documented, or explained.”

$21T in Pentagon accounting errors. Medicare for All costs ~$32T.

That means 66% of Medicare for All could have been funded already by the Pentagon.

And that’s before our premiums. https://t.co/soT6GSmDSG

— Alexandria Ocasio-Cortez (@Ocasio2018) December 2, 2018

This sounds almost too good to be true: there are enough accounting errors in the defense budget to pay for Medicare for All? Well, that’s because it is too good to be true. As notorious Right Wing rag Vox explained, it doesn’t work that way:

The underlying article by Dave Lindorff in the Nation that kicked this off is an investigative report into the Defense Department’s accounting practices. Lindorff reveals that Pentagon accounting is quite weak, that the department keeps flunking outside audits, that funds are shifted between accounts without proper oversight, and that overall documentation of what’s actually happening with the Pentagon’s vast budget is extremely poor.

…

Critically, however, the passage of the article that Jordan Uhl quoted in the tweet that Ocasio-Cortez cited does not mean that there is $21 trillion in fraudulent or missing DOD spending between 1998 and 2015. Indeed, there simply hasn’t been $21 trillion in (nominal) Defense Department spending across the entirety of American history.

The $21 trillion figure represents a summation of poorly documented internal financial transfers, so that the same dollar can be transferred back and forth many times over. That’s how you end up with a total amount of mis-documented financial flows that far exceeds the amount of money that’s being actually spent.

Further analysis can be found at the WaPo.

In short, the Pentagon is playing money games to shift funds from where they have been allocated to where they think they are needed. Such shifts can, on paper, amount to more than the original funds. What’s worse is that their accounting practices are so horrifically bad, they can’t really document all of this.

It’s not clear how much of that money is recoverable in any real sense. I suspect federal agencies do this a lot — Congress designates money in a very fixed fashion, but agency needs can vary. But this isn’t the pot of money needed for Medicare-for-All (MFA). It’s not even close to it. You could pay for a lot of things if you slashed the defense budget. But even cutting it in half would provide about 10% of the budget for MFA.

(Of course, it’s kind of ironic watching the Republicans jump down AOC’s throat about this. They’ve become masters of fuzzy math on the budget and the sitting president pulls numbers completely out of the ether. But that’s politics for you.)

Now while Ocasio-Cortez’s misunderstanding is amusing, it’s reflective of a larger problem with MFA supporters and one that AOC herself has been a part of: an inability to articulate how the program is going to be paid for. And the reason they are unable to articulate it is because they know what articulating a payment mechanism would likely do: kill the proposal stone dead.

This isn’t the country’s first discussion of single payer. A few years ago, Vermont had a vote on a single-payer system. It failed because the people rejected the tax hikes that would have been needed to pay for. A similar proposal in Colorado was crushed for similar reasons.

A national MFA proposal, according to most experts, would come with a price tag of approximately $3 trillion a year (and lest you think Mercatus is biased, even the most optimistic left-leaning think tanks have come up with similar figures). By comparison, the revenue brought in by the federal government in FY 2017 was $3.3 trillion. MFA would literally double the federal budget.

(Indeed, this massive expense is one of the reasons I oppose MFA. Such a program would make the United States government the world’s largest insurer and make health insurance the government’s biggest single expense. I don’t trust anyone with that kind of power, least of all someone like Donald Trump.)

Moreover, that revenue would have to come from the middle class. That’s where most of the money is. You could tax the rich 100% and still not cover it. In fact, most countries with universal health care fund it through heavy taxes on the middle class — either through income taxes or value-added taxes. It’s the only way it works financially. But it’s also the only way it works politically. There is fierce resistance among most people to “plundering” other people’s wealth. But with a regressive taxation system, everyone feels like they are pitching in and therefore feels comfortable taking out. It’s why Medicare and Social Security are popular — because we all pay in and we all take out. It’s funded by a regressive tax.

Indeed, Bernie’s original plan — which included funding — endorsed massive across-the-board tax hikes (for some income brackets, this might have resulted in marginal rates exceeding 100%). And even then, many experts believed he was lowballing by about a third.

Given the heavy cost of MfA, supporters have tended to grab onto straws, pouncing on any suggestion that we could pay for the program without enormous middle-class tax hikes. The most common target in recent months has been the Trump tax cut — currently slated to cost a couple of trillion over the next decade. But this is a bad straw to grasp at since: 1) it represents less than 5% of the cost of MFA; 2) the whole problem with the Trump tax cut is that we don’t have the money for it; we’re borrowing it. In this sense, the report of Pentagon accounting was yet another straw to grasp at.

(Another straw has been that the program will supposedly save enormous amounts of money. This seems very unlikely to me. We’re told that Administrative costs are lower for Medicare, but that’s not really true as the program is mostly administered by private insurance companies. Preventative care has been touted as a cost saver, but that doesn’t work either. It turns out it’s cheaper to let someone drop dead of a heart attack than manage their heart health for decades. Decreased ER visits are another supposed cost savings, but ER visits tend to increase under universal healthcare schemes because insured people go to the ER more readily than the uninsured. Bernie’s plan assumes that providers will take a 20% rate cut because … well, because he wants them to. But I doubt any healthcare reform will pass without the support of the providers. In the end, any supposed savings are going to be overwhelmed by the extra cost of insuring so many more people.)

Look, I’m against MFA but I understand that many people are for it. There are various arguments in favor. But paying for it will not be easy. And supporters had best stop trying to pretend that it would be.Photo by LaDawna’s pics