RSS Feed MenuI argued in this piece for AEI’s The American online magazine that the health reform bill proposed by Sen. Max Baucus would reduce the 10-year budget deficit only through an accounting trick by which increased Social Security taxes – which should, you know, be saved for Social Security – would be counted against the cost of the plan’s increased health coverage.
But it seems that no entitlement is left un-raided: the legislation put forward by Senate Majority Leader Reid, which contains the raid on the Social Security trust fund, would also impose some accounting tomfoolery on Medicare. It’s well-known by now that Reid’s plan would increase the Medicare payroll tax to help offset the costs of the plan. What I didn’t know, though, is that these new taxes would first be laundered through the Medicare trust fund, creating an entirely fictitious improvement in Medicare’s financial health. The new taxes are credited to the Medicare trust fund, created an entitlement to new revenues from the rest of the budget. But the actual revenues will immediately be used to cover non-Medicare health costs. Looks like double-counting to me. The folks over at e21 explain.
Kanzeon // Nov 25, 2009 at 2:37 am
I’m trying to follow this.
It would seem to me that, to increase the Medicare payroll tax, the money would first have to go into the Medicare “trust” column. The increased revenues (dollar for dollar?) are then applied to new programs.
Why is this a problem? It seems to me that we have ONE health care system. Segregating medicare from other government subsidized healthcare programs is where the artificiality lies.
I thought, ultimately, that the plan was argued to shore up medicare, in the long run, by cutting costs, not by pumping money into the system. Now, if the Democrats are double counting the money to claim extra benefits for medicare, that is misleading – but it shouldn’t impact the overall analysis of the effect of the plan on the entire healthcare system and the deficit.
As to Baucus’ “phony” deficit reduction through SS tax increases, I don’t follow your point, but it may be my ignorance. When I go to the SS benefit online calculator, it asks for the amount of my income every year, not the amount of tax I paid into the system. Although I haven’t found a link that clearly answers the question, I don’t see any evidence that, as you assert, “paying higher Social Security taxes today entitles a person to higher benefits in the future.”