Progressive Lies Like "Free College" and "Medicare For All" Hide Cost of Debt

Steve Hanke and Stephen Walters discuss too good to be true socialist lies about free programs that hide the true costs.

Hats off to economists Steve H. Hanke and Stephen J.K. Walters for a brilliant op-ed in the Wall Street Journal on the true cost of "free" government programs.

Lying Prices Keep America Hooked on Spending by Hanke and Walters

This is written in guest post format, but it is an excerpt.

When politicians hide the cost of government, ‘free college’ and ‘Medicare for all’ sound like bargains.

For many politicians, lying prices are actually a goal. Policies that set dishonest prices or fudge budgets can fuel the growth of government and lure voters leftward. Sen. Bernie Sanders and his socialist followers use such sleight of hand to obscure the vast costs of proposals for “free college” and “Medicare for all.”

Recent history demonstrates that the price of each new government program rarely tells the whole story. In the past decade taxpayers were charged $27.2 trillion for federal services that cost $35.6 trillion, adding more than $9 trillion to the national debt. Our tax bills told us that Uncle Sam’s good works were about 26% cheaper than their real cost.

And Sam’s nose is growing thanks to rising deficit projections and the unfunded future costs of entitlements like Social Security and Medicare. Official projections put the present value of these two unfunded liabilities at $50 trillion over the next 75 years. Boston University economist Laurence Kotlikoff calculates that the total U.S. fiscal gap is more than four times that amount and that closing it would require a tax hike of more than 60%.

It is foolish to hope that the Democratic Party will join in reversing this trend any time soon. As it has moved left, it has embraced ever more deceptive prices for reforms to government services, labor (Fight for $15!), health care, higher ed, housing and much else.

This is a cynical strategy, and it creates a dangerous political feedback loop. First, progressive thinking leads to bigger, debt-financed government. But debt-financed government, and the lying prices it embodies, also can lead to more progressive thinking. Absent honest signals about government’s full costs, more voters are likely to shrug and assume it’s a good buy.

The late economist William Niskanen documented the relationship between deficits and spending, showing that attempts to “starve the beast” of big government via tax cuts don’t work: As tax receipts decrease, spending rises. In his words, “a tolerance for deficits leads to increased government spending.” Polls confirm this trend. Since 2011 the proportion of voters who worry “a great deal” about federal spending and deficits has fallen from 64% to 51%, while the national debt has risen 45%.

Before such tolerance for debt and a concomitant fondness for “freebies” afflicts a majority of the electorate, it would be wise for the party of Lincoln to seize the political, fiscal and moral high ground, steer clear of lying prices, and rebrand: Goodbye, Grand Old Party, and hello “Honest Abe Party.” Attempting to out-lie the Democrats is, in the long run, unlikely to be successful politically, and certain to be disastrous economically.

Steve H. Hanke and Stephen J.K. Walters

Mr. Hanke is a professor of applied economics at the Johns Hopkins University. Mr. Walters is a professor of economics at Loyola University Maryland.

Mish Comments - Easy to Believe Lies

Socialists spout too good to be true nonsense. People believe economic nonsense for one simple reason: It is precisely what they want to believe.

The ideas get loonier and loonier. For example, ponder the Green New Deal by newly elected progressive illiterate Alexandria Ocasio-Cortez.

The radical plan would force families to pay more to heat, cool and provide electricity to their homes. It would raise the same costs for businesses, farmers, government and organizations, driving up their operating costs – and raising the prices for just about all the good and services Americans buy.

Under the Green New Deal, Americans would have to power their homes with renewable energy, such as wind and solar power. Every home and business in the United States would have to be “upgraded” for “state-of-the-art energy efficiency, comfort and safety.” And a slew of massive government social programs and mandates would be created.

Although no one knows exactly how much the Green New Deal would cost, a very conservative estimate is $40 trillion in its first 10 to 15 years. The Mercatus Center estimates the single-payer health-care proposal supported by Ocasio-Cortez would, on its own, cost more than $32 trillion.

Ocasio-Cortez has suggested one way to pay for these gigantic government programs would be to increase the income tax rate for America’s wealthiest earners as high as 70 percent, but even that radical move would fail to fund the Green New Deal.

Estimate vs Reality

The cost estimate to "save the planet" is $1 trillion. The reality is something like $40 trillion. Yet the Green New Deal has garnered significant attention and support from some members of the media, Congress, and even prominent senators considering 2020 presidential runs: Cory Booker, D-N.J.; Bernie Sanders, I-Vt.; and Elizabeth Warren, D-Mass.

This is precisely the kind of too good to be true nonsense that people want to believe. The message is powerful. We need to "save the planet".

The idea is so absurd that even Pelosi can't stand it. She put it on the back burner. But there is really only one reason Pelosi did so.

The plan is so idiotic that any Democrat running for president on that platform would lose.

Mike "Mish" Shedlock

Comments (85)
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Zardoz
Zardoz

The debt will never be repaid... we’ve borrowed 3 generations into the future. I don’t think it matters much at this point. Better to give our kids free stuff than building a never-finished monument to stupidity and fear in the desert.

Carl_R
Carl_R

One key point that no one ever discussed is that since 1960 the tax code has been re-written many times, with various different tax rates, ranging from a top rate of 90% or so in 1960 to today's current rates. Tax codes have been written and re-written by Democrats, and by Republicans. Remarkably, through all these various iterations of tax code, and all these various tax rates, one thing has remained constant. Year after year, decade after decade, tax receipts always come in at about 18% of GDP. Oh, there are times here and there when receipts pop over 20%, as during the heyday of the internet bubble, when people are paying excessive taxes due to capital gains, but they always drop back to 18%.

Now, if tax receipts run 18% of GDP, and spending runs 25% of GDP, do you have a taxing problem, or a spending problem?

thimk
thimk

When i read this stuff all i can think of is Venezuela. I've got a great recipe to reduce health care costs - stay healthy. If the radical left regain the executive branch in 2020 capital flight will ensue.

gregggg
gregggg

Nothing seems to shake these politicians from their destructive behavior. Maybe the ancient Irish had the right idea... Lol Maybe we should give it a try: " The Iron Age King was responsible for the ongoing success of his people, for ensuring the land remained fertile, for the health of livestock and productivity of crops. If any of this failed, he was held responsible for that too and sacrificed to the Gods in return for better fortune. Old Croghan man, for example, had holes cut through his upper arms through which ropes were inserted to restrain him, after which he was repeatedly stabbed, had his nipples sliced off, and was then cut in half. Clonycavan man was disemboweled, bopped over the head three times with an ax, once across his body, and then had his nipples removed too. Call me cynical, but these gory stories have the makings of attention-grabbing headlines, and sensational, punter-pulling content.

Schaap60
Schaap60

Public universities were essentially free, or at least very affordable, from the 1960s through the1980s. Is it impossible to return to anything resembling that model now?

Bbbbbbb
Bbbbbbb

Yes, i remember when all the other advanced capitalist countries started providing universal healthcare and education at all levels. Then their per capita GDPs started surpassing the US, their bankruptcies due to college loans and medical bills disappeared, and the citizens were happier. Not to mention healthier and more highly unionized. Boss dont want workers like that, want ‘em dumb, weak, and scared.

pgp
pgp

Socialism has been buying votes since its inception way back in ye olde England. The only way the left could get into power then was to rally the lower classes to demand the right to vote. Enter full suffrage and socialism finally won its first election. Add freebies, propagandize the righteousness of humanitarianism or liberalism to the new democracy and you can stay in government for decades. Inevitably the political right has been forced to succumb to the same idiot free-money policies in order to convince the majority uneducated masses to keep voting for it. Why is anyone surprised that the national government debt is where it is and getting worse... Democracy as it is practiced globally has become a farce; a popularity contest where votes simply follow the best bullshit wrapped in the prettiest bow. Perhaps it's time to change the constitution and qualify voters.

Jojo
Jojo

We can start to fund better healthcare for all by cutting the offense (it's not a defense) budget by 60% for starters.

ML1
ML1

Large part of the high cost of healthcare is caused by Hospitals having to provide free care to illegal immigrants and this causes hospitals to charge Americans more so Americans needing a hospital pay for their own care and for illegal immigrants care.

This in turn causes higher health insurance costs.

Also there is massive problem in that hospitals are NOT required to bill same amounts for same services so one having insurance from a certain insurance provider pays less than a person without insurance or a person with anther insurance company. Hospitals should be required to post prices for all services AND charge same price for same service no matter how it is paid.

Also competition should be increased so Hospitals should be FORBIDDEN to purchase nearby doctors offices and hospitals should be required to NOT differentiate between giving access to the hospital for patients coming from private doctors and doctors working for a doctors office owned by the hospital.

Furthermore government should get out of the way and allow free competition in tests so if a hospital charges 800 dollars for some tests an independent test company should be allowed to setup nextdoor and do the tests for 200 dollars.

KidHorn
KidHorn

According to the left, there's never enough money spent on education.

Where I live, they recently released a report giving every school in the state a grade from 1 to 5. 1 is the worst. 5 the best. I looked at the schools in my county and there's an almost perfect correlation between the score and the pct of students who are white or asian. Schools with many whites and asians scored the highest. Schools with many black and hispanics scored the lowest. Also, the schools with many white and asian kids had far lower truancy rates. The local democratic government solution is to spend more on the poorer performing schools. A far cheaper solution, IMO, is to increase the number of white and asian kids in those schools.

You can spend all you want on education, but if the kids don't attend school, don't pay attention, don't study, and don't do homework, it won't accomplish anything,

RonJ
RonJ

Green New Deal

Was just reading about all the tons waste that will be produced by solar panels when they have to be disposed at the end of their useful life, apparently at best, 3 decades. Also about cadmium and lead that can leach out of the panels during their use. Read about a UK study of 3,000 wind mills which discovered they aren't lasting near as long as expected, 12-15 years instead of 20-25. Shorter recycle time will result in higher electricity cost.

Webej
Webej

Lumping medicare and social security together in the category "entitlement spending" is a sure sign of the BAD FAITH IDEALOGUE. Social security, minus disability benefits, it not doing that bad, particularly after a decade of no interest income. The real problem is all in the absurd medical/pharma racketeering scheme which has an exemption to all sorts of laws (the kind protecting you when you get your car fixed -- same price for same job -- same price for different people -- prices published in advance -- anti-trust -- anti-racketerring statues -- etc etc etc.)

Casual_Observer
Casual_Observer

There is a reason why financial types like Harry Dent and John Mauldin are relocating permanently to Puerto Rico. 4% income tax and no capital gains tax. Some hedge funds are also going. What will happen will be straight out of Ayn Rand when the beast gets starved by the top 1%. We have to get to 2030 according to John Mauldin but it won't be pretty.

Advancingtime
Advancingtime

Like many people, I was under the impression that Medicare was free and that after the age of 65 at least the burden of healthcare payments would be lifted from my shoulders. The dirty little secret is that for most people only part A is free and it will only suffice or be enough if you are poor or willing to become poor if you become ill and run up massive healthcare cost.

For people with savings they wish to protect the cost of healthcare will remain an issue. The complex Medicare system is something most of us know little about and try not to think about until we must. Below are a few things it is important to know, and they may shock you.

Taunton
Taunton

I'm not deluded about anything. End the wars, corporate subsidies, and DEA and slash the CIA's budget down to 1/50 of it's current level and slightly bump up the top marginal rate and we will have a surplus, Medicare 4 All or not.

Mike6712
Mike6712

I'm all for free college as long as it's Single-Payer. If professors at Harvard and the rest of the private colleges think the .gov is paying 50K+ per student then they are beyond delusional. The cutbacks , the pay-cuts and the eventual deferred maintenance on their neatly manicured campuses just may be worth Single-Payer college.