FROM WELFARE TO FREEDOM
The issue of welfare and entitlement reform has simmered on the back burner for decades. As the political leadership of the federal government remains dysfunctional in the midst of a crisis in which Social Security and Medicare near financial insolvency and welfare payments mushroom, it may be difficult to appreciate that, indeed, there is a way out of this mess.
There is a practical way to reduce dependency on entitlements and increase employment but it involves dramatically reducing the size and scope of the federal government while simultaneously reengineering tax policy to serve as a catalyst for the growth of free markets in health care and retirement. In my book Restore the Republic I provide a road map. Here I supply a synopsis.
Without question the latest entitlement, Obamacare, is unaffordable and must be repealed. The taxes that stem from it are already weighing down the economy. In the next few years, Obamacare taxes will hammer small businesses and tens of millions of Americans into greater economic strife. In addition to a devastating 2.3% excise tax on medical device companies, increases in Medicare taxes, and increased health insurance premiums, thirty to forty million Americans not presently insured will be forced to pay between $5,000 and $15,000 per year for private health insurance or pay a much smaller “tax” for the choice of not buying health insurance. If Obamacare is not repealed, the devastation it will work on the economy and on the quality of medical care in America will be profound. It is a weighty anchor astride a ship of state that is already under water.
Medicare should be changed to a needs based system, eliminating from the rolls those who have the financial wherewithal to pay for their own medical expenses. Those who, via direct payment or insurance, can afford routine care should pay for it and those who can also afford catastrophic care should pay for that as well. In exchange, each such person opting out of Medicare should experience a recurring tax deduction, reimbursing him or her over time for all contributions paid into the system. Those who die before they are fully reimbursed should have the payback continued as a tax deduction apportioned by will or intestacy under state law for future generations. Corporations that provide health insurance for their employees and for non-employees should experience a $1.50 reduction in federal income tax for every $1.00 expended to pay for such insurance. Individuals should likewise receive the same tax benefit. Such a move would encourage the private sector to take on the role of health care provider, creating a competitive patient-centric free market out of a top down, rigid, bureaucratic program.
Those who benefit from the transition to privately financed care should be removed from the federal Medicare rolls. Those who remain on Medicare should be able to opt out of the system selectively to receive care at their own expense, and providers should be able to contract selectively with Medicare beneficiaries (who in a single instance choose to pay from their own resources) without having to opt out entirely from the program. Health care providers, including hospitals and practice groups, should be given a tax deduction of a $1.50 for every dollar expended to provide medical service, drugs, and devices in aid of the indigent. Those who permit family members and other individuals to abide with them and provide any degree of financial support for them should experience a tax deduction equal in amount to the economic value of the space provided and the cost of care given. Collectively the foregoing measures would substantially reduce the cost, size and scope of Medicare in favor of a flourishing new free market in health care. The measures would reduce the federal government’s presence in favor of a patient-centric alternative characterized by innovation and driven by market forces.
Likewise, Social Security should be changed to a needs based system and private alternatives to the federal system should be encouraged. Those with the financial wherewithal to pay for their retirement should be removed from Social Security. In exchange, each such person should experience a recurring tax deduction, reimbursing him or her over time for all contributions paid into the system. As with the deduction described above for Medicare curtailment, the deduction for Social Security curtailment should be capable of being bequeathed to future generations if not reimbursed in full within the life of each person opting out of the system. Corporations that provide retirement equal to or greater than Social Security benefits for their employees and for non-employees should experience a $1.50 reduction in federal income tax for every $1.00 expended to pay for the retirement. Individuals should likewise receive the same tax benefit. Such a move would encourage the private sector to take on the role of retirement funding, creating a free market in retirement funding in place of Social Security that has already proven that it cannot keep pace with the living expenses of seniors let alone survive the explosive growth in age eligible beneficiaries over the next four decades. Those who benefit from this shift to private sector programs should be removed from Social Security, reducing the cost, size, and scope of the program.
To counter the anticipated mushrooming in welfare over the next decade, the private sector must grow. It cannot grow unless taxes and regulation are removed to allow a massive increase in capital investment, new market development, and jobs. Environmental regulatory barriers to domestic oil production in particular need to be removed, creating a new bonanza as hydraulic fracturing is used to squeeze previously unimaginable quantities of oil from sites across the United States and from sites along the continental shelf of the United States. All federal regulations should be placed under new law containing a mandatory sunset provision, eliminating all within five years unless separately codified by Congress. That will force prioritization by Congress and will restore the non-delegation doctrine abandoned by the ushering in of the regulatory state, while simultaneously cutting back the federal barriers to free market operation.
Finally, there is no alternative to substantial cuts in federal spending, but if we make those cuts and simultaneously grow the private sector through the means discussed above, we will experience fiscal stability. As we do, the nation should adopt measures to reduce and eventually eliminate the personal income tax.
Forty percent of federal revenue comes from the income tax, the remaining 60% comes from all other taxes and fees imposed by the federal government. Elimination of the personal income tax would create an economic boom the likes of which we have never seen. Freeing trillions in capital otherwise sent to Washington and allowing each individual freedom of choice in the expenditure of wealth will fuel private sector growth, greatly reducing unemployment and restoring economic opportunity and upward mobility.
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The present administration and political leaders in Congress appear incapable of agreeing on how to address any present issue of national import, let alone ones that have vexed the nation for decades, like Social Security and Medicare. Unless dysfunctional politicians are voted out of office, the nation will reach and pass crisis points caused by the overwhelming cost of these programs, triggering at last a popular consensus for reform. It remains the duty of those who foresee these crises, appreciate the ruination the crises bring to the country, and comprehend private sector alternatives to the failing public systems, to take up the cause of privatization now and press for adoption of measures to replace the entitlement and welfare state programs—all before an epoch of great and continuing suffering descends upon us.
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