The Washington Post reports on Bush funding proposals.
http://www.washingtonpost.com/wp-dyn/articles/A18876-2004Sep13.html
I have a couple of comments on the WaPo article on the Administration's $3 trillion over ten years "health care" proposal.
First of all, since the country's TOTAL outlay for health care in 2002 was already $1.6 trillion in one year, three trillion over ten years is a drop in the bucket, especially if one considers that the population is aging. Not to mention that a good chunk of that will be consumed by inflation.
The WaPo also reports that:
"In his acceptance speech in Madison Square Garden on Sept. 2, the president called for the expansion of health savings accounts, which provide tax breaks for families and small businesses; creation of new tax-preferred retirement savings accounts; and creation of lifetime savings accounts, which allow tax-free savings for tuition, retirement or even everyday expenses."
Now that I've come to the conclusion that paying for medical services through insurance policies (private or public) is a bad idea and if I assume that at least some of the people in the administration have a good idea what they are doing, it looks to me that what is being proposed here is that the money which people put into insurance, which they may or may not get back, but which is certainly not taxed at the rate it would be if it were characterized as "savings" and provide more tax revenue in the long run, is going to be moved into a category where collecting taxes on it is more likely.
Although insurance companies are classified in the same category as financial institutions such as banks, credit unions and S&L Associations, the bottom line here would seem to be an interest in funelling more money into a sector that has experienced a considerable drop in revenue. That is--more business for banks and less for insurance companies. None of which, of course, will contribute one iota to improving the access and quality of medical care for the people who need it.
I think one of the things we have to keep in mind is that while common sense tells us that anything we set aside or intend to use in the future is in effect "saved," that's not how economists classify things.
So, for example, when we put money into an insurance policy, money on which we have paid an income tax (if it was earned), that money then belongs to the insurance company, which classifies it as income which is, naturally since this is a business, offset by all the expense associated with writing the policies and managing the money (expense of investing in stocks and bonds), and then, if the company has to pay out on its policies, it calculates those as a loss, which it deducts from any profit it might otherwise have and avoids having to pay taxes on what that profit might be. Indeed, if there's a big loss one year, it can be carried over to others to reduce the tax "burden" and get a refund.
On the other hand, if people put their money into a savings account, they have to pay taxes on whatever interest that account earns right away--or as these proposals suggest, keep records for ten years or longer and then pay tax at the end, if they haven't met all the provisions or the law has changed.
The final point made by the Post that I want to comment on:
"Another expensive part of Bush's agenda is the expansion of health savings accounts and creation of lifetime and retirement savings accounts. The new accounts are designed to have minimal cost in the first 10 years but have very large costs in the long run because they provide tax breaks when the money is withdrawn rather than up front."
What the article refers to as "expensive" is in terms of tax revenue that the government doesn't collect. For some reason, not getting income is referred to as a "cost" when it concerns the government. Why when somebody doesn't pay you is considered a cost, I don't know. Maybe because there's an underlying assumption that the government is somehow entitled to the money.
Anyway, what bothers me about this proposal is the same thing that's going to make the prescription drug support program entirely unfeasible--the requirement to collect and keep ever more records. But maybe that's the idea--make the paper-work requirements so onerous, that nobody will want the program.
I mean, the main benefit of the removal of the capital gains tax from owner-occuppied homes was that it was no longer necessary to keep records for all the "capital improvements" people made over the years of their ownership. Ditto for getting rid of the depreciation for residential investment property.
All of the recent proposals are going in the wrong direction. Making more business for accountants. So can we say that what we have here is a bailout for the financial and accounting sectors--those people who have been so profligate with other people's money?