Three assertions:
There is no such thing as “taxpayer money.”
Taxes do not pay for government spending. (Nor does debt. No revenue is needed.)
Leftists who continue to talk as if “taxpayer dollars” must be collected to “pay for” government programs are undermining Medicare-for-all and every other progressive policy initiative.
I know these assertions run counter to an economic ideology that has been ingrained in us as obvious and irrefutable, known for sure. And I know how easy and seemingly effective it is to say things like: “Look at all the taxpayer dollars going to the military. We should spend some of those taxpayer dollars on healthcare instead.” But I want to show, with specific examples, why using this language is a bad idea—a really bad idea.
Maggie’s Farm
There are two reasons why it's important to stop talking like this: 1) Because it's not true, and 2) Because it perpetuates an ideology of how money and public financing work that is not only false, but profoundly reactionary and politically damaging—that is designed to, and will, impede achieving the most basic progressive goals.
Let's deal with the second point first, since I know a lot of leftists won’t overcome their resistance to understanding and promoting an economic proposition that runs counter to the common wisdom unless they can see the political point of it.
Consider the logic of this language: If government spending depends on tax revenue, if the government—the public authority—is an empty pocket that has to be filled with dollars that originate in the private pockets of “taxpayers,” that means public wealth depends on private wealth. That means private wealth is the source, the wellspring from which the public treasury draws; It means that, without large concentrations of private wealth (which are subject to the highest rates of taxation), the public authority cannot function.
Is that not precisely the theoretical grounding of capitalist socio-economic theory in its most regressive Thatcherite form?
If that's true, we are then in a polity where those who pay more dollars in taxes have a prima facie credible claim to demand more influence on the use of those dollars by the public authority—i.e., more political power. After all, the government depends on them; they are its donors, the breadwinners of this household, the source of its wealth. In a taxpayer/donor-financed polity, you can debate whether "taxation is theft" and to what extent “winners”—i.e., meritorious taxpayers—are paying for “losers” and “moochers”—i.e., “undeserving” non-taxpayers. It’s a polity where social programs of universal benefit exist at the sufferance—whether forced or voluntary—of the wealthy, subject to constant negotiation about how far that should go.
This is the paradigm of noblesse-oblige, welfare-state capitalism, whether more or less “generous,” where the public authority—the federal government—must go hat in hand to the wealthy to pay for public services.
This paradigm exudes an ideology that valorizes the wealthy 5% and renders everybody else dependent on them. It feeds the arrogant, trickle-down, anti-social individualism which has such a tenacious and pernicious hold on the minds of working-class as well as elite Americans. It’s an ideology in which there is no such thing as society, just a collection of individual taxpayers. That ideology is a main pillar of the capitalist social order, and must be destroyed if we are ever going to move toward a socialist society.
Yes, “taxpayer money” to “pay for” federal government spending is a central support of all that. Every time we say “taxpayer dollars,” no matter in what progressive direction we are flailing, we are enmiring ourselves deeper in the quicksand of this anti-social capitalist paradigm.
And if leftists and socialists do not understand this, our class enemies damn well do:
Maggie has succinctly stated for us the foundational principle of the neo-liberal capitalist austerity paradigm: The federal government is an empty pocket that must be filled with someone else’s dollars.
Are you beginning to see now why it’s important—politically important—to know whether that’s true or not?
Let’s look at what’s happening in the current debates and proposals regarding progressive programs like Medicare-for-all, to see why a rejection of the Thatcherite paradigm is not just a matter of esoteric economic theory, but a practical-political necessity for the left; and to see how almost everybody who is arguing for those programs is actually reinforcing that paradigm in a way that threatens to undermine their important progressive goals. The left has to stop speaking Maggie’s language.
Let's start with the Democratic Party. It’s not the left, I know, but it is the legislative horde that left activists must corral and entame to get programs like Medicare-for-all. And, pressured by its angry constituents and the bevy of self-identified “socialists” who have recently joined it, the party has even, however squeamishly, agreed to accommodate the “Medicare-for-all” demand.
As can be expected, the Democratic Party, under Nancy Pelosi’s leadership, has bought into the federal deficit and debt hysteria. It has fully committed itself to a PAYGO policy, whereby, to avoid the horror of grandchildren-destroying debt, any new spending must be “budget neutral”—offset by reductions in other spending programs or tax increases. ‘Cause, hey, the state has no source of money of its own.
A lot of left-of-Pelosi progressives see and reject the trap this represents. They understand this as part of a cat-and-mouse game the Republicans and Democrats have been playing for decades:
Republicans have made clear time and time again that they don’t care about the deficit. And Democrats shouldn’t either. Rather than fixating on the GOP’s shaky math, Democrats should highlight the cruelty of shoveling money to the rich at a time when inequality is soaring and millions languish in poverty….
Democrats should be bold and single-mindedly focus on downwardly redistributive taxing and spending. Go for Medicare-for-All, public child care, green jobs. Propose popular programs, and don’t worry about the cost. If the GOP raises deficit concerns, waive them away by predicting fabulous economic growth, just like Republicans do.
-Josh Mound
Pay-Go is a good example of self-hating Democrats trying to be the “fiscally responsible” Republicans that the Republicans themselves never are. The GOP just passed a $3 trillion tax cut for the rich, with no offsetting revenue or budget cuts whatsoever. A Pay-Go rule means that all we’ll ever see is GOP tax cuts for the rich, never Democratic tax cuts for the middle class and seniors. The Republicans figured this out a long time ago: there are exceedingly few 'fiscal responsibility' voters, and they’re going to vote Republican no matter what.-Alan Grayson
Our families in MI-13 reside in the second poorest congressional district in the country, and they need real help from the federal government. House Democrats insisting on paying for progressive legislation that elevates working families with budget cuts elsewhere needlessly ties our hands before we even begin to fight. If Democratic leadership is going to buy into right-wing talking points and stand in the way of progress for our families, we will replace them with representatives more in touch with the families we represent." -Rashida Tlaib (D-MI)
PAYGO is a self-imposed, economically illiterate approach to budgeting. Republicans know this. They understand that deficits pose no risk to our national solvency and that the budget can be used to improve the financial well-being of the donor class. So they have unabashedly used their power to expand deficits and, hence, deliver windfall gains for big corporations and the already well-to-do. Instead of vowing budget chastity, Democrats should be articulating an agenda that will excite voters so that-- when the time comes-- they can unleash the full power of the public purse on their behalf-- a cleaner planet, good jobs, a secure retirement, affordable child care, debt-free college, and Medicare-for-All.
-Stephanie Kelton
The Republicans always preached balanced budgets. But, starting with Carter and cemented with Bill Clinton, the Democrats decided to win for themselves the title of “the party of fiscal responsibility.” As Bill said: “I hope you’re all aware we’re all Eisenhower Republicans…We’re Eisenhower Republicans here, and we are fighting the Reagan Republicans. We stand for lower deficits and free trade and the bond market. Isn’t that great?” Clintonism explicitly turned the Democrats into the second Republican Party.
So, when the Republicans come into power they balloon the deficit with tax cuts for the rich and military spending. When the Democrats are elected, their civic mission becomes pointing out the profligacy of the Republicans and doing the Republicans’ budget-slashing, deficit-reducing work for them.
You’d think someone might notice that, whatever either “Republican” party says about the deficit and the debt, the one consistent result of both parties’ policies has been increased wealth inequality.
Progressive voters like those cited above correctly presume that’s the intended result for the Republicans, and now understand that, no matter what the Republicans preach, the purpose of their spending and tax policies is not, and will never be, to eliminate the deficit; it is to relentlessly increase the wealth and power of “their” people.
A lot of progressive voters also indulgently think the increasing inequality is an unfortunate result the Democrats are forced into producing for “their” people—because somebody’s got to do something about the deficit. What they don’t notice is that it’s an inevitable result of precisely that “deficit” concern.
The Democrats, and many of their leftish progressive supporters, continue to think that shaming the Republicans for their fiscal hypocrisy and promising to enforce fiscal discipline will be the political bomb that will win over the voters. But, they’re the only party that’s actually done anything to reduce the deficit, and their political position has still weakened. Why, oh why, they wonder, are “their” people not voting for them?
You’d think somebody might notice that what’s important here, what really matters for the people and the country, is the growing inequality of wealth, not the deficit.
And, indeed, there is a slew of sincere progressives—like the ones cited above—who have noticed this dynamic, know all about and reject the Clintonite Republicanization of the Democratic Party, and do want to change the game. At the leading edge of this, activists and insurgent Bernie-inspired candidates have turned Medicare-for-all from a “never, ever” to a great “new idea” that’s de rigueur for Democratic politicians. People are at the end of disgust with the for-profit health-insurance “market” and the half-assed attempts to patch it up (the ACA). Healthcare as a right—universal single-payer coverage under the rubric of Medicare-for-all—is a significant progressive advance, and it does seem its time has come.
Thus, Bernie Sanders has introduced a Medicare-for-all bill that’s been co-sponsored by more than a third of Democratic senators (I’ve warned about the duplicity of those Democrats here), and John Conyers has one in the House that has over 120 co-sponsors and is considered the “gold standard” by the single-payer movement. These are the kinds of plans most lefties—from New-Deal-“socialist” Democrats through harder left socialists and marxists—are counting on to bring us the social program we want and need.
But both of these plans, just like Nancy Pelosi’s PAYGO, rely on and reproduce the fundamental Thatcherite capitalist principle that public spending derives from and depends on private wealth, more blandly stated as “taxes fund government spending.” Both think it is necessary to define the new taxes that are needed to pay for Medicare-for-all.
Here’s a page from Conyers’s aptly named “gold standard” bill:
Note the new but undefined taxes in sub-sections (1) B through E. With these provisions, Conyers is honoring the “taxes pay for government spending” paradigm that he feels he must respect.
But then note sub-section (3), which authorizes the annual appropriation of any “additional sums” that will be needed to “maintain” the program, without any reference to whether that matches the undefined and unknowable amounts raised by the taxes.
Similarly, on his website, Bernie says his plan would be “fully paid for” by a 6.2% tax (“premium”) on employers and 2.2% on households (i.e., working-class families), as well as higher tax rates on high income tiers, new capital-gains and estate taxes, etc. But those taxes do not appear in his bill.
His bill establishes—“create[s] on the books of the Treasury of the United States”—a “Universal Medicare Trust Fund” that replaces the current Medicare Trust Funds, and would presumably receive all the new taxes. But, again, that Fund “shall consist of such gifts and bequests as may be made and such amounts as may be deposited in, or appropriated to, such Trust Fund as provided in this Act, including “Notwithstanding any other provision of law, there are hereby appropriated to the Trust Fund for each fiscal year … amounts that would otherwise have been appropriated to carry out the following programs:” So, whatever taxes are paid to the Trust Funds, and whatever else the law says, we’ll appropriate what we need every year to carry out the program.
It’s important to see the two things that are going on here. First, both bills, with their authorization of appropriations in every year going forward, establish what is categorized as a non-discretionary, or mandatory, budget item—as Max Mastellone puts in an excellent essay: “a more or less permanent appropriation of funds that does not have to be renewed year to year by Congress.” That’s why neither of these bills appropriates a specific sum; they authorize a continuing, variable, appropriation. They differ from a discretionary budget item, like defense spending, which requires authorization of a specific amount every year.
“Non-discretionary” is also what is meant by “entitlement”—a word we should stop hiding from. Isn’t the whole point to make healthcare a right? Isn’t a right something we’re entitled to? An entitlement program is the category of program that we have a right to as citizens, a program the government therefore must fund every year. Whatever word we want to use, we should not retreat from, but step right into, the concept. This is exactly the concept, and the kind of program, the right is trying to discredit and destroy, and we must fight that head-on.
Secondly, however, both of these bills uphold and reinforce the “taxes-for-spending” paradigm that is a primary tool to undermine universal mandatory programs like Medicare-for-all, but which they think they can use as a support. Both politicians feel they absolutely must specify which taxes are going to pay for their program, even though their bills explicitly acknowledge they’ll be funded if the taxes don’t cover it.
The Money MacGuffin
What they are doing here is repeating the Roosevelt ruse. When he established the Social Security program, FDR included separate payroll taxes going into separate Trust Funds to supposedly pay for it That was a ruse for political reasons; it had no economic rationale. The federal Trust Funds are an accounting fiction, “created on the books,” not a separate pool of money. (LBJ repeated the ruse with a dedicated Medicare payroll tax and Trust Funds.)
Whether the earmarked taxes/Trust Fund ploy was a shrewd political tactic, a poison pill, or both, we shall see. But a ruse it was. In cinematic terms, it’s a MacGuffin—something put in the plot that looks like it’s important, but really has no effect on the outcome at all. FDR’s administration admitted this in a 1937 lawsuit: “The proceeds of both [payroll] taxes are to be paid into the Treasury like internal revenue taxes generally, and are not earmarked in any way.” And FDR himself acknowledged it quite openly in 1941, when an advisor challenged him to dispense with the fiction and eliminate the payroll taxes:
“I guess you’re right on the economics. They are politics all the way through. We put those pay roll contributions there so as to give the contributors a legal, moral, and political right to collect their pensions and their unemployment benefits. With those taxes in there, no damn politician can ever scrap my social security program. Those taxes aren’t a matter of economics, they’re straight politics”.
So, the FICA payroll taxes are an economically unnecessary political device, based on pay-your-taxes-to-fund-your-benefits fiscal conservatism, that FDR thought would insulate the Social Security program from right-wing attacks.
How’s that working out? Has it stopped those right-wing attacks?
Today, Conyers and Sanders and virtually every Medicare-for-all progressive are reprising Roosevelt’s ruse: “We’ll show you how we’re going to pay for it, every penny! There, now you can’t object.” And all that’s happened is that the right, ignoring the MacGuffin, shifted the focus onto taxes and the deficit. The whole argument becomes: “Can you really pay for it without immense, continually augmented, tax increases, and without increasing the deficit?” “Yes, we can.” “No, you can’t.” “Yes, we can!” “I’ll show you my figures when you show me yours.” Yada, yada.
This is a futile and losing game. Futile, because, in reality, nobody knows what a Medicare-for-all program will cost. That’s unknowable precisely because the federal government will[ constitute a monopsony—a single buyer of health services that will dominate the market and radically change the price structure. Swatting imaginary numbers back and forth is beside the point.
The public controlling the cost is exactly the kind of change the right doesn’t want. Let’s be serious: The right-wing, and all the protectors of for-profit healthcare do not care about the cost of healthcare. In fact, the more expensive it is, the better for them. A main reason they oppose it is because they and everybody else know that single-payer healthcare will cost less—every year, for every person and in the aggregate. The right is not in it to win an economic argument or to cut costs; they are in it to protect material interests. The right’s objection to single-payer isn’t about high costs to the people or to the state; it’s about lost profits for health insurance and pharmaceutical companies.
( continued )
