A Camp-ground for Tax Reform

This post originally appeared on TaxVox, the Tax Policy Center blog.

By proposing a far-reaching and detailed rewrite of the Revenue Code, House Ways and Means Committee Chair Dave Camp (R-MI) did something very few elected officials have done in recent years: He stuck out his neck and proposed radical reform. The initial press response has focused on politics and concluded that neither Republicans nor Democrats will be able to take on the special interests, that there is too much partisan gridlock, and that the plan is going nowhere.

But such responses largely ignore the history of successful reforms and forget that some policymakers do care about policy. If the goal is to conquer a mountain, someone has to start by building a common basecamp.

Almost any major systemic reform that does more than give away money creates losers. Someone always has to pay for whatever new use of resources the reform seeks—in this case, tax rate reduction and a leaner code with fewer complications. But politicians hate identifying losers. We voters punish them for their candor, which is why they nearly always increase deficits to achieve their goals and leave it to a future Congress to identify the losers who pay the bill.

With his full-blown tax reform proposal, Chairman Camp decided to lead and proposed repealing many popular tax breaks. There’s a lot I like and some things I don’t like in his proposal, but the simple fact is that a well-designed comprehensive alternative to current law can change the burden of proof. Change a few items, and each interest group argues that it was unfairly picked on. Put forward an alternative that takes on almost all preferences, and each interest then needs to justify why it deserves special treatment not accorded others.

The prospect for any reform is nil if no leaders do what Camp did and step up to the plate. The process is not one of instant epiphany. Rather it slowly builds support. Those who first propose change may increase the odds of success from 5 percent to 10 percent. Others who follow further improve those odds.  If we reject out of hand all ideas that start with less than a 50 percent chance of success, we’d probably never reform anything.

It often takes modest support by others to move the process forward.  In 1985, President Reagan and House Ways & Means Committee chair Dan Rostenkowski started the legislative process that yielded the Tax Reform Act of 1986 by simply agreeing not to criticize each other while the measure went through committee. Like Speaker Boehner today, Speaker O’Neill wasn’t enthusiastic about reform then, but Rostenkowski was able to proceed anyway.

In 1985, Rostenkowski knew he could pass a Democratic bill. But he knew it would go next to the GOP-controlled Senate Finance Committee. Each party would have a turn and a final agreement would come from a bipartisan conference committee. If House GOP leaders let Camp mark-up his bill now, Democrats would have their turn, at least this year, in the Senate. At least so far, both President Obama and senior Ways & Means Democrat Sandy Levin (D-MI)  have avoided any major criticism of Camp’s plan, but one wonders if Democrats aren’t going to forego an opportunity, once again joining Republicans in deciding in advance that nothing substantial can be done, so it won’t.

Leadership is seldom about achieving results that can be predicted with certainly. More often it requires using your clout to change the process or reframe the debate in ways more likely to serve the public. It’s certainly about more than protecting your party’s incumbents in the next election regardless of the policy consequences.

When I served as economic coordinator and original organizer of the 1984 Treasury study that led to the ’86 Act, it was a time when books declared major tax reform the “impossible dream.”  Sound familiar? In the face of that dispiriting commentary, I tried to encourage the Treasury staff with what I call the “hopper theory” of democracy: the more good things you put in the hopper, the more good things are likely to come out. By this reckoning, Chairman Camp has already won.


Finding an Opportune Way to Expand the Earned Income Tax Credit

President Obama announced only one major new proposal during last night’s State of the Union address. Here’s what he said:

I agree with Republicans like Senator Rubio that it [the EITC] doesn’t do enough for single workers who don’t have kids. So let’s work together to strengthen the credit, reward work, and help more Americans get ahead.

Having worked on the EITC and other wage subsidies for a long time (and having introduced them at a crucial stage of tax reform efforts in the 1980s), I say it’s about time they were back on the table. Particularly since the onset of the Great Recession, policy discussions around helping those with lower incomes have focused on unemployment insurance, food stamps, and government-subsidized health insurance. Employment needs to move toward the front of our public policy agenda.

As necessary as these other social safety net programs might be—and am not trying to assess their merit here—they generally do not encourage people to stay in the workforce. Like the welfare of old, before the onset of reform of what then was Aid to Families with Dependent Children (AFDC), they provide the greatest benefit to those who do not work at all.  While it’s debatable whether a simple EITC expansion increases total labor supply, there is almost no doubt that per dollar of cost it increases employment more than many other social welfare provisions.

Employment has been a vexing and growing challenge for the American economy. The share of all adults who work—also called the employment rate— was declining even before the Great Recession, particularly among the young and the near-elderly. Indeed, a declining employment rate represents a far bigger and longer-term issue than unemployment, since the NON-employment rate includes both those who are unemployed and those who drop out of or never join the labor force.

Concern over employment makes wage subsidies fertile ground for bipartisan consensus, if—and this is a big “if” in these partisan times—both sides can claim victory from the deal.

Consider the history the EITC. Almost every president since Richard Nixon has signed legislation establishing the EITC, expanding it, or making some provisions permanent. And it’s been bipartisan. The  initial enactment and the largest increases all occurred under Republicans—Ford, Reagan, and George H.W. Bush, while the expansion during the Democratic Clinton administration was also quite significant.

Many who backed these legislative changes did not view the credit in isolation. They often favored it over some alternative—welfare for Senator Russell Long (the EITC’s first champion) and a minimum wage increase for President George H.W. Bush. Or they accepted the EITC as part of a broader tax or budget package. The EITC was never the subject of stand-alone legislative action.

That leads us to today, and what compromises might be supported by both political parties. I suggest two possibilities.

One, following our historical pattern, is to expand the EITC as an alternative to other efforts. At some point, recession-led unemployment insurance expansions will end. A bill to increase the minimum wage might go nowhere. Might an expanded wage subsidy be a compromise?  A broader tax or budget bill always presents possibilities. The EITC offers one way to mitigate the net impact on lower-income populations, whether offsetting  losses from new deficit reduction efforts, or ongoing cutbacks due to sequestration or dwindling appropriations.

The other is to tweak the EITC so it interacts better with other policy goals, such as reductions in marriage penalties—a cause often advocated by Republicans. The childless single workers identified by the president are not the only ones left out of any significant wage support. So also are many low-income married workers. Despite recent changes, the EITC still creates marriage penalties, particularly if a low-wage worker marries into a household already receiving the maximum credit. Such a low-wage worker often fares worse than a single person who gets nothing or almost nothing: once added to the household, the additional worker’s income can phase out his partner’s’ EITC benefits and reduce or eliminate any previous eligibility for other public benefits. Current government policy announces that it is more advantageous to stay unmarried.

Simply expand the current, very small, credit for childless single people, and marriage penalties would multiply in spades. I suggest including in any expansion low-wage workers who decide to marry or stay married, not only those single persons left out. Such an expansion would proceed largely along the same lines as the president’s, but also reduce marriage penalties .

In sum, the president’s best path to bipartisan support for the EITC is to stress more policies that favor employment, offer the expansion as a compromise from other efforts less favored by his opposition, and reduce marriage penalties.


The Budget Deal: A Tentative Step Forward

In a recent Washington Post article, I characterized any forthcoming budget deal as two parties who had dug a hole for themselves deciding to stop throwing shovels at each other. Despite this skepticism, I must admit that this December 2013 agreement is certainly better than throwing shovels—or, more formally, threatening another government shutdown, along with its attendant costs on the workings of government, the well-being of citizens, and economic growth.

This budget agreement also takes a couple of baby steps forward. For the first time in a while, it includes modest reforms to mandatory programs, not just discretionary programs. It cuts back slightly on the silly sequester. Perhaps more important, it gets the two budget committees functioning again. Traditionally, members of these committees have had to fight with the rest of Congress as much, if not more, than with their opponents within the committees—partly because committee members, regardless of affiliation, shared the objective of getting the budget into some sort of order.

If the committee members have really decided to restore their status, and if they are constrained by other congressional leaders from making significant headway on the budget in the months leading to the next election, I hope at least they will start working on bipartisan budget process reforms, such as reducing the game-playing in future budget agreements. One example is greater constraints on future legislation that increases long-term deficits. A trick still possible (but not used in this deal) is to avoid scoring or counting costs against a bill when they fall outside an arbitrary ten-year budget window.


What Should We Require From Large Businesses?

If we want successful companies to contribute to the economy fairly, what should we be asking them for? More corporate income tax? A higher minimum wage? Health insurance for employees? More profit-sharing for employees? Restricted-stock payments of highly paid executives, so they can’t succeed individually when they fail their workers and shareholders?

We’ve tried all these approaches, but at different times and in a discombobulated way.

The corporate income tax, which once raised far more revenue than the individual income tax, now applies mainly to multinational companies, which find ways to hide their income in low-tax countries. Domestic firms often avoid the tax altogether through partnerships or similar organizational structures.

The minimum wage has been allowed to erode substantially. I earned $1.25 an hour while in high school in the mid-1960s; if that amount had grown at the same rate as per capita personal income, high school kids and others would now be earning $20 instead of $7.25.

Health insurance mandates for many employers is our new form of minimum wage. The ACA’s $2,000-per-employee penalty for larger employers that do not provide insurance is essentially an additional “minimum wage” requirement of at least  $10 an hour, either in the form of a penalty or  health insurance.

Profit sharing was at one time touted as the way to instill better work habits and allow employees to share in a firm’s success. Many employees, however, put all their savings in that one investment and got stuck with huge losses when their firms declined.

A 1993 Tax Act limited to $1 million annually the amount of cash and similar compensation that could be paid to top executives and still get a corporate tax deduction. Post-reform, stock options flourished, as did a more uneven distribution of income within firms.

More recent proposals to reform the corporate income tax set minimum taxes on multinational companies, regardless of the country in which the income was earned; increase the minimum wage on all firms; bump up or reducing the mandate on larger employers to provide health insurance (by adjusting either what services the insurance must provide or the size of the penalty for not providing insurance); regulate companies to disclose how unequal their compensation packages are; and require executives, particularly in financial companies, to invest more in the stocks and bonds that couldn’t be sold immediately and would fall in value should their companies falter.

What drives all these proposals, I think, is the notion that large organizations only become that way by being successful and that they owe the public something in return for this success. At some point, almost all companies achieve their size by generating above-average profits and sales growth. The Wal-Marts and Apples and Mercks of today, the General Motors and U.S. Steels and Pennsylvania Railroads of yesterday, have or had more power and money than most. Did they get there only through the hard work and ingenuity of a few people who deserve most of the rewards? Or were they also lucky? The first out of the block? The beneficiaries of scale economies, where only a few companies would survive or the winner would take all? Did they get government help along the way, perhaps taking advantage of the basic research that served as a prelude to their development? Or the protections of a developed legal system, along with a bankruptcy law that limited their losses? If so, doesn’t that legitimize the discussion of how their gains might be shared, either with their own employees or the public?

If we truly want to create a 21st century agenda, I wonder if we could come up with better, more efficient, and fairer policies by asking the broader question than by piecemeal approaches. The corporate income tax, for instance, has been put forward by the chairs of the congressional tax-writing committees, as well as the president, as a ripe candidate for reform. Yet, however much I might favor such reform as a pure tax issue, it’s only a piece of these broader redistributional questions. Might it be better, for instance, to abandon the attempt to assess any extra layer of corporate income tax,  and instead ask larger firms to take a greater role in accepting apprentices, hiring workers during a downturn, sharing profits with workers, providing minimum levels of compensation but not necessarily all in health insurance, and restricting the ability of their higher-paid managers to walk away with bundles even while their firms fail?

Obviously, the devil is in the details. But we should at least have the conversation.


2013 Update on Lifetime Social Security and Medicare Benefits and Taxes

Our updated numbers for lifetime Social Security and Medicare benefits and taxes are now available, based on the latest projections from the Social Security and CMS actuaries for the 2013 trustees’ reports for OASDI and Medicare. Couples retiring today, with roughly the average earnings of workers in general, as well as average life expectancies, still receive about $1 million in lifetime benefits. This number is scheduled to increase significantly for future retirees and is higher for those with above-average incomes and longer life expectancies.

Little has changed on the Social Security side from our previous estimates, as the program has undergone no significant reform in recent years. Our estimates of present values of Medicare benefits for future retirees have decreased slightly from last year as slower health care cost growth has made its way into projections. By 2030, Medicare benefits (net of any premiums paid) are about 90 percent of last year’s estimates, still a significant multiple of Medicare taxes paid. (As in 2012, our numbers incorporate a Medicare cost scenario that assumes the “doc fix” and other adjustments will be extended, not the “current law” scenario in the trustees report.)

We have been publishing these numbers for a long time—and not without controversy over our intent. Our hope is simply that better and more complete information will help elected officials decide whether Social Security and Medicare are distributing taxes and benefits in the fairest and most efficient way possible, a decision we do not believe possible by looking only at annual numbers or how current, not future, retirees and taxpayers might fare. Therefore, we are delighted that in its most recent Long-Term Budget Outlook, the Congressional Budget Office for the first time also published estimates for lifetime Medicare benefits and taxes, as well as Medicare and Social Security combined. Using a slightly different methodology, CBO produces very complementary results. Differences derive from it using median-wage (rather than average-wage) workers, a 3 percent (rather than a 2 percent) real discount rate, and an assumption of Social Security claiming at 62 (rather than 65). As CBO also notes, expected benefits (and taxes, to a more limited extent) have grown over time for a number of reasons, including longer life expectancies, higher incomes, and rising health spending per person.

lifetimessandmedicare


Sixteen Days in January: A Story of the Next Shutdown

Dateline: January 2014. Federal government shuts down completely.

Day 1. Mall, Washington, DC. Park Police decide shutdown again requires barring access to war memorials and the grounds of the Washington, Lincoln, and Jefferson monuments. Veterans rise up in anger and push back barricades. “If you’re furloughed, how can you keep us from entering the parks?” asks Joe Laploski, an Iraqi veteran from New Rochelle, NY. Park Police assign unpaid legal interns to determine whether Park Police should arrest themselves for working.

Day 2. White House. In hastily called press conference, President Obama announces major plan to deal with the national emergency. Enforcement on malls will be sustained, lest someone fall in the Tidal Basin and sue the government. Government debt will thereby be reduced, since Park Police cost less than those future lawsuits, at least on an expected basis.

Day 3. Capitol. Lights go out. Speaker Boehner lost underground. Democrats offer to fund search party, but, invoking the Hastert rule (requiring agreement by a majority of the majority party to act) and unable to decide whether they want to find him, Tea Party refuses.

Day 4. Longworth House Office Building. Democrats send search party after Boehner anyway. Find flasks of aged whiskey hidden by the late former Ways and Means Committee Chair Wilbur Mills two levels below the committee room where he presided. Debate ensues over whether imbibing is an essential government function. Inspired by former Occupy Wall Street supporters, Democrats decide to represent the activity as unity with the “99 percent,” who normally can’t afford such expensive booze.

Day 5. Treasury Department. Electronic payments of billions of government checks and bills stop. Secretary Lew called to emergency meeting at the White House to determine how much blame to assign to Republicans.

Day 6. Oklahoma City. Local Tea Party members claim the IRS is targeting them, citing delayed refund checks as proof. Back in Washington, House Oversight and Government Reform Committee decides to hold hearings in the dark.

Day 7. Near Capitol. Republican staffers gather at a local bar to debate how to get work done during the impasse. Consider asking the guy in charge of the lights for help, until they discover that position no longer exists because of the sequester. Boehner still missing.

Day 8. White House. President Obama plans national address during primetime. He asks the Democratic Party to pay for the speechwriters. Local TV stations refuse to broadcast the president’s speech unless their invoices for airing “Army Strong” recruiting commercials are paid.

Day 9. Treasury Department. Secretary Lew tries to issue checks to TV stations. In a 5-4 decision, the Supreme Court bars him from doing so until he lays out the precise legal priority for billions of unpaid bills.

Day 10. Princeton, NJ. Despite the worldwide recession induced by the shutdown, foreigners still flock to outstanding US obligations, and interest rates on US government securities tumble instead of rise. In a New York Times op-ed, Paul Krugman argues that at this low rate we should borrow all we can—unless it would pay for a Republican tax cut.

Day 11. Treasury Department. In response to the House Oversight Committee’s hearings, Treasury’s Inspector General issues report that Republicans were indeed targeted, indicating as proof that their delayed refund checks were bigger on average than those for Democrats. However, no crime was committed, he asserts.

Day 12. White House. President issues a statement that IRS targeting of Republicans is inexcusable. Fires top IRS data processing personnel and replaces commissioner with top executive from Avon Products with an unblemished record in taxes and data processing because she has never worked in either field.

Day 13. Sacramento. Governor Brown announces that millions of Californians are now insured under Obamacare. He asks that no penalties be assessed on those getting thousands of dollars in excess benefits since recordkeeping was impossible. On Meet the Press, Senator Cruz expresses amazement that the shutdown he favored affects every government program but Obamacare.

Day 14. White House. President Obama launches new peace initiative. He asks Hassan Rouhani of Iran and Bashar al-Assad of Syria to hire their own nuclear and chemical weapons inspectors, claiming that the U.S. shouldn’t have to pay to clean up other countries’ messes. President Putin offers to mediate and contribute Russian oil revenues.

Day 15. Capitol. Boehner found. Claims, like always, he knew exactly where he stood. Negotiates agreement with president on a continuing resolution to fund government until after congressional elections. Congress then shuts itself down until December 2014.

Day 16. Russell Senate Office Building. Before departing, Chairman Camp of the Ways and Means Committee and Chairman Baucus of the Senate Finance Committee issue a 6,700-page document with complex details on how to structure a major tax reform. Congressional leaders promise to take up issue immediately…in the next Congress.


How Much Should the Young Pay for Yesterday’s Underfunded Pension Plans?

Recent stories about Chicago’s pension crisis represent only the latest in a long series of announcements about poorly funded state and local pension plans. Detroit’s declaration of bankruptcy shows one possible consequence of such neglect, with many of the city’s retirees fearing drastically reduced pension payments. This isn’t the first time that retirees and workers have found their financial stability threatened, either: many private pension plans have failed in such industries as steel production and airlines.

While there’s often no easy or right answer for who should pay for these uncovered burdens, as a society we’ve pretty much decided that in this arena, as in so many others, the young should get the shaft.

Often poorly funded or badly designed to deal with risk, many pension plans need only some catalytic economic change, whether from greater competition or an economic downturn, to start sinking rapidly. A promise for the future, underfunded from the past, shifts liabilities forward in time, where they get passed around like a hot potato. No one—employer, worker, or taxpayer—wants to get burned with the cost of past mistakes, or even part of it. But the money that should have been set aside has long been spent, so someone at some time must cover the shortfall.

Consider why government or private employers underfund a plan in the first place. In a private plan, underfunding allows higher wages to current workers, bonuses to top managers, and cash withdrawals to partners and dividend recipients. In a public plan, elected officials can give higher current compensation to workers or more services to the population while letting taxpayers off the hook–temporarily, of course.

When people see this inadequately supported edifice begin to crumble, they make a run on the bank. Given the increased threats to future wages, job security, and dividend payments, everyone has an incentive to get what they can while the getting is good. Keep wages up as long as possible, even if that means further weakening pension plans. Increase those bonuses to top managers, who suggest their skills are needed now more than ever to dampen the firm’s or agency’s fall. Lobby Congress and state legislators to allow employers to defer better funding of their pension plans so these other cash outflows can continue. And maintain pension payments for current and near-retirees regardless of the hit on those not yet retired.

Traditional actuarial calculations—the formulas by which actuaries determine whether employers adequately fund their plans—make matters worse. These formulas often allow employers to play Wall Street with their pensions. A firm or government borrows at low interest rates on one side of the ledger, then invests in riskier assets with higher expected returns on the other side. Even dodging the question of when such practices generally make sense, employers often push their actuaries to use outrageous assumptions about rates of return on those risky assets.

For instance, many state and local governments today assume a return of around 8 percent on a mixed portfolio of bonds and stocks in a world where interest-bearing bonds often yield only 3 or 4 percent at best and the earnings-to-price ratio (the effective rate of return earned by corporations relative to the price of their stock) is about 6 percent in real terms. If these employers want to play the markets with their pension plans, then the plans should be overfunded enough to handle the risk. Alternatively, governments and firms should make their projections assuming a less risky but lower rate of return. If the risk-taking strategy works, then future (not current) funding payments can be lowered.

When the firm or government declares bankruptcy, many bondholders, pensioners, and remaining workers deserve sympathy. Certainly the retiree who might have to rely on less than expected, the bondholder who accepted a lower rate of return in exchange for what she thought was a less risky investment, and the taxpayer who often gets caught covering everyone else’s problems. Sometimes these are the same people who benefited from the excessive payments (made possible, first, when inadequate funds were put into the pension plan, and then, during the delay between recognizing the problem and taking some later action such as bankruptcy). But often they are not.

While these claimants may battle each other, they almost always collude against the young. The use of unreasonable actuarial assumptions establishes this pattern by forcing future workers and taxpayers to cover shortfalls. In addition to covering some of those losses, new workers for the state or the firm, if it survives, will be granted far fewer pension or retirement plan benefits than even current workers, not merely those already retired.

Unequal pay for equal work becomes the new standard. Age discrimination against the old is illegal, but not the young. State pension plans now typically provide tiered benefits, with successively lower benefits for newer workers. In fact, states are now starting to provide negative employer benefits to the young by giving them back less in benefits than their contributions plus some modest rate of return.

The same holds in different ways in private industry. We are all familiar with the higher cash and pension benefits being paid to older airline pilots and automobile workers, among others. Almost no one addresses the consequences for wealth-building, including retirement adequacy, for today’s young. That’s tomorrow’s problem.

Or is it? Seems like we’ve heard that claim before.


You Can Limit Our Deductibles, but it Won’t Reduce Our Health Care Bills

When the Obama administration recently delayed its mandate on out-of-pocket health costs, experts and politicians started debating whether this delay affects our longer-term ability to implement Obamacare. I don’t think it does, but I also think we’re missing the bigger point. Once again, the United States is facing the total disconnect between our nation’s health care policies (whether Obamacare, Ryancare, or “your favored politician’s name here”-care) and the simple, unavoidable arithmetic of health care costs.

Let’s examine the latest example. Obamacare includes a mandate on insurers that out-of-pocket health care costs cannot exceed $6,350 for an individual or $12,700 for a family, numbers often cited as “catastrophic.” At first glance, these limits may sound high: six or twelve thousand dollars is a sizeable expense. But consider: households spend an average of $23,000 a year on health care. If it is considered catastrophic to ask some households to pay $12,000 in out-of-pocket expenses, then how can—or, more accurately, how do—all households cover costs that average almost twice as much?

A similar mathematical conundrum is playing out in another part of Obamacare. Congress determined that we shouldn’t have to pay more than 9 or 10 percent of our income for a moderately comprehensive health policy in the new health exchanges. But
consider: health costs now average about one-fifth of personal income and one-third
of money income. So how do we cover the difference?

The simple answer is that if we don’t pay in one way, we pay in another. Mandate any new limit on what consumers have to pay directly—on out-of-pocket deductibles, Medicare co-payment rates, drug costs under the Part D legislation pushed by President George W. Bush, or our share of the cost of health insurance in President Obama’s new health care exchanges—and those expenses don’t simply disappear. They just get tacked on somewhere else.

Of course, I’m only talking about averages. So you might object, “Well, at least I’m not the one who pays.” Perhaps true, but not as much as you might think.

Perhaps you are fairly healthy and have lower health needs. Insurance policies, however, shift costs from the unhealthy to the healthy. That’s as it should be, but the cost of insurance adds to any out-of-pocket cost. Moreover, since unhealthy households tend to have lower incomes to start with, and on average probably can’t cover even average costs of $23,000, healthy households probably pay at least that average amount and probably more to cover the income shortfalls from the less healthy. So being healthy doesn’t let us off the hook.

Perhaps you are middle class or even poor. The government’s health policies redistribute costs from those with higher incomes to those with lower incomes, including the retired. We might think that we avoid paying these high health costs by shifting tax burdens to the rich. Unfortunately, government health costs are already so high that the middle class has to share in the burden of paying for them.

More importantly, even if those health costs could be placed entirely on the rich, the rest of us would still pay what are called opportunity costs. When our elected officials require that a tax be spent on health care, they simultaneously decide that it can’t be spent on education or training or highways or other goods and services. The decline in education spending in recent years while health costs continued to rise provides only the latest piece of evidence.

Regardless of cost shifts to the healthy and those with higher incomes, we still pay a lot ourselves, only indirectly. In particular, we pay through lower cash wages when employers purchase health insurance, an important but often ignored aspect of the slow growth in cash compensation for over three decades. We also pay a decent amount through our own taxes, including federal income and Medicare taxes and all those state excise and sales taxes, often on businesses, that get passed onto us in the form of higher prices on what we buy. Finally, we pay a lot by borrowing from China, Japan, oil-exporting countries, and, more recently, the Federal Reserve, and then passing those outstanding balances and interest payments to our children.

And if paying a lot isn’t bad enough, these methods of paying help insure that we don’t always get our money’s worth. There’s fairly clear evidence that for every $100 of costs pushed into indirect and hidden budgets, our costs rise by more than $100 as health care providers find it easier to raise their prices.

So, the next time someone tells you that we can’t afford health costs that are only a fraction of what we actually pay, ask him where he thinks the extra money comes from.