Pethokoukis

Medicare and Medicaid waste equals the ‘cost’ of keeping Bush tax cuts

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In 2011, Medicare and Medicaid made a combined $51 billion in improper payments, according to a new report from the Government Accountability Office. To put it another way, 6% of total spending in the two programs is wasted because of a) fraud and b) bureaucrats and contractors doing some of the same work.

Now, from 2013 through 2022, the government will spend roughly $12 trillion on Medicare and Medicaid, according to the baseline forecast from the Congressional Budget Office. Without reform, the two programs will waste roughly $720 billion if that 6% figure holds constant.

Now, that’s a lot of money. In fact, it’s almost the exact amount of revenue that would be gained by a) raising the top two income tax rates to 39.6% and 36% from 35% and 33%, and b) raising capital gains and dividend rates to 20% from 15%.

Letting those rates revert to Clinton-era levels would raise $759 billion, according to a New York Times analysis:

(Now, President Obama wants to go further, of course. He wants $1.6 trillion in tax hikes, including raising raising capital gains and dividend rates to above Clinton-era levels.)

The GAO report helps make my case that we shouldn’t be raising marginal tax rates on either labor income or investment income as a first step to dealing with America’s federal debt problem. A better path:

– First, cut spending and reform entitlements.

– Second, raise revenue through pro-growth economic policies including tax reform.

– Third, increase the overall tax burden if you still need more revenue.

But right now, Washington is going about things completely backward.

16 thoughts on “Medicare and Medicaid waste equals the ‘cost’ of keeping Bush tax cuts

  1. I realize this is not the point of your post, so please forgive me, but why is allowing people to keep more of their money a “cost”?

  2. Great. So increase tax receipts and reduce health care “waste” and the feds fiscal balance will improve $1.5 trillion in the 10 year window. Now, that’s a lot of money.

  3. NOT a lot of money

    Forgive me, I was parroting Jimmy P.

    Do you think that the bulk of the payments of the health care “waste” ended up in the private sector?

    And how many individual, corporate and payroll taxes did the private sector pay with that “waste”? That way you come up with a net number for the fiscal balance, or as Jimmy P avoids it: what were federal receipts for the fraud + contractor duplication payments?

    Fiscal 2012 outlays were lower than in 1983 and 1984.

    It’s real simple. Increase taxes and reduce outlays equally by 2% of GDP and the budget deficit is at historical levels of 3% of GDP. And then bend the cost curve on health care with a tweak to Social Security.

    • It’s real simple. Increase taxes and reduce outlays equally by 2% of GDP and the budget deficit is at historical levels of 3% of GDP. And then bend the cost curve on health care with a tweak to Social Security“…

      There is even a simpler though not politically palatable way, cut ALL entitlements by 15% per year and tax earners 15% less also…

  4. There is even a simpler though not politically palatable way, cut ALL entitlements by 15% per year and tax earners 15% less also…

    Statically, that would reduce the deficit from 7% to 6% of GDP, ceteris paribus. 2012 receipts of 15.8% cut by 15% equals 13.4% of GDP; 22.8% of outlays cut by 15% equals 19.4%. The difference is 6%.

    The problem is the ceteris paribus or the dynamic receipts and outlays. There would be alot of pain for not much gain.

      • You have been exposed to too much radiation, flygirlie. If you think that Granny`s monthly social security cheque has been cut from $1200 (average payment) to $1020 does not cause pain, you are an effing moron.

        Shall I continue about the pain you psychopath. So Romnesia ends up with a $200 million IRA and some 6 year old kid listens to his growling stomach instead of his teacher.

        You are a disgusting piece of shit.

        • You have been exposed to too much radiation, flygirlie. If you think that Granny`s monthly social security cheque has been cut from $1200 (average payment) to $1020 does not cause pain, you are an effing moron“…

          Well you libtard parasite if you think granny so important why don’t you put YOUR money where your supposedly compassionate heart is instead having everyone follow the other fools down the Ponzi scam road?

          You libtard parasites really are waste of good oxygen…

          • True. But shit is rarely pretty“…

            Says the maxie boy the spewer extraordinaire of much fecal filled mindlessness…

  5. The IRS estimates taxpayer fraud amounts to $345 billion (in 2006). And that doesn’t include the hundreds of billions lost to tax dodges concocted by the wealthy and large corporations. Why not illustrate this alternative instead? (We know why…)

    And of course, trying to pursue a “flawless” medical benefits program is a fool’s errand. We’ll always have waste. (Are you always highly efficient every moment at work? Maybe your employer needs to crack down on you!) Comparing a futile effort to reduce waste 100% to a tax increase is a fraudulent comparison.

    • The IRS estimates taxpayer fraud amounts to $345 billion (in 2006). And that doesn’t include the hundreds of billions lost to tax dodges concocted by the wealthy and large corporations“…

      So is this an admission on your part that the government can spend the money you earn better than you can?

  6. The “waste” argument is always a red herring. Every organization on earth has waste. Also nepotism, fraud, back stabbing, and every other human frailty.

    The infantilism of Mr. Pethokoukis’ position, is that government is somehow unique in this regard.

    Not by a long shot. Maybe he should ask Dick Fuld about these shortcomings.

    • The “waste” argument is always a red herring“…

      Says the parasite who thinks its OK for the government to waste other people’s earnings…

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