I have often complained, in these Commentaries and elsewhere, that about fifty years ago the liberals managed to stop the teaching of even the most basic economics to our children. As a result, two generations of Americans have grown to adulthood without the foggiest notion of how our economy works.
In recent years we’ve seen numerous instances in which liberal politicians have tried to take advantage of that ignorance. Claims that the rich don’t pay their fair share of the income tax, an assertion that I answered in Commentary No. 27. Making a campaign issue out of raising the national minimum wage to $15 an hour, a topic I addressed in Commentary No. 45. Claiming that pharmaceutical research companies are making huge profits from people who either have to buy their medications or face death. I dealt with that one just recently, in Commentary No. 57.
Now we’re faced with another one. Democrat Prez hopeful Liz Warren has released details of her “Medicare for All” program. As I reported in Commentary No. 45, the notoriously liberal Office of Management and Budget (OMB) estimated such a program would cost $3.6 trillion a year. In the same Commentary, I predicted the eventual cost would be in excess of four trillion dollars a year. It turns out we were both wrong. The estimated cost of Sen. Warren’s plan is (gasp!) $5.2 trillion a year.
Naturally, someone asked her how she planned to pay such a large cost. Her answer was straight out of the Talking Points for Liberals handbook. She said, “We’re going to make the rich pay their fair share of taxes. We’re going to make corporations pay their fair share.” To make sure everyone got her message, she clarified it. “The Middle Class will not pay a penny more in taxes.”
Wait—haven’t we heard similar reassurances before? Several promises come to mind, such as, “If you like your plan, you can keep your plan,” and, “If you like your doctor, you can keep your doctor,” and even, “The average family’s healthcare cost will go down at least $2,500 a year.” Yes, I think we’ve heard that song and dance before.
I dealt with the question of taxing the rich in Commentary No 27, so I won’t go into it again here. I’ll just refer the reader to Commentary No. 27, available on the America in the Twenty-first Century Website.
We haven’t talked about taxing corporations, though, so let’s address that.
The liberals would have us believe that corporations, particularly large corporations like ExxonMobil and Microsoft, are hugely profitable. They imply that probably ninety cents of every dollar they take in is profit. They make such huge profits by refusing to pay their employees a decent living wage and by cheating on their taxes. They even hint that it’s probably okay for China, Vietnam, and the Philippines to steal all their business because those places sell to the U.S. market at a fair price.
Let’s start this discussion of Business Economics 101 with a cold, hard fact. Businesses don’t pay expenses. They don’t pay wages. They don’t pay taxes. Accountants call those things “costs of doing business,” and whatever those costs are, they merely pass them on to the consumer in the form of higher prices.
Are they hugely profitable? Well, not exactly. The typical U.S. business makes an average profit of slightly more than eight percent on sales—before taxes. After taxes, the average profit is slightly less than seven percent.
Think about those numbers. Liberal politicians like Warren and Bernie Sanders would have us believe that corporations have huge piles of cash stashed in a bank somewhere. Or perhaps in a vault in the company’s headquarters. Or even on the CEO’s yacht. They could easily pay their employees more, or pay more taxes, but they’re not going to because they’re greedy. They want to keep it all for themselves.
(Parenthetical comment: the subtle message here is that capitalism is an evil system, because it concentrates most of the money and power in the hands of an undeserving few, while leaving the vast majority of people to struggle for survival.)
But never fear—Democratic Socialists like Liz Warren are going to save the day. They’re going to ride in, wearing their white hats, and untie Sweet Sue from the railroad tracks before the train gets to her. They’re going to force the evil capitalist rich people, and the evil capitalist corporations, to pay more taxes. They’re going to use that money to give every citizen of the U.S. free health care.
In fact, that free health care is going to be available to everyone standing on U.S. soil. Citizens. Illegal aliens. Terrorists. Members of South American drug cartels. MS-13 gangbangers. Everyone.
(Another parenthetical comment: you won’t be able to keep your plan, no matter how much you like it. The Democratic Socialists have been clear that they intend to put Blue Cross, Humana, and the other health-insurance companies out of business. There will be only one Plan—Medicare for All, or the National Health Service, or the Federal Health Administration, or whatever they choose to call it.
(You probably won’t be able to keep your doctor, either. Most doctors currently practicing will retire. After twelve years (or more) of intensive training, they’re not going to work for the $50,000 a year or so that the Federal Health Administration wants to pay them. That’s less than a union plumber makes.
(Where did that $50,000 figure come from? Just a guess. It’s the USD equivalent of what England’s National Health Service pays its doctors. Of course, $50,000 a year in England puts doctors in the top ten percent of wage-earners. In the U.S. it’s barely above the poverty level.
(The current group of doctors also aren’t going to work by the rules the FHA gives them—requirements like killing unborn babies in the womb, and keeping old people relatively comfortable while they die.
(You’ll be assigned to a doctor whose last name contains about twenty letters, all consonants. He will have been trained in someplace like Vietnam, Malaysia, or the Philippines. The $50,000 a year the FHA offers him will be far better than the $3,000 a year he was making in his home country.)
But I digress. What I wanted to talk about is Sen. Warren’s allegation that “…the Middle Class will not pay a penny more in taxes.” It may surprise you to hear this, but she’s right. The Congress will not pass a law increasing the tax rates on the group we usually think of as “the Middle Class.” Instead, they will pass a law increasing—substantially increasing—the tax burden on corporations.
Remember what I said about corporations not paying expenses, or wages, or taxes? They just pass those costs on to the consumer? In an effort to remain competitive they also reduce the amount of raises they give their employees. They reduce bonuses, or eliminate them altogether.
They may reduce the employees’ benefits, like the employer contribution to their 401(k) plans. They may even lay off some of the employees, and tell the others they’re going to have to work harder. We saw all of those things during the Obama Administration, when the U.S. economy was on a steady downward spiral.
So it will be true. Those of us in the Middle Class—roughly 20% of the population, making approximately $80,000 to $135,000 a year—will not pay a penny more in income tax. But we’ll pay for our “free” health care by paying more for everything from bread and milk to cars and houses. And we’ll pay more with less, because our raises will be smaller, our bonuses will be smaller (or will not be there at all), and our eventual retirement will be affected because our employer will contribute less to our 401(k) plan.
Those of us who are already retired will suffer because the “cost of living adjustments” (COLA) to our Social Security checks will be less, or will not be there at all. During Obama’s reign we went several years without any COLA.
What’s really scary, though, is that those two generations that grew up understanding nothing about how our economy works will say, “Wow! The Democratic Socialists promised us free health care and now we’ve got it! And they’re promising a lot more! Guaranteed jobs, a guaranteed income, a free college education, a place to live, and a secure retirement. Let’s vote for them and get all that free stuff!”
I still believe that President Trump is going to win by a landslide in 2020. After that, though, I think the nation is up for grabs. By 2024 those two generations that know nothing about economics will have a solid voting majority, and the allure of “free stuff” may be too hard to resist.