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The next 100 years

"The next 100 years" Continued...

Issue: "2010 The Year Ahead," Jan. 16, 2010

Q: What kind should we have? The current party in power, the current administration, and the current Congress say that we need to throw out the whole system and little by little replace it with much, much more socialized medicine. What they want is a single-payer plan: Everybody has healthcare covered by government, kind of like Canada or the U.K. and a lot of other countries. Americans don't want that not because it sounds really inefficient, although it does, but rather because Americans have their values tied up in the free enterprise system. It does violence to how people see the world and the United States to nationalize one-fifth or one-sixth of the American economy.

Q: So what's a stealthy route to nationalization? OK, you're going to have a government option for everybody who can't buy health insurance. Well, that would start with 5 or 10 million people, and within 10 years it would be 100 million people, and guess what? That's a secret way to get us single-payer socialized medicine in this country; that's just how you do it. Or, nonprofit cooperatives that would have to be subsidized by the government, which would lead to the same route. This is what they want. They want a pretext for basically nationalizing American healthcare and an excuse to redistribute more income in the American economy.

Q: Is the drive to nationalize healthcare a special case or part of a bigger picture? The current administration has two guiding principles, basically. Overseas, what they call diplomacy, which we call appeasement. At home, what they call fairness, which we call redistribution. Redistribution comes about because, for the current administration, the problem is that some people have more and some people have less. That's not a problem for me: I want more equality of opportunity for people to pursue their skills and passions, and individual opportunity will lead naturally to different outcomes.

Q: Once Congress finishes with healthcare, one way or the other, what will be a hot issue during the rest of 2010? Tax reform is coming around. Right now, the maximum tax rate at the margins for Americans is 35 percent. January of 2011 it's going up to 39.6 percent, and we're getting rid of some deductions that will basically make it 41 percent, and we're talking about a surtax for healthcare, about popping the cap off payroll taxes-and we're going to have to deal with the alternative minimum tax at a certain point. The result: People are going to be paying more and more and more. The problem is that the data show that raising taxes on the rich won't raise any revenue because the rich are really good at avoiding taxes-through really clever, devious ruses like working less, starting fewer businesses, creating fewer jobs, and not being entrepreneurs.

When people see that raising taxes cuts off opportunity for them, their kids, and their grandkids, and when we have to pay for the deficit by taxing the middle class, which inevitably will happen, this is going to become a hot, hot issue. It will start emerging in 2010. This is one area where AEI is utterly locked and loaded. We have the data and we're ready to go on this. I can't wait for that fight.

Q: But what about all the people who don't pay federal income taxes? Most Americans think they pay federal income taxes, but 43 percent don't. [They do pay Social Security and Medicare taxes.] This time next year 49 percent of Americans will have no federal income tax liability and it's going up and up and up. When is the tipping point where so few Americans have skin in the game, where so many Americans are takers and so few are makers, that we say, "You know what? This is pretty sweet. I kinda like this system because someone else is paying." That's what one side is counting on actually happening.

Q: Do most Americans, including some who pay no federal income taxes, think that's right? Sixty-six percent of Americans think that everyone should have some skin in the game, that everyone should be subject to some federal income tax liability because we all should be participating in what the government is doing. Nobody should have a free ride; everybody should at least feel it a little bit.

Q: Some conservatives talk of moving from a productivity tax to a consumption-based tax system by scrapping income and capital gains taxes, and replacing them with a national sales tax such as a value-added tax. It's a really smart idea: It's much fairer. It wouldn't penalize productivity. It wouldn't wreck entrepreneurship. It would be more affirming to our values. But there's a joke about politics. It says, for the longest time a value-added tax or a consumption tax has not been politically viable because the left wing realizes that it's really regressive and the right wing realizes that it's a tremendous money-pump on the American people. When it wins, when we're going to get it, is the day that the left wing understands that it's a money pump on the American people and the right wing understands that it's regressive.

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