Tax Cuts Are a Placebo When It Comes to Health Care

It's been a long day in the House of hearing debates and amendments on the Economic Recovery Act, a.k.a. the Stimulus package.  My favorite type of amendment is "Let's scrap the entire bill and do something completely different" amendment, and we have a doozy of an "parallel universe" bill currently under consideration.  Proposed by the House Republicans, it would substitute all spending provisions in the Economic Recovery Act for... you guessed it... more tax breaks.  Intriguing idea - one that would do absolutely nothing to protect health care coverage for those who have it, to extend coverage temporarily to those who have lost their jobs, or to begin investing in health IT in a way that creates new jobs and improves quality at the same time.

Other than that, it's great.

If you have been living under a rock (or, like me, really sick for a couple of weeks) and haven't read newspapers, magazines or watched television, you may not have heard from the chorus of experts talking about how to stimulate the economy in these tough times, about "the multiplier effect" in which focused government spending on infrastructure or other long-term projects creates jobs which met far more than the original $1 spent.  Tax cuts have less of a multiplier effect because sometimes people spend their extra money, sometimes they tuck it into savings or use it to pay down debt - smarter for them, less helpful for the economy.  The Economic Recovery Act as it currently is in the House has both - government investment in infrastructure and industries targeted to create jobs and tax cuts targeted to middle-income earners whose wages have flat-lined over the past 8 years while their costs have gone up - in the case of health care, by 78% over that same time.

But there's something missing from this debate as to the best way to achieve stimulus, and it hits health care square in the nose.  "Economic Recovery" is not just "offense" -- stimulate the economy so it starts up again.  It's also "defense" - shore up the safety net for those hardest hit.  The $87 billion tagged for additional Medicaid funding (as we discussed) does not create new jobs, but it saves jobs, as states are programming draconian program cuts without it.  It protects those on Medicaid (1 in 9 are children) who are in the worst need of health care coverage.  As a lede in the Wall Street Journal warns, "At least 25 states have enacted or proposed cuts in health-insurance programs for the poor, potentially leaving millions of patients with reduced levels of care or no coverage at all."

Similarly, we have another reminder today that only 1 our of 10 people who qualify for COBRA when they lose their job actually take advantage of it.  The rest can't afford it without subsidies - subsidies that the Economic Recovery Act would supply.

So how would cutting taxes on individuals, on corporations, on small businesses, help the health care safety net?  Is it actually a magic bullet to expand coverage for those in the toughest situation in our economy?  Well, we don't actually need to pose this as a hypothetical.  The Bush years saw historic tax cuts in every bracket (though clearly unequally borne by the various brackets), for industry, for businesses.  In 1997, 43 million Americans were without insurance.  In 2006, that number was 47 million, even counting the 7 million uninsured children who achieved coverage under SCHIP.  Although the uninsured got some money back under President Bush's tax cuts, it never came close to bridging the gap between what they could afford and what the cost of private insurance.  Although small businesses received tax cuts, the number of such employers extending coverage to their employees declined.  Although large businesses were bedazzled in tax cuts, the number of employees they offered coverage to also declined.  And every year, another 18,000-20,000 of the uninsured die because of lack of medical care.  That is not a record to be proud of.

Placebos might feel good on the way down.  But they don't do anything to cure the patient, who inevitably gets sicker.  The sooner this parallel earth "stimulus" plan gets voted down, the better for the nation's physical and economic health.

(Photo credit:  ssilbermanlaw on Flickr.)