When the White House Council of Economic Advisers wasn’t bragging about the strong economic numbers from 2018, it was picking apart the economic damage that could be the result of lofty Democratic proposals like “Medicare for All.”
As IJR reported earlier, White House economists analyzed the strong economic data from 2018 in their 700-page annual Economic Report of the President. While a lot of the analysis was on policies implemented by the Trump administration, they also crunched some numbers to see what would happen if some Democratic proposals became law.
It wasn’t pretty for Democrats.
Medicare for All
Several top Democratic presidential hopefuls, including Sens. Bernie Sanders (I-Vt.) and Kamala Harris (D-Calif.), have come out in full support for Medicare for All, a policy that would expand Medicare benefits to all Americans. As IJR previously reported, Medicare for All has an estimated sticker price of around $32 trillion over a decade.
Despite the jaw-dropping costs, some Democrats have argued that Medicare for All could be funded through increased corporate taxes or taxes on wealthy individuals.
According to the report, a Medicare for All system funded by these types of tax increases could result in a decline in national GDP of more than 9 percent, which means approximately $7,000 per person, by 2022.
Not only did it find that Medicare for All would be a costly mistake, but it also believes it could decrease the health of the average American:
We find that these proposals would be inefficient, costly, and likely reduce, as opposed to increase, the population’s health. Funding them would create large distortions in the economy, with the universal nature of “Medicare for All” constituting a particularly inefficient way to finance healthcare for lower- and middle- income people.
To recap, Medicare for All could tank the national GDP in exchange for inefficient, universal health care that actually reduces the health of the average American.
A 70 percent marginal tax rate
Rep. Alexandria Ocasio-Cortez (D-N.Y.) recently proposed a 70 percent top marginal tax rate for those earning over $10 million per year in the United States. In other words, the IRS would add a new tax bracket of 70 percent for individuals making more than $10 million above the current top tax bracket of 37 percent for individuals making over $510,300.
She claims this money could go toward the plethora of cost-heavy policies she supports like Medicare for All, the Green New Deal, tuition-free college, etc.
The White House ran the numbers to see what impact the 70 percent tax rate would have on the economy as a whole. The council found that production would decrease as individuals are disincentivized to achieve an income above $10 million. Additionally, it found that this disidentification could result in the IRS bringing in even less money than before the tax.
“Recent proposals to introduce a top marginal income tax rate of 70 percent on personal income over $10 million would, if enacted, result in lower output and Federal government tax revenue,” the report stated.
Additionally, U.S. GDP could shrink by “0.2 percent in year one” of the tax rate being implemented.
Not to mention the fact that the 70 percent tax rate wouldn’t even come close to covering these expensive policies, as IJR previously reported.
Repealing the Tax Cuts and Jobs Act
While the White House is proud of its economic accomplishments, the council is aware that President Donald Trump faces re-election in 2020 and that several Democratic candidates have vowed to repeal the “Tax Cuts and Jobs Act” should they defeat him on the campaign trail.
The council credited much of the economic growth of the past year to the tax cuts and reduced regulation, claiming that policies enacted by the Trump administration are directly responsible for the 3 percent growth rates during the first two years of his presidency.
In its report, it argues that a repeal of these policies could reverse growth and halt the U.S. economy.
“Because the administration’s forecast is policy-inclusive, a key downside risk is the political contingency of full implementation of the president’s economic agenda, particularly in light of the inherent unpredictability of the legislative process,” it stated.
It argued that the gains made under the Trump administration would be reversed if the policy isn’t implemented as planned.
The council dedicated 46 pages of its economic report to breaking down capitalism’s superiority to socialism in light of several 2020 Democratic candidates refusing to identify as capitalists.
In its report, the council didn’t go for the low-hanging fruit and analyze the failed policies of Venezuela. Instead, it compared the U.S. to the Nordic countries that Sanders loves to compare to the U.S.
The council found that high-tax systems with abundant national welfare, like those in Norway and Denmark, discourage individuals from striving to generate more income, resulting in a lower personal income for individuals:
We find that even among market economies, average income and consumption are lower in those with relatively high levels of government taxes and transfers as shares of output — such as Denmark, Sweden, Norway, and Finland — than in the United States. This is because the relatively high average tax rates on middle incomes that finance this “Nordic model” also disincentivize generating income in the first place.
In total, the White House Council of Economic Advisers issued some devastating blows to these trendy policies being pushed by several Democratic candidates, especially when it comes to the economic longevity of the United States.