The REALLY ANNOYING Don’t-Wanna-Subsidize-Wealthy-Kids’-College-Tuition Canard [With fun update!]
Hillary Clinton’s performance wasn’t as clean or as crisp as her last one. Among other things, she invoked 9/11 in order to dodge a question about her campaign donors. But she effectively made the case that, though Sanders speaks about important questions, his solutions are ultimately simplistic and hers are better. Instead of railing about breaking up the big banks, focus on identifying and moderating the biggest risks to the financial system. Instead of making college free for everyone, increase access to those who need it and decline to subsidize wealthy kids’ tuition.
— Can anyone really imagine Bernie Sanders in the White House?, Stephen Stromberg, Washington Post, Nov. 15
Stromberg, a Washington Post editorial writer who also blogs there, is an all-but-official Clinton campaign mouthpiece who last month, in a blog post and (unforgivably) a Post editorial (i.e., commentary with no byline, published on behalf of the Post’s editorial board) baldly misrepresented what Clinton campaign spokesman Brian Fallon on Tuesday misrepresented about Sanders’ single-payer healthcare insurance plan, but from a different angle: Stromberg said that the cost of the single-payer plan would be in addition to the cost of healthcare now. Actual healthcare, not just insurance premiums.
According to Stomberg and the Post’s editorial board then, hospitals, physicians and other healthcare provides would receive full payment from private insurers and also full payment from the government. And employers, employees and individual-market policyholders would continue to pay premiums to private insurers while they also paid taxes to the federal government for single-payer—double-payer?—insurance.
A nice deal for some but not, let’s say, for others. Also, a preposterous misrepresentation of Sanders’ plan.
Fast-forward a month and Stromberg, this time speaking only for himself (as far as I know; I don’t read all the Post’s editorials) and for the Clinton campaign, picks up on Clinton’s invocation of the horror of the public paying college tuition for Donald Trump’s kids. But since he probably knows that Trump’s kids no more went to public colleges than did Clinton’s kid, he broadens it.
Instead of making college free for everyone, increase access to those who need it and decline to subsidize wealthy kids’ tuition. Good line! At least for the ears of voters who are unaware that public universities, like private ones, quietly skew their admissions processes to favor the kids of parents who likely can pay full tuition simply by switching the funds from a CD or other savings account into a checking account at the beginning of each semester, thus removing the need for the school to dig into its endowment fund to provide financial assistance. Or to worry about whether the student will have that loan money ready at the beginning of each semester.
Which is why Jennifer Gratz, salutatorian at her working-class Detroit suburb’s high school, whose extracurriculars included cheerleading but probably not a summer in Honduras assisting the poor, was denied admission to the University of Michigan back in 1995. And why she sued the University in what eventually became a landmark Supreme Court case challenging the constitutionality under the equal protection clause of UM’s affirmative action program.
She did not challenge the constitutionality of the U’s almost-certain, but unstated, admissions policy that would ensure that the freshman class had a substantial percentage of students from families wealthy enough to pay the full tuition.
Y’know, the ones wealthy enough to pay for SAT tutoring, SAT practice course and if necessary more than one SAT exam.
What especially angers me about this let’s-not-subsidize-wealthy-kids’-college-canard is that it uses disparities in ability to pay the tuition as a clever way to ensure the admissions status quo. Or something close to the status quo.
In her and her campaign spokesman’s statements in the last several days—most notably her “Read My Lips; No New Taxes on the Middle Class, Even $1.35/wk to Pay for Family and Medical Leave” declaration, but other statements too—she’s overtly declaring herself a triangulator. And some progressive political pundits are noticing it. Yes!* They!** Are!*** And Sanders needs to start quoting these articles, in speaking and in web and television ads.
I said here yesterday that Clinton is running a Republican-style campaign. But it’s not only its style–its tactics–that are Republican. Watch her edge ever closer on substance as well. Which is the way she began her campaign last spring and early summer, until it became clear that Sanders’ campaign was catching on.
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*Hillary Clinton Attacks Bernie Sanders’ Progressive Agenda: Why is she talking like a Republican?, Jonathan Cohn, Senior National Correspondent, Huffington Post, Nov. 17
**Hillary Clinton Hits Bernie Sanders on Taxes, Paul Waldman, Washington Post, Nov. 17
***Under attack at the Democratic debate, Hillary Clinton plays EVERY POSSIBLE CARD, Alexandra Petri, The Washington Post, Nov. 14
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Edited for clarity, typo-correction–and the addition of the last sentence. 11/19 at 8:23 pm. [Oh, dear. That’s addition, not edition. Can’t seem to avoid the typos. I need an editor!] Corrected 11/20 at 9:52 a.m, after Naked Capitalism linked to the post. Damn!
Oh, well.
FUN UPDATE: Yves Smith was kind enough to republish this post on Naked Capital this morning, and there are a few terrific comments to it there. But I can’t resist reprinting this one, from rusti, as an update the post here at AB:
rusti November 20, 2015 at 5:07 am
We can’t, in good conscience, continue to pay for public works projects knowing that The Donald’s kids are driving on these roads, getting their electrical power from these lines, sourcing water from the same pipes and so forth. A few (moderate) tax rebates to impoverished families to allow them to build out their own infrastructure ought to do the trick.
Perfect. Question to self, though: Why didn’t YOU think of that, Beverly??
Added 11/20 at 10:18 a.m.
Hi Bev, I read somewhere that the Aussies figured this out and it works well. They provide loans to kids who need it and then make sure the costs are not exhorbitant. The loans are at zero interest and are paid by over a lifetime through a paycheck deduction. Generous terms are provided for those who do not earn much, loss of a job means immediate stoppage of payments due and the payments are a percentage of income that is manageable. It is a great idea and one we could use as a model if we cannot pass free college tuition and the accompanying taxes needed to support it.
Hi, Woolley. Yes, that would be a decent compromise.
But, really. Who knew that Australia was so darned-near socialist?
There are several easy fixes. A sufficiently progressive tax system is only one of them.
Beverly, Bernie gave a speech at Georgetown, defening and taking ownership of his positions.
“Let me define for you, simply and straightforwardly, what democratic socialism means to me. It builds on what Franklin Delano Roosevelt said when he fought for guaranteed economic rights for all Americans. And it builds on what Martin Luther King Jr. said in 1968, when he stated that, “This country has socialism for the rich, and rugged individualism for the poor.” It builds on the success of many other countries around the world that have done a far better job than we have in protecting the needs of their working families, the elderly, the children, the sick, and the poor.”
More……http://www.motherjones.com/politics/2015/11/bernie-sanders-socialism-speech-georgetown
Means testing is a loser policy for progressives. It creates enormous waste and resentment.
One of the biggest gripes about Obamacare is how tedious and difficult the sign up process is. It is difficult to figure out how much insurance is going to cost you out of pocket. Most of this is because of the means testing provisions to verify employment and income just to make sure the wrong people don’t get a subsidy.
The simpler process is to eliminate means testing for all benefit programs. Instead you simply tax rich people at higher rates on their income. This eliminates all those layers of bureaucracy testing people’s eligibility for benefits in government programs.
This also eliminates all the resentments about certain people getting benefits. Everyone gets the same benefits. This is one of the reasons that Social Security and Medicare are the most popular government programs ever. They are universal with minimal means testing complications.
Bill:
There is means testing for Medicare also. If you are over $85,000 as an individual and $170,000 jointly, Part B, Supplemental, and Part D cost more. In fact and if the compromise does not or did not pass recently, that group above $85,000 and $170,000 will pay 30% than what was planned. Beyond $214,000, $320,000, and $428,000 the premium goes even higher (I did not print individual costs) for joint. https://www.medicare.gov/your-medicare-costs/costs-at-a-glance/costs-at-glance.html#collapse-4809 You are trying to find justification for something not to exist when it already exists. Furthermore the check for this and also the PPACA is your tax return. I have yet to see people who are rich not resent subsidizing those less fortunate.
I started writing parts of this years ago and sometime I will finish this paper.
The resntment still exists; but, it exists for other reasons.
“There is means testing for Medicare also.”
As I said It is universal with minimal means testing complications. The Medicare premium provisions affect only about 1% of households. There is also taxation of Social Security for high income households, but again this affects a tiny percentage.
Obamacare has very complicated means testing which contributes to its unpopularity and affects every single applicant. There are various levels of premium subsidies, there are various levels of cost-sharing, there is even separation between Medicaid and regular insurance. Verification of income is complicated. Income levels can change month to month and your resulting insurance coverage. You have no idea until the end of the next year how much you will be paying.
You know what benefit programs are popular? The employee heath insurance exemption which is worth $4000 per year for the average household. Every employee gets this government subsidy regardless of income level. The mortgage deduction. Everyone gets this regardless of income level (except at the very top). These are universal non-means tested benefits. They are quite simple to apply and administer. No one (well almost no one) complains about Social Security and Medicare going to the “wrong” sorts of people.
Likewise college education credits should be universal and simple. The current system requires complicated application forms, income and assets tests and complicated loopholes.
Benefits should be made universal and simple. The means testing should also be simple and on the back end — you directly tax income progressively.
I LOVE your point about the employee heath insurance exemption and the mortgage deduction, BillB.
The employee heath insurance exemption is significant in another respect, too: the claim by Stromberg and others about the cost of Sanders’ single-payer proposal. Right off the bat, there would be an increase in tax revenue once the need for that exemption is removed.
BillB,
Please link me to proof that ” The employee heath insurance exemption which is worth $4000 per year for the average household.”
Cause I gotta tell ya, the idea that ” The mortgage deduction. Everyone gets this regardless of income level (except at the very top)” is insanely untrue.
Unless of course you mean they get it, even if they cannot use it.
Michael, the average premium cost of a family insurance plan for employees is $16,000 per year (data from the Kaiser Family Foundation). This is untaxed compensation. At the 25% marginal tax rate, that is a government subsidy of $4000 per year. This doesn’t include that fact that this compensation is also exempted from FICA payroll taxes.
The employee heath insurance exemption is the largest tax expenditure subsidy in the U.S. budget, amounting to over $300 billion per year, almost twice the cost of Obamacare.
BTW, I love this part:
” Verification of income is complicated. Income levels can change month to month and your resulting insurance coverage. You have no idea until the end of the next year how much you will be paying”
For thirty years, 80% of US income earners have had stagnant wages. Yet somehow, there is now a problem with figuring out the income of people who are nowhere near the 80% level of US income earners.
I can only think the problem in figuring out the income at his level is if a person with earnings that give him a subsidy hits the lottery.
I don’t think that is a big problem. Course, they could also see a rapid increase in wages, but there is a much better chance of hitting the lottery.
One number for these ahs that find ludicrous ways to attack the ACA.
75,000
That is the number of Americans alive today due to the ACA.
SO play all you want with incredibly silly comments, when you get to a number that matches my number, write another post.
EMichael:
There is no complication. You get a W2. If your income was too high, you give back. If too low, you get back. It is no different than figuring out your income taxes and social security when you are self-employed.
Bill,
Sorry. But where did you mention that the $4000 only applied to American household with employer provided insurance?
Before I go to sleep(it is 9 o’clock out here) one more thought.
The subsidy for those who get employer provided insurance is not a constant number. As incomes go up, it goes up.. It is based on your tax return. The ACA is also based on your tax return. But as your income goes up the subsidy goes down.
Not real complicated.
I will also note that, like employer proved insurance, the MID helps those with higher incomes in the same fashion as employer provided insurance.
Whether those truths are good or bad depends on your point of view.
EMichael:
Your explanation is correct.
At the end of each year you pay for what you should not have gotten in a subsidy or vice versa. It is not complicated. Do you know how many times I have explained this without using the word crapification? If one can attack and tear down they have integrity. If you can explain the topic, you are lying and covering up. The whole topic of the PPACA is political and deliberate falsification by Republicans from 2008 onwards. The blog powers to be do not do much to help the situation and just fan the flames of false dissent.
A large percentage of ESI is still tax deductible by the employer.
There seems to be a reading comprehension problem.
Michael said: “Sorry. But where did you mention that the $4000 only applied to American household with employer provided insurance?”
Here are my exact words: “The employee heath insurance exemption which is worth $4000 per year for the average household.
Run75441: “There is no complication. You get a W2. … At the end of each year you pay for what you should not have gotten in a subsidy or vice versa. It is not complicated.”
Here are my exact words: “You have no idea until the end of the next year how much you will be paying.”
Most people on an ACA plan have variable income. They may not have a steady job or else they would already have employer insurance. They may not even get a W-2. They might be 1099 contractors like Uber. The fact that they don’t have steady income from an employer is the reason they are buying an ACA plan in the first place.
If you don’t know in advance your income for the year, then how do you select an insurance plan? Should you get the silver plan in hopes that you might be eligible for cost sharing? Or should you get the bronze plan to minimize your payments. If you under-estimate your income, then you may have to pay back subsidies at the end of the year. If you over-estimate your income, then you may over-pay for your insurance and have trouble making your monthly rent payments. Even worse is if you fall near the line between Medicaid and regular insurance. Which do you apply for? How do you make a monthly budget when you don’t even know what your real monthly insurance bill is?
I can only assume that someone who says it is simple has never actually applied for an ACA plan and is totally clueless.
The ACA is a vast improvement over no insurance at all, but it is unnecessarily complicated and anxiety inducing nightmare for those that actually have to use it.
Getting back to Beverly’s original topic, means tested programs are loser programs for progressives. Stop worrying about benefits that might go to a rich person. A better plan would be universal insurance, Medicare for all, or free college for all, that is not means tested. You means test people’s income for taxes. You don’t means test their benefits. Means testing of benefits has always been used as a way to discourage and make it difficult for people to claim their benefits.
geez
“Michael said: “Sorry. But where did you mention that the $4000 only applied to American household with employer provided insurance?”
Here are my exact words: “The employee heath insurance exemption which is worth $4000 per year for the average household.”
So are the words “employer provided insurance” in some code?
“They may not have a steady job or else they would already have employer insurance.”
Beyond belief
Michael, employees who get health insurance through their employment get an exemption on paying taxes for that compensation. It is health insurance for the employee. It is not health insurance for the employer. The tax exemption accrues to the employee. It is an employee tax exemption for the employee’s health insurance.
Is that not clear?
The reason for making this clear is that many people resent the subsidies given to buyers of Obamacare. Yet they fail to recognize that employees with health insurance already get thousands of dollars of subsidies and have been for decades.
Obamacare is simply extending to others the health insurance subsidy benefits that employees have always had (although in an annoying means tested manner).
The key difference is that everyone is eligible for the employee subsidy, regardless of income level. It is not means tested, it is universal and therefore extremely popular.
On the other hand, the Obamacare subsidy is means tested and people regard it as welfare for poor people and resent it. That is the difference between means tested and non-means tested benefit programs.
Put more simply by Wilbur Cohen, one of the founders of Social Security, “Programs for the poor become poor programs.” He recognized that for popular political success, government programs must be universal and not just for the poor, and Social Security was a great success because of this. Means testing is a loser policy for progressives.
And getting back to Beverly’s original post, if you want free college, then you need to fight for free college for everyone. If you attempt to means test it, it will be regarded as a welfare program for the poor and there is limited political support for welfare programs for the poor.
Happy Thanksgiving Bill
Bill, I apologize fro my misreading(several times) of your employee health insurance exemption.
At the same time, the idea that exemption is not means tested is only true if you think everyone gets the same exemption. That is not true. Just like the MID is means tested.
Whew! Peace in our time. Glad you apologized, EM.
Ehh, it was mainly a grammar thing.
“Obamacare is simply extending to others the health insurance subsidy benefits that employees have always had.”
Nonsense. As you pointed out, that “subsidy… that employees have always had” assumes that they are in a 25% tax bracket and itemize deductions.
If we had allowed private purchases of insurance to be fully deducted from income taxes, the recipients of ACA subsidies would get essentially nothing. Why? Because most don’t itemize — they don’t have enough deductions (if any at all) to get over the Standard Deduction. If their insurance costs were fully deductible, most would still be under the Standard Deduction ($12,600 for a couple).
Old thread I know but this is just wrong:
“Nonsense. As you pointed out, that “subsidy… that employees have always had” assumes that they are in a 25% tax bracket and itemize deductions.”
No, that is not how it works. The OP is right.
Suppose you have an “average” employer provided plan and your employer pays $16,000 for that plan on your behalf. That amount is not recorded as income to you and you pay no tax on it.
Whereas if you were given the $16,000 as salary instead it would be recorded as income and taxed at your usual rate. Even if you bought insurance with the money.
It has nothing to do with whether or not you itemize. It has to do with what is considered taxable income and what is not. If you have employer provided insurance you get the benefit even if you file a 1040EZ.
Bob:
Unless someone knows differently, you would be correct on employer provided tuition money. If anyone gets a tax break, the employer would.