We cannot escape America’s rising nationalism. Ever- -distant Russia and China are marching
further away to their own drumbeat, both headed by strong nationalist leaders. We’re
seeing our close U.S. allies, Japan and Turkey becoming more independent and
autocratic. Closer to home, the European Union continues to disintegrate in
slow motion. Greece’s imploding bankruptcy will soon claim its financial
membership to the EU. Followed by the freefall collapse of Italy’s banking. However,
the coup de grâce will come on May 7, when
France selects one of two rightwing contenders—no way Brexit, no way Trump,
take away Italy, take away France—the fate of the EU will be sealed. But we
have our own problems here in the US.
A class war has erupted, pitting older adults against the young
and the military-industrial complex. As dramatic as this sounds—picture flash mob
with walking canes in the air in lieu of pitchforks—the facts are starkly
sobering. With the election of Donald Trump, the crystal ball has long been
broken. Little conjecture is required however, as we have been inching toward a
class clash for more than five decades. On January, it will culminate with a refreshed
zeal. And now there is a public acceptance that “there will be blood’—the economic
blood of the poor and elderly.
Trump’s “Contract with the American Voter”1 will, if fully
enacted, bring an end to the Affordable Care Act (Obamacare), replacing it with
Health Savings Accounts (HSAs). Obviously, serious repercussions will ensue for
Medicaid—a joint state and federal government program—the backbone of Obamacare.
Medicaid will be radically changed by giving states unfettered authority to
decide what services they need to offer. The stark inequities that exist today
across states will become even more unequal for services to the poor and aged. An
immediate concern becomes the shift of funding for health care through HSAs.
Since HSAs are not available for seniors on Medicare or those who are claimed as
dependents, the replacement program will not serve them. With a ceiling of tax
deferred contribution of $6,750 per month, rich middle-aged adults become the
sole beneficiaries.
Clutching onto the coat tail of his master, Paul Ryan, the Speaker
of the House during a limited surge in popularity, reignited his war on
Medicare. Ryan—himself the beneficiary of Social Security survivors benefit as
a young adult—wants to “modernize” Medicare—the Federal Government’s single
most expensive program. Within this
program, the largest part is Medicare Advantage (MA). MA—a type of privately
run, subsidized managed health care—consumes more than a quarter of Medicare’s
total budget. Through MA, with a public option, the new administration can
easily privatize Medicare.
Let’s face it, the details all seem terribly boring. And that is
the beauty of this type of war—it remains imperceptible to most people. The war
America faces remains nuanced, hidden because most people are looking for
binary answers. The fact that it is fought with the money generated by and for
older adults makes it that more obscure.
The finances of the U.S. government come not from Apple, Google,
Goldman Sachs, Chevron, and other US industries and services that generate an
annual turnover of $18.5 trillion—but from your average Joe. The poorest
residents (not all of them citizens) pay for our government—a trend that
started with Ronald Reagan and that has continued even through four
administrations. Both parties have colluded
against the poor.
In 2016, most of the federal budget comes from Income Taxes (45%
of total budget) it is quickly being overtaken by payroll taxes (35%). At one
point in 2008, at the peak of the most recent depression, our payroll taxes became
the primary source of income for the federal government. Out of all the
economic activity of the United States, the federal budget was primarily funded
by people’s contributions to their Social Security and Medicare. We need to let
that sink in.
In contrast to this increasing reliance on our insurance payments
to run the government, corporate taxes have been virtually abolished (less than
10% of our total federal budget). In
addition, estate, excise and all other types of taxes make-up less than 10% of
the federal budget. Payroll taxes—which comprise 15.3% of earnings
which is shared equally by the employee and the employer—are not meant to be
taxes, but to contribute to our insurance funds (hence why it is called the
Federal Insurance Contribution Act-FICA). But the rich do not pay
FICA, as it is not imposed on investment income such as rental income,
interest, or dividends. The
rich are also protected from paying their fair share of FICA—payroll taxes. Because in 2016 we only pay part of FICA—Social
Security taxes (OASDI) —on income of less than $118,500 (the amount remains
constant at this level) the more you earn the smaller the percentage becomes. As such, OASDI taxes are regressive. Rich
people, when they do pay payroll taxes, pay a smaller percentage then US
residents who earn less than $118,500.
This would not be all bad, except that FICA funds which are supposed to be saved in trusts for our old
age (OASDI-Old Age, Survivors and Disability Insurance) and medical coverage
(HI-Hospital Insurance funds Medicare) are instead all spent as part of the budget,
every year.
Numerous attempts to stop this
misappropriation have to date failed. Allen Smith, a professor of economics,
emeritus, from Eastern Illinois University has waged a valiant fight to
publicize the illegality of how these funds are misappropriated. Starting in 1969 in the Johnson Administration, payroll taxes
were co-mingled in a unified federal budget. To stop this and assure that these
payroll taxes would be invested in Baby Boomers’ (1946-1964) benefits, a law was needed. In 1990 the Omnibus Budget
Reconciliation Act (OBRA) stopped the use of payroll taxes in the unified
budget—the funds were designated as off-budget. But whether payroll taxes are calculated as "on-budget"
or "off-budget" remains real only for accounting purposes—in practice,
Congress spends payroll taxes, all of the annual budget, and then some each and
every year.
As I said, it’s nuanced, except for the large
amount of money involved. Payroll taxes are worth $1.07 trillion every year.
The budget clash involves increasing Federal discretionary
spending by reducing mandatory spending. The mandatory budget is 60% of the total budget
with $4.1 trillion. It is mandatory because there are some obligations that the
government has to pay such as, social security, Medicare and also some military
personnel costs. Mandatory budget was created in 1935 by the Social Security
Act. In contrast, then there is the discretionary budget with $1.15 trillion.
This budget is dependent on congressional approval and mainly funds military costs
with 54% of discretionary budget. The transformation is to decrease the funds
in the mandatory budget and move it to the discretionary budget. Hence the
clash between spending on older adult and replacing it with military spending.
By becoming increasingly reliant on payroll taxes—while at the
same time reducing the solvency of Social Security and privatizing Medicare—the
incoming administration will directly assault poor older adults. Especially
with the privatization of Medicare. Health insurance companies are quickly aligning
themselves for this bonanza. They are busy consolidating to gain a monopoly. For
now, the Justice Department continues to opposing the mergers between Anthem and Cigna and between
Aetna and Humana. WellCare Health Plans has
also announced its intention to buy Universal American. In less than two months,
these mergers are likely to be approved and Medicare Advantage will be their
prize. Medicare will be sold to the highest bidder, who will then have a
monopoly on our health.
Although we cannot change this policy--which has been evolving for
more than five decades--we can, however, make the system more solvent. Congress
might adopt a policy of greater equity in the system if it brings more money. Elimination
the ceiling for taxing Social Security would represent one big step. Although
previously, Medicare (HI) taxes had the same restriction as Social Security,
Bill Clinton passed a 1993 law removing the taxable maximum for Medicare--thus
making all earnings subject to these taxes. Health Insurance taxes are therefore
progressive, but still only represent 2.9% of the income compared to 12.4% of
OASDI. By removing the ceiling for OASDI taxes and making it more equitable so
that all income—including rental income, interest, or dividends are taxed—then
payroll taxes morph into a more equitable income tax. Which is how it is used by the federal government.
Arguments involving pitting of one generation against another are
for show. The attack is on the poor and across all generations, since this
administration will be selling-out our civic structure of care and social
insurance. Our federal insurance payments benefit future generations. Whether couched
as an income tax or a payroll tax, we deserve assurances that we are investing
in our future as one nation.
© USA Copyrighted 2016 Mario D. Garrett
References
1.
https://www.donaldjtrump.com/press-releases/donald-j.-trump-delivers-groundbreaking-contract-for-the-american-vote1
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