The Recipe

Here’s something I haven’t seen anyone bring up:

Any form of government ‘single-payer’ or ‘public option’ plan – any plan that the government gives people that mimics what the typical employer-based plan offers – is a retroactive tax on the salaries, for as long as we’ve worked, of anyone who currently gets an employer-based plan.

Why is that?

Let’s go through this slowly. If you’re like me, or like the average person, you do work for your employer and in return they give you, basically, (a) X dollars per year and (b) a Health Plan worth Y dollars per year. In other words your employer thinks it’s worth spending at least X+Y dollars per year to have you on staff, but they only give you X of that in the form of cash.

But don’t worry, they say. That Health Plan you’re getting, that’s worth Y dollars. You should factor that in. Maybe you’re supposed to even think it’s worth more than Y dollars. After all, your employer can only pay that rate on your behalf because of their ‘negotiating power’, because of ‘risk pooling’. If you had to go out and buy that Health Plan on the open market by yourself, you’d have to spend more than Y. So, having Y of your salary be given to you in the form of Health Plan seems like a pretty good deal.

The point is: that health plan you’ve been getting, it’s part of your salary. It’s the fruit of your labor. You only agreed to spend N hours/day away from your home and family doing these unpleasant things for only X dollars in cash, because you were also getting that Y dollar Health Plan in return.

But guess what? Barack Obama and other people in the government have now decided it’s unfair that you have Health Plan and other people don’t. Got that? The thing you have been earning, by the sweat of your brow, that Health Plan you’ve been allowing your employer to give you in lieu of salary – you don’t deserve it. It’s “not fair” that you have it and other people don’t. So the government needs to step in and correct this. The government needs to ensure that everyone has a basic plan pretty much just as good, regardless of whether they can pay for it.

Remember: you’ve been earning this Health Plan by working. You’ve been getting it instead of cash and told to like it, dammit. But now it’s “not fair” that you have it! Even worse, remember that the supposed market value of this Health Plan was Y dollars. In other words, instead of giving you an extra Y dollars, your employer gave you a Health Plan, and implicitly said “Don’t worry that’s worth at least Y dollars”.

People have been placing a high value on these Health Plans. They have actually been staying in jobs just for the Health Plan! There has also been an escalation in the demand for good Health Plans, i.e. their price has been bid up. People have wanted them to include more, to cover more, to be more expansive. People have wanted to be paid in as much Health Plan as possible, in fact. “Don’t give me the cash! Put more of it into Health Plan!”

But how much is an employer-based Health Plan really worth in an environment where the government is handing out Health Plans for free? Answer: um, far, far less than Y dollars. After all, would all these people have valued Health Plan so highly these past 10 years if they had known that by 2009 the government would be seriously considering handing out Health Plans?

Where you end up if you think this through is the government is threatening to dilute the value, after the fact of an in-kind service you’ve been getting in lieu of cash. The government wants to inflate away the value of your Health Plan, the one you were told all these years to love and appreciate and value more than its weight in cash. They want to pop the Health Plan bubble that they created. This is an after-the-fact tax and it applies to everyone who is productive. Moreover, it is highly regressive; inflating away the value of a $Y Health Plan probably means little to someone making $800k/yr who ‘only’ received $(800-Y) of that in cash, but means a lot to someone who was told for ten years that receiving $(35-Y)k (plus Health Plan)/yr was just as good as, or even better than, receiving $35k/yr and having to buy (or not) their own health care.

Here’s the recipe for this and future government takeovers:

• decide what you think people Should Spend Their Money On, according to your infinite wisdom
• create tax incentives, etc. for employers to pay people in-kind rather than in cash, on that thing. Subsidize it if necessary. This creates a Bubble in the thing (people begin to value it more than cash)
• then look around, acting shocked that some people have the thing while others don’t. Say that’s “not fair”.
• create a ‘public option’ to provide the thing to everyone, thus diluting away the value to anyone who earned the thing through working. (And more, because this ‘public option’ is at taxpayer expense – i.e. the productively employed will pay more than their share of it)
• now you, the caring, loving government, control the market in that thing.

Repeat, and you get to full-on socialism in no time.

Now is it any wonder that I’d always rather just be paid in money? The government can inflate the value of that away too, but at least it would be more out in the open…..

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