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The Governments Fiscal Policy

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The Governments Fiscal Policy and Healthcare Proposals
Trisha Elledge
Colorado Christian University Abstract
Bernie Sanders is looking to convert our country to a universal single-payer healthcare system. The following paper will break apart the article written by Avik Roy for Forbes titled Bernie Sanders’ Single-Payer Health Care Plan Would increase Federal Spending By At Least $28 Trillion. By converting to a single-payer healthcare system households would suffer more than they would thrive. Increased taxes, less government revenue and a higher unemployment rate can all come from implementing Berniecare into our country. Although Bernie Sanders is claiming to give “free” healthcare to all, I will point out why it is not free at all and why we should give the control of our healthcare back in to the hands of the people and out of the control of the government. The Governments Fiscal Policy and Healthcare Proposals
According to Reem Heakal with Investopedia, “Fiscal policy is the means by which a government adjusts its spending levels and tax rates to monitor and influence a nation’s economy.” This can include the changing of tax rates nationally or adding a new local tax, adjusting where money is spent and allocated or changing where our government dollars and tax dollars will be used. Each year the government decides where our money will be divided out by agreeing on the upcoming year’s budget, however; as the year goes on money is overspent or gets cut and has to be readjusted multiple times.
Since we are currently in an election year, fiscal policy is a hot topic that has been discussed among each candidate. Each candidate has their own view on what needs to be done to lower the over debt of the country and how the governments money should be divided out if they were to make it into office. No matter the candidate, there are always people for and against their policies. This paper will take a closer look into Bernie Sanders healthcare proposal and what its affect would be on the government’s fiscal policy.
Literature Review
In the article by Avik Roy, “Bernie Sanders’ Single-Payer Health Care Plan Would Increase Federal Spending By At Least $28 Trillion”, Bernie wants “free” health care for everyone. His proposal would replace the current health care system in the U.S. with a universal, government-run, single-payer system. He states that, “Twenty-nine million Americans today still do not have health insurance.” However, Bernie’s plan would also increase government spending by 55 percent leading the country into even more national debt. The debate about whether a universal healthcare system would be beneficial in not a new topic, but has been reignited this election season. If our government could implement a healthcare system that was free to all, then that would in theory help out the economy. If individuals could cut out the expense of healthcare, their disposable income would increase and they could adjust their budgets to either save more money or put more money back into the economy essentially making the economy grow. As shown on page 167 in Principles of Macroeconomics, a simplified version of this is drawn out. A households (simplified) disposable income either ends up as consumption or savings. If the household spends it on items that they want or need, it ends up in the planned aggregate expenditure. The money that is put into savings from the household actually gets borrowed from the government. This money that the government borrows is to help finance the deficit that the country is in. Some of this money also goes to help with investment firms and investment projects. If the government is collecting more in taxes and savings then they are spending then the government would have a surplus in their budget. This all sounds good in theory of helping the government grow, however; how is the extra 55 percent of government spending increase going to be covered? It sounds good on paper to have “free” healthcare, but as we all know that nothing is truly free. The centers for Medicare and Medicaid state that healthcare spending in the next 10 years will be around $47.4 trillion. This is split with the federal government spending $13.6 trillion, state and local government spending $8.4 trillion and private businesses spending $9.2 trillion and individuals spending the additional $12.8 trillion. Friedman, the UMass economist, projects Berniecares total cost to be $40.9 trillion in the next 10 years and argues that it would also raise $13.7 trillion in taxes to help cover the additional government spending. The issue that is not discussed here, is the fact that most of the government healthcare spending is actually undertaken by the state and local levels, not the government (Roy, A). This is where it gets tricky, and we learn that it is not actual “free” healthcare. Berniecare would fail to cover up to 20 percent of the out-of-pocket costs that we are typically used to paying ourselves. It would not have the money that private businesses, regular household payments, nor state and local government money; this would all be put on the to shoulders of the federal government. Where is this money going to come from since we currently do not have a surplus in our budget? Bernie is proposing a 6.2 percent payroll tax and a 2.2 percent income-based premium on to the people raising $8.4 trillion. He is also wanting to raise income taxes, taxes on capital gains and dividends, estate taxes, and cap tax deductions leading to another $2.4 trillion. Since the employer-sponsored healthcare would be replaced with Bernicare, they government would be able to collect another $3.1 trillion in new taxes (Roy, A). Essentially in the best case scenario, Bernie care would increase the government deficit by a minimum of $14 trillion. However, once all healthcare if “free” to all he fails to talk about the increase is services of the healthcare industry. With an increase of services, this will raise the overall costs within the healthcare industry therefore creating an even larger deficit within the government and leading to even less federal revenue for other items (Roy, A). So, although Bernie is stating that he has a plan for “free” healthcare, he would be raising the taxes on all individuals yet again. Households would not have a monthly health insurance bill but they would see an automatic raise in their taxes which would then decrease their paychecks leaving them in the same place they are now. Without an increase in pay, households will not be able to spend money on the economy, nor save money for their future leaving the economy in a slump now as well as when individuals go to retire with no money in savings.
Authors Opinion
I do not believe that Berniecare would be beneficial to the economy nor to households. As stated in Bernies white paper on Berniecare, he states that, “The plan would abolish the private health insurance industry including companies” and it would leave “the government with designing and administering a universal healthcare.” This would leave many individuals without jobs and a huge learning curve with the government of taking control of the entire healthcare system. Also, with an increase in taxes it will leave households with less money to spend on the economy to help grow businesses. So with a decrease in jobs in the healthcare industry, lower disposal income and an increase in the federal deficit we will end up back into another recession. I believe that we need to put the power of healthcare back into the individual’s hands where we are able to pick the plan that best suits ourselves and our families. Those that use the healthcare system more frequently should pay more where individuals who use the system less should be able to pay less or pay per service. Berniecare is not the way to lower the government debt, nor do I believe the system would survive in our country with where we currently are in our economy.

References

Case, K & Fair, R & Oster, S. (2014). Principles of Macroeconomics Eleventh Edition. New Jersey: Person Education.
Heakal, R (2016). “What Is Fiscal Policy?” Investopedia. Retrieved from http://www.investopedia.com/articles/04/051904.asp
Roy, A (2016). “Bernie Sanders’ Single-Payer Health Care Plan Would Increase Federal Spending By At Least $28 Trillion.” Forbes – The Apothecary. Retrieved from http://www.forbes.com/sites/theapothecary/2016/01/18/bernie-sanders-incredible-28-trillion-plan-to-replace-obamacare-with-single-payer-health-care/#696e7a1f1bba…...

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