Imagine floating down a river in an inner tube on a hot sunny day. There is a slight bend in the river as it passes a small cove. You are floating merrily along, peeling some grapes, when all of a sudden you find yourself in a whirlpool, floating around and around and around in a big circle. The river keeps going on by, the water in the cove is freshly replenished, but never-the-less, there is a tendency for the water in the cove to cycle gently around itself. Could it be you have discovered the solution to many of revenue problems facing our social safety net? Or perhaps you have been eating too many fermented grapes...?
What dynamics are going on in this cove? Basically, the structure of the river is such that when the flow passes an appropriately designed object in the flow (the cove), the flow cycles a portion of its energy around the object, without any causing any significant negative effect on the general flow of the river.
Question -- Is it possible to design a system where the economic river will create a similar whirlpool to support the social safety net for health care? Perhaps. What construct must such an economic system have? Minimally, any portion of the economic stream diverted into a health care cove should be allowed to recycle within the resource according to natural (market) forces. This keeps the pace and level of the health benefit balanced with the rest of the economic flow.
One might call such a system a 'revenue entitlement' as opposed to its commonly practiced direct opposite, a 'spending entitlement'. A revenue entitlement's basic premise is that resources from natural market place activity surrounding a societal need would be recycled and tapped to provide the energy to drive welfare for that social need. For example, the general taxes on those providing health care should be recycled (dedicated) to welfare health care benefits instead of being sent to the general fund for politicians to spend elsewhere.
Counter this analogy of a naturally recycling cove around a social benefit with a spending entitlement analogy in the same economic river. Under a spending entitlement, there is no whirlpool. Rather there is a large pipe hanging over the point in the river where welfare health care is provided. This pipe discharges flow collected from distant (politically vulnerable) sites in the economic river. Energy to run the pumping system is literally taken by taxing the general economic flow. Government operates a huge pumping system (otherwise known as the federal bureaucracy) and dumps the flow to a point in the river called Medicaid and Medicare.
It doesn't take a wizard to realize this is a hugely inefficient system even if it were to run perfectly. Unfortunately, even the best bureaucratic pumping system leaks badly. The bureaucrat has little incentive to plug the leaks that inevitably occur in their section of the pipe. In fact, the bureaucrat with leaks will likely successfully lobby to get a bigger flow through his section of the pipe leading to even bigger leaks, etc, etc.
OK, time to get up out of the river, towel off and get back to work. How might a 'revenue entitlement' be applied to health care, long term care and social security?
One must first get used to the idea that one is defining a dynamic rather than static system. Just as the river is always moving, so is our economy. Throw some rock in the river to define a point in the river, and the river flows over or around it. Same thing happens when one throws some 'object' such as a tax increase or regulation into the economy, the behavior of everyone in the economy adjusts to the object. One cannot accurately predict how either a river or an economy will adjust via a static analysis to a rock that is thrown in its path. One must consider the dynamics of the economic river to understand how it will react to an obstruction to its natural pathway. Frequently dynamic behavior goes in opposition to that of a static analysis, just as one should turn into (rather than away from) a skid.
Clearing the dynamic hurdle, one might consider what would happen if all FICA, pension, investment, and IRA tax revenue were dedicated to Medicare, Long Term Care and Social Security. None of it would go to the general tax sand box for politicians play with. Unfortunately, this hasn't happened. Instead, the FICA payments that should be dedicated some sort of 'trust fund' are being sucked up by politicians and spread through the bureaucratic redistributionism to other parts of the economic river. Currently, there is no protection of the pension/investment/IRA (and possibly estate) tax revenue stream for Medicare, Long Term Care or Social Security welfare systems. Instead, politicians have dedicated this economic energy source to be used for their own political benefit. The result is the large, inefficient government entitlement system with its huge self serving bureaucracies that operate outside and counter to the general economic well being of society.
As a philosophical exercise to illustrate an alternate system of providing a social benefit, consider the Food Stamp program. One could allow groceries stores the option of of sending their regular income (and/or sales) tax dollars to the government run Food Stamp program or alternatively to directly take an equivalent amount of food stuffs to a local food bank. The later system would efficiently recycle the economic energy of those who could pay for their food to those who couldn't by a 'protected cove' for such a social benefit. There would be very little economic energy wasted on political/bureaucratic spin and such as system would be largely self adjusting to the economic and demographic flow. After all, the cove in the river doesn't have to do anything to make the whirlpool function properly. It just sits there and its very presence creates and perpetuates the desired whirlpool effect with no outside restraint or controls on the flow of the river.
While one might say that under our contemporary political climate, it is preposterous to consider politicians handing the food stamp program over to private charities. However, stranger things have happened. Given our current political environment, this discussion is primarily for the intellectual exercise of showing the possibilities rather than the probabilities of how a Social MarketPlace might be run more efficiently.
This being said, there are some things to watch out for should this 'dynamic cove theory' be put into practice. It is not as simple as one might wish it to be. Consider our senior entitlement system. To properly define such a benefit using thd dynamic cove, one should factor in a generational dynamic to the economic river. If the goal of senior entitlements is to provide broad social benefits for seniors, a 'dynamic cove' to efficiently provide such a benefit would have to include appropriately broad generational dynamics. In other words, younger generations health care costs should not be used to fund the elderly without careful controls. Such a use would be unstable due to generational demographics. Revenue entitlement should not be used as a redistribution scheme for economic energy and resources from one generation to another. If appropriately used, one it can be used to define a self sustaining dynamic safety net that expands and contracts with the benefit needs of the group needing the benefit..
If this spins you around one to many times, perhaps you need to get back in that inner tube and take another float down the river...
It is a commonly held belief in the electorate that government shouldn't tax food, housing or health care -- at least not up front. However, there are lots of hidden taxes on health care. What the above analogy is describing is a basically a system where you might have a sales tax on food to provide food to the poor. The grocery store would have the option to send any collected food tax to government, or to collect an equal amount of food and send it directly to some accredited food bank, completely bypassing the government entitlement overhead. This would get government back to its proper role of promoting (not providing) the general welfare as its role would generally be limited to accrediting and monitoring the food banks. Given that less than a third of the dollars in many government programs actually reach the recipient, one might expect most charities to be at least twice as efficient at dispensing benefits. There is nothing that says the same economic philosophy cannot be applied to health care or many other social benefits for the truly needy.
But then this is a personal opinion, what do you think?