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March 30, 2012 10:09 AM Penalties and Credits: Same Idea, Different Results

By Ed Kilgore

In his column appearing at Ten Miles Square today, Ezra Klein notes with irony that there’s not that big a fundamental difference between the penalty-backed health insurance mandate that may be deemed unconstitutional by the Supreme Court, and the new tax credit for health insurance Paul Ryan wants to create—or for that matter, the tax-based system that makes Medicare a universal program:

The tax credit is…essentially indistinguishable from the mandate. Ryan’s plan offers a $2,300 refundable tax credit to individuals and a $5,700 credit to families who purchase private health insurance. Of course, tax credits aren’t free. In effect, what Ryan’s plan does is raises taxes and/or cut services by the cost of his credit and then rebate the difference to everyone who signs up for health insurance. It’s essentially a roundabout version of the individual mandate, which directly taxes people who don’t buy health insurance in the first place.
“It’s the same,” says William Gale, director of the Tax Policy Center. “The economics of saying you get a credit if you buy insurance and you don’t if you don’t are not different than the economics of saying you pay a penalty if you don’t buy insurance and you don’t if you do.”

So all the caterwauling about the mandate being like slavery is ludicrous. Nobody would go to prison for failing to buy health insurance under ObamaCare. They’d pay a penalty, much smaller in size than the tax credit they’d forego if they failed to buy health insurance under Ryan’s system. Why is this such a big deal? Could be the politics, eh?

The constitutional argument over Obamacare is a dispute over a technicality. We agree that it’s constitutional for the government to intervene far more aggressively in the market. We agree that it’s constitutional for it to intervene in an almost identical, albeit slightly more roundabout, manner. We’re just not sure if the government needs to call the individual mandate a “tax” rather than “a penalty,” or perhaps structure it as a tax credit. As Pauly puts it, “This seems to me to be angelic pinhead density arguments about whether it’s a payment to do something or not to do something.”
Of course, this battle isn’t really about the constitutionality of the individual mandate. Members of the Republican Party didn’t express concerns that the individual mandate might be an unconstitutional assault on liberty when they devised the idea in the late 1980s, or when they wielded it against the Clinton White House in the 1990s, or when it was passed it into law in Massachusetts in the mid-2000s. Only after the mandate became the centerpiece of the Democrats’ health-care bill did its constitutionality suddenly become an issue.
The real fight is over whether the Affordable Care Act should exist at all.

That’s pretty clear. I don’t, however, necessarily agree with Ezra’s assumption that we’ll wind up with something similar to the mandate anyway. Here’s his argument:

If the mandate falls, future politicians, who will still need to fix the health-care system and address the free-rider problem, will be left with the option to move toward a single payer system or offer incredibly large, expensive tax credits in order to persuade people to do things they don’t otherwise want to do. That is to say, in the name of liberty, Republicans and their allies on the Supreme Court will have guaranteed a future with much more government intrusion in the health-care marketplace.

I don’t know that “future politicians” on the right are going to feel any obligation to “fix the health-care system.” The old Republican interest in a market-based approach to achieving universal health coverage has decisively given way to a peculiar conviction that the only real problem in the health care system is risk-sharing, and an atavistic desire to go back to the pre-1960s era of “individual responsibility” when you paid your doctor or just stayed sick and maybe died.

Ed Kilgore is a contributing writer to the Washington Monthly. He is managing editor for The Democratic Strategist and a senior fellow at the Progressive Policy Institute. Find him on Twitter: @ed_kilgore.

Comments

  • Robert on March 30, 2012 10:39 AM:

    Krugman's column today in NYT is more to the point. You and Ezra are way over thinking this. There is no valid legal argument to invalidate the health care mandate, there is a fig leaf legal argument to cover the purely political position of at least 4 members of SCOTUS. Its time for another Court packing plan. It worked well for Roosevelt it will work for Obama.

  • kindness on March 30, 2012 10:42 AM:

    Ryan is a scam artist. You know how we could create a proper system? Take away the Health Care Insurance from all elected officials and make them buy it themselves on the open market.

  • Jeremy Holland on March 30, 2012 10:51 AM:

    My question is-If the SCOTUS strokes down the healthcare law and the individual mandate, wouldn't that make republican plans to privatize medicare and social security unconstitutional?

  • Mimikatz on March 30, 2012 10:57 AM:

    It is a complete breakdown of any sense of shared obligations, a shared destiny, a sense of community. Everyone on the GOP side has retreated to his or her gated community and the rest of the country be damned. Literally. What an impoverished view of life and of the human spirit. The Hunger Games indeed.

    Preserve pidinit? Is that the choice Captcha offers us?

  • jon on March 30, 2012 10:59 AM:

    I still fail to understand how the mandate that doesn't actually force anyone to buy private health insurance even if it strongly suggests that in many cases it would make financial sense to do so is in any way different from the tax policies that suggest I should get married, have a mortgage, invest heavily in the stock market, take out lots of student loans, or have lots of children. When does the Supreme Court get to rule on the Mortgage Mandate?

  • sjw on March 30, 2012 11:03 AM:

    Modern conservatives are 19th-century liberals worthy of Charles Dickens' "Hard Times": everyone is free to pull him/herself up by the bootstraps ... or die in the muck. And as Dickens noted, this is a fundamentally anti-Christian point of view.

  • wvmcl2 on March 30, 2012 11:04 AM:

    You mean they want to go back to the health care plan Plato proposed around 380 BC:

    When a carpenter is ill he asks the physician for a rough and ready cure; an emetic or a purge or a cautery or the knife, --these are his remedies. And if some one prescribes for him a course of dietetics, and tells him that he must swathe and swaddle his head, and all that sort of thing, he replies at once that he has no time to be ill, and that he sees no good in a life which is spent in nursing his disease to the neglect of his customary employment; and therefore bidding good-bye to this sort of physician, he resumes his ordinary habits, and either gets well and lives and does his business, or, if his constitution falls, he dies and has no more trouble.
    (The Republic, Book III)


  • Equal Opportunity Cynic on March 30, 2012 11:06 AM:

    If the SCOTUS overthrow of the health-care mandate goes as planned, it will be very interesting to see who brings the first follow-up case about the "Mortgage Mandate", etc. Unless Dems win the White House and Senate and repack the Court, we'll probably end up with taxes ruled unconstitutional by 2016.

  • stormskies on March 30, 2012 11:25 AM:

    So if these corrupt "Supreme" Court says the mandate in the ACA is unconstitutional does that then also mean that the 'mandate' that buffoon Romney got passed in MA when he was governor will also be unconstitutional ? And, if so, what then happen in MA ?

  • wvmcl2 on March 30, 2012 11:25 AM:

    How about the "clothing mandate?" By telling me I can't walk around naked, they're forcing me to buy clothing from a commercial supplier.

    The only solutions I see are: 1) let everyone walk around naked, or 2) institute a "clothing tax" collected from everyone and then distribute clothes according to need (didn't somebody come up with that idea before?).

  • majun on March 30, 2012 11:57 AM:

    A point, alluded to very briefly, in Paul Krugman's column today, is that if the SCOTUS invalidates the individual mandate, that will wipe out any possibility that the GOP can privatize Social Security. What is the difference between the government telling you you have to buy health insurance and the government telling you have to contribute to a retirement account? Nothing I can see.

  • Mitt's Magic Underpants on March 30, 2012 12:03 PM:

    You are absolutely right, Ed. Future politicians will do nothing. Rs are thrilled when poor people are f'ed over; as long as the rich get richer, all is good!

  • SecularAnimist on March 30, 2012 1:10 PM:

    Ed quoted Ezra: "Only after the mandate became the centerpiece of the Democrats’ health-care bill did its constitutionality suddenly become an issue."

    Right.

    And only after the Democrats adopted this 30-year-old right wing Republican proposal -- which forces the American people to guarantee and subsidize the profits of the insurance corporations and entrenches their death-grip on the US health care system -- did "sensible liberals" start proclaiming it to be the equivalent of Social Security, the New Deal, Medicare, the Civil Rights Act and the Great Society all rolled into one.

    Now everyone is upset that the Supreme Court might overturn Obama's "historic achievement", his "greatest accomplishment".

    What does it tell you that Obama's "greatest accomplishment" is the enactment of a 30-year-old right wing Republican policy proposal?

  • PaulB on March 30, 2012 1:33 PM:

    I don't know that "future politicians" on the right are going to feel any obligation to "fix the health-care system."

    For the purposes of compassion, no, they won't feel any obligation to fix it. For practical reasons, they will. Health care was considered to be in "crisis" back in the late 70s when it consumed 12% of our GDP. It's now 17% and projected to climb into the low 20s. We cannot sustain that.

    The Republican Party will continue to be in denial for several more years, they've invested too much effort in this to back down now, but reality is going to bite them in the butt and the business folks are going to demand that this be fixed since this places a premium on every good and service that we sell.

  • Texas Aggie on March 30, 2012 1:34 PM:

    The corporate party has to destroy completely any semblance of a health care program in the bud. If they allow it to get going and people realize how much they are being helped, it means that the corporate party is going the way of the Whigs. For their own survival, they have to do everything possible, legal or illegal, moral or immoral, to block health care programs that actually help people.

  • roughdraft on March 30, 2012 3:29 PM:

    How is this any different from the Medicare Part D (prescription drug plan) that came in a few years ago ?
    You either bought a commercial policy or paid a penalty if you ever decided later to join. They never tossed that out.