Medicare for All as a Middle Class Entitlement

Like free college and student forgiveness, Medicare for All is a middle class entitlement. It favors the already favored. It does nothing to advance real socialism, as the elites are allowed to keep their property (including the labor power of their workers). It is a better cage.

This is how it is seen and why Sanders has no luck in appealing to Black voters. Let's fix that.

Medicare for All is essentially Medicaid for All. Put another way, every Medicare beneficiary becomes what is called a dual eligible. Without co-payments and premiums, there is no need for a separate needs based health plan for retirees and the disabled. 

The belief on the ground is that M4A will kill private health insurance companies. This is not actually the case. They will retain a role in doing claims processing and in operating managed care systems (which are a feature of Medicaid as well as Medicare Part C). 

What is true is that Medicaid for All takes away the requirement that the family home be sold in order to qualify for long term care in a nursing home. This is where the middle class really makes out, because families can keep their property when they can't take care of their elders at home. It also takes away the need to purchase a reverse mortgage to take care of health care expenses, again, preserving home ownership.

The White Middle Class gets the biggest benefit of this. And so does the Black Middle Class. 

Without M4A, homes are more easily lost to Medicaid liquidation and the pressure to find money for rising health costs. Along with restrictions on predatory lending, both in second mortgages and reverse mortgages (which carry fees that qualify them as usury), the concerted efforts to steal from elderly homeowners, especially among people of Color, will be harder to pull off.

Of course, this will not stop attempts to do so. This raises the question of why redlining and predatory lending exist. It is not a good business model. Helping people succeed helps the community and makes us all richer. Banks are not interested in such things, however. 

Bankers respond to the desires of their best (White) customers who like their segregated enclaves just the way they are. They are the victors who need victims, especially the second generation wealthy, like the Trumps, who carry personal inferiority into the battle.

There is only one way to win this battle. It is to point out that those who would cheat must do so, because they cannot win in a fair fight. The key to claiming equality is to point out that claims of superiority belie deep seated feelings of inferiority. Cheaters should be made to admit that the need to discriminate comes from the inability to win in a fair fight. They must be made to feel less than by their bad behavior. Without extracting such an emotional cost from bad behavior, it will continue.

So how do we pay for M4A. One, stop payroll taxation. Such taxes leave capital income off of the hook. Two, don't rely on a carbon tax. We have enough to do with stopping warming to use the carbon tax on social welfare. Three, don't rely on taxes on the wealthy - indeed, eliminate the Obamacare surtaxes and replace them with a more broad based levy, which leaves us with consumption taxes.

A credit invoice value added tax (I-VAT) gives exporters and their employees an advantage - the same advantage the rest of the developed world takes by funding their systems in this way. 

The other option is an employer-paid subtraction VAT. This method is best (and would not be border adjusted) if employers are allowed to provide continuing health insurance coverage to retirees (and eventually to employees), either through a policy with better benefits for the same price or by employing their own doctors as part of a larger move to a more cooperative workplace. 

Shifting from third party funding or public funding to cooperative purchasing of health care would, in fact, be socialism. Not social democracy, but actual democratic, employee-owned, socialism, with the workers controlling the means of production AND consumption AND finance AND human services (including college education, by the way).

Consumption taxes also kill the benefit of buying life insurance. It's ability as a tax avoidance strategy is ended when the implicit consumption tax buried in income and payroll taxes paid by those who provide goods and services is brought into the light. 

Adding an asset value added tax would entirely end the attractiveness of large dollar life insurance, because when you invest the proceeds in buying assets, a tax must be paid. When such assets generate a return, more taxes must be paid. Also, when property is inherited, the asset VAT must be paid upon sale at market, rather than value added, prices. The only exception to such a tax would be sales to a qualified ESOP or COOP.  Again, real socialism, not the better cage of social democracy. 

The key to making socialism work is making sure it has the best toys. Let's do that, shall we? But until then, pass Medicare for All, highlight it as a way to preserve and create Middle Class assets and portray opposition to it as a form of racism and ageism. This must be part of the bigger fight, not just a benefit for White Millenials and their parents.

WTO Reform: Making Global Rules Work for Global Challenges

Finance: WTO Reform: Making Global Rules Work for Global Challenges, July 29, 2020

Our previous comments explain Regulatory Capture Theory (no agency succeeds unless it is captured by the industries it regulates – this is especially the case for trade policy) and how employee-ownership gets beyond both government regulation and the need to undertake it to protect workers from capital, while saving both American jobs and making overseas jobs create the American standard of living for overseas workers.

Our tax reform plan shows how to get there through both an asset VAT and personal accounts funded as credit to an employer-paid subtraction VAT. We also explain how to turn from tariffs to credit invoice value added taxes (zero rated at the border). The SVAT (not zero rated) is a vehicle for tax credits for each child, for healthcare and for educational expenses. Both are an alternative to personal income tax filing. Small government libertarians like both, big business libertarians like neither. They want tax filing to remain painful while assuring that those with tax shelters can avoid the sure taxation of invoice VAT.

One year ago, the House Budget Committee did a series of hearings on the impact of climate change, to which we also commented. The gist of our comments to the first hearing is that carbon value added taxes (which is a carbon tax that is receipt visible rather than buried in the product price) would help fight warming. These follow hearings from those held in May 2019 by the Ways and Means Committee.

To get the maximum global effect, they would not be border adjusted. To go to the right place, subsidies for families would come through our employer-paid subtraction VAT, with carbon VAT funding environmental research and serve as an incentive to reduce emissions. Such a tax has no chance of passage, however, unless the alternative of a more robust regulatory program is the alternative industry wishes to avoid. There is no such program offered by this administration, although the next is showing promise.

The second of the hearings dealt with environmental consequences within the United States from “Coast to Heartland.”  If the WTO ever has the power to unilaterally act on climate change issues, there is a certainty that they have been captured by industry. The other alternative would require that they become such a powerful international body that QAnon will dedicate a page to them.

Whether or not it is captured, the WTO, as an international organization, is an assembly of sovereigns rather than a sovereign assembly. Campaign finance reports show how sovereign assemblies can be captured as well (no offense intended, at least not much). For such organizations to have any weight at all, they would require direct election by citizens. Until all member nations have a decent respect for human rights and contested elections, including our own regarding voter suppression efforts, there can be no such international assembly. Let us hope that the police actions in the Ranking Member’s home state are not reflective of future attempts at electoral mischief.

In my comments on coast to heartland, I addressed the problems of food and of sea level inundation in Asia and Micronesia and how it will produce a surge in migration inland and to our borders. I will develop them further here, rather than simply attaching them.

Given recent incidents leading to marches on police brutality, as well as the general poverty among the newly arrived, I am not sure why anyone wants to migrate here, but they still do. It may be the air conditioning (which is part of the climate change problem). The irony is that the anarchists at some of the recent marches, rather than the local protesters, cut their teeth protesting against the WTO, World Bank and IMF, starting is Seattle.

Domestically, inundation impacts families who have been there for generations, vacationers and the very wealthy. Flood insurance has provided the last with no incentive to support remediation efforts. We pay, they rebuild. If we capped repayments at $200,000, (assuming Congress could get away with it), the wealthy would have skin in the game and support remediation. Of course, this has little to do with the work of the WTO.

The literature on WTO reform is concerned with the role of developing countries and of data, depending on who is writing the report. Tax policy experts want corporate data reported internationally (see the work of Joshua Meltzer of the Brookings Institution, who should be a future witness on this topic).

Food is a huge issue in trade reform. American international food programs tend to have aid show up just before the harvest. While it does feed the people when in most need, it also tends to depress the sale price of domestic crops. In other words, these policies often benefit the Chairman’s home state of Iowa more than the recipients of food aid.

The way we grow our food in America is effective in that very little work produces a lot of food, but it leads to environmental degradation in terms of soil loss, chemicals used and waste produced by factory farms. If there were a subsidized market for farm waste to be converted to fertilizer, even though it may be more expensive than other nitrogen sources, progress could be made – especially if the result can be exported – although as the world’s workers are made wealthier by capitalism, they will eat more meat and create enough of their own farm waste.

Current vegetable based “meat” alternatives are all the rage, but they are not healthy for people with carbohydrate issues (which is most Americans). Cloned meat is an expensive and unsatisfying experience, at least until cloned blood, bone and fat are created and added, with 3D printing processes turn the result into a better facsimile of a steak or real ground beef.

In the current economy, this is unlikely. Unless a methane tax is assessed against farmers, to go along with carbon taxation, such developments will never pass – at least not until global warming becomes extreme or processes become much cheaper than they are now. Fear of nuclear war or COVID type viruses may also spur the development of alternative sources for protein. As we are finding out, fear sells.

The other way to spur alternative food production, such a printed cloned meat, is space exploration. Currently, potential Mars missions include how to do space food. A billion dollars in defense research and development transferred to NASA can create what the market will not touch. Shifting NASA from the Other Independent Agencies appropriation to the Defense subcommittee would make such transfers easier to manage. Cutting the defense budget to increase other high-tech jobs rather than the amorphous demand for social and educational spending is much more palatable.

If there is no necessity, there will be no invention. The environmental necessity of shifting away from current animal husbandry is not as obvious unless you believe in animal rights, live near a factory farm or wish to fish the Severn River. The clean water crisis makes the problem more acute. The person who made a billion shorting the housing market is now working on investments having to do with water.

As your last witness will likely mention, agricultural runoff may be a major problem for the oceans (I am sure stronger language will be used). Like COVID, much of the impact of humans on the ocean is probably misunderstood. There is much more ocean to explore than we have to date and it appears that life there is very robust. A major function of life is adaptability. Even on the ocean floor, we have microbes that eat oil. The human environment is at risk. The planet seems to take care of itself rather nicely.

Space exploration will make artificial and closed loop environmental food production both feasible and cheap. In a capitalistic society, it may not be cheap enough. In a world which fresh water is probably the biggest planetary challenge, one that climate change may exacerbate, the capability to grow your own food, including meat, and process your own water, may be attractive. Interest costs for a home, let alone an environmentally efficient home, are far in excess of the actual price of the structure, making it a non-started in a capitalist economy. Only a cooperative economy will produce the demand for alternative food production and the means to both build and finance it.

A state socialist economy cannot produce anything but weapons and vodka. A voluntary cooperative economy can produce everything. State action, however, along with developmental aid, has a high potential for success in dealing with desalinization. In the short term, simply getting fresh water and effective sewage is a bigger short-term challenge, as is corruption. Corruption also interferes, although the current administration is showing that the developing world has not monopoly on corruption.

Be that as it may, significant international investment, particularly with government sponsorship, is essential in producing cheap clean water. Plastic water bottles create pollution in the ocean, may raise estrogen levels in men and are not as tasty as a good glass of Army Corps of Engineers processed water in the national capital region. The very idea makes one thirsty. That thirst should not be held hostage to capitalist schemes when public works solutions are available. Capture by industry of the WTO and/or the United States Senate must not get in the way of an essentially free glass of water.

For both information and development, cooperative economic systems are superior to such bodies as the WTO, World Bank or the USDA Foreign Agricultural Service. A public sector economic research agency, either U.S. or international, could be helpful in comparing prices and standards of living from nation to nation. The price of a hamburger in China is not the price of a hamburger in Iowa or Washington, DC (Douglass Commonwealth, if you please).

Economists calculate purchasing power parity, although determining the common market basket will be contentious. Whether industry and finance will allow it is an even more relevant question. A monthly report on PPP would need a variety of market baskets: one for subsistence of the poor, one for factory labor – both union and non-union states and households, one for the professional class and not one for the rich – for whom money is no object and who buy for prestige as much as usage.

Ideally, PPP information would have as big an impact on currency prices as the operations of the public banking system (i.e., the Federal Reserve, European Central Bank, etc.). Perfect competition requires perfect information. Capitalism, however, seeks to make information a private good. Keeping wage and cost information secret is why capitalism can exist at all. If workers knew what their real productive value is, they would be paid better. If consumers knew the underlying price of goods, they would pay less. Expecting the WTO or Federal Reserve to provide international information on these very things is very unlikely, given the reality of capture by regulated interests.

Employee-owned firms, as described in the attachments, would have an incentive to know and use PPP information. Indeed, capitalist firms would not have such an incentive. Capitalist firms make money on the margins and play one side against the other. Employee-owned international firms would maximize worker/member well-being. Wages would be set by PPP levels, which “overvalues” foreign labor and thus protects domestic workers from labor arbitrage.

Employee-owned firms are also more likely to be early adopters of advanced food production techniques, which take the most essential goods, food and water, out of the marketplace and into the home. Think of how many fewer hours one could work without having to buy your own food or pay interest on everything from homes student loans! This is even before considering the fact that most cooperativists are also very likely to be environmentalists as well. It seems to be a package deal.

International employee-ownership makes economic development unnecessary. While capitalism, because it takes low skill and low need workers into more skilled workers and consumers is a powerful engine for development. There is no argument about that. Our contention, however, is that given the option to get the same job in a well-run employee-owned enterprise, there would be no contest. Capitalism would fail, as would government.

I have two final points, ones that are not found in any previous comments for the record.

Point One: discussions of trade are about labor, who does it and who buys it. Not my idea. It is the essence of Marxism. Marx was as much about social relations as he was about the mechanics of production. The implication for the WTO is that any reform of trade rules must also involve rules governing migration (again, going back to our environmental refugees from Micronesia).

The current Administration does not understand either one of these with any clarity. The two areas where the President has the freest hand are also where he has made the most mistakes. Any reform of trade should both cut any President’s wings and must relate the two more closely. WTO talks must also be migration talks or they are flying blind.

Point Two: I had hoped that the COVID slowdown and the current solar minimum might have had an impact on short term warming. Maybe it has overall. The prior certainly impacted wildlife management and cleared the air when America was shut down. The current heat wave, however, has proven that short term factors and local factors may be two very different thing. Still, it would be interesting to see if there is any impact on planetary temperature data.

It begs the imagination to assume that long-term carbon and methane usage are the only factors affecting climate change. If we can prove that short-term climate changes exist (we know that volcanoes have an impact already), we can make our models better. This assumes we can recover from the damage inflicted on our public scientific infrastructure by the current Administration.


The Center for Fiscal Equity’s left-wing bias is well known, but the Trump presidency has forced us to make it obvious. Please note that our biases are also on the libertarian side. Please keep this in mind when making lists of witnesses.

Attachment - Finance: Approaching 25: The Road Ahead for the World Trade Organization

March 12, 2019

Attachment - Value Added Taxes (March 2018), Employee Ownership and Trade, (February 2019)

Attachment - Tax Reform, Center for Fiscal Equity, February 21, 2020

Protecting the Reliability of the U.S. Medical Supply Chain During the COVID-19 Pandemic

Finance: Part 1: Protecting the Reliability of the U.S. Medical Supply Chain During the COVID-19 Pandemic, July 28, 2020 

WM,Trade: Trade, Manufacturing and Critical Supply Chains: Lessons from COVID-19, July 23, 2020 

This crisis is worse than you think. For whatever reason, the Coronavirus Task Force has ignored the first round of symptoms of this ailment. In my experience, it begins as a cold with heavy product. Bad timing made many sufferers believe that they had merely suffering from hay fever. There is then a week of dormancy. If you assume that exposure occurs two weeks prior to the first symptoms, there are four weeks, rather than two, before SARS symptoms are manifested, including fever, fatigue from low oxygen levels and fatigue from the manufacture of immunity (which feels like a gut punch over a two-week period). The CDC has just added nasal symptoms to the list, but has not yet emphasized their role in starting transmission.

In addition to masking, patients must quarantine from the first productive sneeze and stay isolated for three weeks or until the SARS and fatigue symptoms have passed, whichever is later. Every asymptomatic adult in the household must be quarantined until three weeks after everyone with symptoms has completed their quarantine. A society-wide shutdown is not required if this discipline is kept, both here and abroad. 

Most nations that shut down merely guaranteed a second wave. There are people who will get sick no matter what is done, usually those with degraded immune systems due to fastidious cleaning prior the pandemic. Young people who vape are also at high risk. The only way to assure the international supply chain is not interrupted is to limit quarantine to households where someone has nasal symptoms. The alternative is the supply chain coming to a screeching halt.

The following comments are from those submitted to the Ways and Means Subcommittee on Trade (which were excluded from Part 2 of this hearing):

Supply chains are global and many nations who have controlled the virus by shutting down the economy rather than tailored quarantines will quickly find that many with less robust immune systems will get very sick when it opens. There will be a second wave in these nations, and a third, and a fourth. The supply chain will be stressed, if not stopped, even if draconian openings and closings can be imposed in China.

Draconian measures may be efficient, but they may add a different kind of fever, one that the regime will likely underestimate. Revolution kills production lines once people have too much. China, Inc. may not be as efficient a partner in a post-revolutionary future. Workers with more freedom to bargain and vote will want more stuff, which means higher prices here. Higher prices mean higher wages will be required, but jobs will come back as the economy changes.

Current trade policy is the wrong way to go about long-term change, especially when led by an irresponsible actor. Let me restate what we have previously written from Trade Policy comments:
Trade negotiations with China ... have taken on the character of economic gunboat diplomacy, but without the Navy. These occur because the President is ill equipped by his background as a businessman to work cooperatively, which is the essence of governance in a free society. He has a freer hand in trade negotiations. Sadly, his experience as a CEO has not served the nation well. The modus operandi of most executives is to break things in order to be seen fixing them.  This must stop. The public is not amused, including the Chamber of Commerce, farmers and the stock and commodity markets.

Today's witness is not likely to say his boss is a vainglorious idiot, so allow me to. It is well known that in this Administration, professional diplomatic expertise is not valued. Mr. Trump prefers to shoot from the lip. The incompetence of this president is tragic for our ongoing trade policy, which relies on a high degree of professionalism and careful work over a period of several administrations.

Trade, Manufacturing and Critical Supply Chains: Lessons from COVID-19

WM,Trade: Trade, Manufacturing and Critical Supply Chains: Lessons from COVID-19, July 23, 2020 

Finance: Part 2: Protecting the Reliability of the U.S. Medical Supply Chain During the COVID-19 Pandemic, July 30, 2020 

Additional Testimony to Finance:

I also omitted my comments about Hyperstagflation. I see from the Senate version of the draft bill that our views and those of the majority are the same, although $100 is a bit too low. May I suggest $350, which is a good halfway point and leaves worker with $800 a week total. Rent will get paid and food will be bought.

The irony is that I tested positive for PAN-SARS yesterday, although I had the severe version of the virus. We shall see if this is a false positive or, worse, it can be extreme twice. May I suggest a panel of COVID patients to relate their experiences. This is also relevant because it goes to the quality of testing. If the false positive rate for tests is too high, we may have less documented cases than we know, at the same time that we have a much greater number of real cases, like mine, where medical attention was not sought because there were no serious SARS symptoms. Many have had only the cold, the latent contagious stage and the non-contagious fatigue stage where we manufacture immunity (which my blood test yesterday did not detect).

More to the point, many manufacturing workers, including those in the medical supply system, have likely tested positive but may not have actually been sick, while others are never tested but are among the walking wounded – although, as I say below – no one can work with extreme fatigue symptoms, which is a concern as to the welfare of undocumented workers who likely don’t have the luxury of sick leave benefits. This worker illness and the related shutdown will impact medical suppliers in the United States in areas where the virus is active, which means the entire South and West, with the Midwest being the next on deck. Repeated material follows:

This testimony relies on my experience as a member of the Cost Management Systems project of what was then called Computer-Aided Manufacturing – International, now the Consortium for Advanced Management – International. The project produced Cost Management for Today’s Advanced Manufacturing. I created a handbook based on the project, the U.S. Air Force Orientation Guide to Advanced Cost Management.

One of the topics addressed is the manufacturing environment known as Process Simplification, which features Just in Time supply chains. This model works for Wal-Mart, which is massively integrated, and for defense production. Parts arrive with little holding time and go right out the door. If everyone is working in the supply chain, it works beautifully. Commercially, it is essentially a rationalized production line from resource extraction to delivery.

As long as the line is not stopped, it minimizes waste and non-value-added cost. It doubles down on traditional manufacturing’s stance of labor being a cog in the machine. Unionization is not compatible with it unless they have incentives to keep things moving (like in the defense sector, which requires cleared and more specialized workers).

Recent reported experience on Midwest food production has workers being made to work sick, or after exposure. The CDC model has been flawed, but they have finally added a runny nose to the list of symptoms (as I predicted they must, having had the virus myself). The virus has not been contained, not through lack of correct distancing but because the economy was closed in areas where it had not arrived, which meant reopening just as it has gone from early exposure to full-on illness. Because nasal symptoms were discounted, people likely transmitted in private settings, with transmitters not knowing their sneezes were potentially deadly and not hay fever.

Testing positive for exposure means someone sneezed. Not knowing that this is the trigger means workers were idled (or not idled) at the wrong time. There is no danger that workers with SARS or fatigue symptoms will keep working. It is impossible to do so. If they do not have sick leave, the results could be tragic. Undocumented workers have even more dire consequences in their personal supply chain, which includes remittances and cramped living conditions that ensure virus transmission. The attached table shows how states will be affected under current policy.

At this stage of the pandemic, the assembly line is about to crash. A new round of mandated closings is inevitable unless mandate quarantine to the period from the first sniffle to three weeks after they stop for everyone in the household. Unless there is significant cross training already in place, the supply of goods will begin to diminish.

There is simply no stock of inventory to rely on in this model. Farmers will again be overwhelmed with unsold food that they will not able to move. It will be worse in this round unless courageous action is taken on personal quarantine and in the CDC’s understanding and guidance of how the virus spreads and does not spread. I doubt that the medical hierarchy has it in them.

Ways and Means Only:

On the economic side, another round of stimulus will be necessary to keep people afloat, although too much money will simply produce not only inflation, but stagflation – even HYPERSTAGFLATION. Cutting the unemployment bump to $300 per week will help keep this in check. Again, simply letting aid expire would be worse.

An increased level of benefits for the poor, disabled and retired would help we retirees keep pace as prices rise. Stimulus checks are spent too fast, while higher income decreases uncertainly for what could be a long journey.

Supply chains are global and many nations who have controlled the virus by shutting down the economy rather than tailored quarantines will quickly find that many with less robust immune systems will get very sick when it opens. There will be a second wave in these nations, and a third, and a fourth. The supply chain will be stressed, if not stopped, even if draconian openings and closings can be imposed in China.

Draconian measures may be efficient, but they may add a different kind of fever, one that the regime will likely underestimate. Revolution kills production lines once people have too much. China, Inc. may not be as efficient a partner in a post-revolutionary future. Workers with more freedom to bargain and vote will want more stuff, which means higher prices here. Higher prices mean higher wages will be required, but jobs will come back as the economy changes.

Current trade policy is the wrong way to go about long-term change, especially when led by an irresponsible actor. Let me restate what we have previously written:

Trade negotiations with China ... have taken on the character of economic gunboat diplomacy, but without the Navy. These occur because the President is ill equipped by his background as a businessman to work cooperatively, which is the essence of governance in a free society. He has a freer hand in trade negotiations. Sadly, his experience as a CEO has not served the nation well. The modus operandi of most executives is to break things in order to be seen fixing them.  This must stop. The public is not amused, including the Chamber of Commerce, farmers and the stock and commodity markets.

Today's witness is not likely to say his boss is a vainglorious idiot, so allow me to. It is well known that in this Administration, professional diplomatic expertise is not valued. Mr. Trump prefers to shoot from the lip. The incompetence of this president is tragic for our ongoing trade policy, which relies on a high degree of professionalism and careful work over a period of several administrations.

Impact of COVID-19 on Social Security and its Beneficiaries

WM Subcommittee on Social Security, Impact of COVID-19 on Social Security and its Beneficiaries, July 17, 2020

Social Security beneficiaries come in various shapes and sizes, from non-participation to those for whom it is a mere backstop to those at the end of life.

Care for the retired was provided by families prior to the establishment of Social Security. Extended families provided shelter, income and health care because they had to. Allowing seniors to live independently freed the nuclear family to move without taking everyone with them. 

Some families remain multi-generational for a variety of reasons, from tradition to immigrants whose seniors have no eligibility for the program. Such families may have heightened needs due to poverty and immigration status. Ignoring such families in the distribution of economic aid resulting from the virus and their continued lack of eligibility under the Affordable Care Act does society no good and likely is a cause of both economic harm and mortality.

While many in the public health community fear for the lives of these elders, it is possible that when all is said and done, living with school age grandchildren has likely provided some level of protection against the Coronavirus because they have been exposed to every cold and immunity challenge typical in such households. Ask the question of our medical experts. There has been too much panic and not enough real science on this issue. 

The same question arises for households of the disabled. Those of us with no children in the home are likely more susceptible to illness than those with them. Comparing health outcomes of COVID exposure could prove useful.

The vast majority of the disabled (especially those receiving Supplemental Security Income), as well as those retirees have no additional income. While distributing stimulus payments to them was not strictly necessary for them to meet their usual expenses, many are finding that expenses for food and transportation have increased in the pandemic. Most are quite willing and able to do their part in stimulating the economy, as almost all of these payments will be spent. Such households always have unmet needs.

The nation is experiencing a spreading of the pandemic in areas that were likely shut down too early. While the virus does not respect political boundaries, it does spread through human interaction from area to area. Had there been guidelines on when to close the economy, as well as those to open it, the prospect of another shutdown could have been averted. Now it is certain. Sadly, hindsight is 20-20.

As the majority of the nation returns to phase one (or even a more severe quarantine), the supply of money will exceed the supply of available labor and goods. This has already led to higher grocery prices. Given where the current outbreaks are occurring, the possibility of food price inflation is much greater. 

Higher prices will strain the vast majority of beneficiary households. In other words, they will soon need a raise. An annual cost of living increase will be too long in coming. Adjustments will be needed more frequently during the pandemic, either on a quarterly or even a monthly basis.

Some retiree households do have modest additional income which puts them beyond the $25,000 income limit. This limit has not been adjusted for inflation in decades. As part of both short and long-term reform, these limits should be increased to match the increase in the Standard Deduction which was passed with the Tax Cut and Jobs Act. Not doing so was an oversight. 

Such a reform would exacerbate the problem of getting stimulus payments to non-filers. There is an easy fix for this. The next round of payments should be distributed by the Social Security Administration rather than the Internal Revenue Service. Not doing so in the first place was an oversight. This oversight can be corrected for the inevitable next round of payments.

On the health insurance side, COVID has become no more or less inconvenient for most beneficiaries in comparison to the population at large, including for dual eligibles. The same cannot be said for the retirees themselves. We recently provided comments to the Subcommittee on Health regarding how COVID impacts dual eligibles in nursing homes near the end of life. These are attached. The same analysis also applies to assisted living and planned retirement communities.

The gist of our comments are that mistakes in disease modeling (particularly with regard to ignoring nasal symptoms), rather than early reopening, have caused the pandemic to reignite in areas that should not have been closed so early; and more importantly, that fatality is mostly due to compromised immunity as a result of wrapping our retirees in crepe paper and antibacterial soap. Too much hand washing, especially be caregivers, before the onset of the virus and segregation from the swarm of disease that is endemic to the modern world has not served retirees well. It should definitely not become the new normal or the next pandemic will be an extinction level event. 

Sadly, social cohesion among the medical community, which is abetted by the media, is not allowing such a view to be considered at present. Science has taken a back seat to policy.

In the long run, something must be done about OASDI benefit levels. An attached table shows how many will likely die by state when all is said and done

The inadequacy of benefits for poorer beneficiaries, and indeed for all without substantial savings, corresponds with decreased purchasing power for workers as a whole. This can be traced to the fact that the minimum wage has not been increased in a very long time. This also impacts all wages below the middle management level. Historically, unemployment has not increased when the wage goes up. 

For workers to rejoin the economy post-pandemic, not only must the increased unemployment compensation level need to go down from $2,400 per month over base benefits to about half that amount (which still results in an overall payment of $1,500 every two weeks); the minimum wage must be increased, ideally to the same level, if not higher. In the unlikely event that higher wages do result in job losses, paid adult literacy, academic and vocational training should be funded for all comers and their opportunity costs should be compensated at minimum wage levels.

As part of any increase to the minimum wage (which may bring many beneficiaries out of retirement), benefit levels must be rebased by the amount of the increase. Over time, this raise will pay for itself in higher payroll taxes, increased work and a growing economy. It will do all of those things that tax cuts promise but rarely deliver on.

Increasing the child tax credit and making it refundable will also make work worthwhile. Senator Harris suggested $3,000 a year. We would double this, inviting higher cost states to match the increase. This would bring wages to the actual cost of raising a child, as estimated by the U.S. Department of Agriculture. 

Long term changes will likely have to wait for the next Congress, but they must be made. Indeed, no member of either party can be counted as a friend of the poor or a friend of the unborn without taking such actions. Our usual tax reform proposals, which make increased benefits much easier to finance, are attached.

These proposals include adjustments to OASDHI contributions. The employee contribution will feature a lower income cap, which allows for lower payment levels to wealthier retirees without making bend points more progressive. The employee contribution should only be retained if a tie between retirement income and wages is necessary to preserve broad based support for the program. 

There should be a floor to the employee contributions as well, which would obviate the need for an EITC, given higher proposed wages and a more robust child tax credit. To pick up the slack for lower income workers, the employer contribution would be credited on an equal dollar basis to all workers and funded through either an employer paid subtraction value added tax or a goods and services tax. 

The SVAT would be used if employees have the option of investing in a mix of employer voting and preferred stock and an insurance fund of other employee-owned firms. This fund prevents the loss of retirement income should the business fail. A culture of increased accountability to employees would make failure less likely. Contributions would be a credit to the SVAT. The credit would start small and increase until all workers are covered for the majority of their careers.

Firms with no employee ownership would not receive the credit. Current beneficiaries and older workers would be funded under a credit invoice goods and services tax. Using this tax allows for zero rating exports, which will bring the United States into parity with the rest of the developed world, who fund their social insurance in a similar manner.

Firms could accelerate their transition to full-credit status by funding all employee and retiree accounts (which should retain voting rights, unlike current law) as if they were in the program on day one. If this is done, current benefit levels should be a floor for all retirees, even wealthier one.

Currently, some households have plenty of money, due to substantial savings. These savings are enabled by higher incomes and generous tax cuts, rather than thrift. They should receive all of the benefit adjustments described above (from higher income exclusions and rebasing to employee ownership).  

Not doing so would jeopardize any reform at all, not because these beneficiaries have a moral right to equal treatment, but because they are among the most generous donors to political campaigns in both parties. Absent enactment of radical campaign finance reform, any thought of exclusion needs must be abandoned at the outset.

Attachment, Subcommittee on Health, Examining the COVID-19 Nursing Home Crisis, June 25, 2020

Attachment - Tax Reform, Center for Fiscal Equity, February 21, 2020

Happy Tax Day! How consumption taxes would impact employer filing

For more than two decades, we have been proposing a Business Income/Net Business Receipts/Subtraction Value Added Tax. This would be in conjunction with a credit invoice VAT, which would make households conscious of actually paying taxes (and be impossible for the wealthy to evade) and an income surtax (which could be prepaid with bond purchases).

The first tier of the SVAT would be designed as a vehicle for social credits, such as the child tax credit, health insurance exclusions and education credits for ESL through community college. Employers with S-VAT refunds would get a credit on their I-VAT payments, which would cap refunds to I-VAT revenue.

This would not eliminate shelters for the rich. Unless the employing firm provides personal service to higher wage employees, paying them as contractors would be vehicle for the payment of social credits to personal staff – and self-payment would still be subject to second and third tier VAT.

Recently, we added an Asset VAT, which taxes capital income and sales and allows payment through a second and third tier of the subtraction VAT. This would replace capital gains, pass-through, dividend and rental taxation and be paid at point of sale or distribution. Selling and renting back assets would actually be more expensive because the holding company would have to pay the asset VAT, although lease costs would reduce value added for other taxes by the amount paid. If A-VAT and I-VAT rates are the same, doing so would be a wash.

The employer FICA tax would be subsumed in the I-VAT and S-VAT and be credited equally, while employees would pay a separate FICA with a $20,000 floor and a $75,000 ceiling. This ends the need for the EITC (replaced with the floor, a higher minimum wage and the CTC) and gives Social Security payments some degree of variability by income so it is not simply a welfare payment. Under employee-ownership, it could be dispensed with as base wages fall within a tighter band.

The A-VAT would eliminate the tax avoidance inherent in capital gains and wealth taxation. Brokers would collect the tax and submit them to the SEC or state government. The SEC would collect taxes on financial instruments and dividends, while states would collect rental and pass-through taxes. States would also collect I-VAT and S-VAT revenue, as they would likely levy the same taxes, handle disputes and forward information and federal revenue to the IRS electronically.

Conceivably, these reforms would remove everyone from the tax rolls while getting taxes from everyone. Practically, from the employer point of view, it would require the same level of reporting as personal income taxes. The self-employed would file as businesses rather than individuals but would have to file four times a year (the same frequency that estimated taxes must be paid).

The number of tax filers could go way down. Partnerships and individuals with multiple clients would still file, but the vast majority of filing could be accomplished by brand holders whose data collection and filing will mostly be electronic – although via data sticks delivered to each state where they have sales or employees rather than online – limiting opportunities for identity theft.
The only family filing would be to verify the accuracy of child tax credit payments. Employers would report payments to state revenue agencies and to employees each quarter. Revenue departments would send a letter to each employee verifying the information. If it is correct, the employee does nothing.

If there is a dispute, a postcard to the agency would alert it to investigate the discrepancy or trigger a payment change if both working spouses each receive the full credit rather than a half credit per child or payment through only one spouse. Any repayment of double dipping would be arranged by the employer through installments. The state revenue agency and the IRS would electronically verify the correct payment of the child credit.

On the up side, the S-VAT benefit system would be an incentive for franchisers to shift to direct employment (as employee-ownership will end the need to avoid unions) and for firms, generally, to make 1099 employees direct hires, thus ending an endemic abuse. This would eliminate the vast majority of “small businesses.” Most compliance auditing would be part of corporate compliance audits. Essentially, most, if not all, of the IRS would be eliminated. It is much easier to review audit reports for a few thousand companies than processing 147 million individual returns

COVID-19 Exposes Need for Federal Investments in Technology

House Budget, Software Update Required: COVID-19 Exposes Need for Federal Investments in Technology, July 15, 2020 

The underlying problem with all of these issues is turf. Every agency and state funds its own technology and makes its own rules. Congressional committee structures encourage such siloing. This is fine, although inconvenient, on a day to day basis. It fails in a crisis.

Federal telecommunications are linked to a series of central contract vehicles. If the same were done for administrative software and included training, all agencies would have a common electronic voice, including the IRS. If technology funding were independent of agency budgets, no agency would lag behind.

The same principle can be applied to purchasing and funding state systems. Training and infrastructure often take a budgetary backseat. A common tech contract and budget ends the problem. Energy infrastructure and weapons systems would, of course, not be included in the common structure, adding an additional level of security.

Likewise, data silos made the distribution of COVID funds problematic. If all agencies used the same version of SAS software (and no other language), information could be shared by sending data files through a hardwired system (rather than the Internet) or through tape delivery and be accessible through a SAS data step. Screening who should and should not get a stimulus check would have been managed by a few lines of code.

Sending stimulus money for retirees, the disabled and state beneficiaries could have been delivered through these systems rather than the IRS. Not doing so is a flaw in the law, not in agency procedures. It was not even a committee problem, as Ways and Means and Finance have jurisdiction over both funding streams.

In other words, blame Congress, not the IRS, for the problems in getting the money out the door.
Unemployment Insurance claim processing was complicated by the need to telecommute in a pandemic shut down. The next shut down will be able to take advantage of the work already completed. The system could not handle a firehose of funds when it was used to a garden hose. Because many workers are still idle or, if they have returned to work, have existing accounts, adding funds will be much less complicated.

The manner of the first shutdown also had an impact. While viruses do not respect borders, a person to person disease spread does not hit all regions equally. Much of the nation did not need to be idled until the first wave hit (as it is now doing in much of the nation).

The disease model, which originally omitted nasal symptoms so as not to concede that the virus begins as a cold, made proper screening and shut down length impossible. The current spread results from leaving out two weeks of nasal symptoms. I can say from being ill and comparing notes from fellow survivors that it starts as a cold, drips into the lungs and then spreads through the body and triggers SARS symptoms. Simply inhaling it without multiplication in the sinuses does not pose the same level of danger.

Those with healthier immune systems fight off the virus in the nose. Without such immunities, which are acquired through more frequent contact with cold sufferers, the patient is a sitting duck for SARS. This is why children don’t get infected, smokers do and seniors sequestered in nursing homes following CDC guidance cleanliness are doomed.

While treating the symptoms like asthma or with anti-retrovirals will save many, it is too late for our most vulnerable seniors. Proposals for long term social distance and anti-viral precautions will leave us all more vulnerable. The CDC is doubling down on this point for social, not scientific reasons.

Contact tracing a cold four weeks after exposure is impossible. Likewise, leaving heavy sneezes out of the list of screening criteria mean many with the virus are unaware they have it nor are they excluded from daily activities (such as work and shopping) in a manner which would have stemmed virus spread.

There is a great deal of worry about asymptomatic transmission. Between the last sneeze and the first wheeze is a one to two-week period where there are no symptoms. For many, there is never a wheeze. After a few weeks, however, it is unlikely that spread will continue. Ignoring nasal symptoms has made asymptomatic transmission seem random. It is not.

Currently, we predict over 400,000 deaths and over 7 million reported (and countless unreported) cases. Please see that attached state by state breakdown, which applies a 0.12% of population mortality figure (New York was 0.15) to each state. There is little we can do to improve this, especially because the public now considers diagnosis a death sentence. It is a self-fulfilling prophesy.

Neither Donald Trump nor the coincidental reopening of the economy (including taverns) caused the current spate of illness. The first shut down happened for social, not scientific reasons. Indeed, the problem are a result of incomplete science responding to social imperatives. The virus cares nothing for policy, just as it does not care about politics.

The electoral fate of the President should not be tied to virus progression (although it will be). His public bluster is the underlying reason for his fate. Whether he can control it is a matter for a different kind of medicine. It is the ultimate reason for his standing in the polls, as well as of members of Congress who link their fortunes to his.

As we have stated previously, our budget process is badly broken. Our solutions to this ongoing crisis are again presented in the Attachment. These also include why the Tax and Job Cuts Act (not a typo) aggravates the problem. We agree with the background paper that we need more spending, not less, on both entitlements and discretionary programs.

Attachment: The Budget Process, February 27, 2019