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October 11, 2007

My Commenters Is Smarter Than I: Government Subsidies Edition

Jim notices something that I missed in Malkin's recitation of her family's health care woes. After being priced out on the individual market for awhile, Malkin purchased what's called a Medical Savings Account. "The cure for limited market choices was less government intervention," she gloated in her post running away from a debate with me. "Not more." Yikes. No wonder she didn't want this debate. Here's Jim:

After ranting about S-CHIP and other government medical programs being socialism or whatever, she crows how wise her government-funded MSA account was as a 'choice'. Whether the government directly sends funds to insurance companies, or the taxpayer gets a tax deduction to fund a MSA, the government is still paying part or all of the cost. Somehow she can't quite admit to sucking on the same mammary gland as those she denounces.

Exactly right. Medical Savings Accounts (basically, the same thing as Health Savings Accounts) are government-subsidized, tax-protected accounts in which you can shelter income to be used for health spending. In other words, taxpayers who don't have a medical savings account are subsidizing those who do. Some thrilling escape from government Malkin carried out there.

Fun fact: Medical Savings Accounts were created in the 1996 Kassebaum-Kennedy bill and signed into law by Clinton. In case there's any confusion here that's Ted Kennedy and Bill Clinton. And the accounts only exist because of a federal law signed in 1997. Not only is this government intervention, but it's really fresh government intervention.

October 11, 2007 | Permalink


Hah, that's awesome.

Posted by: Ugh | Oct 11, 2007 11:16:59 AM

It only makes sense to think of them as subsidized if you think everyone's money is really the government's and it is only through the states great kindness that they allow anyone to keeps some for their own pleasure. You probably do think this way, but I thought id point this out for the few non-communists that read your stuff.

Posted by: pimp hand strikes! | Oct 11, 2007 11:27:25 AM

I'm late to the debate and so apologize if the argument has been framed this way previously ...

Consider firefighters. Once upon a time in America, the government did not provide firefighting services. Not too far from our grand capitol, for instance, there were firefighting companies, but they were private, and you had to privately pay them to enjoy their services. At some point, people became aware that it would be better if firefighting was universally enjoyed, and not just because it would be "nicer" if your neighbor's house didn't burn down just because he "chose" to not privately pay the firefighting companies. Rather, when your neighbors' houses are burning down, there's a good chance your house will be next. So, in people's own self-interest and to promote the good of the community, firefighting in the U.S. is a service provided by government, universally enjoyed to protect all, not only those who choose to pay for it.

America, your neighbor's houses are burning down. It's time for health care to join the ranks of other community services, such as firefighters, police protection, public education, libraries, etc. Would it be perfect? Of course not. Would it be better? Wait until your family's house is burning. Then answer that question.

Posted by: inquisitor | Oct 11, 2007 11:30:09 AM

pimp hand, if someone pays less in taxes, someone else is making up the difference. that's a subsidy. whether that money goes to the government first and is given back or simply stays in the person's hands is only bookkeeping.

Posted by: Cody | Oct 11, 2007 11:31:49 AM

Clinton and Kennedy are responsible for MSAs.

But in Malkin's world, "most Democrats don’t seem to like MSAs."

Good times

Posted by: cardozo | Oct 11, 2007 11:32:39 AM


Posted by: Rusty | Oct 11, 2007 11:35:58 AM

I think America has a chance to really fix its health care -- but don't make the mistakes that Canada made. I am all in favor of our universal health care but (a) it's not free at all (about $3,000 or so of your income tax goes towards health care (i.e., in effect, you pay an annual premium of $3,000); (b) the waiting times for even the simplest procedures are now so long that people actually die waiting to see a specialist or to get the necessary surgery.

If you go for universal health care in the US, make sure not to copy, piece by piece, the Canadian system.

Posted by: Werner Patels | Oct 11, 2007 11:36:40 AM

The Frost family pays taxes which pay for the MSA "Stalkin Malkin" selected when her husband chose to quit his job with health benefits to cover "Stalkin Malkin's own children.

And, "Stalkin Malkin" just hates them for it.

Posted by: Brighid | Oct 11, 2007 11:39:09 AM

another thing, the way you quote malkin makes it look like she is talking about how she resolved her own situation when in fact she was talking about a wsj column on reducing health costs.

Cody, if someone pays less in taxes its means the government has tax revenue than it otherwise would, not that someone elses pays more. To reiterate: to regard allowing people to keep more of their own money as a subsidy only makes sense if you believe that all income is by rights the government's and they only allow us to keep a piece of it at their largess.

Posted by: pimp hand strikes! | Oct 11, 2007 11:50:30 AM

*less tax revenue than it otherwise would

Posted by: pimp hand strikes! | Oct 11, 2007 11:51:08 AM

it's not free at all (about $3,000 or so of your income tax goes towards health care (i.e., in effect, you pay an annual premium of $3,000)

Which is, of course, rather a lot less than what I and my employer pay annually for health insurance premiums.

Posted by: Dr. Squid | Oct 11, 2007 11:55:19 AM

A tax-sheltered medical savings account is funded by the government? I thought it was one's own money that goes into it. I wouldn't consider any case where the government can't get its hands on someone's money a case that the government is "funding" the account. Maybe part of a possible solution is to make those accounts readily available to everyone.

Posted by: MattH | Oct 11, 2007 11:55:50 AM

MSA's are subsidized?

I thought they got the same tax treatment as group health insurance. They're tax-advantaged relative to individually-purchased health insurance, but not relative to employer-provided health insurance.

Posted by: SamChevre | Oct 11, 2007 11:56:05 AM

what is it that you don't understand about how this works? if the government tells me "don't worry, you can pay less this year", someone else has to make up the difference. asking other people to make up the difference for your tax break is the exact same thing as paying your taxes up front and then getting them back in some kind of program, paid for by other people's taxes. you're trying so desperately to frame liberals as communists that you're ignoring common sense.

Posted by: Cody | Oct 11, 2007 11:58:06 AM

my comment was directed at pimp hand.

Posted by: Cody | Oct 11, 2007 11:59:13 AM

The reason for the disconnect in this discussion is that conservatives have become addicted to deficit spending and don't understand that a shortfall in revenues has to be made up somewhere.

Posted by: Steve | Oct 11, 2007 11:59:46 AM

Let's suppose that we had a government that actually paid all its obligations -- the democratically imposed obligations adopted by Congress -- every year. Then a "tax advantage" to one person (Malkin) is surely an increased tax on others (us), to pay those obligations. Indeed, even our immense deficits don't change this, really -- it's just our grandchildren Malkin is making subsidize her health care.

Posted by: David in NY | Oct 11, 2007 12:03:47 PM

The reason for the disconnect in this discussion is that conservatives have become addicted to deficit spending and don't understand that a shortfall in revenues has to be made up somewhere.

indeed. but they also believe the government spends too much on other things from the start. and we do have a striking example of the kind of government they'd like that collects taxes only for the military and doesn't give anything back to the citizens in the form of public services who have to fend for themselves for everything. it's just that it disappeared in 1991.

Posted by: Cody | Oct 11, 2007 12:06:48 PM

Look, all bloggers feed their fans. Malkin's just happens to be an exceptionally low grade of horse shit. That said, Ezra feeds his fans too, except he knows, usually, something about the subject on which he opines.

However, his statement that MSA is really a gov't subsidy kind of misunderstands where wealth comes from. Ezra presumes wealth is government's, and so when you make choices gov't likes (stick money in an MSA) government lets you keep a little of the wealth it would take. That's faintly ridiculous. That's like saying that everyone in the country is subsidized by the gov't because the government fails to take 100 percent of the wealth created.

Now, are MSAs stupid? Yes, but not because they're subsidies. They're stupid because the create a needlessly complex tax scheme that privileges one kind of savings (savings for health care) over other presumably valuable kinds of savings.

The health system is not going to be fixed by carving out such exceptions.

Posted by: Joe Strummer | Oct 11, 2007 12:11:17 PM

Cody, pimp hand's ignorance stems from that, like most conservatives, he sees the government as a separate entity from the rest of the country, rather than a necessary part of it. This is why he doesn't understand your point, and also explains the issue Steve brings up.

To a conservtive, deficit spending doesn't matter, because it's the "government's" problem, rather than "our" problem.

Posted by: PapaJijo | Oct 11, 2007 12:16:07 PM

I guess Malkin's new argument is that the Frosts should have signed onto a MSA with HDHP or something back before the car accident and it's associated pre-existing conditions became a problem. Of course, we don't have enough information about the Frosts to know whether that was actually possible. But even if they didn't make the right decision here, it doesn't seem like the sort of decision for which we must condemn a family to crushing poverty for the rest of their life.

Moreover, if Malkin is now saying expanded Health Savings Accounts are better than S-CHIP expansion (which I guess is the Bush Administration position), she has to abandon this hysteria over middle class people getting government benefits. If your motivation is that government money should be focused on poor people, you'd want more S-CHIP and less HSA.

Posted by: Consumatopia | Oct 11, 2007 12:18:01 PM

Cody, pimp hand's ignorance stems from that, like most conservatives, he sees the government as a separate entity from the rest of the country, rather than a necessary part of it.

That's not entirely true. When the government does something they like, such as declaring war, their rhetoric changes to claim that it's an act of the people, through their duly elected representatives, or something like that. Only taxes and other things they don't like are dictatorially imposed by this unaccountable entity called Government.

Posted by: Steve | Oct 11, 2007 12:20:21 PM

When I take a deduction for my kids, is the government subsidizing my children?

When my health costs are high enough that I can deduct them further, is the government subsidizing my health care?

When a homeowner deducts the cost of his mortgage interest, is the government subsidizing the cost of the home?

MSAs are dumb for the reason Joe gave, as well as the fact (I believe the fact) that if you don't use the money one year, you lose it the next year.

But I think it's inaccurate to describe them as government subsidized.

Posted by: jerry | Oct 11, 2007 12:23:29 PM

That's like saying that everyone in the country is subsidized by the gov't because the government fails to take 100 percent of the wealth created.

No, not at all. A general tax cut means the everyone gets to keep more money but gets fewer services. Directed tax credits and deductions mean certain people get to keep more money but get the same level of services that everyone else who pays more money gets.

Obviously, if I pass a law leaving all taxes unchanged accept Consumatopia doesn't have to pay any, but Consumatopia still gets to partake of the same government services everyone else does, that's a subsidy of Consumatopia.

Posted by: Consumatopia | Oct 11, 2007 12:23:52 PM

The answers to jerry's questions are "sort of", "yes" and "definitely yes".

The first one is debatable because income taxes are based on the ability to pay, and people with kids have less ability to pay.

But the core point here is that if you're taking mortgage deductions or deducting your health care, you're getting government assistance exactly like someone benefitting from S-CHIP. This does NOT assume that all money is the government's--it does assume you have to pay your fair share.

Posted by: Consumatopia | Oct 11, 2007 12:32:03 PM

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