Credit Due: Sen. Warren did her homework. Doesn't make M4All any more likely to happen, but she showed her work.

A few weeks ago, I said the following about Sen. Elizabeth Warren regarding healthcare policy:

• I'm generally supporting Elizabeth Warren in the Democratic Primary (not a full endorsement, but I've been strongly leaning her way for awhile now)...

• ...but I'm also not happy with her seeming 180 degree shift on how to best achieve universal healthcare coverage from her brilliant CNN Town Hall response in March to her cut 'n dried "I'm with Bernie" stance since June.

HOWEVER, for the time being at least, that seems to be where she's decided to lay her marker, so it is what it is.

(Note: Since then, I've publicly stated that I'm now leaning more towards Sen. Kamala Harris who was always my strong #2 choice. This doesn't mean I no longer like Warren--the two have simply swapped places in my #1 and #2 column.)

I noted at the time that Warren's insistence on sticking with Bernie's "pure" Medicare for All bill had been causing her a lot of headaches of late, especially given the How Will You Pay For It / Will You Raise Taxes On The Middle Class mantra.

Bernie Sanders has, to his credit or detriment, stated it plainly: Yes, his plan would indeed raise taxes on households earning more than $29,000/year, via a 4% payroll. He didn't actually bake it into the legislative text of his bill, but he included it on a list of "proposed" funding mechanisms and has repeated it many times since then, so that seems to be one source that he's locked in on.

As I noted:

The thing is, $29K/year for a family of four is just 112% FPL, barely out of poverty.

Warren has been far more circumspect on this question, for an obvious reason: She doesn't want to give the Trump campaign the sound bite they're looking for, a sharply-edited clip of her uttering the words "Yes, I would raise taxes on the middle class to pay for Medicare for All".

Instead, every time she gets asked this question, she refuses to accept the framing at all, repeatedly pointing out that what's most important is the overall cost impact of making the move: Any tax increases would be offset by savings on premiums, deductibles, co-pays and so forth.

Having said that, the fact remains that yes, taxes would have to increase on some group or groups of people and/or corporations in order to provide the massive increase in federal spending which such a program would require...and most people, even those who fully understand the trade-off, would still like to know what the trade-off would be. If you say "you'll save money" overall, it's not unreasonable to want to have at least some idea of how much better off you, specifically, would be. At least a ballpark, anyway.

After being hammered on either her refusal to answer the question (or her reframing of it, depending on your POV) throughout the debate and afterwards, Warren stated this:

"My commitment is: I will not sign a bill into law that raises costs on middle class families," Warren said.

I went on to note that "middle class families" is a slippery term, since there's no legal definition of the phrase...but I went on to note that the generally-accepted range seems to be households earning somewhere between $40K - $140K/year, give or take.

I went on to recommend that:

So, if Warren wants to be absolutely certain that her statement about "the middle class" is true, it seems to me that the key would be to structure her proposed payment mechanism to be something along the lines of: No payroll tax up to around 200% FPL (perhaps $40,000/year per household); 2% from $40K - $80K; 4% from $80K - $120K; 6% from $120K - $160K and 8% from $160K and beyond. Basically, whatever it takes to make certain that no one below the $140,000 threshold would see higher overall costs than what they'd otherwise be paying...five to ten years from today.

...In any event, assuming she's able to come up with the Magic Formula, while I'd still prefer that she break away from Bernie's "pure" M4All bill altogether in favor of something more along the lines of Medicare for America, if Warren does insist on sticking it out, I'd recommend she change her response to something more like this:

"There'd be a trade-off. Most people would NOT see their taxes go up, but for those who do, the trade-off would be the elimination of premiums, deductibles, co-pays, surprise bills and virtually all other medical bills. The majority of people would pay less overall."

By wording it this way, Warren finally answers the burning question (yes, taxes would go up for some people) while doing so in a way which avoids an easy sound bite attack even with clever editing...and by squeezing nearly all of the tax hikes over the 50% median income threshold, she can also honestly say that costs would not go up for "most" people, which avoids trapping herself the way President Obama did when he stated unequivocally that "If You Like It You Can Keep It" without any caveats, which led to a massive backlash when millions of people discovered that no, they couldn't in fact "keep it".

Well, Warren put her wonkishness into overdrive, put her head together with a bunch of other respected economic wonks, and last Friday she did indeed roll out her official Medicare for All funding plan as promised...and, as I suggested, she made sure that her plan, at least on the surface, would indeed not increase taxes on households earning less than $140,000/year. In fact, she pushed things way up the income and wealth ladder. Like...a whole lot.

The first thing Warren's plan does is to chop down the total amount of increased federal spending needed by a third.

While there are several different estimates which have come out estimating how much a "pure" 100% universal, 100% comprehensive, 100% mandatory single payer healthcare system would cost from different think tanks and economists over the past few years, the range seems to generally fall somewhere in the ~$30 trillion range. The most commonly cited estimate over the past year or so was from the (right-wing/anti-M4All) Mercatus Center, which pegged it at around $32 trillion in increased federal spending. Mercatus may be a right-wing think tank and obviously anti-M4All, but even Bernie himself openly stated that $30 - $40 trillion over a decade is a reasonable range.

Assuming you rely on the estimates below (which come from Warren's own study), they average around $27 trillion...although if you dismiss the ones starting before 2019 they average $29.3 trillion. Note that Mercatus ("Blahous") appropriately starts their estimate in 2022 since that's the earliest year that a Bernie/Warren M4All bill could even theoretically be implemented, assuming a Sanders/Warren administration took office on January 20, 2021. I'm pretty sure you'd have to nudge the others up a bit to account for normal inflation as well as medical trend to at least an even $30 trillion.

Warren insists she can do it for "only" $20.5 trillion over a decade...supposedly lopping down the tally by a good $10 trillion or so.

I'm not going to get into a detailed analysis of how she eliminates the extra $10 trillion; that's all laid out in her plan and supporting documentation. A lot of it assumes significant reductions in the amount actually paid to healthcare providers (doctors, hospitals, pharmaceutical companies and so forth). Some of it comes, of course, from eliminating private health insurance companies. Some comes from other major changes to the system.

Needless to say, the AHA (hospital lobby), AMA, PHRAMA, AHIP, BCBSA and other massive healthcare industry lobbying forces will spend an absolute fortune and call in every favor they have to fight back against most of these things. They've already started, actually...but this is just a tiny taste of what's to come.

Still, this is about her math...so how does she propose coming up with the $20.5 trillion she does admit would have to be raised?

It breaks out pretty much as follows (in addition to repurposing all existing federal Medicare/Medicaid/CHIP/ACA spending, that is:

• Employer Healthcare Spending: Warren says employers, who provide healthcare coverage for nearly 50% of the total U.S. population, are expected to pay $9 trillion over the next decade. She's proposing having them instead basically pay 98% of that amount into a new Employer Medicare Tax based on a simple per-enrollee average spending formula, generating $8.8 trillion.

• Automatic Increases in Take-Home Pay: Warren figures that the employee's portion of their employer-sponsored health insurance would be added to their take-home pay. If you assume that employees are currently paying around 30% of their premiums, that means they'd be taxed on around $4 trillion in additional income, which in turn would generate around $1.15 trillion in her view (the math is more complicated than that, but you get the idea). She figures she can squeeze another $250 billion out of the tax break for medical expenses over 10% of AGI becoming moot, for total additional revenue of $1.4 trillion.

Warren figures that gets you to $10.2 trillion, or around half of the amount she estimates would be needed.

Here's where she comes up with the other half:

• Cracking down on Tax Evasion and Fraud: Warren thinks that with restoring funding and authority to the IRS, redirecting tax law enforcement from low-income to high-income violators, toughening up on enforcement in genearl and anti-fraud measures, she can reduce the amount of taxes underpaid by 30% (she says 1/3, but it's 30%), from $7.7 trillion in lost taxes to $5.4 trillion....generating an extra $2.3 trillion over a decade.

• "Targeted Taxes on the Financial Sector, Large Corporations, and the Top 1%": THERE it is. Let's be honest: This is the main number that everyone is wondering about. This is also, of course, right in Elizabeth Warren's "You Didn't Build That Yourself" wheelhouse:

Let’s start with the financial sector. It’s been more than ten years since the 2008 financial crisis, and while a lot of families are still dealing with the aftereffects, the financial sector is making record, eye-popping profits. Meanwhile, the risk of another financial crisis remains unacceptably high. By imposing targeted taxes and fees on financial firms, we can generate needed revenue and also make our financial system safer and more secure.

For example, a small tax on financial transactions – one-tenth of one percent on the sale of bonds, stocks, or derivatives – would generate about $800 billion in revenue over the next ten years.

...We can also impose a fee on big banks that encourages them to take on fewer liabilities and reduce the risk they pose to the financial system. A small fee that applies only to the forty or so largest banks in the country would generate an additional $100 billion over the next ten years...

Next, we can make some basic changes to ensure that large corporations pay their fair share and to fix some fundamental problems with our current approach that actually encourage companies to shift jobs and investment overseas. These changes will generate an estimated $2.9 trillion over the next ten years.

...Under my plan, businesses will still write off the depreciation of their assets – they’ll just do it in a way that more accurately reflects the actual loss in value. This would generate $1.25 trillion over ten years.

...Currently, a U.S. multinational corporation can make billions in profits and attribute it to a company it set up in a tax haven like the Cayman Islands, which has no corporate taxes...That’s why I’m proposing to institute a country-by-country minimum tax on foreign earnings of 35% – equal to a restored top corporate tax rate for U.S. firms – without permitting corporations to defer those payments...Together, the country-by-country minimum tax and the taxation of foreign firms based on their domestic sales would result in an additional $1.65 trillion in revenue.

Finally, we can raise another $3 trillion over ten years by asking the top 1% of households in America to pay a little more.

...By asking billionaires to pitch in six cents on each dollar of net worth above $1 billion, we can raise an additional $1 trillion in revenue and further close the gap between what middle-class families pay as a percentage of their wealth and what the top one-tenth of one percent pay.

...We can also change the way the government taxes investment income for the top 1%. Today, taxes are only assessed on capital gains when securities are sold. That means wealthy investors can put their money in the stock market, see it grow, and not pay a dime in taxes on those earnings unless or until it is taken out of the market. Under the current system, they can then pass along those shares to their heirs when they die and their heirs will be able to pay even less when they choose to sell.

I’ve already proposed closing that loophole for how capital gains are treated when shares are passed on to heirs. But we can go a step further. Under a “mark-to-market” system for the wealthiest 1% of households, we will tax capital gains income (excluding retirement accounts) annually, rather than at the time of sale, and raise the rates on capital gains to match the tax rates for labor income. Individuals would still only pay taxes on gains and could use current losses to offset future taxes.

Under this system, investment income will no longer be treated differently than labor income for the top 1% of households. Ultra-millionaires and billionaires won’t be able to earn income on giant fortunes year after year without paying a penny in taxes. And we can raise another $2 trillion over ten years to pay for my Medicare for All plan.

I'm obviously still cutting out a ton of details here; Warren goes into great detail about each of these. But at the end of the day, she claims to be able to not only achieve the necessary funding without raising taxes on the middle class, she supposedly has done so without raising them on most of the upper class either (depending on where your cut-off definition is...I'm not sure at what income threshold capital gains really becomes a significant source of income for most households).

She's not done yet, however:

• Immigration Reform: Warren assumes that a complete immigration policy overhaul would generate another $400 billion in federal revenue via additional documented immigrants paying taxes over the table.

• Cuts in Defense Spending: She's proposing eliminating something called the Overseas Contingency Operations Fund, which she refers to as a "slush fund", from the overall military budget...supposedly providing an additional $800 billion over a decade:

Since the attacks of 9/11, the United States has appropriated $2 trillion to fund combat and counterterrorism operations around the world via the Overseas Contingency Operations fund, or OCO. On average this spending has amounted to $116 billion per year – and in total, an amount equivalent to nearly 10 percent of all federal discretionary spending over that same time period.

Republicans – including the President’s current Chief of Staff – and Democrats alike agree that OCO is a budget gimmick that masks the true impact of war spending. The emergency supplemental funding mechanism was never intended to fund the costs of long-scale, long-term operations outside of the normal appropriations process. And in recent years, OCO has also been used to fund so-called “base” requirements unrelated to the wars, outside of the Budget Control Act caps – in effect acting as a slush fund for increased Pentagon spending. And as everything from more F-35s to massive bombs never used in combat have migrated into the OCO account, the Department of Defense has been spared from having to prioritize or live within its means. It’s not just bad budgetary practice – it’s wasteful spending.

...We can start by shutting down this slush fund and balancing with our overall defense priorities in the context of the actual defense budget. And as we end these wars, eliminating the Overseas Contingency Operations fund and forcing the Pentagon to fund any such priorities through its regular budgetary process will provide $798 billion over the ten-year period relative to current spending levels.

Add it all up and she does indeed get to a grand total of $10.2 trillion + $10.3 trillion = $20.5 trillion. PENCILS DOWN!

I'm not going to argue with her math...first because I'm not an economist, second because she's had some respected economists run the numbers. A ton of this stuff goes way beyond my knowledge base, and that's fine with me...I'd be kind of disturbed if I knew everything about the revenue sources she's referring to.

What I am going to say is that there's going to be massive pushback on just about all of these proposed changes from all of the above-mentioned industries and institutions, the likes of which will make what happened to Bill and Hillary Clinton in the early 1990's seem like a walk in the park.

The question isn't whether Democrats should fight for what they want...it's whether they're prepared to fight every one of those forces simultaneously, or whether they should pick their battles. Warren proposal requires doing just that: Fighting not just the Republican Party, FOX News, Rush Limbaugh, Breitbart, etc etc, but also entrenched interests in pretty much every part of both the government and the economy...all at the same time.

Honestly, I'm most reminded of this classic Steve Martin clip from over 40 years ago:

"You can be a millionaire and never pay taxes! First...get a million dollars. Then..."

The thing is, all of this would be an incredible lift even if there weren't 100 other major crises going on which would need to be dealt with the moment she took office as well...but there will be. Climate change. Defending democracy itself. Voter/election security. Criminal justice reform. Immigration reform (which she even shoehorns into her M4All funding plan). Repairing our tattered foreign policy relationships as well as dealing with foreign policy crises themselves. The list goes on and on.

In addition, of course, Warren wouldn't be able to sign such a bill unless and until it actually passed both the House and Senate...assuming the Democrats keep the former and flip the latter.

The House itself would be a heavy lift (the House M4All bill has 119 cosponsors, which is pretty impressive...but getting the other 99 would be difficult to say the least), and Bernie's Senate version only has 15...one of whom is Warren herself, who would no longer have a vote (conversely, Bernie wouldn't have a vote if he were to win either). Joe Manchin and Kyrsten Sinema would be no-go on it from the start, as would at least a dozen other Democratic Senators.

How in God's name either of them expects to push those numbers to 218 and 51 I have no clue...and even that assumes that the Senate Democrats were to eliminate the Filibuster upon taking congrol of the Senate, which is also extremely unlikely.

However, at the moment, none of these issues are what I proposed that she do three weeks ago. I simply said that if she's dead set on her "pure" Medicare for All vision, she should show her math in such a way that the numbers don't formally hit the middle class.

She's done that, so as a wonk, I tip my hat to her.