My Amazon Review of Emanuel Saez's and Gabriel Zucman's "The Triumph of Injustice: How the Rich Dodge Taxes and How to Make them Pay"

The Taxmen

UC Berkeley economics professors Emanuel Saez and Gabriel Zucman have written a social democratic screed against economic inequality and a concomitant plea for confiscatory taxes on the super-rich. That is taxation not to raise revenue, but rather to reduce the number of billionaires. It is no accident that they have advised both Elizabeth Warren’s and Bernie Sanders’ presidential campaigns.

Their discussion involves a data heavy look at the overall U.S. tax system that includes federal, state and local taxation. They conclude that from 1950-1980 the tax system has gone from a progressive one to a largely flat tax system with mildly regressive aspects at the top end. They use adjusted gross income as the basis for their tax rates among the various income groups. By using that metric they exclude transfer payments which bias the results. Further that ignores the very large charitable contributions made by the super-rich which reduces their effective tax rates as defined by the authors.  Had they not made those contributions I would assume that the apparent regressivity would give way to progressivity.

What Saez and Zucman get right is the need to crack down on corporate tax havens that allow for the transfer of income from high tax to low tax jurisdictions. The tax allocations performed by multi-national corporations have been elevated to a high art by the global accounting firms. Thus it makes a lot of sense to form a global compact to limit this behavior and establish a minimum corporate tax on the order of 20-25%.

Domestically they advocate increasing the corporate tax back to the 50% heyday of the 1950s and increasing the top individual rate to 60 %( federal and state). On top of that they propose a 6% national income tax on all income, but they would eliminate state and local sales taxes. On the individual level they would characterize capital gains and dividends as ordinary income while indexing gains to inflation. Because they are French I would characterize their pies de resistance a wealth tax on the order of 2-3% for the richest Americans. As noted above that tax is not for revenue, but rather to penalize and to reduce the number of super wealthy people. My simple question is how is the confiscating of 2-3% of someone’s wealth each year bear any relationship to justice? Think of a large farm where the government takes 20-30 acres away each year from the farmer without compensation. That would be a taking pure and simple.

The authors propose using all of the revenue generated from there overhaul of the tax code to fund child care, pre-K, free college and Medicare for all. It sure sounds like Bernie and Elizabeth.

What the authors ignore are the second order effects of their ambitious plan. The stock market would meltdown under the weight of lower after tax corporate profits and the forced selling of shares by the super-rich. With that the already shaky finances of public pension plans would crater and the private retirement savings of millions of Americans would take a severe hit. What would they recommend? The answer is obvious: a bailout.

Instead of their meat ax approach to the tax code a scalpel would achieve much of what they desire. A moderate increase in upper-income tax rates, elimination of the capital gains treatment of carried interest, elimination of 1031 exchanges for real estate transactions and increasing the corporate income tax rate from 21% to 25%. Such a program wouldn’t cure their bloodlust for billionaires, but would reduce inequality without wrecking the economy.

There is one major factual error in the book. The authors state that the top rates for ordinary income and capital gains taxation are 37% and 20%, respectively. That is wrong. The Obamacare taxes make the high income top rates for ordinary income and capital gains, 39.6% and 23.8%, respectively. They are also wrong in attributing the growth in tax shelters following the 1981 Reagan tax cuts to the genius of the tax avoidance industry. That is not quite true. It was the increased depreciation allowances of the Reagan tax cuts coupled with the Garn-St. Germain Act deregulation of the savings and loan industry that enabled the tax shelter industry to flourish. It was given to them on a silver platter. Lastly they note that stock buybacks were illegal prior to 1982. That is not true. Buybacks were legal, but they were highly restricted.

Saez and Zucman have offered up a serious, though dubious in my opinion, proposal for radical tax reform. Credible responses are necessary especially if either Warren of Sanders become the Democratic nominee for president.

For the full amazon URL see: https://www.amazon.com/review/R1SW7XXSI2N8SC/ref=pe_1098610_137716200_cm_rv_eml_rv0_rv

  

The Democratic Debates: From Circular Firing Squad to Mutual Suicide Pact

I originally thought that the Democratic debates we witnessed last week would turn out to be a circular firing squad where each candidate would be in the attack mode; instead it turned out to be a mutual suicide pact. All you have to do is look at how most of the candidates took positions way out of the mainstream.

Although Medicare for All has the sound of a winning issue, in fact it is a loser once people realize that it would be the end of private health insurance for 150 million Americans and that a majority of all of the hospitals in the U.S. would go bankrupt because of the inadequacy of Medicare’s reimbursement rates. In a way the Democrats are sounding like Republicans in the sense that they want to “repeal and replace Obamacare.”

With respect to immigration the entire field came out for healthcare for unauthorized immigrants and most supported decriminalizing illegal entry in the first place. In other words they would exempt from deportation ANY unauthorized immigrant who hasn’t committed a serious crime.  Although all of the candidates talked a big game on immigration when asked what would be the first thing they would do upon election, not one of the 20 mentioned solving the immigration issue. I would caution that if the Left doesn’t solve the immigration issue, the Right certainly will and the result would not be pretty.

Then, of a sudden, Kamala Harris brought up Joe Biden’s opposition to forced school busing for the purposes of racial balance in the 1970s. Biden showed his age and hemmed and hawed without really responding. What he should have done was to give full-throated support for his position at the time. Although Harris may have benefitted from busing as a school girl, it was widely unpopular in both the White and Black communities and it ultimately fell of its own weight. Later Elizabeth Warren said she would support busing today. She will soon regret that statement. If you want to date the Los Angeles Unified School District’s slow descent into hell you can do no worse than 1977 when a massive school busing plan was introduced. All I can say Trump’s ad makers will a field day with all of the material that came out of the debates.

As to the candidates, Joe Biden showed his age and if he doesn’t quickly rebound he is a goner. Bernie Sanders is the same crotchety old man he was in 2016, only more so. He has passed his sell by date. Elizabeth Warren, in the height of conceit, has a plan for everything. It is one thing to be bold, but quite another to think that she can reorder a complex society of 330 million people. She wants to be the boss of everything. If Warren were an elementary school teacher, she would be a 5^th grader’s worst nightmare.

Both Kamala Harris and Cory Booker had their moments, but so far both appear to be more show horse than work horse. Nevertheless both of them may have the legs to go the distance. In contrast Amy Klobuchar is more of a work horse and perhaps that is why she is lagging in the polls. Pete Buttigieg is a bright guy, but running the U.S. is a huge leap from South Bend, Indiana. I think he is running for president because he doesn’t see a path to governor or senator in his conservative home state of Indiana. Beto O’Roarke looks like a one trick pony who should be running again for the Senate in Texas.

Given Trump’s unpopularity the Democrats are supposed to win in 2020, but as we witnessed in 2016 they have the ability to snatch defeat from the jaws of victory. Simply put, Trump can’t win, but whomever is the Democratic nominee can certainly lose.

  

Too Soon for the Democrats to Break Out the Champagne

All of the signs are now pointing to a Democratic wave election this coming November. Both the President Trump and the Republican Congress are in the doghouse in terms of poll numbers and 2018 is looking like a mirror image of the Republican sweep in 2010. For example in the 2009/10 period the Republicans took the governorships in New Jersey and Virginia and won a surprise victory in the special election for a Senate seat in Massachusetts. This year the Democrats won in Virginia and New Jersey and won a special election for a Senate seat in very red Alabama. Moreover the Democrats passed Obamacare with a straight party-line vote and this year the Republicans passed a massive tax cut on a straight party-line vote.

So what's wrong with this picture? Unlike 2010 when the economy was in the dumps the economy appears to be entering a boom phase. The unemployment rate in November 2018 will approximate a very low 3.5%. Moreover the expectations for the Trump tax cuts are so low that most voters will be pleasantly surprised when they see the tax cuts in their pay checks in February and the real pain on the limitation of state and local tax deductions won't show up until tax filing time in 2019. Thus the Republican poll numbers have nowhere to go but up.

Of course we shouldn't under-estimate the ability of the Republicans to screw up. For example Trump could blow up NAFTA triggering a stock market drop and increasing the likelihood of a recession in 2019. And over all of this looms the ongoing Mueller investigation of the 2016 election and likely a host of irregularities in the Trump Organization.

As a result the Democrats will make big gains in the House of Representatives, but whether it will be  enough to take control remains to be seen.

Supreme Court Rescues the Republicans

In three important decisions the Supreme Court significantly improved Republican presidential prospects in 2016. First in upholding subsidies for the federal exchanges the Supreme Court took off the table the agonizing choices that the Republicans would have had to make with respect to seven million people losing their health insurance subsidies. Simply put the Republican Party would have been way too divided to come up with a practical solution.

Next with the Supreme Court legalizing gay marriage throughout the country, it essentially took a losing issue for the Republicans off the table. In its place the Republicans will find themselves on far more friendly terrain in their defense of religious freedom, Indiana notwithstanding. Thus the way is open for the Republican Party to become the party of pluralism and respect for individual beliefs.

Finally with the Supreme Court now, incorrectly in my opinion, allowing the use of disparate impact as dispositive evidence in housing discrimination cases we will witness a wave of litigation across the country pitting "civil rights" groups against local communities. This would be amplified if the "gosplanners" in HUD get there way to use federal power upend local control to achieve desegregation, both economic and racial. Here the fights will be ugly and it will redound to the benefit of the Republicans.

All that has to happen now is for the Republicans to avoid snatching defeat, as is their habit, from jaws of victory

"A Growing Economy, In Spite of Ourselves," UCLA Anderson Forecast, December 2013

The economy is growing despite self-inflicted wounds
caused by the 16 day partial shutdown of the federal government
and the botched roll out of the Affordable Care Act’s
(Obamacare) insurance marketplace affecting the giant
healthcare sector which accounts for 18% of the economy.
Parenthetically, it would be far better for our economy if
only our political leadership were dealing with fixing long term
entitlements, reforming the tax code and repairing
and improving our decaying infrastructure.

Although real
growth in the current quarter will likely be a modest 1.8%,
we forecast that by the second quarter of next year real GDP
growth will be on a sustained 3% growth path. (See Figure
1) In this environment employment will be on track to add
about 200,000 jobs a month and the unemployment rate will
decline to about 6% by the end of 2015.

Figure 1 U.S. Real GDP Growth, 2005Q1-2015Q4F
Figure 2 Payroll Employment, 2005Q1-2015Q4F

Figure 3 Unemployment Rate, 2005Q1-2015Q4F

The Yellen Fed

As with most observers, we expect that there will be
a great deal of continuity in Federal Reserve policy as the
chairmanship transitions from Ben Bernanke to Janet Yellen,
the current vice-chairperson. We expect the Fed to start
tapering its $85 billion a month bond buying program early
next year. With the start of tapering, we anticipate there
will be a greater commitment to keeping interest rates at
or near zero longer by, for example, lowering the threshold
unemployment rate from 6.5% to 6% before increasing the
federal funds rate.

Indeed, Chairman Bernanke has consistently
called the unemployment rate a threshold, not a trigger.
Our view is buttressed by the facts that (1) the Fed
was caught completely unprepared for the violent bond
market reaction to Chairman Bernanke’s hint of tapering in
mid-May which triggered a rise in 10-year U.S. Treasury
yields from 1.8% to just under 3 percent by early September
and (2) the release of two Fed papers written by senior
staffers that discussed the efficacy in terms of employment
and output of maintaining a forward guidance policy that
would extend the zero interest rate policy regime past 2016.
Whether or not the Fed papers represent the “correct” policy
is a separate question.

Nevertheless, for the Federal Reserve
Open Market Committee on both market psychology and
policy grounds, it seems likely that any tapering announcement
would be softened by leading market participants to
believe that interest rates will stay lower for a longer period
of time. We could also see movement towards reducing the
interest rate paid on bank reserves, now 25 basis points, to
encourage more active bank lending.

However, what the Fed intends and how policy will
actually play out are two different things. Underpinning the
Fed’s focus on the employment portion of its dual mandate
has been the quiescence of an inflation rate running well
below its 2% target. We think that is about to change. Why?
The rebound in housing prices along with rising tenant rents
will put upward pressure on the housing component of the
price indices. In addition, the chaos associated with the
roll-out of the Affordable Care Act’s insurance exchanges
will likely create the opportunity for price increases in the
healthcare sector along with the increased demand coming
from an improved economy and from people who previously
were locked out of the health insurance market.

As a result we expect that consumer prices will soon be rising at an annual
in excess of 2%. (See Figure 4) To be sure, the Fed uses
the consumption deflator in the GDP accounts, not the more
widely publicized consumer price index, for policy-making
purposes. Nevertheless, a consistent stream of 2% year-overyear
increases in the consumer prices index, including the
all-important core, will most certainly get their attention.
In the face of higher inflation we expect that the
federal funds rate will be increased in the spring of 2015
even though the unemployment rate would still be above

Figure 4 Consumer Price Index v.s. Core CPI, 2005Q1-2015Q4F
Figure 5 Federal Funds vs. 10 Year U.S. Treasury Bonds,
2005Q1 - 2015Q4


the Fed’s threshold. Concomitantly, the yields on 10-year
U.S. Treasury Bonds will be on the road to 4%. (See Figure
5) Our logic is that with a labor market recovery well
underway, the Fed (even a Yellen Fed) will pay heed to an
inflation rate running above 2%. Remember that a rise in
inflation from 1% to 2% is equivalent to a 1% drop in the
real fed funds rate.

Strength in Housing and Cars

Although we do not expect a boom in consumer
spending, both the housing sector and the automobile sector
will be aiding the growth outlook. (See Figure 6) Specifically
we are forecasting an increase in housing starts from
an estimated 913,000 this year to 1.25 million 1.44 million
units in 2014 and 2015, respectively. (See Figure 7) We do
note that this is a markdown from our last forecast to reflect
a greater sensitivity to rising mortgage rates than we previously
thought. Indeed the 1.44 million unit forecast is still
below the 54 year 1959-2012 average of 1.47 million units.
Similarly, light vehicle sales are rebounding to levels
last seen in the mid-2000s. Automobile sales are expected
Figure 6 Real Consumption Spending,
2005Q1 -2015Q4F
Figure 7 Housing Starts, 2005Q1 - 2015Q4

Figure 8 Light Vehicle Sales, 2005Q 1 – 2015Q4,
Millions of Units, SAAR

to increase from this year’s 15.5 million units to 16 million
and 16.5 million units in 2014 and 2015, respectively. (See
Figure 8) Both home and auto sales are being buttressed by
recovering home prices and new highs in the stock market.

Figure 9 Case-Shiller Home Price Index, 2000- August 2013, Monthly Data, 2000= 100.

Figure 10 Standard & Poor’s 500 Stock Index, January 2, 1995 – November 21, 2013, Daily Data

(See Figures 9 and 10) It is here where Fed policy seems
to be working, but the beneficiaries are largely those who
own stocks and those who either own their own home or
who can qualify for a mortgage. There will also be enough
income left over to modestly increase the personal savings
rate from 4.6% in 2013 to 5.6% in 2015. (See Figure 11)

Business Investment Side of Economy to Get a
Second Wind

One of the reasons 2013 has been so sluggish is that
the growth in business investment and exports slowed
dramatically. Policy uncertainty coming out of Washington
D.C. certainly has not helped, but the underpinnings are
there for strength in domestic manufacturing, commercial
construction, energy development and the investment required
to enable the bandwidth required for the increased
usage mobile technology. To be sure, it won’t be a boom
but it will be far better than the 2% or so growth estimated
for 2013. (See Figures 12 and 13)

In our view, 2013 was more of a pause in investment
spending, not an outright decline, and with the likelihood of
a more level headed (i.e. no government shutdown) policy
discussion in Washington D.C. in 2014 the way will be
open for more spending. The major risk here, as we see it,
is that instead of investing for the future corporations will
use their excess cash flow to increase dividends and fund
share buybacks. This short-sighted behavior is due, in part,
to the Fed’s artificially suppressing long-term interest rates
which creates uncertainty about the long-run cost of capital.

Similarly exports will revive as the growth, albeit very
modest, returns to Europe and Japan. (See Figure 14) Although
not stellar compared to its history China appears to be
on a 7% growth track while the Latin American economies
with the large exception of Brazil appear to be doing well.

Figure 11 Personal Saving Rate, 2005 – 2015F, Annual Data

Figure 12 Real Investment in Equipment and Software,
2005 – 2015, Annual Data

Figure 13 Real Investment in Business Structures,
2005 -2015, Annual Data

The Worst is Over for Government Spending

Federal purchases declined an estimated whopping
4.7% in 2013! That drag will be gone in 2014 as we anticipate
there will be a minimal budget deal in early January
that will encompass a modest relaxation of the sequester and
modest increases in in non-tax revenues. As a result, federal
purchases will be roughly flat over the next two years. (See
Figure 16) Remember for GDP accounting the ever growing
entitlement spending of the federal government counts as a
transfer payment not spending. The GDP effect takes place
when the beneficiaries of the transfers spend.

After a four year decline, state and local spending will
begin to rise in 2014. (See Figure 16) Revenues are up and
spending has been held down. But make no mistake that until
the long-term pension issues are dealt with, state and local
finances will, for the most part, remain far from healthy.

Conclusion
As long as the federal government does no harm,
admittedly a dangerous assumption, the economy will be
spurred by strength in housing and cars combined with an
uptick in business spending and an end to the dramatic drop
in federal purchases. These factors should put the economy
on track to a 3% growth path by midyear 2014 and bring
the unemployment rate down to about 6% by year end 2015.
Policy interest rates will stay low throughout 2014, but with
inflation rising to a bit above 2%, we expect that the zero
interest rate policy of the Fed will come to an end in the
spring of 2015

Figure 14 Real Exports, 2005 – 2015, Annual Data

Figure 16 Real State and Local Spending,
2005 – 2015F, Annual Data

End notes
1. See, English, William B., J. Lopez-Salido and Robert Tetlow, “The Federal Reserve’s Framework for Monetary Policy-Recent
Changes and New Questions,” Board of Governors of the Federal Reserve System, November 2013 and Reifschneider, Dave,
William L. Wascher, and David Wilcox, “Aggregate Supply in the United States: Recent Developments and Implications for the Conduct
of Monetary Policy,” Board of Governors of the Federal Reserve System, November 2013.

Obamacare's Management Failure

On October 23rd I posted a link to my USNews blog on the management failures of the Republican House majority and the roll out of Obamacare.  The link is here: http://shulmaven.blogspot.com/2013/10/my-latest-usnews-blog-us-needs-some-new.html Today the New York Times published a front page story on the complete management breakdown by the Centers for Medicare and Medicaid Services that were responsible for developing the HealthCare.gov website. This article is an eye-opener for all of my friends who believe that the government is a solution to many of the problems that vex society. As the late sportscaster Howard Cosell would say, "Never have I seen such continuing ineptitude.."  The link to the full article is here: http://www.nytimes.com/2013/11/23/us/politics/tension-and-woes-before-health-website-crash.html?_r=0&hp=&adxnnl=1&adxnnlx=1385232033-Jfvr4hYVfepHCVF3B6xo7Q It is a must read.

Now read what I wrote a month ago:

"If this weren't enough, we have had a failure to launch healthcare.gov, the entry website for purchasing health insurance under the Affordable Care Act, more commonly known as Obamacare. The administration has had two and a half years to develop a website and all of the necessary back-end systems to enable Americans to purchase health insurance on a government run exchange. After all of that time and hundreds of millions of dollars, the system crashed on its first day, and it continues to fail. Not only is the front-end failing, the back-end is failing as the participating insurance companies are receiving the wrong information with respect to applicants and qualified dependents. This is not a mere glitch, it is a system failure.

Even more striking, Health and Human Services Secretary Kathleen Sebelius noted on CNN yesterday that President Obama wasn't aware of the problem until after the website was launched. Hello! President Obama is not a chief executive. He is now learning that there is a real difference between making policy and implementing policy. The real work is in implementation.

Now, I do not expect the president to be sitting in the Oval Office writing computer code, but I do expect him to be briefed at least monthly on the status of his signature program. He should have been familiar with all of the "deliverables" and "milestones" associated with the law. It is not even clear there was a senior White House staffer in charge of monitoring the program. Only yesterday we found out that former Acting OMB Director Jeffrey Zients will be in charge of the "tech surge" in the Department of Health and Human Services. All I can say is that if we had a real chief executive, Kathleen Sebelius would be fired.

Given what has happened in the past month, it is no wonder a majority of Americans want to replace the entire Congress and it is no wonder that the usually administration-friendly Jon Stewart's "Daily Show" has been offering the most biting criticism of the roll out of the health insurance exchanges. The government is not working and most Americans know it."

 

All I have to say is that before we embark on another expansive government program we better think long and hard about whether our government has the capability to manage it.

My latest USNEWS Blog, "The U.S. Needs Some New Management"

This is a follow-up to my blog on the government shutdown and the implementation of Obamacare. For the complete article see the following url: http://www.usnews.com/opinion/blogs/economic-intelligence/2013/10/23/obama-and-the-gop-should-be-fired-over-the-shutdown-and-obamacare-glitches

On Strike, Shut it down

Taking their lead from the student anti-war protesters of the 1960s, the wrecker caucus in the Republican Party led by Senator Ted Cruz is on the verge of shutting down the government. Unlike their 1960s counterparts ( I know they just hate that analogy), today's ideologues can cause real damage. Recall that in the 1960s all the students succeeded in doing was shut down a bunch of universities for a few days. All the university employees got paid, and, for the most part, a good time was had by all. Not to be so cavalier, more than a few people were seriously injured. In the interests of full disclosure I was a participant and sometimes close to being a leader.

To be sure the students highlighted their opposition to the Vietnam War, but along the way they helped set the stage for a conservative revival with the election of Ronald Reagan to California's governorship in 1966 and Richard Nixon to the presidency in 1968. That was hardly the outcome the students were seeking.

Today the situation is far different. The stakes are much higher. Hundreds of thousands of people will be furloughed, others will lose their jobs and essential government services will not be provided. Nevertheless, the House Republicans did one very politically smart move in preparing a continuing resolution that will exempt the Defense Department, but the rest of government will feel the full brunt of the shut down. I remember the 1995-6 shutdown under President Bill Clinton. People got really pissed and Clinton ended up smelling like a rose. And remember the Republican had just come off their great 1994 triumph and controlled the Senate as well as the House. This time they are coming off losing the presidency and seats in both the House and Senate.

Simply put, the Republicans can't win this fight. In the eyes of the American people the Democrats are the party of government and the Republicans are the party of at best limited government, or at worst anti-government. So guess who the American people will blame. This would be true even if President Obama were 100% totally at fault. Thus as a matter or pure politics the government shutdown could very well be setting the stage for the return of Nancy Pelosi as Speaker of the House.

To the the wrecker caucus it is all about defunding or delaying Obamacare. I hate to break it to them, it ain't going to happen. No way the Democrats or President Obama will give up on their signature program. My guess is that the wreckers fear that it will work, and therefore they have to abort the program in the womb. I think that is wrong headed thinking. If Obamacare is going to fail, it will fail of its own weight. My guess is that in 10 years time neither the proponents or the opponents of the health care law will recognize it. In its current form it is way too complicated, but over time it will change, likely for the better.

Letter to NY Times(Online Edition), Mar 12

To the Editor:
Re Bob Herbert’s column and “The Emotion of Reform,” by David Brooks (column, March 9):
It was great to see Mr. Herbert and Mr. Brooks agreeing with each other. President Obama’s maniacal obsession with health care shows complete disregard for the jobs crisis facing our country. Moreover, as Mr. Brooks points out, the focus on health care has created so much uncertainty in the small-business community that new hiring has all but ceased. Wake up and connect the dots.
David Shulman

http://www.nytimes.com/2010/03/13/opinion/lweb13herbert.html?scp=1&sq=%22David%20Shulman%22&st=cse

Time to Pull the Plug on Obamacare

Being a glutton for punishment, I watched nearly all of last Thursday's Blair House forum on Obamacare. I expected very little to come out of the meeting and I was not disappointed. Simply put, the Democrats want to expand coverage, but don't really want to pay for it, and the Republicans don't want anything to pass. Unfortunately doing nothing keeps us on the road to perdition and passing Obamacare only makes things worse.

What both parties understand, but are unwilling to admit, is that the current system is bankrupting the Nation. Medicare has a $38 trillion unfunded liability and yet the Democrats want to exacerbate the situation by expanding coverage and the Republicans are now positioning themselves as the saviors of Medicare. Give me a break.

Obama and his cohorts, sucking up to their paymasters in organized labor, punted on the one big measure that would have a chance in bending the cost curve, the excise tax on "Cadillac" plans. If the Republicans really cared about costs, they would have pushed Obama on this issue. But no, in fear of anti-tax Grover Norquist, they can't come out in public in favor of any tax.

At the end of the day, if we are to break not bend the healthcare cost curve, sterner measures will be needed. A few suggestions, a stiffer tax on "Cadillac" plans, real cuts in medicare, ending the middle-class entitlement of nursing home care under Medicaid, ending fee for service medicine, triage with "end of life" panels, and a payroll tax to fund expansion of care to let all of the particpants know that healthcare is not a free good. Remember both Social Security and Medicare are funded with payroll taxes. If the Democrats want healthcare so bad, they should be willing to tax their own constituencies. After all this is how it works in social democratic Europe. Thus we should put the horse before the cart and cut costs first and generate real savings and then we should rightfully expand coverage.