This article is in response to this tweet thread by Dr. Joe Firestone which was a response to my original article – Medicare for All, Not For Some. I have extracted the relevant slides for the ease of reading.
“These gentlemen think that when they have changed the names of things they have changed the things themselves. This is how these profound thinkers mock at the whole world.”Friedrich Engels, On Authority
Dr. Firestone is attempting to re-brand state-by-state as ‘Fight on All Fronts.’ Changing the name of something does not, in fact, change what it is. Dr. Firestone claims that my critique of the state-based approach does not apply to his renamed state-based approach of ‘FOAF.’ Perhaps he should have told the rest of Whole Washington about this re-branding, as it clearly is not being used.
Canada enacted universal healthcare after a few provinces did.— Scap 🌹 left turn at Albuquerque (@scapelliti) July 24, 2021
It’s a proven strategy. The US did it for pensions & health insurance with ERISA, after some states passed laws regulating benefits.
(Graphic by @WestCoastBernie for @WholeWashington and @BigAmpMedia) pic.twitter.com/LUEuLTc3kJ
In this interview with Briahna Joy Gray, Andre Stackhouse does not object to the use of ‘state-by-state’ to describe Whole Washington’s approach. Everything that Andre describes as applying specifically to the state-by-state approach could be done to fight for Medicare for all on the federal level, rather than on a state-based level. Rather than distracting from the overall goal and focusing on state-based efforts which require thousands of hours of volunteer time to gather signatures for a ballot initiative, these efforts could easily be focused on National Improved Medicare for All (NIMA).
We see in these tweets; Whole Washington is referencing “province by province” and inferring that they are indeed attempting the state-by-state approach. Does Dr. Firestone realize that their approach is being marketed as state-by-state and not as Fight on All Fronts? In an attempt to refute my article, he has chosen to use this rebranding as FOAF to distract from what is really happening, which is a state-by-state campaign.
Even if FOAF were fundamentally different from state-by-state, it would be a bad slogan. One does not need to be a military historian (however, I am one) to understand that fighting on all fronts weakens the effort as opposed to focusing on the most important front. This is especially true when the FOAF effort is primarily focused on the state-based approach which can most easily lead to disastrous failure. Therefore, my critique does in fact apply to FOAF, whatever it may be called. I still disagree with the strategy.
Dr. Firestone attempts to refute my point that only wealthy states can afford a state-based system. But he conflates individuals with states, thus negating any point he might have. States as currency users must have the money to pay for their own healthcare program. Even if some individuals would be saving money under a state-based system, the states are going to be taking on a greater expense which must be offset by increased taxes. Dr. Firestone is aware of this but obfuscates his point by distracting from the crux of the matter. States must raise funds to pay for healthcare, there is no getting around this simple fact.
Comprehensive Annual Financial Report (CAFR) data actually shows that even the wealthiest states would have a hard time pulling off state-based healthcare. From 2004-2018, “In fact, all but one state (Montana) had one or more years in the red.” This means that even the states with larger tax bases have been incredibly shaky on their financing. The 50-state median during this period was 102.6%, which is a very thin margin of error when it comes to budgeting. To add the increased burden of a state-based healthcare system to this already fragile system is inviting disaster.
Dr. Firestone’s regional approach is pure fantasy. There is no mechanism whereby when California or WA passes a state-based bill that other states in the region are automatically included in it. I am not aware of any history of states ever banding together in regional programs except for when the southern states created the Confederate States of America and seceded from the union. Many states do not even have ballot initiatives. If California, Oregon, and Washington want to secede from the union and create a socialist state with a fiat currency and a national healthcare system, I fully support that revolutionary action. However, this seems unlikely to happen. Until then, they face the simple reality that states are currency users, not currency issuers, and healthcare is an incredibly expensive program to take on as a currency user.
If the state-based system actually worked, this could potentially be the case. But not necessarily so, there has been some progress on Medicaid expansion, but since Medicaid expansion became a reality in 2014, twelve states have yet to adopt it. Even though this means billions in federal funding, these have-nots have not created the pressure needed in over 7 years. Right now, all the states are have-nots when it comes to Medicare for All. It would be far better to pressure with a united front for a federally funded healthcare system, than to split the effort and base it around haves and have-nots. This slide really illustrates why Medicare for All is a better system and admits that state-based efforts will in fact increase tax burdens and are not fiscally sustainable. Joe has made my own argument for me when he admits this.
Dr. Firestone is correct that I chose poorly in my last article contrasting these states. As referenced above, it turns out that even a theoretically rich state like New York ran a deficit from 2004-2018. In fact, their revenue was only 99.3% of their expenses over this period. Being a richer state does not exempt them from the race to the bottom.
There are many issues with Dr. Firestone’s theory of RTTT. The first of which is that Washington’s proposed bill would not necessarily result in businesses saving money. As Market Place explains:
“William Hsiao, an emeritus professor of economics at the Harvard T.H. Chan School of public health, said that industries employing younger workers, like the tech industry, are more likely to be opposed to single-payer health care because the health insurance premiums of those workers tend to be lower.”
With the uniform payroll tax of the single-payer system, Hsiao said, “industries will probably end up paying more than they currently do.”
If there were clear savings, more businesses would be supporting this effort. As it stands, Whole Washington has very few business endorsements. It should be a slam dunk to get large businesses endorsing state-based healthcare if Dr. Firestone’s theory of RTTT is true. Where are endorsements from Starbucks, Boeing, and Amazon? If this were truly a race to the top, large corporations in Washington would be in favor of it.
The simple reality is that businesses are mixed on their support of both state-based and national universal healthcare initiatives. As KHN reports, a large part of this is due to the pay-fors:
“The National Federation of Independent Business, a Washington, D.C.-based advocacy organization that represents small-business owners, offered similar worries about the tax hikes likely paired with this system. An internal survey of NFIB members showed 75% opposed single-payer, often citing payroll tax increases as their concern.”
This is why NIMA can be successful where state-based cannot; it does not require pay-fors. It could be implemented without any tax increases. Even though Dr. Firestone claims that the savings coming from a state-based system would be greater than the tax increases, a closer look at the numbers indicate that this is not absolutely true. Dr. Firestone estimates 15% of payroll is average but offers no source for this. The truth is healthcare costs vary for businesses; there is no flat rate. Daniel Myers, co-owner of the Loyal Nine, a cafe/restaurant in Cambridge, Massachusetts “estimates 10% of his payroll goes to health care.” The Berkeley Labor Center estimates based on using the Bureau of Labor Statistics national average for private sector workers that health insurance costs are about 15% of payroll in California. Due to the complicated nature of private health insurance and employer-based plans, there is no firm rate that companies pay.
The 8.5% payroll tax in the Whole Washington plan is barely lower than the 10% figure given by Daniel Myers, but it is significantly lower than the 15% estimate. Some businesses might stand to gain financially from this whereas others may not. However, this is not the only tax being used to fund the proposed state-based bill in WA. In addition to this there is an 8.5% capital gains tax described by Dr. Gerald Friedman as follows, “The 8.5% premium on capital income (including business net income) balances the assessment of wage/salary income, so that all categories of income are treated equally. The basic exemption of $15,000 is also the same, assuring that virtually all with family incomes of less than $100,000 will be exempt from this charge.” Even if this did not include business income, an 8.5% capital gains tax is a significant risk for creating capital flight and a race to the bottom. Washington currently has no capital gains tax, an increase to 8.5% would make it the 10th highest state in capital gains taxes. There is also an additional flat 1% income tax starting at $15,000 and premiums “will be paid by all adults in the labor force with an income above twice the poverty level.” The indication made by Dr. Firestone and Georgia Davenport that this is only being paid for by an 8.5% payroll tax is incredibly misleading. The fundamental issue with state-based systems is they require pay-fors that are not necessary on a federal level. These pay-fors open up the potential for a race to the bottom.
Dr. Firestone says we must be specific when we talk about race to the bottom – then he goes on to say that even if we are correct, “Even if they do, in the future, model various factors, we have to remember that simulation models are only as good as the assumptions that go into them.” He has already prepared to be proven wrong with this statement as he will just shrug off our numbers by saying “they are only as good as the assumptions that go into them.” The numbers going into our “assumptions” are based on state CAFR’s and Whole Washington’s own study. These numbers are a good model to make accurate “assumptions.”
While it is true that we cannot predict the future, we can look at current material conditions and history to see that the race to the bottom is a reality that must be faced when it comes to state-based attempts. Even if we assume that most businesses would save money under this system (which is unclear as explained above), there are other reasons why businesses will be against the program.
Dan Price, while lacking in his understanding of MMT, has a good understanding of corporate greed and control. This point applies to Dr. Firestone’s fundamental misunderstanding of the concept of class war and the capitalist class. In order to maintain the capitalist system, the working class must be kept in line and employer-based healthcare is a major way that this can be done. Even though expensive, employers are willing to make this sacrifice in order to maintain control over their workers. Indeed, Dr. Friedman’s study actually explains this: “The current system of employer-provided health insurance was established by employers looking to reduce competition for their workers and to discourage workers from quitting or changing.” This is another reason why there will be no “Race to the Top.”
Dr. Friedman goes on to explain:
“By separating access to health care from employment, single payer would ease this tension in the collective bargaining process. Labor unions would be able to shift their efforts from the increasingly difficult effort to protect health benefits, and concentrate on issues such as wages, pensions, and vacations.”
If there is one thing that large corporations fear, it is organized labor. While this is certainly a good argument for why we need a NIMA system, it goes counter to Dr. Firestone’s assertion that there will be a race to the top. Corporations would rather continue to pay for health insurance than risk the losses they would incur from strengthened unions.
Dr. Firestone refers to Canada being right in front of me – then he ignores how the fight for single-payer was actually won in Canada. It was not simply because provinces passed it and pressure grew for a national system. That is an oversimplification and falsification of history. The conditions that led to single payer in Canada were far from the current conditions in the United States.
When Saskatchewan became the first province to enact a universal healthcare plan, Canada already had universal hospital insurance. This universal healthcare insurance “was introduced as early as 1947, and by 1958 had been adopted nationally as a federal-provincial jointly funded program.” This meant that a large amount of healthcare was already covered through a national program with funding similar to how Medicaid is currently funded in the US. And as Kshama Sawant described in her speech at M4M4A in Seattle, these victories came about due to a strong third party that organized the working class and dragged the other parties left. The US does not have this. Rather, they have two capitalist parties that continue to shift to the right on economic issues. There are lessons to be learned from Canada, but they are about the strength of a socialist workers’ movement and not about a state-by-state approach. No state has a strong workers’ party capable of forcing the narrative to the left.
Yes, this is not true. Even the richest states are unlikely to be able to carry out this strategy. State budgets are far too fragile to entrust with healthcare. In order to balance a state budget, cuts to vital services are often made.
The Majority of the Funding would be federal – this is a huge stretch. Medicaid is a joint effort between states and the Federal government, so including it under federal funding is deceptive at best. In fact, the Whole Washington website says that the majority of the funding would not be Federal, it would be from a payroll tax:
“The majority of the funding still comes from Employers through a Payroll tax; however, it’s usually much less than what they currently pay. Instead of purchasing individual plans, they contribute to the Trust.”Whole Washington FAQ
The study by Dr. Gerald Friedman says that the funding would be split between the two. The existing revenue of $42 billion listed in Dr. Friedman’s study is already being used for Federal programs. This means that Washington still requires $28 billion in new state revenue. Around $18 billion comes from: 8.5% payroll premium on wages, salaries, and business net income, with $15,000 exempt on sliding scale and exemptions for small businesses. The rest comes from the other taxes mentioned above. In 2020, the total taxes collected by the state of Washington amounted to $29 billion. This means that in order to fund their state-based plan, Washington would be doubling taxes. This is a recipe for the race to the bottom, not a race to the top.
This is true, Vermont failed because they did not go ahead with their plan. This was because of the pay-fors. Governor Peter Schumlin explained some of this in an interview with Harvard TH Chan School of Public Health saying,
“I say to the Medicare for all folks, great idea. But you will not get a politician in Washington to vote to raise taxes, because it’s a tax-based system, as fast as the current premium-based system is requiring us to do it.”
And here is the crux of the matter: state-based systems have to rely on taxes, which means they are susceptible to economic shocks, as Gruber noted. Whatever happened later in his career, this is a simple economic reality when it comes to state budgets, which is why the race to the bottom exists. Which is why on the federal level it must be emphasized that NIMA does not require an increase in taxes to fund it.
Dr. Firestone’s plan for a capitalist crisis is for the Federal government to bail the states out. Why rely on a system that will need the Fed to bail it out in the first place? Why does he assume that Federal aid would actually be coming? We have already seen politicians in Washington, DC are willing to cut state and city funding if it pleases their donors.
“Every Senate Democrat voted in favor of Tuberville’s nonbinding amendment to ban federal funds from cities that “defund” their police departments. Sen. Cory Booker, D-N.J., called the vote a “gift” to Democrats.”Salon
“As per recent Federal Court ruling, the Federal Government will be withholding funds from Sanctuary Cities. They should change their status and go non-Sanctuary. Do not protect criminals!” – President Donald Trump
“The Biden administration is considering using federal regulatory powers and the threat of withholding federal funds from institutions to push more Americans to get vaccinated — a huge potential shift in the fight against the virus and a far more muscular approach to getting shots into arms, according to four people familiar with the deliberations.”Washington Post
The Federal government is entirely capable of withholding funds, so relying on them to bail out a failing state-based system is overly optimistic and unrealistic. Would it not be better to fight for NIMA, a system that will always be funded? There are a lot of IFs in Dr. Firestone’s slides. IF the stars align perfectly, state-based will work.
Most states do have a rainy-day fund, but it is not significant enough to truly soften the blows of a recession. Real Progressives’ Race to the Bottom page details each state’s rainy-day fund and how long it would last. Washington State’s, as it currently stands, would last less than four weeks. According to a Forbes study based on business cycles between 1854 and 2009, “The average recession lasts for 17.5 months or 1.5 years. A full business cycle on average is 4.7 years.” No state has the resources to last on their own for anywhere near that long, without making enormous cuts to public services such as education and healthcare.
This is what happened following the 2008 recession. According to the Council on Budget and Policy Priorities, “The cuts enacted in at least 46 states plus the District of Columbia since 2008 have occurred in all major areas of state services, including health care (31 states), services to the elderly and disabled (29 states and the District of Columbia), K-12 education (34 states and the District of Columbia), higher education (43 states), and other areas.” A state-based healthcare system would be the single most expensive item on the state budget, and one of the first to be subject to cuts in a recession. Even now, with a stronger than expected economic recovery from the pandemic:
“Most states (34) still project lower revenues for the current fiscal year than they expected before the pandemic struck, our analysis of these data indicates. In some cases, the forecasts are much lower. In four states — Alaska, Nevada, New York, and Texas — forecasts are more than 10 percent below pre-COVID-19 projections. In 20 states they are more than 4 percent below.”
The pandemic has put an incredible strain on the healthcare system as it is. With decreased revenues from taxes, any state would struggle to maintain paying for healthcare with a pandemic induced recession. Even with Federal bailouts, state budget cuts are an unpleasant reality during periods of economic downturn. The likely result is that state healthcare would be cut just when people need it the most.
As previously noted, doubling tax revenue is not actually relying “very little on revenue from the rich & corps.” The supposition that they would be saving money is dubious at best, as I detailed above. It is important to remember that Federal pass-throughs are not a given. Representative Ro Khanna’s State-Based Universal Healthcare Act of 2021 aimed to streamline this process, but it has been indefinitely shelved by Nancy Pelosi. I have detailed some of the difficulties with relying on Federal pass-throughs and waivers in this article:
This is hard to believe when Whole Washington’s slogan is “Universal Healthcare for Washington State.” Some more rebranding might be necessary here if they really want us to believe that NIMA is a priority.
Perhaps it is the key word in this slide. I have argued above that a RTTB is far more likely than a RTTT and backed it up with data.
State-based is an unacceptable compromise and does not present a path to NIMA. The path sketched out by Dr. Firestone is one fraught with peril and almost certainly doomed to failure. Even Dr. Firestone says it may not work. Other states have tried this path with no success because they have not even passed the preliminary hurdles. A state-based system would never be a true single-payer system and would have to rely on tax increases for funding. The Washington bill is just one of many proposed and all have similar issues because the system was not designed to allow states to run their own healthcare systems. The Federal government is the only one with the power of the purse and the ability to take on expensive programs like a Green New Deal, Federal Job Guarantee, free higher education, and Medicare For All. These systems all build off of each other like a layer cake, as Fadhel Kaboub has explained. This is why we need a national working-class movement to take power from the capitalist class and create a system that works for the many, not just the few.