- Anyone with a conscience should be offended by the greatest generational theft ever witnessed in the history of the world.
- Millenials are now on a path to become the first generation in American history to have a lower standard of living than their parents.
- This law can work if and only if enough young people are willing to pay premiums far higher than are actuarially fair.
Anyone with a conscience should be offended by the greatest generational theft ever witnessed in the history of the world. Young Americans—especially the Millennial generation born between 1977 and 1995—are the biggest losers in this battle, but it will adversely affect their children and grandchildren to boot. Obamacare simply represents the latest front in this war, which now rages from Social Security to Medicare to this deeply flawed law that is imploding as we speak.
Let’s be clear: by design, this law can work if and only if enough young people are willing to pay premiums far higher than are actuarially fair in order to subsidize workers my age who on average earn far more than the young workers who are subsidizing them. Even if one takes into account that Millennials in the long run eventually will become old themselves and benefit from these subsidies, Obamacare still is an extraordinarily bad deal that effectively would force today’s 18-year olds to pay 18 percent more for their medical care over a lifetime than if each generation paid its own way. Such an age-related tax is unconscionable. Imagine if sales taxes or income taxes included a surcharge for everyone who happened to be a twenty-something. If this idea sounds preposterous, welcome to Obamacare.
Moreover, if fully implemented, this law will strip the economy of more than 1 million jobs and relegate another 10 million full-time workers to part-time status. In both cases it will be young, inexperienced workers who bear the brunt of these adverse effects on work effort. Equally appalling, the law will discourage young people from getting married even though all the empirical evidence shows that marriage is one of the most potent anti-poverty programsin any society’s arsenal. Worse, if honestly scored, the law will add $2 trillionto the federal deficit in its first 20 years, an amount that largely will be borne by today’s youth and their progeny, if indeed they can afford to procreate. And perhaps most sickening of all, RAND Corporation scientists estimate that as a result of the law at least 3.8 million Americans who already have coverage they like will not only lose that coverage, but will end up remaining uninsured.
We already were drowning in debts and unfunded liabilities amounting to$280 trillion in present value terms across all levels of government. We either can square the circle by massively increasing taxes on today’s youth or dramatically reducing the level of Social Security and Medicare benefits that their parents and grandparents enjoyed. Consequently, Millenials are now on a path to become the first generation in American history to have a lower standard of living than their parents. While the responsible course of action would have been to get our fiscal house in order and set some priorities, Obamacare instead represents one last big party on the next generation’s dime.
According to the CBO’s latest long term budget outlook, growth in health spending will drive 85% of the increase in the size of the federal government over the next 75 years. Anyone interested in furthering liberty or restraining the size of Leviathan cannot ignore the central role that health entitlements play in each. Many in my college generation fought in the streets to protest the nation’s involvement in the misguided Vietnam War. More recently, seniors were successful in repealing the Medicare Catastrophic Coverage Act of 1988 after turning to the streets in protest over its unjust financing. Will we ever see this generation protesting over the gross injustices being perpetrated in the guise of health reform?
Young Voters Are the Reason President Obama is Still in Office
In 2008, 66% of those under age 30 voted for Barack Obama “making the disparity between young voters and other age groups larger than in any presidential election since exit polling began in 1972.” President Obama’s margin of victory that year was sufficiently large that he could have won even if the youth vote had split 50-50. In contrast, a Tufts University analysis of the 2012 election showed that had the youth vote been split 50-50 for the presidential race in just four states — Florida, Pennsylvania, Ohio and Virginia — Romney would have been elected president. That’s regrettable, as such an outcome might have averted the disastrous Obamacare rollout that has created consternation on both sides of the aisle.
Gallup poll figures show that as recently as May 2013, 60% of those 18-29 approved of President’s Obama’s performance in office (the same fraction in that age group who voted for him in 2012). This approval rating has plummeted to 45% in the most recent poll, but it’s still higher than any other age group. That’s a puzzle, since as one pundit put it, “Obamacare is simply the latest instance of generational theft being perpetrated against younger Americans.” But generational theft is just one of several reasons America’s young adults ought to be strongly opposed to this law. What’s puzzling is that we haven’t seen more outrage from Millennials. Why they can muster the energy to protest the perceived injustices perpetrated on Wall Street even while ignoring the far more consequential injustices being inflicted by Beltway policymakers is baffling.
Injustice #1: Generational Theft in the Short Run
There’s little doubt that Obamacare is a very bad deal for young people. The modified community rating requirements in Obamacare prohibit insurers in the non-group and small group markets from charging their oldest subscribers more than 3 times the amount charged to their youngest. Because actual health spending varies by about 6:1, Avik Roy showed more than 18 months ago these restrictions mean that 18-year-olds must pay 75% higher premiums so that 64-year-olds can pay premiums that are 13% lower. Of course, Obamacare does far more than use taxation by regulation to engineer cross-subsidies from the young to the old. It also mandates that plans cover a long list of “essential” health benefits that many young people may not need. As a consequence, average premiums for the lowest cost plans in the non-group market under Obamacare, according to the Manhattan Institute, will be 97% higher for 27-year-old males and 55% higher for females of the same age. (Note these figures adjust the pre-Obamacare premiums to account for the ACA requirement that plans must take those with pre-existing conditions without charging such sick individuals higher premiums.)
Intelligent 22-year-olds might reasonably wonder how it could possibly be fair to be subject to such a tax in order to subsidize the health spending of 60 year olds given that:
- The average full-time male worker age 55-64 earns $25,000 a year more than their counterpart age 20-24.
- For females, the equivalent annual earnings difference is $17,000.
- In short, the average older worker is more than capable of financing his or her own higher health insurance premiums without looking to far lower paid workers to cross-subsidize the cost.
Of course progressives counter that young people shouldn’t worry since they’ll be able to get subsidized coverage on the Exchanges. Unfortunately, even after accounting for these subsidies, a recent study by the National Center for Public Policy Research shows that of the 4.3 million 18-30 year olds who will be eligible for the exchanges in 2014:
- About 2.9 million will be at least $500 better off if they forgo insurance and pay the penalty.
- 2.38 million will be $1,000 better off if they go the same route.
- For 25 year-olds, everyone with an income above $23,831 (207% of poverty) would save at least $1,000 even after accounting for available subsidies on the Exchanges.
In short, if those with a $1,000 incentive not to buy coverage fail to do so, the Exchanges will be 780,000 shy of the 2.7 million the administration says it needs in 2014 for the Exchanges to operate properly (i.e., avoid moving towards a death spiral). If those with a $500 incentive elect not to purchase, the shortfall will be 1.3 million.
And these figures actually underestimate the incentive since the smartest youth will quickly figure out they need not pay a penalty at all. As Lauryn Hilland Wesley Snipes discovered the hard way, Uncle Sam can throw you in jail for failure to pay taxes. Not so with the Obamacare individual mandate penalties. In fact, the IRS is not even allowed to slap a lien on your property to collect these. The only way it can collect the penalty payment from someone not willing to voluntarily send in a check is by deducting the amount from that individual’s tax refund. Given more than a $1,000 incentive to do so, I think many young people will figure out a way to arrange their taxes so that they are not owed a tax refund each April.
Injustice #2: Generational Theft in the Long Run
Progressive pundits such as Ezra Klein, Matthew Yglesias and even theAARP argue that today’s young people are tomorrow’s old people. So everything will work out in the end. But such arguments completely ignore the time value of money. I have shown that once we take into account that most normal people don’t view $1 forty years from now as equivalent in value to $1 today, Obamacare essentially will impose a lifetime tax of 13.8% on the medical expenditures of 22-year-olds.
Do Millennials really believe it is fair for them to have to pay 13.8% more for health care over their lifetime to bring to fruition a health “reform” plan that covers less than half the nation’s uninsured? Especially given that they already are paying great sums into Social Security and Medicare so that the average senior can take out $3 in benefits for every $1 in taxes they contributed?
Even if idealistic Millennials are willing to make this sacrifice on behalf of their elders, do they seriously think they will be able to afford to do so? The nation’s $280 trillion in debts and unfunded liabilities amount to a little over $900,000 per American. That’s in present value terms meaning that it’s the amount every person would need sitting in the bank today earning 3% interest over the rest of their lifetime to pay off their share of this unconscionable burden.
Of course, most of this is not exactly a debt since we’ve only incurred about $20 trillion of that total. We could close the federal fiscal gap ($222T of the total) if we were willing to cut, immediately and permanently, all federal purchases and transfer payments, including Social Security and Medicare benefits, by 40 percent. Or if we were willing to raise income taxes–again, immediately and permanently–by 64 percent. This is a pretty bleak future thanks to the reckless and irresponsible actions (or inactions) of the past few generations of policymakers on both sides of the aisle.
It’s sad to think that a nation that had a revolution precipitated by a tiny tax on tea has become so quiescient in the face of such the corrosive effects on liberty posed by these gargantuan fiscal obligations. This year, Tax Freedom Day fell five days later than last year. It took until April 18 for the nation as a whole to earn enough money to pay all required federal, state and local taxes. But if we’d used taxes instead of all the borrowing we did this year to pay for government, it would have extended Tax Freedom Day to May 21. Do Millennials seriously want to spend over half their year working just to pay taxes to bankroll President Obama’s progressive vision of America? This was supposed to be a land of freedom and opportunity. How did a government of the people, by the people and for the people become one in which Americans are enslaved nearly five months of the years just to pay the tax man?
Millennials, it’s time to throw off your chains. You deserve far better than this administration has given you. But the road to freedom lies in replacing Obamacare with more sensible patient-centered health reform that gives you ownership over your health care–not Uncle Sam. Seniors managed to topple the Medicare Catastrophic Coverage Act a quarter century ago by marching in the streets over its unfairness. If they can do it, surely you can too.
Update 1: November 22, 2013
Michael Barone notes: “People in their 20s tend to have negative net worth. They owe more — in consumer debt, on college loans — than they have in bank accounts, home equity and financial assets. In contrast, people in the 55-64 age group, the oldest covered by ObamaCare, tend to have relatively high net worths. Federal Reserve wealth statistics consistently show that Americans reach their peak net worth in these years. After age 65, they start spending that net worth down.” I checked the net worth statistics from the2010 Survey of Consumer Finances: as of 2010, the median net worth for households headed by someone under 35 was $9,300 while that for households headed by someone 55-64 was $179,400. The mean net worth was $65,300 and $880,500 respectively. This simply amplifies my point that the age-related cross-subsidies in Obamacare are alarmingly regressive. How any Millennial could view them as fair is beyond me.
 According to the Bureau of Labor Statistics, the average full-time male worker age 20-24 earns $476 weekly compared to $1001 for full-time male workers age 55-65. I annualized these figures assuming each worker works 50 weeks a year.
 BLS figures show the average full-time female worker age 20-24 earns $425 weekly compared to $769 for full-time female workers age 55-65.