by Mitch Kokai
Senior Political Analyst, John Locke Foundation
Imagine that it is 1937 and time for the first Social Security payroll taxes to be assessed on workers and their employers. Two years earlier, President Franklin D. Roosevelt’s new program was successfully sold to the American public as an ambitious yet fiscally responsible, self-financing expansion of social insurance protections. The new Federal Insurance Contributions Act tax—a payroll tax of 2 percent on earnings—will pay for it.
Imagine further, however, that upon 1937’s arrival, FDR and Congress decide they don’t want to risk the problematic politics associated with imposing the payroll tax. And so, despite previous assurances of fiscal rectitude, they roll back the tax while leaving in place what eventually proves to be the single most expensive spending program in the history of the American republic. The result is a fiscal disaster of unprecedented magnitude.
Something eerily similar to this hypothetical scenario is now happening with the Affordable Care Act. The ACA was enacted in 2010 with the promise of reducing the federal budget deficit while expanding health insurance coverage. Nearly lost amid the recent press cheerleading over ACA enrollment figures is that this promise has disintegrated, and now no one—including, notably, the Congressional Budget Office—can say how much fiscal damage the ACA will ultimately cause. All we know for certain is that many of the savings provisions designed to pay for it have been shelved thus far.