It is also important to look at the composition of the tax draw. As a % of GDP the average OECD country takes approx 10.0% of GDP as income derived taxes; the USA was at 11.1%. That was for 2018 so it incorporates the first year of the JCPA. As we know the benefits of the rate reductions didn't kick into tax revenues until the 2020-21 period. If you use 2017 data the take in the US was about 120 bp higher, so income derived draw (Fed, St and Local) was almost 25% higher in the US than the average OECD country. And our deficit (as % of GDP) was the highest of any country in the OECD -- in 2018. It's what - 70% higher under Bidenomics? Which is what -- 300 basis points in just 5 years , at a time when collections are going thru the roof and spending has nothing to do with the pandemic any more. It's structural. Spending far more than taxes.
Many conservatives would have less of a problem paying for the far higher social services libs want if they are paid for with consumption taxes -- as elsewhere in the OECD. On average, 32% of OECD taxation is from consumption -- it is 18% in the US. Hence our deficits (the spread is closed a bit by higher property related taxes in the US - but that's still a tax on capital).
As to Social Security, I feel the "intercompany accounting" stuff misses the point. Maybe it's the elderly version of the "I'm entitled" ethos we have impregnated in recent generations. There was a GAO study about 5 to 7 (?) years ago that looked at some 200+ scenarios regarding the effective IRR received by SS recipients based on contributions paid and benefits received. Every one of the 200+ scenarios demonstrated that the recipients had received above T-bill returns on their contributions - anywhere from 2 basis points (single, high income, late retirement) to around 1,200 basis points for lower income earners (which is the intended progressiveness\subsidy). So if the Tbill has been yielding say 4.5% over the last 50 years, portions of recipients have been receiving a 16%+ return on their contributions. And yet 80% or more of American retirees believe they are not even getting their contributions returned to them by SS, much less with interest. Much less a lot, lot more. That is where we need better education, vs worrying about transfer price accounting. And we are shirking that need by constantly saying that we must reform SS and the MediCs, but current retirees will always be excluded from that sacrifice. I suppose that's probably Paul Ryan's fault for throwing his wheelchaired grand-mother over the cliff. Sometimes good politics poisons needed reform.
As to drug pricing, Christ is there anything more unfathomable? But the deficit won't be "a lot lower" even if we accept the likely overstated CBO estimates. CBO says $500B over 10, so $50B annual. The deficit is $1.7T. And CRFB says even if the $500B is accurate, by the time it filters through premiums and changes in Advantage savings it will be more like $25 or $30B. And you' are only talking about matching European pricing, so probably less still. But I get your point -- still real money.
But here's my rub with Biden's proposal. If you want savings, focus on savings. Why go into all the Large-molecule vs Small molecule re-imbursement stuff? Because you want to essentially shorten trademark lives where the industry is making their discoveries? Punish capital again? mRNA is large molecule. The GLP1's are large molecule. The Alzheimers' drugs and individualized cancer treatments require LMs. If you listen to Gottlieb his #1 concern about the Biden legislation is the unintended re-allocation of capital away from the LM drugs (and secondly that the savings aren't going against the deficit but just to spend it elsewhere). If we want deficit reduction I'm fine. We know what the VA pays (or Europe) and we know what Medicare pays (although MediCs have a much more costly distribution logistic than the VA does). But why turn the "smartist guys in the room" government types loose on restructuring the entire drug market in the psuedo name of a 1% deficit reduction?
