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Paying for National Health Care

By       Message Craig Harrington       (Page 1 of 1 pages)     Permalink

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The health care reform movement promised during the Obama presidential campaign seems to have gotten bogged down by Washington politics. But beyond of the town hall shouters and insurance industry lobbyists, there is a very real concern about costs.

How will the United States pay for a system built to serve the world's third largest workforce?

One method would be to integrate fiscally responsible trade policy with fiscally responsible health care reform. M. Brian O'Shaughnessy, writing for The Buffalo News recommends instituting a border adjustment tax on imported goods, and using the revenue it generates to fund the national health care system.

In 2008 the United States imported $2.5 trillion worth of goods. At the same time it exported just $1.8 trillion worth of goods; representing a net loss of almost $695 billion via the trade deficit. A border adjustment tax - what would in this case be called a "value-added tax" - would raise revenue from foreign producers, rather than shouldering the American people with extra tax burdens.

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Every nation in the world has a value-added tax at its border - except for the United States. They use the revenue from this tax to pay for domestic programs, social welfare, national health care, and other things.

If the United States had a VAT program in place that levied a tax of 18 percent on imports, it would have raised $454 billion in 2008 alone. If an 18 percent tax had been levied against all imports throughout the Bush administration, the U.S. could have brought in $2.7 trillion. None of this money would have been raised domestically.

Even if the U.S. opted not to levy such a high tax - instead carrying one of just 10 percent - it could still raise hundreds of billions annually by making exporters pay for the privilege of entering the world's greatest consumer market.

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O'Shaughnessy, a business owner and exporter, must pay a VAT when he sends goods abroad. He and all other American exporters are asked to foot the bill for France's education system, for Germany's mass-transit, and for health care in the United Kingdom. If the U.S. simply returned the favor, it would not only be able to make itself more competitive, but it would guarantee financing for all government projects.

Instituting a VAT would make foreign goods more expensive, giving a boost to domestic industries which have been decimated by subsidized foreign competition.

Using the VAT revenue to support domestic manufacturers, the same way other countries support their industries, would help them compete internationally.

Using revenue to fund government programs would shift the tax burden off of American works.

Finally, doing this would in no way instigate the dreaded "trade war" feared by both parties in Washington. Countries that produce goods will still flock to the U.S. market because it is a sponge for consumption. The government could even encourage trade by keeping a slightly lower VAT than other nations.

America needs to stop bleeding cash into the international market through the trade deficit, and it needs to stop funding itself through foreign loans. A domestic VAT is the answer.

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Craig Harrington is pursuing a degree in History and Political Science at The Ohio State University. He is also a journalist for EconomyInCrisis.org.

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