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C1: Debt
Funding spending changes through taxes is politically infeasible as there is much less
scrutiny over government borrowing – deficit spending is the most realistic funding
Duke 19
Duke Political Union. "Sides of the coin: Balanced budgets and the 2020 election" Chronicle. 11-4-2019,
https://www.dukechronicle.com/article/2019/11/politics-student-opinions-debt-deficit-budget-balanced-budgets-and-the-2020-election //XY
Many governments recognize this is not sustainable. Nearly every US state has some sort of stipulation requiring a balanced budget.
Nevertheless, the federal government has never had such restrictions on its ability to run a budget deficit. Federal deficits have run in the
hundreds of billions for the past several decades. Indeed, the last year we had a balanced budget was 2001. Fundamentally, this problem is
caused by excessive spending and tax decreases. The spending part is obvious. When
the Congress increases spending it is
often politically difficult to raise taxes. This is why Warren refuses to answer how she would pay for her policy proposals. If
implemented, these policies will likely be paid for through taking on more debt. Since taxes are
politically undesirable, [therefore] the most feasible way to account for new expenses is through
debt. George W. Bush realized this during the Wars in Iraq and Afghanistan. Although these wars cost
billions, the Bush administration lowered taxes instead of raising them. This combination of tax cuts and war kept
support high on both the foreign policy and economic front. This was of course paid for through more debt. Although issuing more
debt may not have been the best long-term option, it was certainly the most politically feasible. This
brings us to a more recent example: the Trump tax cuts. Fundamentally, I support any tax cuts, and Trump did an excellent job in lowering
corporate tax rates (although there were some problems with changes in rules on income tax deductions). Roughly speaking, Trump’s tax cuts
decreased government revenue by close to $275 billion in 2018, not taking into account the increase in economic growth caused by the tax
cuts. While $275 billion is a great number to start with in terms of tax decreases, it is necessary to also decrease spending to correspond to the
lower revenue. However, this is also politically undesirable. Just as raising taxes is unpopular, so too is decreasing spending. Some constituency
will inevitably lose out from a spending cut—and they could be a key group in a battleground state. Accordingly, tax cuts, just like increases in
spending, are often paid for through debt.
Comprehensive estimates for Medicare For All still project a ballooning of the debt
Liu 19
Liu, Jodi L., 2019 xx-xx-xxxx, "Spending Estimates Under Medicare for All," No Publication,
In 2018, RAND conducted a study for the New York State Health Foundation (NYSHealth) to understand the impacts of the comprehensive
single-payer health plan (the New York State Health Act—NYHA) being considered by the New York state legislature (Liu et al., 2018). The
RAND study assessed how the plan would affect several outcomes, including health care spending. In 2016, co-author Jodi Liu also analyzed a
previous proposal by Sen. Bernie Sanders for a national single-payer plan (S. 1782, 113th Congress) in the course of completing her dissertation
at the Pardee RAND Graduate School (Liu, 2016). In this research report, we extrapolate from our previous single-payer research, including the
work mentioned above, to estimate the effects of a national single-payer health plan (often referred to as Medicare for All) that would provide
comprehensive health care coverage to the population nationwide, including long-term care benefits and no cost sharing. The approach is
similar to national single-payer health care proposals that have been discussed in Congress, including a recent plan sponsored by Rep. Pramila
Jayapal (Medicare for All Congressional Caucus, 2019). We did not model a Medicare for All plan using a microsimulation approach; rather, we
estimated aggregate changes to health spending that might occur under the plan by applying adjustments based
on our previous work. Top-Line Findings We estimate[s] that total health expenditures under a Medicare for All
plan that provides comprehensive coverage and long-term care benefits would be $3.89 trillion in 2019
(assuming such a plan was in place for all of the year), or a 1.8 percent increase relative to expenditures under current law. This estimate
accounts for a variety of factors including increased demand for health services, changes in payment
and prices, and lower administrative costs. We also include a supply constraint that results in unmet demand equal to 50
percent of the new demand. If there were no supply constraint, we estimate that total health expenditures would increase by 9.8 percent to
$4.20 trillion. While the 1.8 percent increase is a relatively small change in national spending, the
federal government’s health
care spending would increase substantially, rising from $1.09 trillion to $3.50 trillion, [This represents]
an increase of 221 percent.
Increases in federal borrowing directly compete and increase the cost of private access
to credit financing as corporate bonds pose higher financial risk than historically safe
treasury bonds – this crowding out threatens the capital base for private expansion.
Wharton 15
Mar 25, 2015, 3-25-2015, "Government Debt Issues Can Raise Corporate Bond Costs," Knowledge@Wharton,
The federal government borrows money by selling bonds. Investors then must choose between
safe government bonds and the higher yields of riskier alternatives like corporate bonds. All that is
clear, even to those with only a basic understanding of the financial markets. But sometimes the government sells a lot of bonds, other times
fewer. How does the ever-changing level of government issuance affect corporate policies on the critical issues of financing and investment,
such as whether to raise money through bond sales or new stock issues? The picture has long been murky. “We’re asking a very simple
question,” says Wharton finance professor Michael R. Roberts. “We want to know how government debt — federal debt — affects the behavior
of corporations. “The upshot is there is a downside to government financing,” he continues, explaining that more
bond sales by the
government make[s] it harder for corporations to borrow. Roberts and two colleagues, John R. Graham of Duke
University’s Fuqua School of Business and Mark T. Leary of the Olin School of Business at Washington University, have probed the issue with a
century’s worth of corporate data, describing their findings in their paper “How Does Government Borrowing Affect Corporate Financing and
Investment?” The research shows how the ebb and flow of government debt issuance ripples through the markets, changing the prices of other
types of assets and causing investors to raise or lower their portfolio allocations to alternatives like corporate bonds. “In concert, our results
suggest that large, financially healthy corporations act as liquidity providers by supplying relatively safe securities to investors when alternatives
are in short supply, and that this financial strategy influences firms’ capital structures and investment policies,” Roberts, Graham and Leary
write. “We’re not saying that government debt is bad, period. But rather, government
debt does crowd[s] out corporate
debt in investors’ portfolios, which has a negative effect on firms’ abilities to finance their
investment.” When the government reduces its bond sales, in other words, big, healthy corporations increase theirs, helping to assure
investors have a safe place to put their money. But when government bond sales grow, forcing the government
to pay higher yields to attract investors, corporations must pay higher yields as well to compete,
making financing and investment more expensive. As a result, corporations issue fewer bonds. “It’s a simple
and intuitive idea,” Roberts says, explaining that “when there is more government debt, there is more competition for
investors’ money — there is less demand by investors for corporate debt…. So it becomes harder or
corporations to issue debt.” The relationship between prices and yields of government and corporate debt has long been clear. But how
this dance affects corporate financial decisions has received little attention, Roberts says. “We’re not saying that government debt is bad,
period,” Roberts notes. “But rather, government debt does crowd out corporate debt in investors’ portfolios, which has a negative effect on
firms’ abilities to finance their investment.” A ‘Simple and Intuitive’ Idea The research used nearly 100 years of data from firms listed
on the major U.S. stock exchanges, focusing on non-financial firms in unregulated industries. The researchers found that an
increase in government debt of a given amount caused a decrease in corporate debt about a third as large. The
effect was concentrated in long-term debt, rather than short-term. The work also found that firms do not increase their stock
issuance to make up for their lower debt levels during times when government debt is high. New stock issues come with a price, such as
diluting the value of pre-existing shares, so firms can be reluctant to simply turn to the equity markets when debt becomes less attractive,
Roberts says. As a result, corporate investment falls when government debt issuance rises. The interplay between government debt and
corporate policies is not the same for all companies. “We find that the debt and leverage policies of larger, more creditworthy firms are more
sensitive to variation in government debt than are the policies of smaller, less creditworthy firms whose debt is a more distant substitute for
Treasuries,” Roberts and his colleagues write. Risks and returns on high-quality corporate debt are similar to those of Treasury securities,
making them easy substitutes. But investors are attracted to lower-quality corporate debt for different reasons, pursuing higher yields even if
accompanied by more risk, so low-quality corporate debt is not an easy alternative to government debt. “[Foreign investors] started demanding
Treasuries much more so than corporate bonds.” The
rise and fall of government debt also affects lending policies
of major institutional players such as commercial banks, insurance companies and pension funds.
Every percentage point increase in government debt causes these institutions to reduce
corporate lending by four to 12 basis points. “Thus, financial intermediaries respond to increased
government borrowing by increasing their holdings of government debt, marginally increasing their holdings of agency debt
and reducing their holdings of corporate debt,” Roberts and his colleagues write. The study also looked at the role of foreign
investors, who became bigger purchasers of U.S. government and corporate debt after the U.S. went to a floating exchange rate in 1972. The
bigger role of foreign investors amplified the relationship between government and corporate debt. “[Foreign investors] started demanding
Treasuries much more so than corporate bonds,” Roberts says. A Demand for ‘Safe’ Assets “These results suggest that the supply of safe assets
from non-financial institutions has become increasingly important over time for fulfilling excess demand due to variation in the supply of
Treasuries,” the authors write, adding that “the increase in foreign holdings of U.S. Treasuries appears to have led to increased competition for
safe assets, making alternative sources of these assets more appealing.” Because
a rise in government debt causes a
decline in corporate debt, corporations respond by holding more cash and other types of shortterm liquid assets such as Treasuries, the authors find. During these periods of higher government debt, the
cost of issuing corporate bonds rises, making it more attractive to hold onto cash and other liquid
assets. Firms are less likely under these conditions to make long-term investments. The work shows that large non-financial corporations’
role complements that of the financial institutions. When a drop in government debt creates excess demand for safe long-term securities,
corporations step in to supply it, while financial institutions are more likely step in to supply safe short-term securities when demand is high.
“We show that government debt plays an important role in shaping corporate behavior,” the authors write. “Increases in the supply of
Treasuries alter relative asset prices such that corporations reduce their debt issuance and investment in long-lived assets. The result is a
decrease in corporate leverage and shift in the composition of assets toward short-term, liquid assets.”
Incentivizing investment is critical to fostering high economic growth
Emmons 12
William Emmons, 1-1-2012, “Don't Expect Consumer Spending To Be the Engine of Economic Growth It Once Was”, Federal Reserve Block,
What's wrong with a consumer-driven economy? In a pure accounting sense, an additional dollar of consumer expenditure increases GDP just
as much as an additional dollar of business investment or exports. So what's wrong with a 70 percent share of consumer spending in GDP?
There are both theoretical reasons and empirical evidence that suggest U.S. long-term growth prospects may have been harmed by the
consumer boom that played out in the decades before the crash. Standard economic-growth theory suggests that an
economy must
continuously invest in new capital goods and structures in order to grow, become more productive
and raise citizens' living standards over time. Empirical evidence confirms the prediction that economies
that invest a higher share of their incomes (or that have access to relatively inexpensive investment goods, which presumably results
in more investment) tend to grow at faster rates.2 If consumer spending "crowds out" investment spending,
the economy may not grow as fast. Indeed, during our own economic history, higher investment generally has been associated
with lower consumer spending, and vice versa, where both are measured as shares of GDP. This is at least circumstantial evidence of some
crowding out going in one direction or the other. During the period 1951-2010, consumer spending generally was lower than its average in
years in which investment was higher than its average; and consumer spending generally was lower than average when investment was higher
than average.3 Moreover, just as in
cross-country studies, higher investment spending has been associated with
higher economic growth, while years of relatively high consumer spending have been associated with
relatively low economic growth in the U.S. This is true whether we look at long or short periods of years considered
individually or decade-long averages, as shown in tables 2 and 3.
Financing Medicare for All devastates the economy as federal borrowing directly takes
bonds away from the private market. With deficit financing, GDP would decline 24 percent by 2060.
Paulson 20
Mariko Paulson & Felix Reichling & , 1-30-2020, "Senator Sanders’ Medicare for All (S.1129): An Integrated Analysis
— Penn Wharton Budget Model," Penn Wharton Budget Model,
Taken literally, Sanders’ plan lacks a financing mechanism, which by long-standing CBO and PWBM
convention implies deficit financing. Under deficit financing, we project that the Medicare for All Act
would reduce GDP by 24 percent by 2060, despite large efficiency gains from lower overhead and
reimbursement costs. As a presidential candidate, Senator Sanders, however, has stated his intent to also
increase taxes, although he has not specified the actual tax changes tied to Medicare for All. Accordingly, we also
analyze two alternative financing mechanisms that mostly finance benefits received by workers. With premium
financing, where most workers pay the same insurance premium (subsidized for lower-income workers)—similar
to private insurance with no risk adjustments—we project that GDP increases slightly by 0.2 percent by 2060.
With payroll tax financing, where workers with higher wages pay more, GDP falls by 15 percent. We
also provide various robustness checks to key model assumptions and plan design. For example, without the
expansion of plan benefits to include long-term care or dental, but still including the elimination of most
deductibles while covering all workers, GDP increases by 12 percent under premium financing. These results
indicate that Medicare for All could be designed in a way that boosts economic growth.
US trade is interconnected, and economic growth trends are mirrored in other
Arora 4 quantifies that
Vivek Arora and Athanasios Vamvakidis, 3-xx-2004, “The Impact of U.S. Economic Growth on the Rest of the World: How Much Does It
Matter?”, Journal of Economic Integration,
with the other regressors for most specifications.
The results suggest a positive and statistically significant impact of
U.S. growth on growth in other countries, particularly developing countries. The regression results reported in Table 4
cover all countries in the sample. The first regression includes U.S. per capita real GDP growth in addition to the standard growth determinants,
while the second regression also includes non-U.S. world per capita real GDP growth.15 A
1 percent increase in U.S. growth is
correlated with an average 1.0 percent increase in growth in other countries. The estimate for non U.S.
world growth in the second regression is positive (0.4 percent), although much smaller than the U.S. coefficient and not statistically
significant. To test whether growth in countries that trade more with the United States is more highly correlated with
U.S. growth, the third regression includes an interaction term of U.S. per capita real GDP growth with the share of
exports to the United States in total exports. The interaction term is indeed positive and statistically significant at
the 10 percent level (it is significant at the 5 percent level if the t-statistics are corrected for heteroskedasticity). The estimated impact of
U.S. growth remains statistically significant even when non-U.S. world growth is included in the regressions, which suggests that the
influence of U.S. growth on growth in other countries is distinct from the influence of any common global
shocks on growth across countries. Furthermore, the estimated impact of U.S. growth is considerably
larger than the estimated impact of growth in the rest of the world, which suggests that the U.S. effect
dominates any impact from common global shock
Maximizing economic growth is key to reducing poverty as
Bajoria 08 explains
Jayshree Bajoria, 11-19-2008, "Financial Crisis May Worsen Poverty in China, India," Council on Foreign Relations,
https://www.cfr.org/backgrounder/financial-crisis-may-worsen-poverty-china-india // Anderson MF
By year’s end, the impact of the global financial crisis of 2008 was starting to be felt in the developing world, with slowdowns expected in all
emerging economies. These growth declines could have significant effects on the world’s poorest populations. The World Bank
estimates that a 1 percent decline in developing country growth rates traps an additional 20
million people in poverty. Concern centers on slowing growth in India and China, the world’s two most populous nations and the
largest contributors to reductions in global poverty in the last two decades, according to many academic studies. Reduced economic
growth in both countries could reverse poverty alleviation efforts and even push more people into
poverty, say some experts. The financial crisis has also likely made the achievement of the United Nations’ Millenium Development Goals
(MDGs) on poverty--to halve the proportion of people in extreme poverty by 2015--more difficult. The Poverty and Hunger Challenge With an
average annual growth rate of 10 percent, China has lifted over 600 million of its 1.3 billion citizens out of extreme poverty--those who earn
less than $1 a day--since 1981. In the same time period, India’s 6.2 percent average annual growth rate has brought an estimated 30 million out
of its 1.1 billion people out of extreme poverty. But an estimated 100 million Chinese and more than 250 million Indians remained under the
extreme poverty line in 2005, according to the latest World Bank poverty estimates (PDF). Roughly 470 million Chinese and 827 million Indians
earned less than $2 a day, the median poverty line for all developing countries. Though some economists say World Bank figures understate the
true extent of poverty, there is broad agreement that a slowdown in China and India will harm poverty alleviation goals.
The administrator of the UN Development Program (UNDP), Kemal Dervis, warned in October 2008 that together with volatile food and fuel
prices, "current global economic conditions threaten the gains that have been made to reduce poverty and advance development for large
numbers of people." The World Bank estimates that a 1 percent decline in developing country growth rates traps an additional 20 million
people in poverty. China India Development Economic Crises In the developing world as a whole, economists say that soaring food and fuel
prices were already placing strain on the poor prior to the onset of the financial crisis. The UN World Food Program estimated in September
2008 that there are 850 million chronically hungry people in the world, a tally that could increase by 130 million this year (PDF). The World Bank
estimates that the number of poor increased by at least 100 million as a result of the food and fuel crises. It argues that declines in food and
fuel prices in late 2008 have not solved the problem. According to its November 2008 report, the
poorest households were
[are] "forced to switch from more expensive to cheaper and less nutritional foodstuffs, or cut
back on total caloric intake altogether, face weight loss and severe malnutrition."
C2: Pensions
Decoupling work from insurance would cause a wave of early retirement as many stay
in work for the healthcare provided – this change in employment also effects tax
revenues making health subsidies even more costly.
Wettstein 17
(Center for Retirement Research), http://crr.bc.edu/wp-content/uploads/2017/06/IB_17-12.pdf (research
economist with the Center for Retirement Research at Boston College) // Anderson MF
Indeed, part-time work did increase in the treatment group by 5.9 percentage points out of the 8.4-percentage-point overall effect (see Figure
4). Thus, the reduction in full-time work can be decomposed into 70 percent switching into part-time work and only 30 percent going into full
retirement.13 Overall, decoupling labor force decisions from insurance decisions can affect labor
among those near retirement. This study finds that, before the availability of Medicare Part D, many
individuals worked past age 65 to maintain access to their employer-sponsored drug insurance.
While this barrier to retirement is only relevant for those who have employer-sponsored health insurance, it
seems to provide a large incentive to delay retirement for this group. Knowing the pervasiveness of job lock
is important for assessment of public policies that weaken the link between employment and insurance.14 If policies remove an
inefficient constraint on retirement, they could be beneficial. On the other hand, they may be costly if they reduce
employment and, correspondingly, tax revenue. The large estimated labor responses imply a high valuation by near retirees on the
health insurance subsidies in Part D. However, they also indicate that the fiscal cost of these subsidies is larger than their
cost on paper when taking into account the reduced taxable earnings that result.15
Increased early retirement makes pension financing unsustainable
Leibfritz 2
Willi Leibfritz, 8-xx-2002, “Retiring later makes sense”, OECD Observer,
https://oecdobserver.org/news/archivestory.php/aid/824/Retiring_later_makes_sense.html (Head of OECD structural policy research) //
Anderson MF
Ageing poses a serious challenge to OECD countries, in particular, how to pay for future public pension liabilities. And early
places an unsustainable burden on pension financing. There is no easy solution, but delaying retirement
could help. Retiring early has become so ingrained in OECD countries that these days it is almost an individual professional goal. It is even
possible to drum up economic arguments in its favour: retirees spend money rather than save it, for instance, and are valuable for such sectors
as tourism. Retiring early, some argue, frees up jobs for younger recruits and helps to boost productivity. To many, retirement is a hard-earned
right, and so the earlier the better. Indeed, futurists have been telling us for years that early retirement would become the norm, that thanks to
labour-saving technology we would soon be spending more of our lives at play and less at work. All very well, but the reality is quite different.
Early retirement may seem like a worthy individual goal, but it is a socially expensive one, and, as far as
public pensions are concerned, quite unsustainable. The essential reason is that more people are
retiring early and living longer. That means more retirees depending on the funding of those in work for their
income. The outlook is worrying. In the next 50 years, low fertility rates and rising life expectancy in OECD countries will cause this old-age
dependency rate to roughly double in size. Public pension payments, which pay 30-80% of total retirement incomes in OECD countries, are
expected to rise, on average, by over three percentage points in GDP and by as much as eight percentage points in some countries. Such is the
pressure on pension funds that there is a danger of today’s workers not getting the pensions they expected or felt they paid for. Action is
needed, but simply aiming to reduce the generosity (and cost) of public pensions, or trying to augment the role of privately funded pensions
within the system, though necessary steps, may be insufficient to deal with the dependency challenge. After years of advancing early
retirement schemes to avoid redundancies and higher unemployment, many governments are now looking at
persuading people to stay in work until they are older. Surely, the thinking goes, if we are healthier now and jobs are physically
less strenuous and unemployment is down, then perhaps the present rate should rise anew. In fact, increasing
the participation
rate of persons aged 55 to 64 years is one of the main objectives of social policy within the European
Union under the Lisbon and Amsterdam Treaties. The approach makes economic sense. For a start, as long as the
extra labour resources from delayed retirement are put to work, then in theory the level of GDP will rise, thereby
increasing the resources available for consumption. This is simplistic of course: having more old people at work is
not enough to improve productivity. Indeed, some contend that the level of GDP could fall, since retiring early acts as an incentive to
work hard and save more and so boosts productivity, whereas delaying it could dampen the morale and productivity of would-be retirees.
However, these negative effects appear to be small, so on the whole retiring later would increase GDP in the longer term. Working
people certainly pay more income taxes and social security contributions than retired people, so a later
effective retirement age would generate more funds to pay for pensions. Likewise, there would
be less pressure on those funds as delayed retirement means people start drawing their
pensions later. Working longer also helps people to stay out of poverty, which is particularly important where pensions risk falling to
low levels.
A wave of early retirement would lead to immediate contribution withdrawals, forcing
pension funds to enact fire sales that crash asset markets they participate in – this
leads to an economy wide collapse
Beetsma et al. 16 (Roel Beetsma is the MN Professor of Pension Economics at the University of Amsterdam. He is also Vice-Dean of the Faculty of
Economics and Business and Chairman of the Department of Economics and Econometrics. He holds a Ph.D from CentER, Tilburg University. Siert Jan Vos defended
his PhD thesis 'Essays in Pension Economics and Intergenerational Risk Sharing' on 7 November 2012. The thesis focuses on intergenerational risk sharing through
pension systems and the effects of demographic risks for pension plans. Christiaan Wanningen. “Systemic Aspects of Pension Funds and the Role of Supervision”)
It is conceivable that relaxing participation restrictions, for example by giving individuals the opportunity to switch between pension funds or to
take up at least part of their pension savings, could create risks similar to those associated with a bank run. The risks resemble those associated
with the open-ended investment funds that have been on the rise since the start of this century – see ESRB (2016). They seem highest in the
case of an abrupt alleviation of initial restrictions or if a fund threatens to go into underfunding. A
sudden loss of confidence for
some reason may trigger participants to withdraw their pension savings. If the threat of a large-scale
withdrawal were to materialise, this could become self-fulfilling, as large groups of participants
would rationally rush to the fund to recover their savings for fear that nothing will be left if they wait too long. A
large-scale withdrawal of accumulated savings would force the pension fund to sell its assets for
cash. If a single fund finds itself in this position, the effect on the financial market as a whole is likely to be small,
unless the fund is very large. However, a loss of confidence could also be caused by some common shock and
force the entire pension sector into fire sales at the same time, thereby causing a substantial drop
in asset prices, leading to domino effects throughout the entire financial sector.
Recessions are devastating and push millions of people into poverty.
World Bank
World Bank, 11-18-2010, "New Study Reviews the World Bank Group’s Response to The Global Financial Crisis,"
Increased poverty resulting from the financial crisis will be a major challenge in the foreseeable future. The World
Bank estimates that the
crisis left an estimated 50 million more people in extreme poverty (below the $1.25 a day
poverty line) in 2009, and some 64 million more will fall into that category by the end of 2010. Even with rapid economic
recovery, some 71 million people will remain in extreme poverty by 2020 who would have escaped it had the crisis not occurred, coupled with
unemployment rates that remain high in several countries. Even in a financial crisis, the WBG needs to support the crucial requisites for longterm results — fiscal and debt sustainability, structural reforms, environmental and social sustainability, and actions to reduce risks related to
climate change. Finally, improved coordination among WBG institutions and other development partners during response initiatives will
continue to be of paramount importance.