SHOPPING AT THE IRS MALL In the article the economic point that was made was similar to the welfare situation we were discussing in class. The article states that an employer can increase his employees salaries by $5000.00 which more than half of that amount can go to taxes or offer him/her medical benefits and which will suit the employee better because he keeps all the money and not just half. Well this exactly like the welfare situation because in our mind we think that the money will go for food and only for food but as economist say who are we to decide where and how the money should be spent. The point is that receiving half the money is more productive in the employees mind than pretending all the money will go for health care. The employee's happiness is greater with the cash then it would be the health benefits.
Especially if all you can get with the money is health care and even with that one realizes that more half of the money will end up to waste. Another point that was not discussed in the article but might be valid is maybe in a family the other spouse can have health care benefits through their job therefore receiving health care benefits is unnecessary. (Refer to graph on A-1).
The economic importance of this is that in reality the employees are not even getting the $5000.00 worth of benefits that is being pretended. The inflation that comes with health care is far greater than the Consumer Price Index. The reason that is, according to the article is that "95% of the mandated health coverage we pay will end up as a waste". By thinking he/she is receiving double of what was expected can causes inflation and by thinking he has so much health care it can encourage unnecessary use of the service.
Another issue that needs to be discussed is that the people who will win in this situation are the privileged class, which consist of educated, wealthy, higher salaried people who can afford the service. When you are talking about the disenfranchised class, which consists of lower income people, who cannot even afford the service even if it was offered, they end up loosing. When these people are faced with the scenario of either receiving $5000.00 more taxable income or just receiving health care worth $5000.00 they will choose more money, simply because they don't have the advantage like the privileged class does.
Well Al Gore or any other liberal politician will respond to this article with a question. How would this effect the employee if the total benefit was not even offered? Which brings up a good point. The cost of health care is very expensive and not many people can probably be able to afford it without any assistance from their employer. This raises another issue, does one really need all that health care that one gets when joining the plan. Al Gore or other liberals might say that the benefit is not such a bad idea but the other "positive services" that comes with it might be extra. They should maybe really look into what the insurance companies are offering and see if maybe it's all necessary. They would probably also defend the fact that the rich benefit more from the plan than the unprivileged stating that everyone needs health care and maybe it's worth receiving significantly less income to compensate for it. I think with all being said and done there is too much politics involved and even with article being true there is too much too loose if we really start looking into what the health care industry has to offer. Bottom line Al Gore or other liberals will say anything to defend the health care industry.