Your Top Two Expenses, If You Are American

When you think about budgeting your expenses, what are your biggest line items?  People think about mortgage payments, car loans, possibly student loan payments, and food.  If I look at my own credit card bill, groceries top the list for most months.

But these items are likely not your biggest expenses.  If you are an American living in the United States, then there are two expenses that are likely bigger than all of the items already mentioned.

Those two expenses are taxes and medical care (including insurance).

Both of these major expenses are because of government.  Taxes are obvious, as it is government that forces (or threatens to force) you to pay them.  Medical care and insurance are a little less obvious, but anyone who is somewhat competent and takes an honest look at the situation will conclude that it is government policies that have caused the dramatic rise in medical care costs.

These two expenses are not the highest line item for all Americans in the United States.  There are usually exceptions for everything.  But realize that these are the top two expenses for even many relatively poor people.

For taxes, I know we hear statistics about how the bottom 47% don’t pay taxes and that the top 10% pay the large majority.  But these statistics are for income taxes only.  The biggest tax that hits wage earners is payroll taxes: 7.65% for employees and 7.65% for employers.

But most people fail to realize that they are essentially paying over 15% on their wages because the employer portion is resulting in reduced wages for employees.

Of course, there are thousands of different taxes out there, many of which are hidden.  There are excise taxes, tariffs, corporate taxes, investment taxes, and the ultimate hidden tax of inflation.  All of these taxes serve to reduce wages, or make products more expensive, or to reduce our choices.

All government spending is a form of taxation, as it consumes resources that would have been otherwise used in the marketplace in accordance with consumer demand.

Therefore, even though many poor people don’t pay income taxes, they pay for the cost of government in many other ways.  Life is more expensive for them as a result.

Health insurance and medical care costs are a bit trickier, but even here I don’t think people realize that poor people still pay.  As related to the discussion about taxes above, all subsidies are being paid by somebody.  Subsidies for health insurance and medical care don’t just appear out of nowhere.  The cost is spread wide, and even the very people who are being subsidized are paying for part of it.

For those who buy health insurance, or who work for an employer that provides health insurance (usually at a price), the numbers are really unbelievable.  It is common for a family to be paying $1,000 per month in premiums, and sometimes it isn’t even for that great of a plan.

Also consider that your employer is probably paying a good portion of the cost as a benefit.  Therefore, the total cost of the health insurance plan for a family may be somewhere around $20,000 per year.  As discussed above with payroll taxes, this company benefit is coming at the expense of a reduced salary.  Therefore, your health insurance plan may be costing you and your family upwards of $20,000 per year or more.

This is simply ridiculous.  It is also unsustainable.  If we were getting wonderful healthcare, then maybe it would be a little more acceptable, but that is not even the case.  Diseases and ailments are running rampant in America, and the solution from many doctors is to just throw more pills at the problems.  Worse still is that many doctors, in hand with the pharmaceutical industry, get people on pills for things they didn’t even see the doctor for, such as depression or cholesterol.

It is becoming easy for the so-called socialists to promote single-payer healthcare (i.e. socialist healthcare).  When they point to other countries with socialized healthcare, they have a point that costs are lower.

The U.S. has a lot of money to burn because we are a relatively rich country.  In addition, we don’t have anything resembling a free market when it comes to medical care or insurance.  It is not 1950’s American anymore, which was not completely free market, but far closer than what we have today.

Today’s system in the U.S. is a total mess.  It is a result of a century of laws and regulations that have piled problem upon problem.  One intervention has created a problem that leads to another intervention.  Each “solution” creates a new problem, which calls for more solutions, and so on.  It is a giant bureaucratic mess.

While there are still a few elements of a marketplace in medical care, it isn’t much.  I can’t imagine that socialized healthcare would really be that much worse at this point.  If the wait times are as bad as some people claim, it might actually help some people.  They will be less likely to go to a doctor and will be less likely to be prescribed a statin drug or anti-depressant when going in for a fever.

If you require trauma care, there is still no better place to be than in a major city in the United States.  But aside from that, I really don’t see how things could get much worse with socialized healthcare.  I used to fear it, but there isn’t much to lose at this point now.

Of course, the true solution is to get the government out of the healthcare business, but I don’t see how this is possible at this point.  I think our only hope in the near future is technology and innovation.  I can envision a cruise line in international waters that shuttles people out in a boat.  You can pay for your medical care out-of-pocket and avoid the bureaucracy of the United States.

It is astounding that some people are actually paying more for health insurance than they are for shelter and food combined.  And to top it off, many of these are high deductible plans that barely cover anything until you spend thousands of dollars in medical expenses.  With this, there are some families easily paying $2,000 or more per month in health insurance and medical care costs.

Again, this is unsustainable.  Either the government will completely take over, or we will have to see some kind of turn back towards the free market.

This is why middle class America is struggling so much.  It isn’t cell phones or Starbucks that is causing budget problems for Americans. You could buy a $5 cup of coffee every day for a year and it probably wouldn’t add up to one month of health insurance premiums and medical care costs.  It certainly wouldn’t add up to one month worth of taxes.

If we want a dramatic improvement in living standards, we need to see a drastic reduction in regulations and a drastic reduction in government spending.  Until Americans realize this and expect it from their so-called representatives, then we will only see marginal gains at best.

2 thoughts on “Your Top Two Expenses, If You Are American”

  1. Interesting to hear acceptance of single-payer from a libertarian. While not on that side of the political ledger (I’m left-leaning, but believe in efficiency and incentives), I can see no reason to not give single-payer a shot. How would a free market system deal with people who choose to not have insurance and can’t pay for care that hospitals are currently mandated to conduct?

  2. To be sure, I am not accepting of a single-payer system. My point was that it can’t be that much more of a disaster than the fascist system that we have now. I stated in my post: “Of course, the true solution is to get government out of the healthcare business…”

    In a free market, if people choose not to have insurance and can’t pay for care, then they will have to depend on charity. This is how it used to be with charity hospitals and doctors volunteering services. Fortunately, in a free market system, prices would be drastically lower. Therefore, most people would be able to easily afford insurance and even out-of-pocket costs for most things. Again, I point to 1950s America. It was not a completely free market system, but far closer than what we have now. Healthcare was generally inexpensive and available.

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