How Tom Steyer wins the presidency

How Tom Steyer wins the presidency
© Greg Nash

When the Democrats stage their fourth presidential debate on October 15, it will include a fresh face — billionaire, private-equity guru, environmentalist and philanthropist Tom SteyerThomas (Tom) Fahr SteyerWarren leads in speaking time during debate Democrats debate in Ohio: Who came out on top? Yang compares U.S. election tampering to Russia's election interference efforts MORE. In addition to impeccable Democratic credentials, Steyer brings a deep knowledge of the workings of the economy and Wall Street as well as an unsurpassed zeal to remove President TrumpDonald John TrumpWarren defends, Buttigieg attacks in debate that shrank the field Five takeaways from the Democratic debate in Ohio Democrats debate in Ohio: Who came out on top? MORE from office.

In 2017, Steyer launched the Need to Impeach campaign, an effort to remove the president for obstructing justice, violating the Constitution’s Emoluments Clause, violating campaign finance laws, encouraging Russian hacking and election interference, and much more.

To gain traction in his so-far quixotic campaign, Steyer needs to dominate the debate. He needs to do something no Democratic candidate has yet done — espouse a foreign policy. And he also needs to present new, realistic solutions to our major domestic challenges. Let me suggest answers to some domestic policy questions Steyer will face.

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Q: Do you support universal health care and, if so, in what form?

A: Absolutely. But traditional Medicare for All leaves government bureaucrats running and rationing a fifth of the economy. My answer is Medicare Advantage, which now covers one third of the elderly.

Under Medicare Advantage, you pick your insurance plan, actually your insurance company, since the plans are all standard – they all have to provide the same coverage. The government pays the insurance company you’ve chosen the entire premium to cover you for the year. The premium is based on your pre-existing conditions. So, if you have diabetes, the insurer you choose gets a higher premium payment due to your higher expected costs. This ends cherry picking by insurance companies since they average the same profit no matter who they cover.

Under Medicare Advantage for All, no insurer can turn you down. If your employer is providing health insurance, they’ll receive the premium payment from the government. But like other insurers, they’ll have to cover anyone who wants to join their plan. Thus, IBM can keep insuring its employees, but needs to cover people who don’t work for IBM.

By having a standard plan and eliminating cherry picking, Medicare Advance for All will produce intense competition among insurers not over whom to insure, but over the quality of their care.

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Medicare Advantage for All will also operate within a global budget, which it can hit by adjusting what’s covered under the standard plan. This will let Congress keep federal health care spending at a fixed and reasonable share of GDP.

Q: Three men own more wealth than half the country. Would you tax wealth?

A: Inequality in our country is outrageous. I ask everyone of substantial means to join me in donating at least half their wealth to the poor, to charities and to other worthy causes.

As for taxes, we need a complete overhaul to fix four big problems. First, the rich, starting with our Tax Cheat in Chief, must pay their fair share. Second, we need to eliminate the huge work disincentives most Americans face, particularly the poor. Third, we need to stop leaving massive bills for our kids to pay. And fourth, we need to tax carbon and get other countries to do the same.

My tax reform eliminates the payroll tax for those earning less than $40,000 as well as the ceiling on payroll taxes paid by the rich. I’d replace the personal income tax, which many rich people don’t pay, with a progressive, cash-flow consumption tax on those spending more than $250,000 per year, whether that spending is done at home or abroad.

This would include the consumption services of homes, planes, fancy cars and yachts. I’d also transition to a business cash flow tax from our corporate income tax. I’d replace the estate tax with a tax on lifetime inheritances and gifts received once they exceeded $1 million. And I’d tax carbon and get other countries to do the same. Finally, I’d make a basic payment to each household based on family size and implement other major changes to our welfare system that lock the poor into poverty.  

Under my plan, the rich would pay taxes on their wealth to the extent they or their children spend it. Furthermore, every American, rich and poor, would face the same 30 percent marginal tax on earning more money. Best yet, in combination, my tax, health care and Social Security reforms would collectively make our fiscal policy sustainable. Right now, we’re in absolutely terrible long-run fiscal shape.

Q: Tell us about your Social Security reform.

A: Social Security has a $43 trillion unfunded liability. Worse, Social Security plus our private retirement account system have failed to secure an adequate retirement for tens of millions of current and near-term retirees. We need to pay current retirees what we owe them under Social Security and do the same for current workers as they retire. But we need to replace Social Security with a modern Personal Security Account System in which each worker contributes 10 percent of their pay to a global index fund run, not by anyone on Wall Street, but at zero cost by a computer.

The government would make contributions on behalf of the poor, the disabled and the unemployed to ensure the new system is progressive. Contributions would also be shared between spouses and legal partners. All contributions would be collectively invested in the world stock, bond, and real estate market at no cost to contributors. The government would guarantee that your account balance equaled at least what you contributed when you reached retirement.

At retirement, your share of the global fund would be gradually sold off with the proceeds used to buy government inflation-indexed bonds. The income and principal from these bonds would pay you and all others your age an inflation-indexed pension that is proportional to what you accumulated and that continues until you die.

This plan moves us from an insolvent, unfunded system, which is going to bankrupt our children, to a fully funded system on which we can count.

Laurence Kotlikoff is a professor at Boston University (BU) and professor of economics at BU. He is also a fellow of the American Academy of Arts and Sciences, a research associate of the National Bureau of Economic Research, a fellow of the Econometric Society and was formerly on President Ronald Reagan's Council of Economic Advisers. Follow him on Twitter @Kotlikoff.