Taking Dave Ramsey to the Woodshed

A recent Facebook post by some friends caught my eye today, and though I was initially skeptical, I went ahead and checked it out.  It was a link to a video by Dave Ramsey, a financial advice radio host, breaking down Obamacare using math.

Initially, I was pleased to see that he began the segment stating that math is important, and that it doesn’t change whether you’re a conservative, liberal, Republican, or Democrat.  And then, I waited for the math…

I’m still waiting.  In fact, the only time Dave actually mentions numbers, they’re either hypothetical, or outright lies.  For example, he states that 46% of Americans don’t pay any taxes, right before he states that we all pay 15% of our salaries to Social Security.  Are you fucking kidding me—this guy’s a financial guru of some kind?

So, let’s talk actual facts:

1) The tax rate on Social Security is 6.2% for employees, 6.2% for employers, and 12.4% if you’re self employed.  So, I guess if you’re self employed, it’s close enough to 15% that I’ll give the guy a pass, but for the vast majority of us, it’s nowhere close to that (and don’t be a dummy and suggest that the employer would pass on all 6.2% if they didn’t have to pay the tax; they’d keep all or most of it).

2) Every single person who’s employed pays payroll taxes, i.e. the Social Security tax.  So unless 46% of all Americans are unemployed (which they’re not), claiming that almost half of our population doesn’t pay taxes is not only wrong, but deeply misleading and insulting; I can’t think of anything worse than having to pay taxes only to have the Republican Party look at you as a freeloader.

But Dave Ramsey’s not a Republican, you say?  What a lark—what an absolute laugh!  The man begins by using liberal and socialist as synonyms, and ends by complaining that the Affordable Care Act amounts to communism.  But that’s fine, I won’t kill the guy for his political stripes—it’s just frustrating that he puts on this façade of neutrality when it’s clear to which camp he really belongs.

OK, so let’s get to his “math”, which is really just a bunch of vague hypothetical’s that show this man does not possess one shred of the “intellectual honesty” he begs of his listeners.  His primary issue with Obamacare is that sick people cannot be turned away by insurance companies, and therefore, he says, everyone’s premiums are going to rise, because the insurance companies will be paying out more money in claims.  And if it stopped there, I’d have no disagreements with him.

But it doesn’t.  See, if sick people don’t have insurance, it doesn’t stop them from being sick.  Those people will still go to the hospital, only, instead of being on an insurance plan that can mitigate costs, those costs (usually emergency room care—by far the most expensive) get passed onto the system.  In other words, someone has to pay, and in the end, insurance premiums rise to cover much of those costs.  This is one of the main reasons that health insurance premiums, prior to the passage of Obamacare, were exploding upwards, having risen almost 200% since 1999; since 2010, however, the rise of health care costs has slowed significantly.

Dave also forgot to mention the fact that the reason there’s an individual mandate for EVERYONE to buy insurance is precisely to deal with the problem he identified.  By forcing healthy people to enroll in health insurance (and at a much lower cost than would have been possible before Obamacare), those companies get to add tens of thousands of new, low-risk customers to their revenue stream, which will keep premiums down.  Finally, the new health care exchanges, where consumers can shop for insurance, will increase market competition, and as any capitalist knows, competition is good for the consumer.

Look, in the end, I don’t know to what degree Obamacare will be successful—my guess is that it will probably be better than what we had before, but how much better, who knows?  However, what I do know, is that if you leave massive variables out of a math equation, you’re going to get a fucked up solution, which is what Dave Ramsey gave his listeners.

The great irony is that he gave an entirely partisan viewpoint to people that are already inclined to agree with him, many who share his political philosophy, and even though his eight minute rant is littered with falsehoods, exaggerations, omissions, and outright lies, it worked!  My friend’s comments were something like: “can’t argue with math,” and “it’s just math.”

Once again, it just shows that people who listen to conservative media are SO MISINFORMED that it’s almost impossible for them to make rational decisions about politics.  Their pundits, be it Limbaugh, Hannity, O’Reilly, or Dave Ramsey, leave so much information out of the dialogue, get so many facts wrong, and lie on such a regular basis, that their listeners might as well be living on another planet.  It’s really sad—and at some point, you’d think they would have enough self-respect to stop listening to people that lie to them all the time.

I don’t doubt that this fucking guy can help people save money by telling people to save money, but that’s about it.  Beyond that, I would certainly be careful about taking his financial advice to heart… I mean, he can’t even do math.

About The Author: Jay Scott

Comments

  • Reply Jasper

    We share this facebook friend. I feel an urge to argue with you. First, he says “15% roughly” at some point in the video. He is probably including contributions to medicare. But social security tax is different than other taxes in that it is designed to be paid back to you at the end of your life. Income taxes are meant to pay for present expenses. Now, social security is a bad deal in and of itself. The rate of return you receive on social security is much lower than what you receive on the market averaged over long periods of time. By some estimates, it is actually negative interest. The employer portion of the tax is hidden from you. That 6.2% would be included in your wages eventually if not immediately. Employers cannot simply refuse to pay you that extra 6.2% in the long run. Employers who raised wages by 6.2% would pull the best employees and hurt their competitors. Taking your argument of employers suppressing wages to the extreme, everybody with a job would be making minimum wage.

    Second, social security and the ACA both hurt the bulk of young people disproportionately. The premiums will go up significantly for healthy young people. So, right when you are starting out your adult life at your lowest earning potential, you are forced to pay 15.3% of your income into social security and medicare that you will not see for another 40 years (assuming no disability and that these programs are solvent at that point). Then, you will be forced to pay hundreds of dollars more per month in health insurance. Throw a few student loans on there for good measure. So, right when you need every extra dollar, you are getting robbed. I will not get into the moral implications of the government doing this all by force if it feels so inclined.

    My personal opinion is that this whole thing was written in the back rooms by the big insurance companies for their own benefit. It’s state-corporate collusion at its finest.

    • Reply Rick Allen

      Jasper,
      It sounds like you have been doing a good job of saving for your retirement. Congratulations! You are one of very few people that have anywhere near the amount of money needed to retire without an assist from Social Security. Fact is, most people don’t save very much, so it’s a good thing we have Social Security. Otherwise we’d have a very large population of homeless elderly people. And by the way, don’t assume that the stock market is the best investment in the world. The stock market has had two periods of no growth for well over a decade (1929 to 1954 and 1966 to 1983).

      • Reply Jasper

        People respond to incentives. In the absence of state force, some people would save and some people would spend that extra income. People could voluntarily give up 12.4% of their income to a retirement account and receive a much higher return on average. I think it is quite conceited for the state to force people to buy into something because somehow people don’t know what is good for themselves.

        As for the stock market and the stability/growth of investments, the federal reserve and other government interventions have pushed yields so low that saving is illogical now. Where one could expect 5-6% on a simple certificate of deposit in the 1990’s, you can expect to lose money with CDs because the interest rate is lower than the rate of inflation.

      • Reply Josh by

        What I really wish people would realize is that all of this is a God issue. It will be coming so much quicker than so many people realize, too. Our nation is going to be judged by God because of how far off track we are. You can add the affordable care act into part of this judgement. If any of you want to read something interesting check this out:

        http://www.thepropheticyears.com/reasons/World%20debt.HTM

        I know that that economic crash didn’t come just recently, but how many of you know how close it came? The affordable healthcare act is only going to make things worse for us. When you see that it does just remember this and consider that maybe God was warning you and if you haven’t accepted Christ as your savior then do it soon and do not get the mark of the beast (probably an RFID chip). We will see Christ return in our lifetime.

        • Reply comfortable pinko liberal

          no.

        • Reply Britt

          Yes, the man who came to help the poor and sick will come back to end the world for helping the poor and sick

  • Reply NYSur4

    I think this was the same guy I heard the other day repeating the lie that Congress is exempt from the Affordable Care Act. I immediately turned the channel and vowed never to listen to a word the man has to say again.

    My opinion about the affordable care act is nuanced and will likely evolve over time as actual facts (not “Dave Ramsey” facts) become available. Like you, I think it will probably be a net incremental positive. I wonder if we’ll ever get the public sentiment behind single payer, which is probably the only real solution.

    • Reply Anonymous

      You’re wrong. He’s not on television. Go back to bed.

      • Reply Adayinthelife

        He does not have his own TV show at this time, but he’s a regular contributor on Fox. Not sure if he said that specifically, but he is certainly on TV from time to time.

        Go back to bed. Perhaps when you wake up your attitude will have improved.

        • Reply Anonymous

          You are both wrong… Who said anything about a TV? Radios also have channels. Go back to bed and maybe when you wake up you will read. Of course sticking in your own facts to make your argument is how republican sheep operate so that isn’t too surprising. Maybe after you sleep you will wake up with a mind of your own and we can take the republican party back from the people screwing it up?

  • Reply Nick

    He said “46% of Americans pay no federal income tax.” Thus his statement only applies to federal income taxes (which are the main source of tax revenue for the federal government). That does not include social security, medicare, sales, etc., because those are not federal income taxes. So…what are you talking about?

    • Reply Rick Allen

      While his statement is true, it certainly doesn’t tell the whole story, since federal tax collections for Social Security and Medicare are almost as great as collections from income taxes. Don’t you think that it would be better if he just told the whole truth? Studies have shown that most Americans pay pretty much the same percentage in taxes regardless of income, except at the extremes, where, in both cases, they pay less.

      • Reply Nick

        The problem is, the government-paid expenses associated with Obamacare (leaving aside increased premiums paid to private insurers, if that is the end result) are not funded by Social Security or Medicare taxes…those are taxes allocated to specific programs. It is going to be funded through federal income taxes. His point was a broader one regarding people who receive federal government benefits (including taxpayer funded expenses associated with Obamacare) yet pay no federal income tax, while those federal government benefits are funded through the federal income tax. So the specific reference to federal income taxes is very relevant.

        • Reply Tom

          Nick, The problem I have with your perspective is that by your measure, the guy who takes home a billion dollars as a hedge fund manager (but creates *nothing*) and pays a very small amount of that in taxes is a more upright citizen than the “parasite” father of 2 who gets government benefits like food stamps or an ObamaCare subsidy because his job mopping the floor at WalMart pays so little.

      • Reply Anonymous

        He did tell the whole truth he said 46% of Americans pay no federal “income” tax. Income tax is not social security, it’s not Medicare and it’s not disability.

  • Reply Jonathan

    Finally, someone broke this down. I felt this video was less than honest when I first viewed it but didn’t have the time to dig deeper, your review does that for us, thank you.

    • Reply Voice of Reason

      ‘Didn’t have time to dig deeper’.
      So, rather than do that, you found time to find an article that let someone else do the heavy lifting so that you didn’t have to do any actual thinking.

      Your kind drags us all down, thank you.

  • Reply Mike

    I second what Jonathan wrote. My respect for Dave Ramsey has gone done many notches after seeing his video. Failing to mention the entire equation in his “math” explanation is dishonest and a disservice to the people who trust his advice and opinions.

    • Reply Cindy

      I agree. Will never look at Dave Ramsey again. I watched the video, and most people are going to believe half the country pays zero, zilch taxes period. Which it appears was just what he wanted. I could go on but the author if this rebuttal covered it well.

      • Reply Anonymous

        You are the one saying they pay “zilch” in taxes, not Dave Ramsey. He said 46 percent pay no FEDERAL income tax and he is correct. If you don’t know the difference between federal income tax, social security tax and state taxes, that’s your problem.

        • Reply Facts

          Stop confusing the issue with facts please. Cindy would appreciate this.

        • Reply Tom

          Maybe you should get off your high horse and try to figure out *why* only 53 percent pay income tax…

          Mitt’s implication (and yours) is that there is something morally inferior about those people. As if they were all welfare moms living high on the hog, popping out babies while spending their lives watching TV and eating Cheetos.

          The article YOU CITED states that 74% of the 46% are working families with children or the elderly. Maybe you should figure out exactly what $26,000 dollars for a family for four turns out to be. Hint: 30 years ago, that meant that there was one person working a full time job, likely with benefits – today, it’s more likely that both parents are working part time jobs, or that a single parent is working more than one part time job.

  • Reply CB

    What I wonder is if ANYONE, from EITHER side of the aisle has actually read the ACA legislation?

    Please – attempt to read it and then report back.

    I know that I had to change my healthcare provider because of ACA – they pulled out of my state. Costs for myself, costs for my wife and teenage son are going to more than DOUBLE for our insurance premiums.

    I’m not a part of the 1% I keep hearing about – so this really hurts – especially with college tuition right around the corner.

    People who didn’t pay for healthcare insurance before aren’t going to pay for it now – they’ll simply get penalized (depends on their taxable income) with a tax at the end of the year.

    The only people that will benefit from the ACA (For sure) are the insurance companies.

  • Reply Mike

    The 15% Dave Ramsey refers to includes Medicare. The employer must remit 2.9% of all wages for Medicare. The 12.4% on FICA + 2.9% on Medicare adds up to 15.3%

    The 46% number used to identify taxpayers who don’t pay income taxes, includes people who pay in but at the end of the year, receive a refund sufficient to cover all of their annual income tax. This number has nothing to do with the previous 15% figure Ramsey spoke on.

    There is an assumption made in your rebuttal that adding the uninsured will offset those with a prior medical condition. I imagine, not trying to put words in your mouth, you anticipate this will offset the overall costs for everyone. There isn’t sufficient statistical evidence to support this assumption or that costs will be reduced for everyone because those without insurance are being treated. In fairness to both, I would suggest this remains to be proven. An argument could be made just as Ramsey and you both have, when in the final analysis we don’t know yet. Current anecdotal findings suggest everyone appears to be suffering from sticker shock.

    Eventually the computer program issues will be resolved and we will have a better understanding of the costs. I tend to believe there’s no such thing as freebies. There’s always a price to be paid when the government adds their administrative cost. So far, there’s no accurate statistical data you can point to suggesting Ramsey is wrong.

    • Reply Anonymous

      Spot on. It’s always “just math,” but that math is usually advanced algebra, not arithmetic. ACA may lower health costs for everyone for the US as a whole or may lower them. It may lower them for a majority and raise them for a minority by varying degrees. And visa versa. We have an equation but don’t know the inputs for most of the variables and won’t for a while.

      It would be a lot more productive to be discussing research on what we should expect those various inputs to be (insurance adoption rate of the currently uninsured whose cost to cover is below the mean and that of those above the mean, potential savings or increased costs of increasing preventive care, etc…).

      The rest of it seems like argument for argument’s sake.

  • Reply Johnny 5

    His whole video talks about leaving politics out of it and just focusing on the math. But he leaves several variables out of his so called calculations: 1) competition on the market place. 2) limits on the amount of profit an insurance company can receive (the 80/20 rule) before they have to issue refunds to policy holders. 3) transparency in the hospitals (helps make hospitals accountable and make it easier for you to shop around…creating competition which is a mechanism for driving costs down) 4) More people purchasing insurance (and based on his own words this would drive cost down) 5) Government Subsidy that a person may qualify for. 6) inflation 7) rising costs of healthcare with or without new health care law

    Now an intelligent conversation about the math would have included these points. It’s possible that he may have still reached the same conclusion, because these are variables that we don’t know how are going to play out in the real world. But he doesn’t do that…he completely ignores this part of the math. Why would he do that? And by the way, Obama’s original plan had also included a government run insurance program to help create more competition. That was compromised out of the final law.

  • Reply Triumph Tim

    Here’s my math;

    Pre-ACA; family of four, $10k deductible, $710 per month
    Post-ACA; family of three (daughter is on employer plan now), $10k deductible, $1013 per month

    Seems pretty clear to me.

  • Reply Blaine

    You wrote: “right before he states that we all pay 15% of our salaries to Social Security.” Dave never says we all, he said we pay. I believe he was referring to his own household, not EVERYone.

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