Many people are against the Affordable Care Act subsidies because they don’t believe government should subsidize private goods or services to individuals and families. Opponents of the ACA feel it furthers the socialist principles by having government interfere in a private marketplace. I would suggest that the ACA Premium Tax Credit subsidies are a natural evolution of our society’s desire to achieve equal opportunity and security for all regardless of income or employment.
Governments are formed to create an orderly society through laws and subsequent enforcement. When individuals feel safe and observe they can compete on an equal level with everyone else, business activity and productivity increases.
Subsidies Promote Equality and Equal Opportunity
An underlying foundation of the United States government is the notion of equality or equal opportunity, a principle often invoked in political speeches but not always applied. Nevertheless, most Americans acknowledge and embrace that their neighbors should have equal opportunity to succeed in business, education, and their personal lives. Equality and equal opportunity has become part of our national identity when we reflect on what it means to be American.
Another function of governments is to provide certain services, such as national defense, that can only be achieved when all beneficiaries contribute to the cost of the national defense.
The United States had a basic government structure with a very light touch in private markets through much of the 19th century. On a local and state level, governments were petitioned to acquire and maintain roads. Road districts, established to maintain thoroughfares, were seen as a government function that helped people move their products to market or the nearest railroad depot to be shipped to another region.
School districts were formed to build public school houses. Funds to pay for the school building, maintenance, and teacher salary were derived from local and state taxes. The creation of good roads and schools was believed to provide more benefit than the cost in taxes. The schoolhouse educated children who became more productive and contributed more to the community than if they had no education.
With a few exceptions, public roads and schools were open to everyone regardless of income. Rich men and poor women walked and traveled over the roads. Children from wealthy families attended schools with children from families with little means. The tax funded infrastructure of roads and school allowed everyone to pursue a life relatively equal to everyone else.
Federal Subsidies to Support and Protect Farmers
However, as our society progressed some segments of the population were put at a disadvantage because economic and market forces, they could not overcome. For example, it is generally accepted that a stable agricultural economy is important to the nation’s wellbeing and national defense. If a country cannot feed itself, they are vulnerable to aggression by foreign governments.
There are a variety of federal programs to stabilize crop prices and remove wild swings in the marketplace. Commodity support programs help smooth out the price fluctuations and prevent farmers from going bankrupt. Beginning in the 1920s, congress started passing legislation to support ranchers and farmers with agricultural subsidies
Another program is federal crop insurance. It only takes one hailstorm, freeze, or flood to wipe out a farmer’s crop. Congress passed the Federal Crop Insurance Program in 1980. The crop insurance program has evolved over the years and now covers numerous crops with several types of subsidized insurance products.
FEMA Flood Insurance
Floods are another hazard that we face. While private flood insurance was available in the 19th century, massive floods in the 1920s caused insurance companies to abandon the market. The devastation caused by increasingly larger floods affecting more homes and businesses was just too great for private insurers to underwrite.
Congress passed the National Flood Insurance Program in 1968. Flood insurance is purchased through private insurers but underwritten and subsidized by the Federal Emergency Management Agency. FEMA flood insurance is virtually the only protection homeowners like me can get if the home is in a designated flood zone.
Medicare
Medicare was enacted in the 1960s for individuals 65 and older. Health care services became more expensive in the 1950s as more illnesses could be treated with surgery and other treatments. Hospitalizations were becoming more expensive and health insurance for individuals over 65 was either very expensive or non-existent.
While individuals who qualify for Original Medicare Parts A and B, the monthly premium for Part A hospital insurance is $0. Part B has a nominal monthly premium of $185 in 2025. The cost of the Medicare insurance is subsidized by Medicare payroll taxes and self-employment taxes.
Employer Sponsored Health Insurance
Employer sponsored plans have been the main avenue for many individuals and families receive health insurance. The employer will usually make a contribution to the employee’s health insurance plan, but not necessarily the spouse and dependents. The employer gets to take the contribution as an expense against their profits. The employee’s contribution is usually pre-tax, lowering their taxable income. Indirectly, the government is subsidizing group insurance because of lower taxable income on the part of companies and employees.
Affordable Care Act
Individuals and families with incomes over Medicaid limits are not eligible for government sponsored health plans. If individuals are not of Medicare age and the family is not offered employer sponsored health insurance, with an income too high for Medicaid, they are stuck paying the full cost of health insurance. It only makes sense to help these individuals and families with a subsidy for health insurance.
When we review the history of the United States, federal, state, and local governments have offered paths to subsidize industries and people in the spirit that we are all created equal and should have an equal opportunity to succeed. The Affordable Care Act subsidies help families be sustainable and allow them to contribute to their communities without the crushing weight of health insurance premiums. This is no different from what we have done with crop subsidies, crop insurance, flood insurance, Medicare, road maintenance, or our public school systems.
YouTube video reviewing history of government subsidies.
