"The most promising way to move forward in all three dimensions – coverage, cost, and
long-run fiscal situation – is to replace the employer exclusion with a tax credit, a step that has been proposed many times before (e.g., Butler 1991 and Pauly and Hoff 2002). Firms would still be allowed to deduct the cost of their contributions to employee premiums, just as they can deduct wages and other expenses today for the purpose of calculating taxable income. But workers would now have to include employer contributions to health insurance in their earnings for the purpose of calculating taxes (precisely which taxes is discussed below). In exchange for, workers who purchased qualifying insurance would get a refundable tax credit. Qualifying insurance would be along the lines proposed by the President in his standard deduction for health insurance, including limits on out-of-pocket payments, coverage of a general range of medical care, and guaranteed renewability by the provider (Treasury 2008)."
This is a pretty fair description of the McCain health care plan. The funny thing is, this is not be found in McCain campaign literature or on his senate website, but rather in a paper written by Jason Furman, Obama's Economic Policy Director, who now is arguing about the perils of this very plan. Now Furman would probably be right to respond that the McCain plan doesn't go far enough to facilitate risk pooling in the individual market and maybe that the tax credits are insufficient. But the general thrust of the McCain plan is one that he championed before he became an Obama staffer, now his job is to criticize that very plan.
Furman's counterpart in the McCain campaign, Douglas Holtz-Eakin, was a real deficit hawk and had a sterling reputation coming from the CEA and a stint as the CBO director. Now Holtz-Eakin's main task is defending the indefensible, McCain's tax policy. He surely knows that he will not bring the budget with the tax cuts McCain has proposed back into balance merely by curtailing earmarks. But that is the company line.
Both are incredibly intelligent men, highly accomplished in their fields, but their current job description is to say stupid and false things. That is politics.
Here is a video of the two going at it on CNBC and in Arnold Kling's words, "squandering their cognitive surplus."
hat tip: Greg Mankiw and Arnold Kling
random note: Mankiw was actually Furman's dissertation adviser.
Friday, September 05, 2008
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2 comments:
"Now Holtz-Eakin's main task is defending the indefensible, McCain's tax policy."
I think you're omitting the fact that McCain won't get many of his tax cuts passed a Democratic Congress.
The net affect will be an much smaller tax cut than he's currently pitching; and much higher government revenues that most models predict.
On the expenditure side, I can only assume McCain will veto more spending bills from a Democratic Congress than Obama will.
You are dead on. I think if you are a deficit hawk you should favor McCain regardless of your party affiliation. I think you see evidence of this in the fact that he has routinely floated out there the possibility of sending the Tax Reform commission's (I want to say Connie Mack and John Breaux headed that particular commission) plan to congress for an up or down vote.
The tax reform proposed was revenue neutral and recommended the elimination of the AMT and a modest reduction in marginal rates. These revenues were compensated for by eliminating the exemption of employer provided health care from being taxed, capping the mortgage interest deduction, and eliminating the state and local deduction.
Irrespective of who is in office, I don't believe taxes will be cut. Revenues as a portion of GDP will go up, it will just be a question of how much and how much spending goes up.
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