There's been a surge of stories describing the Obama/McCain debate over the economy as some sort of throwback to the 1980s. For instance, a day after NPR reporter Adam Hochberg described Obama's economic plan as "heavy on working class populism," NPR host Michele Norris framed Obama's plan as "tax and spend liberalism" in an interview yesterday:
Now, as you well know, John McCain is also out this week talking about the economy. His campaign has already said that your "Change that works for you" campaign really amounts to change this country can't afford. The GOP has used the same argument for decades, that tax and spend liberalism is bad for America. "Tax and spend" is almost a hyphenated phrase that's become equivalent a dirty word. Are tax and spend policies really bad for America or is that what you're intending to do?
Obama is probably the most liberal Democratic nominee since Michael Dukakis, but these descriptions are a caricature. His top economic advisers are establishment moderates (University of Chicago economist Austan Goolsbee and Brookings Institution economist Jason Furman); his health care plan, while ambitious by historical standards, is more cautious than Hillary Clinton's; and his proposals to raise taxes on the wealthy largely represent a return to the status quo before President Bush took office. In addition, Norris is implicitly misrepresenting the effect of Obama's tax plan on most Americans. As the New York Times points out this morning, he would actually reduce taxes on Americans making less than $75,000.
However, I do take issue with Obama's claim during the Norris interview that "over the long term we will save money" under his health care plan:
John McCain doesn't have a plan to make health care affordable and accessible to every American. I do believe that it's important for wealthier Americans to contribute a little bit more by giving up some of the Bush tax cuts so that we can provide health care to every American. I think over the long term we will save money because people will be getting regular checkups, regular screenings. That's something that John McCain does not do.
To me, this suggestion sounds disturbingly reminiscent of the phony supply-side claim that tax cuts pay for themselves. I'm sure that Obama's plan would generate some savings from preventive care, but I've never seen a serious estimate suggesting that any plan like his would actually cause a net reduction in government health care spending. Is there any support for that idea? Over to you, Ezra Klein and Jonathan Cohn...
Last week, the Economic Policy Institute released an important analysis of Jacob Hacker’s Health Care for America (HCFA) plan by the respected health economics team at the Lewin Group. As you can read in the EPI press release, Lewin found that HCFA would cover everyone in America, while saving the U.S. economy over a trillion dollars over the next decade. And the efficiencies achievable primarily through Hacker's public health insurance plan would save enough money that, after modest premiums from employers and individuals, the new system would cost the US government only $50 billion more than what we are paying now for a system that leaves millions uninsured or badly insured.
In short, while the Hacker plan would reduce total national health spending, it's still projected to cost the federal government approximately $50 billion more per year than the status quo.
Update 6/12 7:29 PM: Per my point above, the progressive labor economist Jared Bernstein wishes Obama had chosen more liberal economic advisers.