How liberal is Obama on the economy?

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...

Update 6/12 12:57 PM: In comments, Matt points to the Lewin Group's analysis of the Jacob Hacker health care plan that was the basis for the Democratic plans (PDF). Here's a summary:

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.

Comments

[Rob]

Brendan, perhaps you could help me find the Obama promise to lower taxes on Americans earning less than $75,000 a year. I couldn't find it on his website or in his Blueprint for Change.

If he has made such a commitment somewhere other than on his website or in his plan, look carefully at whether it is to lower taxes on families earning less than $75,000 or on individual Americans earning less than that amount. The New York Times says it would be on "people" earning less than that amount, which implies individuals, and your statement reflects that interpretation, referring to "Americans making less than $75,000." But is that factual?

[matt]

he's most likely referring to the lewin group's cost estimate of the hacker insurance plan. see here: http://www.ourfuture.org/blog-entry/lewin-report-good-news-obama-clinton-health-care

the hacker and obama plans are quite similar, and over the long run they do save money. call it dynamic spending analysis.

[Brendan Nyhan]

Rob, here's a Tax Policy Center analysis of the Obama and McCain plan with details. (See the update pertaining to Matt's comment above.)

[Rob]

Thanks for the citation to the Tax Policy Center analysis of the candidates’ tax proposals. Upon review of the analysis, however, it appears that the Times article you http://www.brendan-nyhan.com/blog/2008/06/nyt-fact-checks.html”>described as “excellent fact-checking” isn't quite so excellent after all.

The Times article states, "Mr. Obama’s plan would raise taxes on those making more than $250,000 by allowing Mr. Bush’s tax cuts on top earners to expire. . . . " However, according to the Tax Policy Center, Obama would "restore the 36 and 39.6 percent rates and increase the rate on capital gains and dividends for taxpayers in those brackets." Those brackets start at $164,550 for single individuals and $200,300 for married couples filing jointly--far lower than the $250,000 figure used by the Times.

The Times article further states, "Mr. Obama’s plan calls for cutting taxes on people earning less than $75,000 a year." Based on the Tax Policy Center analysis, it appears this statement is overbroad. Obama has apparently proposed a refundable tax credit for wage earners and the self-employed, which the Tax Policy Center "assume[s]" would be phased out on adjusted gross income beginning at $75,000. But that's not a cut in taxes for all people earning less than $75,000 a year, since some of us derive income from sources other than wages, such as pensions, interest, dividends, capital gains and withdrawals from Individual Retirement Accounts.

So the Times article understates how many Americans will find their taxes higher under the Obama proposals and overstates how many Americans will find their taxes lower. As fact-checking goes, that isn't very factual.

[Howard]

Regarding national health insurance - the US pays far more per capita for health care than any nation, out of a group of 30 industrialized countries.

But the quality of care we receive and the measures of levels of health are not appreciably better. In some areas they are even deficient.