Sunday Pedantry

Greg Mankiw, a Harvard economist and former Bush adviser, has an op-ed in the New York Times with some sensible — if at times obvious — advice for Barack Obama. One thing I want to push back on though is this bit of clever sophistry:

Over the past several months, Senator Obama lambasted Senator John McCain’s proposal to reform the tax code to include a refundable health insurance tax credit. But long before Mr. McCain ever proposed this idea, it was advanced by Mr. Furman, the Obama campaign’s policy director. He can explain why the Furman-McCain plan makes a lot of sense.

Now the new president may decide that this plan does not go far enough. He may want a more generously funded social safety net to help the less fortunate get health care. Fair enough, but in pursuing that goal, he will run into the next issue.

It’s true that Jason Furman has in the past argued that tax credits could comprise a large part of health care reform, but emphasis on this point is like suggesting war opponents and war supporters share the same view on Iraq because they both believe succesful war efforts require tanks. That is, the issue isn’t whether or not tanks are used, but rather whether the strategy of their deployment makes any sense. The primary issue with refundable tax credits vis-a-vis the Republican vision advanced during the campaign was that it was a) woefully inadeqaute and b) would make health care less affordable and harder to obtain by expanding the number of people seeking individual insurance in the private market. If a refundable tax credit was coupled with a risk pooling mechanism (like insurance in the employer market) and also enough to cover effective care while remaining viable as health care costs increased, they would indeed be quite useful. John McCain’s health care plan addressed neither of these issues, so suggesting that the common use of a refundable tax credit reconciles two wildly divergent strategies insults the intelligence of Mankiw’s readers.


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