"Democrats: More Than Health Care"

NY Times:

Perhaps you have heard that Hillary Clinton and Barack Obama have come up with different health care plans. Hers would require every American to own health insurance. His would not.

That difference is the only one between the two candidates on any domestic policy that has received much attention. (Think about it: can you name another?) Outside of health care, the campaigns — and we in the media — have focused on more exalted concepts, like experience, change and judgment.

But there really are some other important differences between the candidates. When you look at their policies as a whole, you see that Mrs. Clinton and Mr. Obama have actually laid out two competing economic philosophies. The fight over health insurance is just one part of their disagreement.

Compared with all the other candidates — Democrat and Republican — Mrs. Clinton and Mr. Obama occupy roughly the same place on the ideological spectrum. They’re both somewhat to the right of John Edwards, who favors a more muscular brand of government intervention to help the middle class. And they are well to the left of every Republican.

But the differences between Mrs. Clinton and Mr. Obama can’t be neatly captured with the standard language of right and left.

The easiest way to describe Senator Clinton’s philosophy is to say that she believes in the promise of narrowly tailored government policies, like focused tax cuts. She has more faith that government can do what it sets out to do, which is a traditionally liberal view. Yet she also subscribes to the conservative idea that people respond rationally to financial incentives.

Senator Obama’s ideas, on the other hand, draw heavily on behavioral economics, a left-leaning academic movement that has challenged traditional neoclassical economics over the last few decades. Behavioral economists consider an abiding faith in rationality to be wishful thinking. To Mr. Obama, a simpler program — one less likely to confuse people — is often a smarter program.

Given the odds that the next five weeks will turn one of the two candidates into a presumptive presidential nominee, it’s worth thinking about these ideas while there is still a campaign going on. Mrs. Clinton and Mr. Obama both may be middle-of-the-road Democrats, but they do have different visions of how government should work.

If you can remember Bill Clinton’s State of the Union addresses, you’ll get a pretty good idea of where Hillary Clinton is coming from. Those speeches were filled with programs to encourage specific kinds of behavior, like tax breaks for college tuition, health care and retirement savings.

So has Mrs. Clinton’s campaign. She has proposed new tax credits for savings, tuition, health care, elder care and renewable energy use. Her retirement tax credit, for example, would match the first $1,000 saved by couples making less than $60,000. For those making from $60,000 to $100,000, the match would be 50 cents on the dollar. To Mrs. Clinton, these policies are more efficient than old-style bureaucracy and less expensive than across-the-board tax cuts.

“Her view is that it makes more sense to have government focus on specific needs and concerns,” Neera Tanden, the campaign’s policy director, says. “And her experience in the government informs that view.”

Mr. Obama — the onetime community organizer — tends to look at economic policy more like a foreign-policy realist looks at the world. He will sometimes remind aides that policies that look good on paper don’t necessarily work in the real world. “That’s his thing,” says Austan Goolsbee, Mr. Obama’s top economic adviser.

The problem with Mrs. Clinton savings plan, according to the Obama view, is that many people won’t save even when they are offered subsidies to do so. After all, many workers who are eligible for 401(k) matching funds don’t take advantage of them now.

So Mr. Obama would instead require companies to deduct money automatically from their employees’ paychecks and place it in a savings account the employee owned. Employees could opt out of the program. But if they did nothing, they would end up saving money. It’s an idea that comes directly from academic research showing that savings rates have jumped when individual companies have adopted such plans.

Mr. Obama isn’t opposed to narrow tax credits, but his agenda isn’t organized around them. Instead, he has proposed an across-the-board $1,000 tax cut for every family in the bottom 90 percent or so of the income distribution. As he notes, the middle-class squeeze is caused by slow-growing wages and the rising cost of energy, education and health care, he says. It’s not a narrow problem.

His skepticism about government tinkering also helps explains his stance on a health care mandate. (Except for the mandate, the Democratic health plans are essentially the same.) Mrs. Clinton and Mr. Edwards favor a mandate, because — as they point out — there will never be universal health care without one.

Mr. Obama counters that Mrs. Clinton’s mandate won’t do the trick, either. She has not proposed especially tough penalties for people who ignore it.

“I don’t think that the problem with the American people is that they are not being forced to get health care,” Mr. Obama has said. “The problem is they can’t afford it.”

So which of the approaches has a better chance of success?

There’s no question that tailored policies can work. They often did during the Clinton administration. President Clinton’s expansion of the Earned Income Tax Credit, which provides a cash rebate to working families with low incomes, has been arguably the most effective antipoverty policy of the last 30 years.

Even when such policies aren’t perfect, they can make a difference. Mr. Obama is right that some people would ignore a health care mandate. But some wouldn’t. As any good behavioral economist knows, there really are people who can afford health insurance and who would like to have it — but who haven’t gotten around to getting it. A mandate would nudge some of them to do so, and the whole health care system would be better off as a result.

Yet for all of the good ideas Mrs. Clinton has proposed, there still seems to be something missing from her agenda. It feels like less than the sum of its parts. It lacks some of the elegance of the Obama approach.

Most people have only limited time and ability to sort through the details of government programs and then sign up for each one that might help them. And today’s middle-class anxiety stems from some tremendously broad issues, like globalization and technological change. No matter how well it’s designed, a package of tax credits doesn’t seem quite up to the task of making the economy work for the middle class.

Barack Obama