Krugman Redux

NOTE: For an update on Krugman’s column of February 4, 2008, see this post.

Today New York Times columnist Paul Krugman published another column praising Hillary Clinton’s proposed health-care mandates. Since my post criticizing his views got more hits than anything I’ve ever published on this Blog, I think I should respond. I’ll be brief.

I have no way of knowing whether Krugman read my post, but he didn’t respond to one of its two most powerful arguments against mandates. Mandates impose a regressive health-care tax because they force young, healthy workers—mostly blue collar, poor and near poor—to pay a higher proportion of their income for insurance so that more highly paid workers can pay less.

A system like that differs radically from the government-financed health-care systems in the rest of the industrialized world. General tax revenues support those systems, and they are progressive because the tax systems that support them are progressive. Mostly the taxes are consumption taxes (sales or value-added taxes), with generous tax exemptions for food and necessities. So they tax the wealthy, who mostly spend more, more than the poor, who spend less. These systems are progressive in the sense that the wealthy pay more than the poor in both absolute dollars and a percentage of income. Those few systems that use income taxation are progressive in the same sense (as is our own income tax).

Krugman never explains why a lifelong progressive should support a progressive system for taxation but not health care. The only possible explanation is that—for some inexplicable reason—Krugman wants to make Clinton look good.

Krugman insists that insurance prices and health-care costs won’t balance unless everyone is forced to participate. But the simple truth is that no one knows. There are too many variables to consider. Most of the studies have been done for political candidates; they are all incomplete, and most have an agenda to pursue.

The devil is in the details. By offering young, healthy workers cheap policies with high deductibles (so-called “catastrophic” health insurance), Obama’s system might get them to participate voluntarily. If Clinton wants to be fair and progressive—i.e., to allow people to satisfy her mandates at reasonable cost—her system will have to offer the same thing. If she forces everyone buy “Cadillac” comprehensive policies, her system will be massively regressive and will encounter massive political resistance. Even if it doesn’t, the very word “mandates” will give opponents a powerful (and unnecessary) tool to demagogue her plan to death once more.

Any system will take some tinkering to get right. The really important goals are five things that Krugman doesn’t even mention. First and foremost, we have to get all the people who want insurance and can’t find or afford it insured. Second, we must make sure that everyone’s insurance is “portable” and employer-independent. Third, we need to get rid of “pre-existing condition” exclusions so that everyone can buy insurance, whatever their current medical condition (this will, of course, require some adjustment in cost). Fourth, we have to put in place uniform national rules preventing private insurers from gaming the system through misleading sales practices or “cherry-picking” customers from limited insurance pools. Finally, we must make sure that all medical insurance covers all medically indicated care (within the dollar limits of the policies), so that doctors, not insurers, regain control of the practice of medicine.

These are the problems that trouble the vast majority of American families. Most of them don’t give a damn whether young, single healthy workers are gambling with self-insurance or not paying their fair share. That’s why Obama’s plan is far smarter politically than Clinton’s.

Obama’s plan will solve these problems more quickly and easily than Clinton’s because he’s given some thought to how to sell his plan to the nation. He eliminates mandates because he knows that they killed Clinton’s 1993 plan and are a red flag to conservatives and even some independents.

Unlike Bush and Clinton, Obama sees both sides of issues. In so doing, he preserves political capital for all the fights ahead, including energy independence, global warming, infrastructure repair, education overhaul, and, yes, social security reform.

In the end, Krugman’s and Clinton’s approach is the same, old tired “which side are you on?” politics that got Reagan and the Bushes elected and made the Democrats a minority party. Obama’s “what problem can we solve?” politics will make the Democrats a majority for at least a generation, if only we have the good sense to nominate him.

UPDATE

It is satisfying to have events confirm your analysis. On April 19, 2008, the Wall Street Journal reported [subscription required] that John McCain already had started pounding Hillary for her health-care mandates, although the general-election campaign had not even begun.