Massachusetts Institute of Technology economist Dr. Jonathan Gruber, widely cited as “the architect of Obamacare,” recently committed a Kinsley gaffe, “when a politician tells the truth— some obvious truth he isn’t supposed to say.”
This bill was written in a tortured way to make sure CBO did not score the mandate as taxes. If CBO scored the mandate as taxes, the bill dies. Okay, so it’s written to do that. In terms of risk-rated subsidies, if you had a law which said that healthy people are going to pay in – you made explicit healthy people pay in and sick people get money, it would not have passed… Lack of transparency is a huge political advantage. And basically, call it the stupidity of the American voter or whatever, but basically that was really, really critical for the thing to pass. It’s a second-best argument. Look, I wish Mark was right that we could make it all transparent, but I’d rather have this law than not.
This provokes four questions:
- Is Gruber right that lack of transparency was a huge political advantage in enacting Obamacare?
- Do Gruber’s allies in Congress and the Obama White House agree that Obamacare cross-subsidies were intentionally obscured to avoid politically unpopular votes?
- Do they agree with the more general principle, that some large, explicit, and transparent subsidies will be unpopular, and that the only way to enact them is to hide and obscure them?
- If so, is it ethical to hide and obscure large cross-subsidies (or large costs), in Obamacare and elsewhere, so they can be enacted into law? Does the end of greater redistribution justify the means of obfuscation, of lying to voters?
Here are my answers.
- Yes. Gruber is right that lack of transparency provided a huge political advantage in enacting Obamacare. He is correct that the cross-subsidies within that bill would have doomed it had they been explicit, transparent, and well understood. If your goal is to enact unpopular subsidies, then hiding them is an effective means of doing so.
- Yes. I would bet heavily that both Team Obama and key Congressional Democrats involved in enacting the Affordable Care Act (ACA) intentionally obscured these policies as Gruber described and for the reasons he gave. I think this logic permeates the construction, drafting, and enactment of this law.
- Yes. I think this tactic is core to Progressives’ long-term success in expanding government’s function as a massive income redistribution machine. This logic underlies hidden cross-subsidies in many of our largest government programs and the taxes imposed to finance them. It is on occasion embraced across the political spectrum, but it’s a tool used far more often by the Left to redistribute society’s resources behind our backs.
- No. I think this tactic is repulsive and unethical in a representative democracy.
Jonathan Gruber Isn’t The Only Liar
Here are a few areas where American economic policy hides or obscures subsidies or costs, I believe intentionally.
- As Gruber points out, in Obamacare the healthy subsidize the sick. He does not point out that embedded within this the healthy subsidize the sick for sickness related to unhealthy behaviors. A congressional floor vote to defend such a value choice, if made transparent and explicit, would certainly fail.
- Obamacare also forces young people to subsidize older people by limiting the width of premium “rating bands” for insurance sold in the individual market. This was the result of closed-door lobbying by AARP. This one might pass Congress if voted upon explicitly, but the ACA’s architects hid it to avoid admitting that they were shafting young people.
- Social Security conflates forced individual retirement saving, insurance programs, and massive cross-subsidies, in part to hide the latter.
- So does Medicare. The biggest cross-subsidies are across birth year cohorts, but there are plenty of others as well. Don’t get me started on trust-fund accounting.
- The employer-side half of Federal Insurance Contributions Act payroll taxes that finance most of Social Security and part of Medicare are often framed as if they “are paid by the employer” when their true economic burden is borne by the employee in the form of lower wages. If all FICA taxes were imposed on the employee side, they would be more transparent and less popular.
- A minimum-wage increase forces low-skilled, unemployed workers to subsidize the wages of the low-skilled employed. Expanding the earned income tax credit is a more transparent way to help the low-skilled unemployed, but it puts the costs on budget and in full view. The Left pushes to hide the costs and lies, claiming it’s a free lunch.
- Corporate Average Fuel Economy requirements are less transparent than a gas tax that would achieve a similar goal. But gas tax increases are wildly unpopular while raising CAFE standards appears only to make things harder “on the auto companies.”
- A global CO2 cap-and-trade system would have obscured the redistribution of global economic growth from developed economies to developing economies. An explicit and transparent carbon tax imposed only on developed economies would achieve a similar endpoint but would have made explicit this massive proposed global redistribution.
- For years, policymakers used Fannie Mae and Freddie Mac to subsidize homeowners through hidden credit subsidies. The Left pushed this for low-income home buyers through affordable housing goals, while elected officials across the political spectrum supported the same thing for all home buyers through special advantages conferred by government on these two firms.
I could go on. Corporate incomes taxes hide the costs imposed on the people who work for, own, and buy from these firms. Many agricultural subsidies are intentionally obfuscated to enhance their bipartisan support. Apparently Gruber thinks it’s okay to lie to American voters when his allies are in power to enact policies that he wants but the voters wouldn’t. He then says American voters are “stupid” both for not agreeing with his value choices and for not figuring out the deception.
When you strip away all the complexity, economic policy is ultimately an expression of elected officials making difficult value choices. If over time these officials make value choices that do not reflect the values of the people whom they represent, they can, should, and will be replaced.
When these same elected officials, and those who advise them, deliberately construct policies to hide value choices that would be unpopular were they transparent and explicit, we end up with two terrible outcomes. We get policies that do not reflect our values, and we re-elect representatives who are lying to us.
This article is reprinted with permission from KeithHennessey.com.