January 2, 2008

ARGUING AT THE MARGINS:

Clinton vs. Obama: 2 approaches to policy: She leans to narrowly tailored policies; he wants it simpler (David Leonhardt, January 2, 2008, NY Times)

They are 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 Clinton and Obama cannot be neatly captured with the standard language of right and left.

The easiest way to describe Clinton's philosophy is to say that she believes in the promise of narrowly tailored government policies, like targeted 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.

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 Obama, a simpler program - one less likely to confuse people - is often a smarter program. [...]

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

So 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 is an idea that comes directly from academic research showing that savings rates have jumped when individual companies have adopted such plans.

Obama is not opposed to targeted tax credits, but his agenda is not 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.


An across the board tax cut is harmless enough, though based on the myth that the middle class is overtaxed, and it does nothing to simplify the tax code or move us towards a code that disfavors consumption and maximizes savings.

And not only should you have to opt out rather than into your retirement savings plan but opting out should disqualify you from collecting SS later. Add a means test for benefits and you privatize SS in a way that should be acceptable to such middle of the road Democrats.

That this -- along with some sketchy health care reform -- is the extent of the Senator's agenda is pretty pitiful, though understandable for such a neophyte. It's unlikely he's ever thought much about most issues, nevermind come up with any policies.

What's most revealing here is that the two leading contenders for the Democratic nomination are so thoroughly establishment Republican.

Posted by Orrin Judd at January 2, 2008 9:24 AM
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