Correcting the Record on Robert Reich's Statement about Hillary Clinton's Economic Policies

While I have had a long and close relationship with Robert Reich, I feel compelled to set the record straight on his recent post about Senator Clinton's economic policies.
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While I have had a long and close relationship with Robert Reich--and I have a great deal of respect for Senator Obama--Reich's recent blog post about Senator Clinton's economic policies was so unfair and personal in its critique, and had so much incorrect information, I feel compelled to set the record straight.

1. Reich's suggestion that Senator Obama's Healthcare plan, which does not include an individual requirement, would actually cover more people than Senator Clinton's plan--and that Senator Clinton is "stooping low" to suggest otherwise--is neither logical nor plausible.

While I can understand a political rationale for not having an individual requirement for health insurance, I cannot possibly see how Bob - or anyone else - can make the statement that without such a requirement you might somehow cover more Americans than with one. Senator Clinton put forward a healthcare plan based on shared responsibility, including an individual requirement, after she and her advisors were convinced by the fact that every - and I mean every - independent expert we spoke to was unanimous in their view that without an individual requirement, her plan would fail to cover a large chunk of the uninsured. We knew that including an individual requirement would mean tougher attacks from most Republicans. But Senator Clinton chose to bear that risk because without such a requirement, she would not only be unable to achieve coverage for all Americans, but would be less able to combat insurance company discrimination and to end the hidden tax that comes from health costs being shifted from those without insurance to those who are covered.

Bob Reich makes the illogical leap that since individual requirements - like auto insurance - do not always lead to perfect compliance, programs without a requirement will cover the same or more people. Really? If one believed that, then they must believe that states would be better off getting rid of their apparently silly requirements for drivers to have auto insurance since as many or more people would be covered without. Requiring parents to educate their children does not have 100 percent compliance, but does anyone think it is a bad idea to require education for all children in the United States? Senator Obama made a choice to have a health insurance requirement for children because he knew that millions more children would be covered with that requirement than without. Whatever case the Obama campaign wants to make for its decision not to include a requirement for adults as well, suggesting that you can cover the same or more people is just not plausible.

I encourage Bob or anyone else interested in this issue to review the overwhelming consensus of credible independent experts who have found that an individual requirement is a necessary component of any plan designed to cover all Americans. [E.g. Jonathan Gruber, MIT (12/05/07); Diane Rowland, Kaiser Family Foundation (New York Times, 11/25/07); United Hospital Fund (December 2006); California Medical Association (July 2005); Henry Aaron and Bruce and Virginia MacLaury, Brookings Institution (CQ Congressional Testimony, 9/11/07); John Holahan, Urban Institute (October 2005); Len Nichols, New America Foundation (US Fed News, 6/26/07); Drew Altman, Kaiser Family Foundation (New York Times, 11/25/07)].

2. Reich's assertion that Senator Clinton "has no grounds for alleging that [Senator Obama's plan] would leave out 15 million people" is simply wrong.

For Bob to suggest that it is a cheap shot to make this highly supported point is puzzling. A recent study in the Journal of Inquiry found that in a voluntary system like the one Senator Obama advocates, "Even if the . . . subsidies were designed to be as effective as possible at covering the uninsured, at most half of the uninsured would gain coverage." Assuming that Senator Obama's child mandate would cover all children, his plan would still leave half of the adult uninsured population without healthcare. That's well over 15 million. Indeed, a number of independent analysts have confirmed that Senator Obama's plan would leave at least 15 million uninsured, including the Washington Post [6/9/07, "[T]he Obama plan could leave a third of those currently uninsured lacking coverage."], the Wall Street Journal [12/04/07, "Mrs. Clinton charges that Mr. Obama's plan would leave 15 million people without insurance. Outside experts agree that number is in the ballpark."], Jonathan Gruber of MIT [12/05/07, "The 15 million estimate that [Senator Clinton] used was validated by myself and other experts."] Jonathan Holohan of the Urban Institute [New Republic, 12/03/07, "Obama would still leave about 22 million, 23 million, but he has a mandate for children, about 9 million uninsured kids, so assuming you get most of them, you get pretty close to 15 million."], Len Nichols of the New America Foundation [New Republic, 12/03/07, "Every reasonable model out there . . . will show you that the kind of subsidies that we could do, 50 percent or so, are going to get you half [the uninsured] . . . The way you go from half to 15 [million] is the kid mandate."], and George Miller and Charles Roehrig of the Altarum research institute [New Republic, 12/03/07, "We've done some very crude hand calculations that suggest that the estimate of 15 million uninsured under an Obama-like plan (no individual mandate, coverage of all children, incentives) is in the right ball park."].

Bob is certainly free to disagree with these experts, but where is the validity in launching the steep charge that "HRC has no grounds for alleging that O's would leave out 15 million people"? (emphasis added).

3. Reich's statement that Obama's plan "puts more money up front" than Senator Clinton's plan is not accurate.

Senator Clinton's plan includes the most detailed financing framework of any of the Democratic plans. She has committed an up-front investment of $110 billion per year and has made the affordability of healthcare a centerpiece of her proposal. Bob says he wants details from Senator Clinton, but then praises Senator Obama for "proposing a reinsurance mechanism for catastrophic illnesses" for which he has offered virtually no details at all. A robust reinsurance mechanism is very costly and could, depending on its design, swallow up the majority of the $65 billion that Senator Obama has committed to his plan. Bob attacks Senator Clinton for lacking specifics, and yet claims with confidence that the Obama plan "contains sufficient subsidies to insure everyone who's likely to need help," when his plan contains fewer financing details to determine what it could or could not do. I understand that it is hard in a campaign season to adjust and calculate the moving parts of a comprehensive health care plan. Indeed, I admire all three of the leading Democratic candidates for putting out health care plans that far surpass what any Republican candidate has ever put forward in terms of coverage or detail. But I cannot understand or fathom for the life of me, how Bob could level such harsh critique on the detail in Senator Clinton's plan when there is less detail in Senator Obama's plan.

4. Reich's harsh criticism of Senator Clinton on enforcement is an unfair damned-if-you-don't, damned-if-you-do critique and misses the clear political origins of this critique.

In 1993-1994, then-First Lady Clinton and the White House policy staff put out each and every detail on how each component and enforcement measure of their health care plan would be addressed. She was widely criticized for dictating every detail instead of leaving room to work collaboratively with Congress. But now, when she responds to this lesson learned and says she will have effective enforcement but wants to work with Congress to reach a consensus on the most effective way possible, she is criticized as well. Let's be honest, folks: the argument that Senator Clinton's approach means she is not committed to enforcement was something created for the purpose of a political critique. Senator Obama criticized Senator Clinton for not having details on enforcement at the very same time that he had not (from everything I have been able to find) personally spoken of any details as to how he would force non-compliant parents to pay their share of premiums for their children.

It certainly appears that for months and months neither Senator Edwards nor Senator Obama truly believed that this level of detail was a sign of conviction for supporting a child health requirement or an overall health requirement. As a factual matter it is clear that they rushed out details only after Senator Obama launched critiques at Senator Clinton - a point made far too little by the press. At that point, it seems clear to me that each had to personally talk about the details of his enforcement measures to minimize exposure to being seen as hypocritical for criticizing Senator Clinton. Again, I understand that political campaigns are a contact sport and candidates will feel compelled to make such critiques against a front-runner. But why in the world would this lead Bob Reich to make the non-plausible case that Senator Clinton is stooping low on the enforcement issue? Besides, she and her campaign have put forward ideas to use schools and hospitals to register the uninsured and to work with employers to automatically enroll uninsured employees and withhold a small portion of their wages to pay for premiums [AP, 11/20/07]. So where is the beef?

5. On Social Security.

There is no question that Social Security faces a long-term financing shortfall. Senator Clinton has argued that 1) we should fix Social Security in the context of returning to fiscal responsibility, 2) that we will need to have a bipartisan process like was done in 1983 to reach an economically and politically viable solution, and 3) that it is not right for Democrats to start asking even upper-middle class families and seniors to consider tough choices on Social Security when most Republicans still are fighting tooth and nail to ensure that we continue providing large tax relief to the most well-off Americans and when little is being done to try to recoup the billions in tax revenue we lose from corporate tax avoidance and offshore tax havens.

What is so objectionable about this position? First, if our nation is not taking steps to increase our projected national savings, then it is hard to say that we are better preparing our country as a whole to deal with the baby boom retirement challenge. Second, history has shown that leadership in creating a bipartisan process is very often what it takes to make significant improvements in the solvency of Social Security and Medicare, as we saw in 1983 and 1997. I do not understand how--in an article where Bob is accusing Senator Clinton of "stridency and inaccuracy"--he can simply assert that "a commission will likely call either for raising the retirement age (that is what the Greenspan's Social Security commission came up with in the 1980s) or increasing the payroll tax on all Americans." How does he know that? And if Bob is so sure, he should also inform (and I guess to be even-handed criticize) Senator Obama, who wrote in his fine book, The Audacity of Hope, that "[t]he problems with the Social Security trust fund are manageable. In 1983, when facing a similar problem, Ronald Reagan and House Speaker Tip O'Neill got together and shaped a bipartisan plan that stabilized the system for the next sixty years. There's no reason we can't do the same today" (p.182). Senator Obama repeated this argument on This Week with George Stephanopoulos on May 13, 2007.

And third, I think it is reasonable to want to ensure that progressive leaders do not bargain against themselves and that we require mutual sacrifice from the most well-off among us before we ask for a contribution from working families and seniors. While Senator Clinton has taken privatization off the table and expressed a strong disagreement with raising retirement age, she has certainly left room for a truly constructive bipartisan solution.

Bob is most upset that Senator Clinton has criticized the proposal that Senator Obama has at times spoken favorably of to entirely eliminate the payroll cap. He even states that "the cap doesn't have to be lifted all that much to keep Social Security solvent - maybe to $115,000." [This statement is so factually incorrect that I will assume it was just a typo. Raising the payroll cap to that level would cover only a modest fraction of the solvency gap.]

As to the idea of lifting the payroll cap entirely or even to a level like $140,000: while I certainly think that this idea is far better than what many conservatives propose for solvency, I have never believed it is the most progressive way to move forward. If you lift the cap to $115,000, as Bob suggests, you may hit some very young professionals who are doing quite well. But you also would hit many people who just happen to live in high income areas or be in the senior part of their careers. For example, in high-cost areas like New York City and Chicago, a lot of families that make $100,000 to $115,000, especially those with several children, are not "upper class" and are struggling with stagnant wages and spiraling health, energy, and college costs just like many other families. If the cap were lifted to $115,000, as Reich suggests, NYPD lieutenants and NYC fire captains would face a tax hike of more than $1,000. If you raised the cap to $140,000, that NYPD lieutenant would be set back $1,500 and the fire captain would face a $2,600 tax increase. In addition, small business owners and the self-employed at that income level would face even higher tax hits, because they pay both the employee and employer side of the payroll tax.

In my book The Pro-Growth Progressive (November 2005), I offered a far more progressive idea: impose a small surtax on all income-wage and investment income - above $200,000 or higher (I would set the threshold today above where I pegged it then). This is one of several solvency ideas that are more progressive than simply raising the payroll cap and it wouldn't take a penny from the fire and police officials mentioned above. Senator Clinton is choosing to keep her options open, but has not ruled out considering such measures as part of a bipartisan process to address Social Security's long-term challenges.

Finally, while issues of "conviction" are certainly matters of opinion, let me register my strongest possible disagreement with Bob's harsh and unfounded charge that Senator Clinton and her campaign lack conviction about anything. I could describe her bold plan to combat climate change or her push toward providing paid leave by 2016, her universal savings agenda or her detailed plan to provide economic opportunity to young minority men. But consider just health care alone. You can love or criticize Senator Clinton's role in the health care plan in 1993-1994, but one thing that is beyond question is the degree of courage and conviction she displayed in that bold effort. How many of our leaders have ever put so much on the line to do something so important for so many Americans? And to come back in 2007 and not shy away from the issue, but put out a plan that calls for $110 billion in up-front costs and an individual requirement - even knowing the attacks she would face - hardly deserves that unfounded claim.

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