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I had never heard of Jason Furman until today, when I encountered him twice. First, he shows up on Greg Mankiw's blog, where Greg touts this paper.


In fact, if we turned our irrational health tax subsidies right-side up–by curbing subsidies for higher-income workers and those with more generous health insurance plans–we could raise tens of billions of dollars annually, money that could go toward increasing access to health insurance. Taking it a step further, we could scrap the current deduction altogether and replace it with progressive tax credits that, together with other changes, would ensure that every American has affordable health insurance. In either case, reducing subsidies for pricey plans would likely lead to a health insurance system that includes more cost sharing, promotes more consumer consciousness, and plays a modest, but potentially meaningful, role in restraining health spending.

Then, I saw Jason at this event, on Social Security reform. He and Jeffrey Liebman represented the Democratic Party wonks at the forum.

They seemed quite reasonable, and I continue to say that as a conservative/libertarian I would rather have a Democratic President who listens to Democratic economists than a Republican President who does not listen to Republican ones.

The political economy of Social Security is really weird. Conservatives favor "means-testing" more of Social Security, so that we can reduce the unfunded liability while not hurting the poor. Liberals are opposed to this, because they think that making Social Security "universal" makes it harder to cut benefits. So liberals favor a more regressive system. My guess is that they have the political economy wrong, and that trying to keep benefits high for everyone will mean that they end up remaining high for no one.

The other thing is that liberals absolutely hate using private accounts as the ultimate lockbox. The Liebman-MacGuineas-Samwick plan uses a small "carve-out" account (Washington-speak for a private account funded out of current Social Security taxes) for just that purpose--to make sure that the few remaining years of Social Security surplus are not made available for Congress to squander, as has happened with all surpluses to date. Again, I do not understand the liberals' problem, since this approach makes the funding of Social Security more progressive.

I think that Social Security is one issue where Republican politicians so far have been more receptive to reasonable ideas than Democratic politicians. We'll see whether the LMS proposal generates any momentum. My sense is that most non-politicians see it as a good start, and most politicians see it as a non-starter.

For more on the LMS plan, see Samwick's blog post, with a link to the plan.


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COMMENTS (1 to date)
Matt writes:

Democrats like flat taxing social security for the same reason Republicans like flat taxing income taxes, namely to grow government.

In both cases, the well off, wth more power and influence will choose expanded goverment because at their tax rate, they get a higher rate of return by shifting expenses to government.

National health care eventually appeals to the investment class if it is paid for with a VAT, because health insurance otherwise appears as a corporate expense. Make income tax rate progressive and suddenly unions and management will have the best health care, because it is an expense.

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