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Six good Obama economic policies

I have been fairly aggressive in my recent criticism of the Administration. I figure it’s time I say something positive about good things they are trying to do.

Here are six of President Obama’s economic policies that I support. Several come with caveats.

  1. Make
    [some of] the Bush tax cuts permanent: The President proposes to make permanent the individual income tax rate cuts enacted in 2001 and 2003 for the 10%, 15%, 25%, 28%, and part of the 33% brackets. This is good.
    • Caveat: He proposes to allow the other part of the 33% bracket to increase to 36%, and for the 35% bracket to increase to 39.6%. I oppose this.
  2. Index the Alternative Minimum Tax: The AMT is screwed up. For the past ten years Congress has annually “patched” the Alternative Minimum Tax so that it doesn’t affect millions of new taxpayers. The President proposes to permanently indexing the current AMT parameters for inflation. This is good.
  3. Slow out-of-control health care cost growth: The President argues that cost growth is the core problem to be solved by health care reform. Out-of-control health care cost growth (1) leaves those with health insurance with less money available for other things; (2) prevents millions of people from being able to afford health insurance; and (3) contributes to the unsustainable growth of Medicare and Medicaid spending. The Beltway health care reform debate usually focuses on only the uninsured, ignoring the other symptoms and, more importantly, the underlying cause. Kudos to the President.
    • Caveat: Despite his Administration’s claims, the President did not propose policies that would have significantly slowed this cost growth. He identified a problem and then did not propose an effective solution.
    • Caveat: Congress ignored the President’s problem definition and again just tried to expand taxpayer-financed coverage for the uninsured.
    • Caveat: The pending legislation would dramatically increase long-term health care spending through the expansion of third-party payment for health insurance.
  4. Slow the growth of Medicare spending: The President has proposed modest policy changes to slow the growth of Medicare spending. Medicare spending is unsustainable and its growth must be slowed to prevent fiscal collapse.
    • Caveat: We need to slow Medicare spending growth even more than the President has proposed.
    • Caveat: He proposed to spend those savings on a new health care entitlement, undoing all the fiscal policy good of slowing spending health care growth. <forehead slap>
    • Caveat: I would slow the growth of different parts of Medicare. The President is primarily squeezing Medicare Advantage plans. I would make beneficiaries pay higher cost-sharing and have more means-testing, and I would squeeze fee-for-service Medicare providers (hospitals, physicians and nurses, nursing homes, home health providers, medical equipment providers, the whole ball of wax).
  5. Approve Free Trade Agreements with South Korea, Panama, and Colombia: In this year’s State of the Union the President said “We will strengthen our trade relations – with key partners like South Korea and Panama and Colombia.” These are the three nations with whom the U.S. has Free Trade Agreements pending Congressional approval. I assume with this language the President means he will submit to Congress these three FTAs and push Congress to enact them this year. This is good and long overdue.
    • Caveat: If he means something else by “strengthen our trade relations” then he’s playing a game.
    • Caveat: I’d like to say the same thing about the global free trade negotiations based in Doha, but his language was so vague I cannot draw a positive conclusion.
    • Caveat: He did almost nothing to advance free trade and free capital flows in his first year.
  6. Expand nuclear power: The President now supports the expansion of nuclear power: “And we’re going to have to build a new generation of safe, clean nuclear power plants in America.” His recent budget proposed significantly expanding financial support for the construction of new nuclear power plants.
    • Caveat: He opposes using Yucca Mountain in Nevada as a repository for nuclear waste but offers no alternative solution.
    • Caveat: Some suggest his support is contingent on enactment of a cap-and-trade bill. I see no evidence of this.

The packaging caveats in (1) and (4) are important. If Congress packages policy changes to slow Medicare spending growth with policies to increase health spending, then the result is worse than doing nothing. Similarly, if the legislative result of making some of the Bush tax cuts permanent is to cause other tax rates to go up, that’s bad.

(photo credit: Official White House photo by Pete Souza)

By | 2017-05-23T19:06:28+00:00 Saturday, 20 February 2010|

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