Wacky Objections to an Obama Senate Bill

Greg Mankiw links, apparently approvingly, to a VoxEU post by Willem Buiter and Anne Sibert savaging an Obama-sponsored bill in the Senate. (Cloyingly titled the Patriot Employer Act.)

Felix Salmon has replied quite effectively, pointing out that the bill would not have the kind of disastrous effects the authors suggest, and that their objections are flawed, overblown, and largely trivial.

Mankiw pulls the money quote for his post title: the authors describe the bill as "reactionary, populist, xenophobic and just plain silly." They forgot "distortionary," which is their post’s main basis for fear-mongering.

I just want to point out a couple of blatantly disingenuous parts of Buiter and Sibert’s argument, which to me exemplify how frantic and reactionary the whole post is.

The bill provides a one-percent-of-revenues kickback to employers who fulfill a list requirements. One of those requirements (in Buiter and Sibert’s words, my emphasis) is that:

"[employers] must provide a defined benefit retirement plan or a defined
contribution retirement plan
that fully matches at least five percent
of each worker’s contribution."

Putting aside the question about "fully" matching five percent, or the incredibly low bar that five percent represents: The authors attack this by attacking defined benefit retirement plans (a.k.a. company pension plans)–with some good basis for their objections. But they conspicuously ignore the "or"–the option for defined contribution plans. Presumably they can’t muster any objection to those.

Next, to receive the kickback under the bill, employers must:

pay at least sixty percent of each worker’s health care premiums

The authors’ objection:

tax incentives…that link health
insurance with being employed rather than with being alive, are
distortionary and unfair.

So…because the bill does not promote universal, single-payer health care, it’s a bad bill.

Is Mankiw really endorsing this argument?

The main point, though, is that employers aren’t required to opt in to this program. If they think they can fulfill its requirements for less than 1% of revenues, they can do so–with the manifest benefits (primarily to Americans) that would result for individuals, the companies, the government, and the general public.

Isn’t this exactly the kind of win/win incentive that government at its best (and only government) can provide?



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