Originally published in The Boston Globe
Tuesday, August 15, 2000
THE CANDIDATES' ACID TEST
By Martin and Kathleen Feldstein
"Economic polices will define future for young voters"
For young voters who have grown up during the longest economic expansion in US history, economic issues may not seem as dominant in this election as social questions and foreign policy. But some of the most important differences between the two candidates boil down to their approach to the role of government in the economy.
Young voters should think about how this impacts the candidates positions on subjects like education and health, as well as on more obvious areas like taxation.
A fundamental difference between Governor Bush and Vice President Gore is revealed by their answers to this question: What economic activities should be done by government, and what should be left to individuals and the market?
Because of this difference, the outcome of the election will have a huge impact on the young people who will be concerned both about helping their aging parents and about raising and educating their own children.
Health care illustrates the candidates different philosophies. Bush and Gore agree change is needed to provide better access to health care for all Americans. But Gore favors expanding existing government programs, while Bush would use a private market solution.
Gore proposes to expand Medicaid and related programs that target the poor; Bush would help these families buy their own health insurance, as most of the population already does. Specifically, Bush favors a refundable tax credit to allow people who do not receive health insurance at work to purchase their own.
Bush also supports giving people the opportunity to manage their own health spending. Under his plan, all individuals could set up tax-free savings accounts to pay for day-to-day health expenses, with insurance kicking in if expenditures reach a high level.
Both Bush and Gore favor giving drug insurance to senior citizens, but Bush favors a fundamental reform that would allow seniors to choose from a variety of health plans that include prescription drugs. Gore favors a more costly expansion of Medicare, without addressing overall reform.
We favor medical savings accounts, combined with a high-deductible insurance policy. Giving individuals control over expenditures and an incentive to be conscious of the cost should preserve quality and avoid some of the excessive increases in health care costs that would result from the Gore Medicaid plan. Using private insurance for seniors drug coverage would give them greater choice, maintain drug product innovation, and provide benefits at lower cost.
The same distinction over the role of government affects the candidates approach to the shared goal of improving education. The big issue is whether schools will be held accountable for results.
Bush favors giving a choice to parents whose children attend schools that do not improve enough to meet state student test standards. Parents in these cases could transfer their child to another public school or receive government funding directly, to use for another option. The vice president, in contrast, sides with teachers unions, which oppose school choice.
We are convinced by the evidence from several studies that school choice would improve education overall. Competition raises the quality and performance of schools.
The differences between Bush and Gore over Social Security have probably received as much attention as any other issue. Again, Bush emphasizes individual choice: allowing employees to shift some of their payroll tax to Personal Retirement Accounts that would supplement traditional Social Security benefits. Gore relies on the promise of using future tax revenue to extend the Social Security system and to create a taxpayer-financed IRA-type entitlement for lower-income individuals.
Young Americans understand how relevant this issue is. Surveys show they have little faith in Social Security and react favorably to the kind of proposal Bush has put forward.
The candidates also differ in their proposed use of projected federal budget surpluses. Both agree to set aside the $2 trillion, 10-year surplus associated with Social Security for Social Security only. But that leaves $2 trillion or more. Bush would reduce tax rates for all taxpayers and eliminate the income tax for millions of low-income Americans. Gore would support a much smaller tax cut and use more of the surplus to fund new government programs.
In short, Gore would reverse the philosophy of government initiated by President Reagan. In the last two decades, government nondefense spending has taken a lower share of national output than in the prior two decades, and the private economy has flourished. Young voters should ask themselves whether there is a relationship between this diminished role of government and the strength of the private economy. They have the biggest stake in the outcome of this election.
Martin Feldstein, former chairman of the Council of Economic Advisers, and his wife, Kathleen, also an economist, write frequently together on economics.