Former Clinton and Obama economic adviser Lawrence Summers is one of the leaders of the small but vocal sabotage caucus. But in multiple attempts to disavow the standard economic analysis that supports the tax plan — the centerpieces of which he supported in the past, including arguing that the “business tax system is badly broken” — Summers has been repeatedly debunked.
Now, as a last-ditch resort, using scare tactics, he has claimed that the new tax bill will literally kill people. Arguing outside his area of expertise, he is as misguided on the health consequences of the tax plan as he was on its macroeconomic effects.
His confused argument is that because the government is no longer forcing people to buy health insurance, they are more likely to die. The argument is again at odds with standard economics and mistaken in several ways.
First, if the tax bill reduces federal program participation, it is simply among people who were only on the program in the first place because the Obama administration forced them to buy health insurance that they do not like or want, and fined them if they didn’t buy it. The Senate bill extends some relief to these people by letting them keep their money and make their own decisions.
Standard economics predicts that people are better off when they make choices voluntarily. Some people argue insurance markets are sometimes better off with government mandates, but those conditions are not present in this context.
Instead of using standard economics, Summers conveniently turns to “behavioral economics” to support his opinion. We are happy to celebrate the success of our University of Chicago colleague and new Nobel laureate Richard Thaler on his work on “nudging” people to live better lives. But a nudge is by definition causing people to shift between close-to-indifferent options, because if they have a strong preference (the typical case when it comes to life and death), they will keep doing what they are doing. In other words, you can’t nudge a perfectly happy person into suicide.
Even if behavioral biases were the primary factor to consider, they support decentralized, rather than centralized, decision-making. Bureaucrats, who presumably are not immune to behavioral biases, have too little incentive to overcome biases that affect their rulemaking, because most of the benefits or costs of government regulations fall on the rest of us.
Second, there is little and poor evidence linking insurance coverage to mortality. The best evidence of the effect of insurance on health outcomes comes from two experimental evaluations, the Rand Corp. experiment of the 1970s and the most recent Oregon Medicaid expansion experiment. Although it may seem like a logical conclusion that lack of insurance leads to poorer health, in both studies, researchers were unable to detect any increased mortality effects from differing coverage levels during the study period. A well-known review of the literature on this topic by Helen Levy and David Meltzer of University of Chicago concludes the same. This is potentially partly due to the fact that lack of coverage does not necessarily imply lack of lifesaving care as hospitals cannot turn away emergency-care patients without coverage. The whole point of academic research is to examine issues like this to see if what our gut says is true, and then to inform policymakers and the public. In this case, the science, performed rigorously, shows something that might not be expected. Thus, the studies in medical journals cited by Summers are cherry-picked: they are not representative of what the economics profession has found.
Third, Summers argues potentially higher premiums may prevent consumers from attaining affordable coverage. These predicted premium effects are speculative, especially given how poorly the profession predicted the premium impacts of Obamacare itself. One first order effect of relaxing the mandate is presumably that demand falls, lowering and not raising premiums. However, there may be nonstandard premium effects that operate in both directions: for some people they will rise, and for others, fall due to risk selection. However, when premiums rise, it is taxpayers who pay most of the premium increase, not the subsidized beneficiary, which is why premiums can double in a year, yet still have more poor people get insurance. Thus, even if premiums rise for some as they have recently, it has not resulted in the coverage drops that may otherwise be anticipated because others — taxpayers — are picking up the tab.
Fourth, the mandate may in fact be elevating death rates in some populations. Opioid prescription abuse, which is an urgent concern of the president and Congress, is now the leading cause of death among people under 50. Obamacare’s mandate led to coverage expansions in Medicaid. The Medicaid program is uniquely at risk for worsening the opioid epidemic because of bad program integrity combined with an at-risk population.
Most important, everyone agrees the tax plan will stimulate economic growth, although there is disagreement about how much. Economic growth saves lives, as opposed to killing people, particularly so for the poor, in this country and elsewhere, where it has saved millions, even billions, of lives. The past decade has hampered that progress, but the time has finally come to return to the economic growth, and the improved human conditions, that America has been known for.
Mulligan is a professor at the University of Chicago and author of “Side Effects and Complications: The Economic Consequences of Health-Care Reform.” Philipson is on leave from the University of Chicago, serving as a member of the President Trump’s Council of Economic Advisers.