Two Myths About Obama's First Year as President

In the last few days, I've read and heard a lot of Massachusetts-inspired talk that funnels into two complaints about the White House: 1) Obama's mistake in 2009 was that he never focused on jobs; and 2) Obama should have sought a simpler health care plan to get Republican support. I think both these interpretations are wrong.


First there's the idea that Obama messed up by focusing on health care to the exclusion of job creation. Peggy Noonan puts it thus:

"At the exact moment the public was announcing it worried about jobs first and debt and deficits second, the administration decided to devote its first year to health care."

I don't know if this sentence is overly tricky or entirely wrong, but it's definitely something like both. "At the exact moment the public was announcing it worried about jobs first" ... ahem, that's the exact moment we passed a $800 billion stimulus, followed by a $50 billion lifeline for the auto industry, while the Fed spent over a trillion dollars to prop up the housing sector and make banks start lending to businesses. Maybe Obama didn't do enough, but he certainly did something -- and the Republican Party stood almost united against every part of it they could vote for. Steven Pearlstein gets this dead on.

The second myth is that the White House and the country would have been better off if we had passed simpler health care regulation rather than seek a $900 billion bill. These critics think we should have stuck with simple insurance regulation through taxes-- such as banning rescission and rejecting coverage for preexisting conditions. But as Pearlstein writes, the problem with that

is that if you don't require everyone to buy insurance, then there will be lots of people who will wait to buy their policies until they get sick and then demand coverage at the "community" rate. That's a great way to drive up premiums, which in turn will drive even more healthy people to drop coverage, which will raise premiums even further.

To prevent this kind of debilitating "insurance spiral," you could add one more feature -- a mandate requiring everyone to buy at least a basic insurance package. Unfortunately, there are lots of low-income households for which the newly mandated premiums could eat up as much as a half of after-tax income, which hardly seems fair. So you'd probably want to make sure that there's enough competition among insurers to keep premiums down, which is what those government-supervised exchanges are all about. And you'd want to have some subsidies to limit the financial hit to low-income families. To pay for the subsidies, you'd either have to raise taxes or cut spending in other areas.

And hey, that's exactly the $900 billion health care reform plan on the table (er, the cutting room floor).

Obama made mistakes, but the freak upset in Massachusetts is a cause for creative reflection, not creative revisionism, among both Democrats and their critics.

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Derek Thompson is a senior editor at The Atlantic, where he writes about economics, labor markets, and the entertainment business.

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