Beyond Health Care

David Leonhardt makes an effort to get at the domestic policy differences between Barack Obama and Hillary Clinton that go beyond the health insurance mandates issue. According to Leonhardt, Clinton is a great fan of, er, Clintonian initiative that involve narrowly targeted efforts to alter incentives. Obama, by contrast, is more influenced by behavioral economics research that tends to suggest a blunter approach may work better. He illustrates the point with an example from retirement policy:

Her retirement tax credit, for example, would match the first $1,000 saved by couples making less than $60,000. For those making from $60,000 to $100,000, the match would be 50 cents on the dollar. To Mrs. Clinton, these policies are more efficient than old-style bureaucracy and less expensive than across-the-board tax cuts. [...] The problem with Mrs. Clinton savings plan, according to the Obama view, is that many people won’t save even when they are offered subsidies to do so. After all, many workers who are eligible for 401(k) matching funds don’t take advantage of them now.

So Mr. Obama would instead require companies to deduct money automatically from their employees’ paychecks and place it in a savings account the employee owned. Employees could opt out of the program. But if they did nothing, they would end up saving money. It’s an idea that comes directly from academic research showing that savings rates have jumped when individual companies have adopted such plans.

I'm definitely with Obama on this specific question. I'm not sure, though, that it really works out as a general account. Leonhardt, for example, tries to shoehorn the mandates issue into this frame but I don't think I'm convinced that's really what's going on there. My impression is that at the end of the day you'd actually have a similar group of people shaping economic policy in either person's administration.