Ms. Clinton, why hurt U.S. workers?
The mischievous columnist in me wants to ask: Why is Hillary Clinton trying to lose jobs and lower wages?
My more responsible columnist side quickly adds: Of course that’s not Clinton’s goal. Yet it is the predictable — indeed, it’s the predicted — outcome of two important recent policy pronouncements. First, her call to repeal the socalled Cadillac tax on high-cost health plans. Second, her newfound opposition to the Trans-Pacific Partnership trade agreement.
This is not my economic analysis. It’s the assessment of the Obama administration.
Let’s start with the Cadillac tax on health-care plans that cost more than $10,200 for a single person and $27,500 for families. Beginning in 2018, employers who offer such insurance will have to pay a 40 percent tax on the excess amount.
The theory is that the tax will help reduce health-care costs by discouraging employers from providing overly generous coverage. A second benefit involves the bottom line; the tax will reduce deficits by an estimated $91 billion over the next decade and more than $500 billion in the 10 years after that.
But that’s not because the tax alone will generate so much revenue. It’s mostly because of the third, and, for purposes of this column, most relevant benefit: The Cadillac tax will raise wages.
How’s that? Asmy Post colleague Catherine Rampell has explained, health benefits provided by your employer, unlike your wages, aren’t subject to taxation. That has the perverse effect of encouraging employers to pay you more in the form of tax-free health insurance, less in the form of your actual, taxed salary. The Cadillac tax would reduce that incentive, and, economic theory predicts, raise wages over time as compensation packages shift.
Raise wages significantly, in fact. Jason Furman, chairman of the Council of Economic Advisers, made this point in a speech at the Brookings Institution last week, estimating that the tax “will increase take-home pay by $45 billion per year by 2025.”
That amount, Furman noted, is twice how much the Congressional Budget Office estimates low- and middle-income workers would benefit from increasing the minimum wage to $10.10 per hour.
Translating economic theory into cold hard cash can take time, Furman acknowledged. In the meantime, he observed, lowering health insurance bills “would benefit workers through another channel: by reducing employers’ compensation costs and thereby boosting hiring.”
Which reawakens my mischievous side: Secretary Clinton, why do you want to lose jobs and lower wages?
Same question on trade. Clinton says that her concerns about the TPP involve its failure to crack down on currency manipulation and the agreement’s alleged capitulation to pharmaceutical interests.
This is bunk. If anything, the deal is stronger on both pharmaceuticals and currency than it was when Clinton, as secretary of state, proclaimed it the “gold standard” of trade deals and predicted it would “help create new jobs and opportunities here at home.”
Then, administration negotiators were pressing for 12 years of intellectual property protection for so-called biologic drugs, the standard in the United States, and, indeed, the standard in a 2007 Senate bill cosponsored by . . . Sen. Clinton.
The final deal grants monopoly rights for between five and eight years — less generous to pharmaceutical companies.
As to currency manipulation, including enforceable sanctions for currency in the TPP, it is a poison pill as Clinton well knows— and knew when she was talking about how the deal would create American jobs — was never going to be part of the final agreement. The new agreement, though, includes a side deal lacking in teeth but that at least requires member countries to report on and discuss currency practices.
“I wish more had been done,” said C. Fred Bergsten of the Peterson Institute for International Economics, a leading hawk on currency manipulation. “But it is churlish, or worse, to imply that the issue has been left unattended.”
Still, let’s assume both criticisms are valid. Are they serious enough to justify opposition? As Furman noted in a different Brookings address, the most comprehensive economic analysis of the TPP found that it would increase U.S. incomes by 0.4 percent yearly by 2025, or $77 billion.
Clinton wrote in her memoir, “Hard Choices,” that “it’s safe to say the TPP won’t be perfect — no deal negotiated among a dozen countries ever will be — but its higher standards, if implemented and enforced, should benefit American businesses and workers.”
What has changed since then? You don’t have to be a mischievous columnist to suggest an answer.