NDA erred in making Arvind Subramanian its Chief Economic Adviser
It appears that people in India who recommended him to the post were bamboozled by his college degrees.
In his recent book, Of Counsel: The Challenges of the Modi-jaitley economy, Government of India’s former Chief Economic Adviser Arvind Subramanian criticises the voters of Uttar Pradesh for their choices and terms their vote for the National Democratic Alliance as a “paradox of citizens voting against their economic selfinterest”. He compares them to voters in America and asks, “For example, why do poor white males vote for the Republican Party and President Trump when the policy agenda either has no benefits to them (tax cuts for the rich) or is positively harmful (undermining Obamacare and welfare benefits more broadly)?” It is clear from Subramanian’s writings and interviews that he detests the NDA, the political formation that ensured his ascent to high office.
In reality, President Donald Trump’s tax plan has cut down on subsidies to extremely rich people in Hollywood and New York City, while providing relief to the everyday American. In the past, these wealthy people were able to claim their local property taxes and state income taxes as itemised deductions on their federal income tax filings. This translated to regular people in low tax states subsidising the ultra-rich people who lived in high tax states ruled by politicians characterised by extreme levels of corruption and fiscal irresponsibility. Trump’s tax plan put an end to this scheme, while at the same time increasing the limit for standard deductions. Since most people who are part of the middle class and poorer sections of society did not pay local taxes in excess of their federal standard deduction limits, they did not itemise their deductions, but used the standard deduction while filing their taxes. As a result, Trump’s tax plan gave a break to the poor who had been forced to subsidise the rich for many years.
On the other point that Arvind Subramanian has raised, Obama’s healthcare plan, one only has to look at the statements of its architect, Professor Jonathan Gruber of Massachusetts Institute of Technology, in order to understand the true nature of the legislation. In a video that has surfaced, Gruber shows utter contempt for the voters as he explains the passage of Obamacare, “So despite the fact we thought we might get this as part of the law, it was going to be dead. Until a second Massachusetts hero arose, John Kerry. John Kerry said, No, no, no, we’re not going to tax your health insurance. We’re going to tax those evil insurance companies. We’re going to impose a tax that if they sell health insurance that is too expensive, we’re going to tax them. And conveniently, the tax rate will be the marginal tax rate on the income tax code. So basically it is the same thing: we just tax insurance companies, they pass on higher prices that offsets the tax break we get into the same thing. It is a very clever basic exploitation of the, of the, lack of economic understanding of the American voter.”
This was no off the cuff remark, but a statement that Gruber repeated over and over again in various settings. In another video that has been dug out, Gruber brags about Obamacare, “That passed because American voters are too stupid to understand the difference [between the taxes on the public and the taxes on the insurance companies].” In yet another video, he is seen stating, “Lack of transparency is a huge political advantage” and “basically, call it the stupidity of the American voter or whatever, but basically that was really really critical to get the bill passed.”
Gruber was not just another ordinary economist working on Obamacare, but was the architect of the legislation. According to the New York Times, “It is his work that convinced the Obama administration that health care reform could not work without requiring everyone to buy insurance.” Princeton sociologist Paul Starr condemned Gruber’s position as “groupthink” and stated that Gruber was pushing for it because “it’s his baby”. Gruber explains why they resorted to deception to pass the bill. In his own words it was because “I’d rather have this law than not.”
Empirical data highlights the fact that Obamacare has been a monumental disaster. Soon after the government legislated that everyone must purchase health insurance and ensure profits for insurance firms, the insurance companies decided to cash in on their good fortune by promptly raising the premiums to unaffordable levels and imposing deductibles so high that the insurance plans were rendered practically unusable for most people who had purchased these plans. As an example to provide an insight into the effects of the legislation, insurance plans before the passage of Obamacare cost around 125 dollars a month for a 40-year old man, and this covered doctor visits as well as inpatient treatment on the payment of 15 dollars as co-pay per visit. Under the new system, not only does the insurance premium for a similar patient cost around 475 dollars a month, but the insurance kicks in only after the patient has paid up 10,000 dollars towards treatment.
The fact that Arvind Subramanian has been unable to comprehend the basic details of Obamacare and Trump’s tax plan means that he is punching way above his intellectual weight. He is the kind of gullible American voter that Gruber had in mind when he made his remarks about the stupidity of the American voter. This then raises the question as to how someone who lacks an understanding of economics and is swayed by political rhetoric such as describing Trump’s tax plan as “tax cuts for the rich” without any basis in facts, became India’s Chief Economic Adviser.
It appears that people in the Indian government who recommended him to the post were bamboozled by his college degrees and were overawed by the idea that his degrees were proof of his intellect and understanding of the Indian economy. Nothing could be farther from the truth. In reality, a university degree from a so-called top ranked university in UK or US is merely a certificate that one has been a good student—that is, a student who has obediently turned in homeworks and demonstrated an exceptional ability to memorise and regurgitate everything that has been taught in the classroom. The higher the degree, the greater the confidence with which we can say that the candidate fits this mould. This obedience and compliance is important for the universities as they prepare their students to carry forward the agenda of the European and American establishment around the world. This fact manifested itself a few years ago when Arvind Subramanian advocated that the US use WTO to act against India.
If there is a lesson for those in the Indian government that the mistake of appointing Arvind Subramanian can teach, it is that British and American universities impart fluff to their students while shepherding them into a pattern of what Starr has described as “groupthink”— clearly, a thought process in which every thought is to carry forward the agenda of one’s political masters in the West—and that Government of India needs to stay away from such people instead of making them the stewards of the Indian economy.
Arvind Kumar can be reached at arvindk@uchicago.edu