Any bid for the Presidency of the United States, from the tight race to the outcome, will surely affect both the U.S. economy and the capital markets at large. The 2012 election is no exception.
Follow our blog series for regular updates on the election and how each candidate’s strategy could impact the markets.
Today’s post focuses on Mediscared? Time for a Reality Check.
While working on a Medicare whitepaper that I hope soon to share with you on OppenheimerFunds.com, I found an article from the Annenberg Public Policy Center’s FactCheck.org, entitled “A Campaign Full of Mediscare.”1 It’s worth reading, even though (especially because?) we all will find some parts of it annoying.
In the article, the authors debunk or clarify the claims and counterclaims both Republicans and Democrats have made—and will no doubt continue to make—as the campaign heats up. As the title suggests, many of those claims are intended to scare us into believing that one plan or the other will deny us reasonable access to healthcare, bankrupt the country, or both. The authors conclude: “We don’t see conclusive evidence that Ryan’s market-based approach will work either better or worse than Obama’s regulation-based system, or that either will work at all.” President Obama’s plan, which uses administrative oversight to reduce payments to providers, requires cuts “too deep to be absorbed without adverse consequences,” and Governor Romney and Representative Ryan’s plan “runs a risk of allowing insurance companies to siphon off younger, healthier seniors and burdening traditional Medicare with the rest,” thereby defeating the goal of making the program fiscally sustainable.
Dipping my toe into equally contentious waters, I’d argue that both sides have promoted equally implausible promises concerning the federal budget. Does President Obama really think we can stabilize our debt burden just by raising taxes on millionaires and without significant and painful spending cuts? Can Governor Romney find sufficient tax preferences to fund large tax cuts without eliminating deductions for such items as home mortgages, state and local taxes, and employer-paid healthcare premiums? As I’ve argued here before, a constructive longer term plan will contain a mixture of these unpleasant changes but will leave us with both our government and our private sectors stronger.
Do I sound cynical? I’m not—far from it! But I do want to draw a few conclusions from these campaign issues:
- First, campaign speeches offer slogans and verbal assaults, not policy analyses. We’ll actually have to do some work to get our facts straight. We’ve all figured out how to surf the internet for the best buys on shoes and airfares; we ought to be willing to do the same for policy analysis. And we’d all better slog through some arguments that make our blood boil a bit.
- Huge policy issues such as healthcare finance, budgetary stability or national defense won’t be resolved by one piece of legislation. Unforeseen events and unintended consequences will force changes in whatever policy direction we set in the next four years. In the U.S. we make policy incrementally.
- Some resolution, however, is essential. Let’s get healthcare legislation and a fiscal plan in place and then live with them, at least until we know what must be fixed.
- Finally, I do agree with both presidential candidates that this election is about more than how we’ll finance retirement benefits or exactly what tax rate we’ll pay on different kinds of income. It really is about what government can and should do to, as the Constitution says, “…promote the general welfare.” If you think about it, it’s pretty great that our political process allows us to make decisions of that magnitude. I hope that’s a decision we will all make based on facts and dispassionate analysis, and not on slogans and unsubstantiated claims.
Read more from the series Election Insights 2012 at http://blog.oppenheimerfunds.com/tag/election2012/