The Presidential Debate

As an undecided voter in this election, last night's debate did not help me decide. Neither candidate gave me much reason to vote for him. Both seemed to stay on script.

I think the exchange on health care went to McCain, but that is only because I believe that while Obama's proposals for reforming the health care system are superior to his former democratic opponents, ultimately the stabilization of health care costs will depend on a lot fewer mandates. Obama implicitly supports better benefits for the rich - because employees can keep existing plans - and that is something McCain should have caught him on. An employee who gets a Cadillac health plan from an employer - even if they make more than $250,000 would get that still under Obama. That says a lot about Obama's sense of equity. Under the McCain plan, everyone would start out with the same benefit, thus a Cadillac health plan would be funded out of the wealthier person's pocket not the tax code.

The problem with McCain's proposal is that it is hard to explain. It falls into what economists call a "transitional gains trap." Gordon Tullock's wonderful formulation, that we are unwilling to give up a bad thing for something that might be slightly better, fits here. Eliminating the employer deduction for health insurance (which is a remnant of WWII price controls) would introduce more market like decisions into the health care system. A $5000 refundable credit would more than cover the benefit that most employees get from their employer provided health care. But like some other parts of the tax code, that change will be almost impossible to achieve without a big fight.

McCain's opening gambit on housing would be expensive and I am not sure that the incentives in it are in any way appropriate. But I thought that McCain's attack on Obama on the credit crisis was mostly correct. Obama did, as most democrats did, support Fannie and Freddie - which are a base cause of the problems we face - more than most republicans.

I am also concerned about the legitimate comparison between Obama and McCain on legislative record. Obama has none. McCain, while I disagree with some of his record, has a long record on a series of issues. The danger here is not that Obama will not have a set of legislative proposals but that the majority in each house will probably be more successful in rolling Obama on issues than McCain.

I thought both candidates did an adequate job. Both cited too many gotcha vote comparisons. Both were reasonably clear on their priorities. But McCain had the larger task to turn the tide that seems to be working in Obama's favor and there I believe he was unsuccessful.