The Issues
“Like Goolsbee, Liebman is known as an academic economist with a centrist streak,” The National Journal reported, referring to Austan Goolsbee, a prominent Obama economic adviser who is the chief of the newly-established Economic Recovery Advisory Board.
“Liebman has a reputation for avoiding stark ideological positions and preferring empiricism to rhetoric.”
In his studies at the Kennedy School, Liebman has said that tax policies tend to help people with very high or very low incomes, while the middle class bears most of the burden.
Social Security
Liebman, who worked on Social Security proposals for the Clinton administration, served as Obama’s chief Social Security adviser throughout the campaign.
In 2002, he advocated partially privatizing the Social Security system in The Distributional Aspects of Social Security and Social Security Reform, which he co-edited with Harvard economist Martin Feldstein. (The New York Times has said the conservative Feldstein “may well be the most influential economist in Washington, even though he has not worked there since 1984.”)
In the 2005 Nonpartisan Social Security Reform Plan, Liebman joined former McCain adviser Maya MacGuineas and former Bush adviser Andrew Samwick to look at Social Security and “see if we could develop a reform plan that we could all support.” The plan suggested progressive changes to taxes and benefits and included required personal Social Security accounts. “The plan also illustrates that a compromise plan can contain sensible but politically unpopular options,” the authors wrote. Among their politically risky ideas were raising the retirement age and making recipients convert their account balances to annuities.
Personal accounts have been criticized for putting lower-income people at a disadvantage — exactly the problem Social Security was created to solve. But Liebman has defended the idea.
"The amount of income-related redistribution in Social Security is a lot less than people think," he told The New York Times in 2005. "If you get the details right, you can design a personal-account retirement system in which groups with high risks of poverty in old age come out at least as well as with the current system."
Health Insurance
In their September 2008 paper “Simple Human, Complex Insurance, Subtle Subsidies,” Liebman and co-author Richard Zeckhauser investigated behavioral reasons for why people failed to enroll in health insurance plans. They said people without insurance were not “crafty calculators” who have figured out they will pay more for insurance than the cost of the health care they would get from it. Rather, the authors suggest that people don’t get insurance because it seems complicated, and if they don’t have it already they don’t make an effort to change the situation. “If we are right, efforts to expand insurance coverage should focus more on finding ways to automatically enroll people into a default health insurance plan than on punitive financial incentives,” they wrote.
Reducing Health-Care Costs
While 2008 GOP presidential nominee Sen. John McCain (R-Ariz.) criticized Obama’s health-care plan as being too costly, the Obama camp insisted cost-cutting measures were built into the plan. In a May 2007 memo, Liebman joined Obama advisers David Blumenthal and David Cutler to describe three ways in which they believed the plan would reduce costs:
- Using new technology including electronic medical records to make care more efficient.
- Offering incentives for individuals and small business to buy into larger health insurance pools to cut down on administrative costs for health insurers.
- For patients with chronic illnesses, the Obama plan would coordinate care among many specialists — again, relying on electronic medical records. This would mean people with chronic illnesses get better care with less money wasted.
The writers of the memo argued that these cost-cutting measures could save between $120 billion and $600 billion per year, but estimated that the overall number will be close to $200 billion. They said the universal health care plan means the federal government will pay between $50 billion to $65 billion in additional costs than it currently has been. The plan proposes to pay for this by repealing the Bush administration tax cuts for the top two tax brackets.
Poverty and Slums
Liebman has focused on poverty and inequality during the course of his career. In one Brookings Institution paper, Liebman helped show that low-income individuals save more when offered matched IRA or 401(k) plans. The study was co-authored by Peter Orszag, Obama’s choice to head the Office of Management and Budget, and Brookings vice president William Gale.
Liebman was praised for a 2001 study he did with Harvard’s Lawrence F. Katz and Princeton’s Jeffrey R. Kling. The three interviewed people living in slums — an unusual tactic among economists — in a report concluding that slums were emotionally and physically damaging to the families that lived in them. “That insight runs counter to current public policy,” The New York Times wrote, “which tries to improve life in the slums by spending millions on police, schools and jobs.”
“Either it was the neighborhood that caused the problem, or the innate characteristics of the people themselves,” Liebman told the Times. “We had no credible way to convince someone that it was the neighborhood until we did this research.”
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