In Defense of Gruber

Regarding Jonathan Gruber and the Cadillac tax, I think a little historical context will be useful:

1) Our tax system subsidizes employer-provided health insurance. That’s dumb. Pretty much all economists agree that it’s dumb.

2) On the other hand, it’s politically hard to eliminate a subsidy once people get used to it.

gruber3) In 2008, we had an election. The candidates were named Barack Obama and John McCain. Exactly one of those candidates took the politically courageous step of proposing to eliminate the subsidies (and replace them with other subsidies, far more sensibly designed). The other candidate took the low road, leaping to the defense of subsidies he had to know were indefensible, playing to the crowd, and staking all on what could reasonably be called “the stupidity of the American voter” (though I myself would prefer to call it “the inattentiveness of the American voter”). That candidate won in a landslide.

4) Once elected, President Obama’s demagogy came back to haunt him. On the one hand, he knew that you cannot have sensible health care reform without curtailing those subsidies. On the other hand, he’d publicly committed himself to preserving them.

5) Therefore, Obama and his advisors resorted to sleight-of-hand, seeking to offset the subsidies with a new “Cadillac tax” that is the economic equivalent of curtailing the subsidies. This tax kicks in for policies that cost over about $23,000 for a family of four. It would be better if it kicked in for policies that cost anything over about ten cents, but it was still substantially better than nothing.

6) Obama and his advisors — at this point including Gruber — soon realized that it would be politically unpopular to impose the Cadillac tax directly on consumers, but politically palatable to impose it on insurance companies, who would undoubtedly pass it on to exactly the same consumers. There, once again, we see the inattentiveness (or, in Gruber’s unfortunate choice of words, stupidity) of the American voter.

7) So — here we have two different policies with exactly the same effects — tax the consumer or tax the insurance company. Gruber believed that the voters would oppose one and support the other. It does not seem to me, under those circumstances, that it’s especially dishonest to choose the package that you think will sell. If voters have opinions that are completely incoherent to begin with, then neither Gruber nor anyone else can be accused of confusing them. They were, after all, maximally confused in the first place.

8) I do think that those of us who are paid to teach economics have something of a moral obligation to, you know, teach economics. So it would have been better if Gruber, like so many of the rest of us, had made some effort to explain to the public that there is no difference between paying a tax and having a taxed passed on to you. On the other hand, the public is confused about enough different things that we can’t all be explaining all of those things all the time.

9) I want to say this again. If the voters favor a law that says all drivers must be licensed, but oppose a law that says nobody without a license is allowed to drive, then I don’t think it’s immoral to propose the first law instead of the second. That’s basically all Gruber did. I would prefer that he had tried to point out the inconsistency, but Gruber is under no obligation to live by my preferences.

10) Bottom line: The Cadillac tax is a good thing and Gruber found a way to make a good thing politically palatable, without telling any out-and-out lies (as far as I know, he never tried to claim that the tax would not be passed down). I see no sin in that.

11) The real sin was lying to the American people in the first place about the desirability of employer-based insurance subsidies, and doing it just to score political points against an opponent who had, in a burst of responsibility, dared to speak sense about them. That sin is entirely on Obama, not on Gruber.

12) Once he was elected, Obama routinely spoke outrageous and obvious falsehoods about health care policy, most famously “If you like your coverage you can keep it”. I’ve argued elsewhere that this was more of an absurdity than a lie, because he can’t possibly have expected anyone to believe it. After all, if you’re doing nothing to increase the total health care resources available, and if you’re making more of those resources available to some people, then you’ve got to be making fewer of those resources available to some other people — and surely this is obvious to anyone over the age of five. But then maybe I’m underestimating the inattentiveness (or stupidity?) of the American voter.

13) Re the Cadillac tax then, I do wish Gruber had behaved differently, but I cannot say he behaved particularly badly. The (outrageously) bad behavior was all on Obama’s part.

14) But this addresses only one of the many areas where Gruber has boasted about misleading people. I haven’t completely thought through how I feel about all the other instances, though my gut feeling is that some of them are considerably more troubling — the exploitation of quirks in the CBO scoring process, for example. That, perhaps, will be fodder for another blog post.


28 Responses to “In Defense of Gruber”

  1. 1 1 Joseph Zaccardi

    Calling out American Voters for being stupid because they do not understand that taxing insurance companies and removing some subsidies feels like missing the forest for the trees.

    The stupidity of the American Voter is the apparent belief that lobbyists, businessmen, friends, neighbors, family, etc. only act out of selfishness and greed but electing them to government office magically transforms them into altruistic saints.

  2. 2 2 John Hall

    It seems to me that your example of the driver’s licenses is significantly simpler than the case of health care. Aren’t there costs to making the health care system more complicated that don’t easily show up in comparing the effect of different tax and subsidy structures to consumers?

  3. 3 3 Tristan

    @John Hall
    I don’t think Landsburg is conflating them in that way. If he were, he would be genuinely confused why voters can’t understand the equivalence between taxes on one party or another.

    But he’s not confused about why the voters are confused, he knows why: it’s because they didn’t take an intro economics class (and not everyone who passes such a class would even necessarily grok that fact on a deep, meaningful level).

    The reason for bringing up the driver’s licenses is to show how a politician bases their decisions on people’s ignorance of equivalency– the complexity of said equivalency is irrelevant to his point, as long as politicians understand it and voters don’t.

  4. 4 4 Jimbino

    Or Gruber could have cloaked the deceit in religious terms. Once in the realm of religion–ghosts, angels, devils, giants, unicorns, talking snakes and talking donkeys–Americans throw the last vestiges of skepticism and reason to the winds, and they reinforce their stupidity by praying whenever they get the chance.

  5. 5 5 khodge

    If one side has the right to willfully mislead in its public statements, the other side has the right to turn those public statements into soundbites…and to get the press to replay those soundbites.

    In one of the clips I saw, the audience was clearly laughing at the American public being called stupid. I think one would be hard pressed to show that the audience was exempt from Gruber’s generalization.

  6. 6 6 Roger

    Steve, you are over-thinking this. No one supports Obamacare because of how it actually works. The support it because either they like Obama, or they want govt freebies, or they think it is a takeover of the health care industry, or they hate their insurance company for telling them that they have a pre-existing condition. Nobody pays attention to the Cadillac tax.

    Nobody was misled, except maybe the CBO. Obamacare was passed on a party-line vote. Most Democrats were firmly in favor, and Republicans firmly against, regardless of the sort of details that you post about.

  7. 7 7 Ken Arromdee

    “I’ve argued elsewhere that this was more of an absurdity than a lie, because he can’t possibly have expected anyone to believe it.”

    A lie that will only convince people who don’t think it through and is obviously false to people who do think it through is still a lie.

    Whether a falsehood is a lie depends on whether it is told to mislead people, not on whether it is told to mislead competent people.

  8. 8 8 David Wallin

    I applaud consistency. Though, I suspect you’ll get way less grief from “supporting” Gruber than you did “clarifying” Todd Akin.

  9. 9 9 James Kahn

    Treating the presidential election of 2008 as a referendum on Obamacare is an extreme misreading. When the specifics of the proposal became clear, voters were against it. The closest thing to a referendum was the Massachusetts senate race in which Scott Brown was elected almost entirely to take away the 60th vote for the law that was thought to be needed, and which forced the Democrats to use a procedural trick to avoid a cloture vote. The next closest was the 2010 Congressional election in which Democrats were routed.

    Obamacare has never had the majority support of the voters. The spin Gruber referred to may have preserved a few Democrats’ seats in Congress in 2010 by providing some cover for those who voted for it, but did not make the law palatable to more than a minority of voters. It was clearly rammed through despite voter opposition. No doubt most voters do not understand tax incidence, but that was a relatively minor part of the overall picture.

  10. 10 10 David Wallin

    @James Kahn, was not Scott Brown elected (19 Jan 2010) after the Senate approved Obamacare with 60 yes votes(23 Dec 2009)? I believe the manipulation was in the House where they passed the Senate bill after Brown’s election to avoid a vote on the bill coming out of conference?

  11. 11 11 James Kahn

    @David Wallin, as I recall, it was expected that the House bill would have to be reconciled with the Senate bill in conference, and then re-voted on in the Senate. Once Brown was elected, they didn’t have the 60 needed for a regular voted, so they went for the reconciliation ploy that only required a majority.

  12. 12 12 Harry

    Regarding the Cadillac policy tax, maybe that is all Gruber did, if we can pin the deed on him. Indeed, it may be unfair to blame Gruber for this and all other problems in the colossal mess that is Obamacare. Dr. Gruber was a yes man with a long resume, picked to be part of the team of bullshit artists to sell the program.

    When Hillarycare failed to be passed in 1973, the criticism from the left was not that it was a bad idea, but rather that it had been out in full view for critics to pick apart, which it was, not just in the Harry & Louise commercials, but also widely in the media.

    So the Democrats were determined in 2009 not to make the same mistake twice — to have the actual bill subject to public criticism for very long, or, as it turned out, not at all. Before Christmas Eve 2009, everybody was holed up in Harry Reid’s office conjuring up wisdom like the Cornhusker Kickback and the Louisiana Purchase, and no doubt the parties referred to Professor Gruber when the subject of, “How can we fool ‘em this time?”

    Not only did Congressmen have to pass the bill before they read it, the bill itself was unspecific, leaving wide latitude for people like Kathleen Sibelius to direct the fine print operation.

    However, the bill was not entirely opaque to ordinary people. I remember talking to someone who employed ten people that he was considering dumping employee medical insurance once the government took care of the problem. Many I know know that the program includes six years of benefits paid for by ten years of taxes. It seems the more they know, the less they like it, and the more skeptical of Mr. Obama when he speaks.

  13. 13 13 Charles G. Phillips

    Professor Landsburg’s defense of Gruber misses the point. The first question should be: is Gruber’s assertion that the Cadillac Tax fooled a majority of voters accurate? It did not. The ACA has been opposed by a majority of Americans since inception. Democrats who voted for it have been disciplined since its passage and it remains unpopular. It wasn’t the Cadillac Tax, its wasn’t OBM scoring, it wasn’t clever engineering by geniuses like Gruber–it was the control of all three legislative branches by a single party that was committed to a statist agenda.

  14. 14 14 Manfred

    You make a good case, Steve, and I agree with several things you say.
    But, I cannot shake the following feeling: Gruber was not an independent observer, writing from the academic trenches, and analyzing the law with an independent eye, in academic papers. No – he was a hireling, a paid hack.
    You say something about this point in #8) (and #9)). Gruber could have used his clout to teach economics to the masses – real economics, the economics of trade-offs, of social costs, of opportunity costs, of tax incidence. But he did not – he used his advising position to support a lie; he cashed in hundreds of thousands to support a lie.
    He did not use his MIT professorship to teach economics – he used it to support a lie.
    So no – Gruber is not an innocent helper of the Affordable Care Act. He actively participated in the deception, and he chose freely not to educate the public – which he could have, using his (bully?) pulpit as an MIT full professor with tenure. I find this disgraceful.

  15. 15 15 Harold

    Roger: “Nobody was misled” A regular commenter here might not agree.

  16. 16 16 Ken B

    Manfred 14:
    Well said. Gruber was for example writing op-ed pieces without disclosing to the paper or the readers his stake in the game.

  17. 17 17 Al V.

    “No one in this world, so far as I know – and I have searched the records for years, and employed agents to help me – has ever lost money by underestimating the intelligence of the great masses of the plain people.” – Mencken.

  18. 18 18 Ken B

    Murphy has an interesting video compilation, in the trackbacks. Gruber talks — I’d say boasts but YMMV — about “exploiting” the ignorance of voters. That does not sound as benign as Steve suggests under his point 7. He not only fails to dispel ignorance but sees a way to benefit from it, politically and financially, and is able to do so precisely because of his status as an economics professor.

  19. 19 19 Scott D

    “Once he was elected, Obama routinely spoke outrageous and obvious falsehoods about health care policy, most famously “If you like your coverage you can keep it”. I’ve argued elsewhere that this was more of an absurdity than a lie, because he can’t possibly have expected anyone to believe it.”

    What is the purpose of a lie that you expect no one to believe? I see no possible gain from lying, and significant downsides, to lying with the presumption that you will be disbelieved. I think that he lied with the intention of being believed, and indeed, many people did believe.

    “After all, if you’re doing nothing to increase the total health care resources available, and if you’re making more of those resources available to some people, then you’ve got to be making fewer of those resources available to some other people — and surely this is obvious to anyone over the age of five.”

    Steve, you give people far too much credit. These are people who literally do not understand where production comes from or what wealth is. To the average ACA supporter, it is a fairy tale about greedy people exploiting poor people. Presumably in their world, there is enough health care for everyone, but the greedy insurance companies keep it from us, denying coverage and jacking up premiums. Scratch that, concepts like “supply” don’t even register in such a person’s conscious mind. It’s not that they are all stupid, just that knowledge of economics is ridiculed and devalued in many circles.

  20. 20 20 axman

    If you start with the premise that government central planning is a viable way to deal with commerce, what Gruber did in fooling the public was completely acceptable. Personally, I don’t buy that premise, but that’s another matter. However, if we do buy that premise, then Grubers only mistake was admitting this publicly. Anyone who believes in government at all and also calls Gruber out for these events is either a fool or a hypocrite. If bureaucrats simply did what the loudest majority of citizens wanted, how would that work out for us? Of course they must fool the public because the public are fools.

  21. 21 21 nivedita

    Why is “if you like your plan, you can keep it” obviously absurd?

    Firstly, you seem to be conflating health insurance with health care. A typical plan does not guarantee any particular level of health care — that is, it does not, for example, guarantee that you will be able to see your primary care physician once a month. What it guarantees is how much it will cost you when and if you do. If the supply of primary care physicians doesn’t change, and they are seeing more patients, existing patients will see them less often, but that doesn’t mean that their insurance plan has changed. This could even make existing plans less expensive, depending on what happens to the price of a visit.

    Secondly, there are expensive portions of the health care system that are not really resource-constrained. For example, patented drugs. A pharmaceutical company cares about the total amount of sales of the drug, not the per-dose price, because additional doses are relatively cheap to manufacture for many drugs. This means that if additional patients are able to buy the drug because of expanded insurance coverage, this does not necessarily mean that the total amount spent on the drug significantly increases, nor does it mean that existing patients must take fewer doses. In fact, the amount that existing patients pay for the drug may go down significantly. This is also the case for capital-intensive devices in hospitals such as scanners. More patients equates to lower cost per patient, so an increase in health care is associated with a reduced cost per patient.

  22. 22 22 Scott D


    Subsidize a good and watch the price go down (not).

  23. 23 23 nivedita

    @Scott D. Not sure what you’re getting at. That is what normally happens — the net of subsidy price to buyers goes down.

  24. 24 24 Scott D

    remove the word “net”.

  25. 25 25 nivedita

    @Scott D. Why?

    Besides, my original comment contains examples where even the gross of subsidy price can go down.

  26. 26 26 Floccina

    You would think people would expect it by now. SS seems the most obvious case. FICA and matching are cleverly designed to make voter think they pay for it but pay so much for it. Few voters understand tax incidence which allows politicians to hide the tax show the benefit. It is what they do. SS is a welfare program disguised as ponzi scheme so that people would support it.

  27. 27 27 matt foley

    I love all of these references to the stupidity of the American voter, especially in this context, and after a number of commenters have done an excellent job of explaining that Obama and Gruber went out of their way to deceive the people who were ostensibly already in support of the initiative based on the historic 2008 election win. Are we also going to call the voters fools for not knowing what the outcome of a 2400 page bill that was passed without scrutiny through some backdoor maneuvering and really epic bribery would be? Yeah, what a pile of idiots. But in fact, the majority of voters never liked the idea, with quite good instincts, which goes to show that they had enough distrust of these clowns to not support this massive power-grab.

    It’s been well noted above that Gruber was a paid hack, writing in the media while crafting the bill, while getting paid an amount of money so vast that most Americans could retire after collecting it. Yet, we give him a pass on his state exchange vs. federal exchange backtracking and/or the Cadillac plans while glossing over the CBO scoring. Seems to me that spending may be relatively popular, but horrific government deficits that the Bush administration would have been stoned for would have killed off this travesty, but for Gruber’s involvement in that charade. And yet, we write an article, “in defense of Gruber”. Shocking.

  28. 28 28 Bob Murphy

    I realize I’m late to the party, but here’s a long reply I wrote to Steve’s original post.

  1. 1 Good Economics – Outsourcing on Grubergate «
  2. 2 Steven Landsburg on the difference between an absurdity an a lie about Obamacare | Utopia - you are standing in it!
  3. 3 The “Best” of Gruber In One Short Video
  4. 4 The “Best” of Gruber In One Short Video | The Liberty Herald
  5. 5 American People Don’t Know Basic Economics Because Economists Have Misled Them
  6. 6 American People Don’t Know Basic Economics Because Economists Have Misled Them | The Liberty Herald
  7. 7 Two Questions for Bob Murphy | The Liberty Herald
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