Why you should care
Remaking failed systems from scratch could be smarter than just tweaking around the edges.
It’s official: Larry Kotlikoff is running for president. “I’m trying to get people around to the idea that we don’t need political parties to decide who is going to run our lives and our country,” the third-party, write-in candidate told OZY earlier today. “This is an ideal time to run, because we have two such terrible choices.” When OZY first caught up with the economist last year, he outlined some of his plans, below, for helping America.
Sunlight pours through the bay window of a Boston condo as a distinguished academic economist talks about his next steps. Larry Kotlikoff for prez, 2016?
Wait, who? You may have missed it, but the guy’s been around before. Three years ago, Kotlikoff launched an abortive effort to take on Barack Obama and Mitt Romney. Obviously, he faded from memory, and fast. But this time around — unlikeliness aside — no other candidate (yet, anyway) has a briefcase so full of specific policy proposals, many of them getting at the heart of Americans’ economic woes, and still more of them touching a relevant nerve: taxes. Kotlikoff’s stump speech: The other guys don’t have ideas that “rock anybody’s boat,” he says. Grab the gunwales!
Kotlikoff is a professor at Boston University, an entrepreneur and a prolific author (17 books and counting). If his name sounds vaguely familiar, it may be because of the recent best-seller he co-authored, Get What’s Yours: The Secrets to Maxing Out Your Social Security . Of course, the 64-year-old hopes people will buy the book to help navigate Social Security’s insanely complicated 2,728 rules — but that they’ll also feel outraged. “Anyone looking at this system should feel sick to their stomach,” he says. Kotlikoff prescribes himself as the balm: He’ll pull the plug on income taxes! Give everyone health care vouchers! End banking as we know it! And launch a national accounting system that would, he swears, force the government to be more honest about the future.
Obviously, third parties rarely win. Kotlikoff certainly won’t. But he has had “a lot of impact already because of his ideas,” says Eugene Steuerle, a tax expert at the Urban Institute think tank — from changing the way people think about Social Security and the transfer of wealth from the young to the old, to filling Paul Ryan’s ear with his policy prescriptions.
Kotlikoff manages to eschew labels — liberal, conservative? Who knows. Republicans invited him to testify in March at the Senate finance committee, where he quipped that the Democrats had invited him the last time. He went on to explain why the United States is bankrupt, i.e., can never pay what it owes on paper. He tangles with big-name economists, like Paul Krugman and Thomas Piketty, whose work, he scoffs, is “not even up to high school standards.” He says, and Paul Ryan’s spokesperson confirms, that he chats with Ryan regularly; one idea from Kotlikoff’s health care plan (vouchers) showed up in Ryan’s proposed fix for Medicare, although Kotlikoff wants them for everyone, not just the over-65 set. But, twist: He didn’t vote for Ryan/Romney — he chose Obama.
The academics don’t all love him: Piketty has criticized Kotlikoff, in turn, for being unable to explain inequality. And Scott Sumner, a professor of economics at Bentley University, chided Kotlikoff for saying the U.S. is bankrupt. “The bond market is clearly not concerned about U.S. Treasury debt,” Sumner wrote .
If he pisses people off, he has one easy label to rest on: the everyman. Kotlikoff grew up in Pennsauken, New Jersey, next to Camden, where his grandfather had emigrated from Kiev and established Kotlikoff’s — Camden’s first, and last, independent department store. Young Larry spent holiday seasons at the store wrapping gifts for customers (it closed in 1981, after three burglaries in one day). His climb to academic fame was rocky — he was pushed out of jobs at UCLA and Yale (he says) and barely survived a year at President Reagan’s Council of Economic Advisers, where his analysis showing that welfare recipients faced a possible 100 percent marginal tax didn’t fit the party line.
I catch up with Kotlikoff at his comfortable but modest Victorian Boston digs. It’s midmorning and he’s wearing a tidy dark gray shirt, gray trousers and loafers, as piles of sooty snow melt outside. Receding gray hair gives away his age, though he’s trim and moves like a younger man. He peppers his speech with about as much economics jargon as he thinks I’ll get, and then tells a good story to explain it if he thinks I don’t.
His adult son, now living with him, has slept in and joins the conversation briefly. The two are collaborating on a new website to guide people through the financial complications of divorce, which Kotlikoff’s just been through (amicably, he swears — he’s about to remarry). Call it a self-help product. One of Kotlikoff’s claims to fame is his financial planning software, ESPlanner : It’s supposed to ease mathematically difficult choices, like figuring out if you’re putting too much money into retirement accounts. The software has been around for more than 15 years and is “much better than anything else,” at crunching through reams of complicated data, says financial planner James Pinney, at Pinney and Scofield. Others, however, find the user interface a challenge.
Which is, perhaps, an apt metaphor. Kotlikoff is undeniably brilliant. But not exactly user-friendly. His amusing, endearing professorial habit — the esoteric mixed with the pithy — makes for a fun interview. But you can see how it’s far from Cruz/Obama rousing rally rhetoric.
His family opposes a presidential run, and Kotlikoff worries about being held up for ridicule. But he might not be able to stop himself. He’s just somad about so many of the systems that comprise American economics, from health care to social security. For him, it’s not about culture wars or foreign wars. “Everywhere you look, you see generational warfare,” he says. “Our children seem to be our enemy … why don’t we just admit that we hate them?”
Taxes: The “purple tax plan ” features a progressive payroll tax, with provisions to support the poor combined with a progressive consumption tax, which everyone would pay — including corporations. Corporation tax would be replaced by a tax on shareholders’ portions of corporate profits. Bonus: no tax returns!
Finance: He would turn financial companies, including your local bank, into mutual funds. Depositors become investors, and the companies don’t borrow money, thus, theoretically, putting an end to systemic risk. He calls it limited purpose banking.
Health care: Forget Medicaid, Medicare or Obamacare. All Americans would receive a voucher for health insurance, with the value based on existing conditions. Total value of the program would be limited to 10 percent of GDP. Want more coverage? Buy it yourself.
National accounting: More than a thousand economists, including 17 Nobel Laureates across the political spectrum, have endorsed his bipartisan Inform Act, which would require the government to report the “fiscal gap,” a comprehensive accounting of future revenue and financial obligations. Bad news: The gap is $210 trillion, 16 times the official debt tally, and compares to annual economic output of just $18 trillion.
Photographs by Dominick Reuter for OZY.