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How Obama Stumbled on Health Care

Editor’s note: An excellent analysis of the current political situation in Washington as reported in the Wall Street Journal, followed by Keith Hennessey’s analyis.

http://online.wsj.com/article/SB10001424052970203517304574306323185061360.html

 

More health care stumbling by Team Obama

Kim Strassel once again outshines the crowd in today’s must-read Wall Street Journal column, “How Obama Stumbled on Health Care.”

All Democrats have to do is agree on something.  That they can’t is testimony to Team Obama’s mismanagement of its first big legislative project.  The president is a skilled politician and orator, but the real test of a new administration is whether it can shepherd a high-stakes bill through Congress.

Kim brilliantly identifies four key mistakes made by the President and his team in their health care legislative effort.  I suggest you read her analysis, then return here for my supplement.  Go.  Read it now. 


After six months the Administration is one for three on major domestic legislative initiatives.  They had a quick legislative win with stimulus, but despite all their work to manage macroeconomic expectations, they are fighting a rearguard action against a growing perception that the stimulus has failed.  They rammed a carbon cap bill through the House at some political cost, which now languishes and will likely die a quiet death in the Senate.  And Thursday could not possibly have gone worse for the White House.  The day after the President tried to restore forward momentum with his health care press conference, the press chattered instead about the Cambridge police while Speaker Pelosi and Leader Reid explicitly acknowledged what everyone in Washington already knew:  both legislative bodies may miss the President’s health care deadline.  Nobody expected the Senate to pass a bill before the August recess, but if the House fails as well, then the President faces not just a loss of momentum, but momentum in reverse.  That is why I anticipate a few more twists and turns in the House before the recess.  Who knows – maybe the Speaker can pull things together.

Here are six additional health care stumbles by Team Obama, rounding out Kim’s list to an even ten.

  • They still have not chosen a strategy: Does the President want a Democrat-only bill that pleases the Left and passes the Senate with at most one or two Republican votes?  Or does he want a bipartisan bill at the expense of the Left’s policy priorities?  A bipartisan strategy can work only if the President is willing to negotiate directly with Republicans like Senators Grassley and Enzi, who are not so naive as to think that Senate Finance Committee Chairman Baucus has authority to negotiate for House Democrats or the President.  Senators Grassley and Enzi are experienced enough to know that an early deal with just Chairman Baucus would unravel later in the legislative process when Republicans have less procedural leverage.

Only an up-front negotiation between Republicans and the President can produce a deliverable bipartisan deal, but such a negotiation likely means no public option, no individual or employer mandate, no tax increases except for taxing health benefits (infuriating organized labor), much lower spending and real scorable long-term deficit reduction, and addressing social policy issues that anger some on the Left.  It would be extremely painful for the President to break with his own party on these issues at the front end of the process.

Without Presidential strategic guidance, House Democrats are running hard-left with the Tri-Committee bill as you would expect, while Senate Democrats tug between Senators Baucus and Conrad trying to create a centrist alliance without authority, and Senators Dodd, Rockefeller, and Schumer trying to keep the Senate bill from straying too far to the center.  The result is chaos, confusion, and Democrat vs Democrat battles.

  • They appear to think they control the agenda during a recession: Six months ago a surge of national optimism and stratospheric poll numbers convinced Team Obama that the President would set the policy agenda for 2009.  He has more agenda-setting power than all other American politicians combined, but less agenda-setting power than an economy in severe recession.  Sometimes unwanted external events drive the policy agenda for you (think 9/11, pirates, a financial crisis, Iran and North Korea).  2009 American domestic policy is not about health care reform or climate change.  It’s still about returning the economy to a healthy growing state, and will be until the unemployment rate begins to decline.  For the next several months, the President has less domestic agenda-setting power than the monthly employment report from the Bureau of Labor Statistics.

By claiming that the stimulus is working (you just can’t tell yet) and things will eventually get better (just be patient until next year) while 2.6 million jobs have been lost since January and the unemployment rate continues to climb, the President risks seeming out of touch on the most important domestic policy issue.  Team Obama wants to derive legislative advantage from a serious crisis for long-standing liberal policy priorities. They need to focus on selling their macroeconomic strategy to avoid losing even more ground.  This is beginning to undermine the President’s ability to convince members of his own party to take tough votes.  It is easy to imagine Members of Congress going home in August to talk about health care reform, only to hear their constituents demand to talk about jobs and the still-weak economy.

This relates directly to one of the “perils of spin” identified by Kim:

Selling a huge expansion of government health care in the middle of a recession was never going to be easy.  The Obama team hit on the argument that by adding to the government rolls, it would in fact save money and boost the economy.  Bizarre as this claim was, it became the administration’s prime rationale for “reform.”

  • They ignore the negative economic consequences of health care reform done wrong: In Washington the people who work on health care legislation are usually health policy experts.  Team Obama forgot what Kim points out:  health care reform is as much an economic issue as it is a health policy issue.  While the debate first focused on the health policy question of the public option, it has now expanded to include broader economic policy questions.  The Speaker wants Members to vote on a bill that would result in bigger budget deficits, higher taxes (on small businesses and eight million uninsured people), higher premiums that mean lower wages, a burdensome employer mandate leading to a less flexible workforce, and clunky new government bureaucracies to run it all.  How can Speaker Pelosi expect House Democrats to vote for a bill that hurts the economy when the economy is weak?  They already took one tough economic vote for climate change legislation only to see the Senate apparently ignore it.  Neither the bill’s authors nor the Administration have satisfactory answers to the economic downsides of the specific policies in these bills, and they are losing the policy debate because of it.  In the Bush White House we spent hundreds of man-hours anticipating policy attacks and preparing our responses in advance.  The Obama Team seemed caught off guard when CBO Director Elmendorf said the bills move the deficit in the wrong direction.
  • They are trying to finesse fundamental policy inconsistencies: The President still has not satisfactorily resolved at least three core policy inconsistencies.  Large partisan Congressional majorities do not relieve you of the burden of making a coherent and internally consistent argument for your desired policy change, and the Administration has failed to do so.  The President’s core problem definition is spot-on, but until he addresses these questions he will be unable to close the sale.
  •  
    1. If cost growth is the problem, why begin by expanding gross federal health spending by 16% and creating insurance mandates that will raise premiums?  CBO said the former was a problem last December.
    2. Why did Team Obama predicate both their health and budget strategies on bending the long-term health cost curve down, and then knowingly propose policies that CBO says will instead only raise the cost curve?  What made them think Congress would ignore CBO?  The President correctly defined the underlying problem, but still has not offered a specific and credible solution to long-term private health care cost growth.
    3. The President campaigned against an individual mandate and against taxing employer-provided health benefits.  The Left wants to do the former; moderate Democrats need the latter for a bipartisan deal.  Few know where the President stands today on either policy.  Team Obama cannot finesse these core policy choices and expect legislative progress.
  • They are trying to do it all at once: Team Obama began this process with a surprising inside-the-Beltway tactic, I think to avoid a danger learned during the Clinton Health Plan battles.  They encouraged Chairman Baucus to negotiate deals with insurers, drug companies, and health care providers, then triumphantly announced the support of these special interests at various Presidential events.  It is unclear whether they thought interest group support would help enact a bill, or merely weaken the organized interest group opposition that helped kill the Clinton Health Plan in 1994.  It’s an incredibly cynical tactic, given the President’s campaign against Washington special interests.

But they are repeating one of the Clinton Administration’s core mistakes by trying to do massive health care reform in one big bite.  For 15 years since the failure of the Clinton Health Plan, Democrats pursued an incremental approach.  They gradually expanded Medicaid and created S-CHIP, putting conservatives on the defensive as they argued against incremental expansions of taxpayer-financed coverage to politically sympathetic populations.  Team Obama instead reverted to the all-at-once approach of 1994, and they face some of the same challenges as Team Clinton did then.

Shuffling $1 to $1.5 trillion (that’s 1,000 to 1,500 billion dollars) and creating new individual and employer mandates are massive policy proposals that would fundamentally reorder one-sixth of the U.S. economy.  Redistributing this many resources creates big winners and losers, and those losers will fight legislatively.  We can see this as Democrats argue about how to pay for such an enormous entitlement expansion.  Having locked themselves into budget cutting agreements with various health care interest groups, Team Obama overestimated their ability to sell tax increases to their own caucus.

They must now choose among breaking with organized labor, dialing back their spending desires, reopening these agreements with health care providers, and budget gimmicks.  Congress usually looks first to gimmicks, but the President’s unintentional elevation of the actually honest CBO Director makes that harder than usual.  Anyone who thinks they have a deal should be careful.  If these bills implode, all bets are off, and the probability escalates that prior promises are re-opened or ignored.  (Hospitals:  You’re the deep pockets.  Insurers, Business and Pharma:  They can make you villains again if they need to cut you more to make the budget numbers work.)

  • Speed can kill: They tried to jam it through Congress quickly and failed.  Their strategy was to take advantage of a huge Democratic margin in the House to pass whatever the committee chairs could agree upon, and then either cut a deal in Senate Finance, or rally their new 60-vote Senate supermajority to power through a filibuster with the August recess as a hard backstop.  The strategy was predicated on the President’s tremendous popularity, first year momentum, political muscle, large partisan Congressional majorities, and speed.  The goal was to rush a bill through before anyone had time to analyze it and question the policy choices within.

For two months Washington has assumed that Chairman Baucus would close a back-room deal either with Senator Grassley or his own Democrats on the Finance Committee, and announce the deal the morning of the Senate Finance Committee markup to deny the economic losers time to organize opposition.  This speed-based strategy presumed that partisan loyalty to a popular President would trump serious policy concerns, and it appears to have been a miscalculation.  Congressional Democrats will stretch hard to help a new Democratic President succeed, but they won’t vote aye on any bill just because the White House asks them to, and certainly not when their confidence is rattled by bad employment numbers, an apparently ineffective stimulus, and for some a tough climate change vote.

If the House fails to pass the Tri-Committee bill before the August recess, I think that bill is dead.  The loss of momentum would mean that the safe move for a nervous House Democrat in August would be to tell his constituents, “Don’t worry about me.  I would not have voted for that bill.  I will insist on changes when I go back in September.”  Having heard from his constituents about their concerns, he may then return to Washington in September with a list of changes that must be made to secure his aye vote.

It would be a mistake to predict that the President will fail on health care reform.  He still has enormous resources that he and his team can bring to bear.  He is the most powerful and popular person in Washington.  The country wants to succeed, and most of them want him to succeed.  Many in the press want him to struggle, then succeed.  The policy flexibility that has undermined Congressional efforts so far allows him to cut almost any deal needed to get the political victory of a signed law.  He has a deep support network ready to help him sell his message to an increasingly skeptical public, and as Congress scatters for recess he will soon have the public stage to himself for a month if he so chooses.  He has policy and political goodies to distribute to convince wavering Congressional allies to side with him.  And he has huge partisan Congressional majorities who know their long-term political fate is tied to his.  With all of this at the President’s disposal, it is amazing that his top agenda item is in such trouble.

Don’t believe anyone’s prediction about how this will turn out.  What happens when Congress returns in September is for the moment unknowable.

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July 24, 2009 - Posted by | Federal Government, healthcare | , ,

1 Comment »

  1. Wow, what a wonderful post and blog.

    Your analysis is spot on. As the founder of Small Business Against Big Government (SBABG.org), I’ve seen that our group members have been most concerned with the economic impact of the plan, how it will affect profitability, and therefore growth and job creation. From day one, it looked like a burden and a job killers, so the “merits” (if there are any, and I don’t think there are any as currently constituted) of the plan haven’t even been debated.

    Small Business owners just don’t want any more government intervention in the economy. They were wary of the “stimulus” that went to the presidents pet programs and favored groups, but they trusted his promise that it would prevent unemployment from rising above 8.5%. He used up all his political capital.

    The administration has been very brazed and turned the debate to one where the health care plan would actually help the economy and shrink the deficit, an unbelieveable and outrageous claim that might have been believed in January or February, but not now when people have seen just how good the presidents “prognostication power” or trustworthiness really is (i.e. he doesn’t get credit for either), at this point.

    And the CBO is really holding his feet to the fire and not letting him lie, while undermining his competence and credibility more each day.

    We recently shared with our members two important posts that we’d love to have you wiegh in on (below). We’ll also and will plan on utilizing your blog as a resource as this is the issue that will dominate.

    http://www.sbabg.org/2009/07/20/the-government-health-care-plan-is-sick-and-its-bad-for-small-business/

    http://www.sbabg.org/2009/07/24/thetwo-biggest-fattest-lies-in-the-health-care-reform-debate/

    Thanks for all the work you’re doing.

    SBABG.org

    Comment by SBABG.org | July 26, 2009 | Reply


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