Passing Health Care Reform: Political Rationale Versus Public Sentiment

It has been argued by Democrats that they must pass Health Care Reform, having devoted a year to the undertaking, in order to prevent a backlash from the electorate in November.  This is the perceived, stated cause for the 1994 election landslide.

The reality is the Democrats sealed their fate in the coming election by pursuing an unpopular health care reform plan while Americans were more concerned by job losses and the rising deficit.  The 2010 election will result in record Republican gains regardless of whether the Health Care Bill passes because a majority of voters:

• Do not like the Obama plan
• Do not appreciate the political tactics used to advance and potentially pass the bill

Damn the Torpedoes

Efforts to pass the current Health Care Bill fly in the face of voter fiscal concerns, clear opposition to its content and recent political events which have been catalyzed by the health care proposal.  These include:

• The formation of the Tea Party movement born out of revulsion over bailouts, deficit spending and the perception of an out-of-control Government
• State elections in Virginia and New Jersey which reversed the Democratic landslide of less than a year earlier
• The election of a Republican to the Massachusetts Senate seat which had been occupied by the Democrats for more than 50 years

Political Cover and Pro Forma, Accounting Reality

This week the CDO issued its preliminary finding that the proposed Bill will reduce the deficit over a 10 year period.  The ruling has provided wavering Democrats with political cover.  If passed, though, the details of this manipulation will come to be understood by the electorate.

• On a pro forma basis the Health Care Plan will materially increase taxes, the deficit and unfunded entitlement liabilities
• The Bill includes non-health care proposals, including the nationalization of student lending, added to obscure the actual cost of the Health Care Plan
• The Bill increases taxes during an economic crisis and high unemployment.  Raising taxes to pay for a new entitlement does not produce savings nor is it an act of fiscal responsibility
• Taxes begin immediately and are assumed to generate revenue for 10 years whereas health care benefits do not begin for four years.  The CDO’s rigid methodology of calculating costs has been manipulated to generate the impression of a savings.
• The CDO’s methodology does not take into account the dynamic effect of new taxes and Government intervention within the private health care sector.  Economic activity, growth, job-creation and tax revenue will be negatively affected by the Bill to an extent ignored by the CDO analysis

A Tradition of Unconstitutional Public Policy

This blog’s editorialized concern over Obama’s election originates from historical familiarity with The Great Depression and Franklin Delano Roosevelt.  FDR used our countries worst economic downturn to implement public policy initiatives which were economically devastating at the time of passage and created a legacy of flawed institutions, including Social Security and Fannie Mae, which increasingly threaten the nation’s solvency. 

Many components of the New Deal, including the National Industrial Recovery Act and Social Security (as originally articulated), were unconstitutional.  The Constitutional impediment to FDR’s social agenda prompted an attempt to circumnavigate the document by “packing the court”.

President Obama has similarly used the current economic crisis, which resulted in a temporary 60 seat Senate majority, to attempt implementation of a social agenda every bit as transformational and unconstitutional as that undertaken by FDR.

Should the Health Care Bill pass, it will be challenged on legal grounds and I expect it to be overturned as the Government is not authorized to force Americans to buy anything, including health insurance, via Federal edict. 

It Is Not 1935

At the time Social Security was adopted the United States was a very different place:

• There was no Federal social safety net
• The human suffering of The Great Depression was sufficiently widespread and debilitating that Government relief was perceived to be defensible
• There was no similar, pre-existing entitlement which could be evaluated to determine whether the proposed program was sustainable

The Health Care Bill is being proposed in a starkly different world:

• There is a large social safety net which many Americans believe is excessively large and expensive
• Our free market system has produced societal wealth gains which make the present suffering of people impacted by The Affordable Mortgage Depression incomparable with that of The Great Depression.  As an example, people aren’t living in “Hoovervilles” nationwide
• Most Americans are concerned by fiscal irresponsibility demonstrated by the Government and are more interested in reducing borrowing and spending then they are adding new, unaffordable entitlements 
• Both Social Security and Medicare have demonstrated the Government’s inability to control their costs and each is hopelessly insolvent

Why Passage of the Health Care Plan May Not Produce Health Care Reform

The Health Care Bill’s proposed implementation plan may be its biggest impediment to becoming permanent.  The Democrats expect beneficiaries to become loyal supporters of this new entitlement ensuring its survival.  This is the lesson of Social Security and Medicare.

But these programs began providing Americans with services immediately.  The Obama Plan does not benefit voters for years.  As such, the next two national elections will largely be referendums on the Health Care Bill, the mechanism by which it was passed, the deals bartered to ensure its adoption and the many unappealing specifics of the program. 

The Health Care Bill is unpopular now.  When its details become public this displeasure will intensify.  Paying taxes for the unwanted program while accruing no benefits will exacerbate the angst.

I expect the Health Care Bill to eventually be deemed unconstitutional, as was much of the original New Deal, but barring this possibility, there is the material chance that voter backlash during the next two national elections will force its revocation or material revision.  

Finally, the nation's looming insolvency, driven by unfunded pension obligations which cannot be fulfilled, will force a dramatic reduction in entitlement benefits.  The timing of this inevitability is unknown.  But Health Care, as the newest addition to the social safety net, may not fare well next to the more established "third rails" of American politics.  The Obama Plan could be rolled out only to be gutted by the very programs he is attempting to emulate and the deficits his Administration is proactively accruing.  This would be political irony.