Obama Plan to Include Individual Health Care Mandate?

Ezra Klein blogs that he was able to confirm that Barack Obama’s health care plan, which we’ll get a preview of in his budget on Thursday, will include (or at least allow for) an individual mandate requiring all Americans to obtain health insurance. As I have written repeatedly, and as recently as last week in this space, President Obama’s vision for health care reform made a mandate inevitable, no matter what he said during the campaign. If Ezra is right and Obama does give way on this point, it would represent his largest reversal to date, as this was one of the few actual policy differences he had with Hillary Clinton during the primaries. For those of us who sat through all of their 20 or so debates and watched this issue get hashed out over and over again, this is a pretty major development. Adopting a mandate will make it a lot more difficult for Obama to argue that he isn’t pursuing a government takeover of health care, and he’ll have a hard time explaining away his stunning flip flop. This wasn’t one of those issues where Obama made a convoluted statement that could be interepreted multiple ways, he was absolutely unequivocal.

Take, for instance, this exchange from the Austin, Texas debate last February. Clinton tells Obama that there’s no way he can achieve universal health care without a mandate, and Obama offers a pointed criticism of the concept of a mandate in response. This was just based on a quick search on my part. There’s plenty, plenty, more where this came from.

Here’s an excerpt from the transcript:

SEN. OBAMA: Number one, understand that when Senator Clinton says a mandate, it’s not a mandate on government to provide health insurance; it’s a mandate on individuals to purchase it. And Senator Clinton is right; we have to find out what works.

Now, Massachusetts has a mandate right now. They have exempted 20 percent of the uninsured because they’ve concluded that that 20 percent can’t afford it. In some cases, there are people who are paying fines and still can’t afford it, so now they’re worse off than they were. They don’t have health insurance and they’re paying a fine. (Applause.) And in order for you to force people to get health insurance, you’ve got to have a very harsh, stiff penalty. And Senator Clinton has said that we will go after their wages.

Here’s the video. The relevant part starts around the two minute mark:

Jindal’s Moment

In addition to this being President Obama’s first speech to a joint session of Congress, it’s also Bobby Jindal’s chance to introduce himself to a large national audience in delivering the Republican response. According to the Washington Post, Jindal will be delivering the speech from the governor’s mansion in Baton Rouge, which is more or less a typical way to deliver the response. I think he would have been better off taking a page out of Christine Todd Whitman’s book. Back in 1995, when she was the tax cutting governor still in good graces with the party, she delivered her response in front of an audience in the New Jersey state assembly chamber, which mitigated the natural advantage that President Clinton had by delivering a speech in front of Congress with all its pageantry.

I’m still waiting to see how Jindal performs as governor, and see his views fleshed out more, but what I find most appealing about him is that he is undeniably brilliant. I watched Jindal’s performance on “Meet the Press” this week, and it was refreshing to see a Republican who was actually able to provide a detailed defense of his decisions and policies. At one point, David Gregory grilled Jindal about his decision to reject some unemployment money from the stimulus package because it would require permanent changes to state law that would impose obligations down the road. Gregory quoted Sen. Mary Landrieu saying that Jindal was wrong. “Her point being, you could insert a sunset clause when this has to go away, but it would certainly be beneficial at a time when you’re in economic stress,” Gregory said.

Here was Jindal’s response:

GOV. JINDAL:  That’s great, except the federal law, if you actually read the bill–and I know it was 1,000 pages, and I know they got it, you know, at midnight, or hours before they voted on it–if you actually read the bill, there’s one problem with that.  The word permanent is in the bill.  It requires the state to make a permanent change in our law.  Law B–our employer group agrees with me.  They say, “Yes, this will result an increase in taxes on our businesses, this will result in a permanent obligation on the state of Louisiana.” It would be like spending $1 to get a dime.  Why would we take temporary federal dollars if we’re going to end up having a permanent program?

And here’s the problem.  So many of these things that are called temporary programs end up being permanent government programs.  But this one’s crystal clear, black and white letter law.  The federal stimulus bill says it has to be a permanent change in state law if you take this state money.  And so within three years the federal money’s gone, we’ve got now a permanent change in our laws, we have to pay for it, our businesses pay for it.  I don’t think it makes sense to be raising taxes on Louisiana businesses during these economically challenging times.  And what it shows is what we’re going to do in the stimulus is we’re going to look at every program, every dollar.  If it makes sense for Louisiana, makes sense for our taxpayers, we’ll use those programs and dollars.  If it doesn’t, like on Friday we said, “This doesn’t make sense for us.  This is not a good deal for us.” It makes–my job is to represent Louisiana’s taxpayers.  Makes no sense for us to take temporary federal dollars and create permanent state obligations.

Transcript here. Video here.

One thing I would say is that, perhaps because he has such a command of the details, at times he tends to speak a bit too fast and drop wonky terms. I think that could turn some people off from his message, and that’s something he’ll need to work on as he matures as a politician. He’s smart, yes, but does he come across as likeable enough to connect with a national audience? We’ll see how he performs tonight.

The Great Obamaflation

On March 14, 1980, President Jimmy Carter gave a televised speech from the East Room of the White House in which he told the American people that “persistent high inflation threatens the economic security of our country” and that the “dangerous situation calls for urgent measures.”

A Time cover story on his speech explained: “his task was not just to proclaim another new anti-inflation program but to calm a national alarm that had begun to border on panic.” Inflation, the magazine observed, was “rapidly becoming Carter’s most dangerous political liability.”

As lawmakers and commentators debated whether President Obama’s $787 billion economic stimulus package would effectively combat unemployment and stagnation, less attention was paid to whether it would help trigger something more pernicious.

“I think a major inflation is a really big danger of where we stand now,” John H. Cochrane, a professor of finance at the University of Chicago’s Booth School of Business, told TAS. “It’s going to hurt all of us. A big inflation will come with economic chaos on a scale we haven’t begun to see yet.”

It would also hurt President Obama’s political standing in a way that a deepening recession may not.

“He is probably going to be able to avoid blame for the recession for a long time because it started on Bush’s watch,” Rep. Paul Ryan (R-WI), who raised alarms about stagflation in a recent New York Times op-ed, said. “But I don’t think he’ll be able to avoid blame for the inflation that may follow.”

A series of government policies designed to boost the economy and stabilize financial markets have made the prospect of inflation much more likely. To start, the federal government is facing deficits projected to be above a trillion dollars for the foreseeable future. When this is combined with the stimulus package, the multiple bailouts, the actions of the Federal Reserve Board, and the trillions in liabilities the government is taking on by purchasing troubled assets that could go bad, it means the federal government will end up with an unprecedented level of debt.

Cochrane explained that while right now, there is an appetite for U.S. Treasury bonds as jittery investors seek safe havens for their money, at some point, the demand will subside and the government will have a difficult time finding buyers for its debt. This problem will be exacerbated because with the global economy suffering, America won’t be able to depend on other nations, especially Japan and China, to absorb the Treasury bonds as they have in the past.

When this point comes, either the Obama administration will have to raise taxes by a crippling amount, or the Fed will have to literally print money in order to buy up the debt. The likely result is the type of stagflation America experienced during the Carter years.

Cochrane, who wrote about this prospect as part of a recent critique of the stimulus package, said that America could see double-digit inflation for a period of several years.

In a speech last week at the National Press Club, Fed Chairman Ben Bernanke said, “we see little risk of unacceptably high inflation in the near term; indeed, we expect inflation to be quite low for some time.”

While this may be true in the near term, it’s unlikely to remain this way over time. Bernanke’s mistake, Cochrane said, is to think of the standard type of inflation that results when too many dollars are chasing too few goods — a problem not likely with the anemic demand we’re experiencing in the economy. However, a scenario in which there are too few buyers of U.S. debt is a different beast entirely.

“We usually can say that the Fed can just take care of this problem [by raising interest rates],” Cochrane said, but the central bank would be under tremendous pressure not to, because such action would further cool an already weak economy.

Even putting aside the political pressure, the Fed wouldn’t be able to operate effectively in this type of inflationary environment anyway.

“Once you have a flight from U.S. government debt, there’s nothing the Fed can do about it,” he said, since the Fed’s operations are based on trading government bonds. “If people don’t want more U.S. Treasury debt, then the Fed is out of ammunition.”

Unlike other types of inflation, this scenario would also have major foreign policy implications. If the Fed were to print money to buy up bonds with inflated currency, it would essentially mean that the U.S. government was defaulting on its debt, which would be an international relations headache given the substantial amount of U.S. debt that is owned by other countries.

Ryan said that our problems are made even worse by the looming $56 trillion entitlement crisis.

“What we didn’t have after the Great Depression and the Carter years was the entitlement explosion,” he said. “So you’ve got unprecedented borrowing in the credit markets because of the stimulus and deficits and right after that you have an explosion in spending in these unfunded liabilitiesâ€_.Fundamental monetary policy leads you to conclude that we are baking inflation into the cake. It’s not going to happen now, it’s going to take a while, but it is going to come.”

President Obama organized a “fiscal responsibility summit” on Monday to address the nation’s long-term debt, and he said the budget he’s releasing on Thursday would slash the deficit in half by 2013. But he’ll have difficultly following through on such promises given the continued demand for bailouts and his ambitious domestic agenda, not to mention resistance from Congressional Democrats.

Ryan said that now is the ideal time for Republicans “to become the party of sound money again.”

As part of that effort, he said that he carries around a 50 billion dollar bill from Zimbabwe in his wallet to educate citizens in his Wisconsin district about what can happen if a country neglects its currency, and he recently gave a talk on the subject at a local high school.

“They don’t really know what you’re talking about at first,” he conceded. “But as soon as you start explaining the consequences of inflation, people understand what you’re talking about.”

By the fall of 1980, inflation was still high, despite President Carter’s calls for fiscal austerity and restraint among average Americans, providing a ripe target for Ronald Reagan.

“We don’t have inflation because the people are living too well,” Reagan charged in their presidential debate. “We have inflation because the government is living too well.”

President Obama may still be enjoying high approval ratings, but by pursuing policies that are sowing the seeds of our next crisis, he could be writing his own political obituary.

Obama Using Fiscal Summit to Promote Health Care Plans

In watching the introductory remarks to the White House “fiscal responsibility summit,” it became clear that this media stunt is largely aimed at setting the stage for Obama’s health-care agenda.

In his speech, Obama said that health care is “the single most pressing long-term fiscal challenge we are facing by far.”

His director of Office of Management and Budget, Peter Orszag, speaking ahead of Obama, declared, “Health care reform is entitlement reform. The path to fiscal responsibility runs directly through health care reform.”

Of course, both Obama and Orszag are correct that health care is our biggest fiscal challenge, but the problem is that their idea of “reform” will drastically augment our entitlement crisis. Even if one were to buy into the unrealistic savings Obama promises as a result of rationing care, increasing the use of IT, and improving access to preventative care, those imagined savings will be offset many times over by plans to provide subsidies for every American to acquire health insurance.

When you cut through the rhetoric, what Obama is saying is that the only war to rein in entitlements is to expand them.

Obama and Social Security

The New York Times is reporting that liberal Democrats are already resisting efforts by the Obama administration to do something about Social Security, and that in response, Obama shelved plans to announce a Social Security task force at today’s White House “fiscal responsibility summit.” If this report is accurate, that would actually make the summit even more of a farce than it is already shaping up to be, given that there’s no way to address this nation’s long-term fiscal nightmare without dealing with Social Security. 

Who Do You Mean By “Many”?

In a story on the phony NY Post cartoon controversy, the local news channel WPIX reports:

NEW YORK (WPIX) — Outrage and protests continue to mount over The NY Post’s controversial cartoon interpreted by many as comparing President Obama to a chimpanzee that was shot and killed by police in Stamford, Connecticut last week.

Emphasis mine.

It turns out the “many” mentioned in the story are Al Sharpton and Julian Bond. Plus it notes that NAACP members see the cartoon as “an invitation to assassinate the President.”

It seems like a good time to remind everybody that, in contrast to the harmless cartoon, people have actually died as a result of Sharpton’s racial and anti-Semitic incitement.

Obama’s Fuzzy Budget Math

President Obama is expected to give us the first summary of his budget this Thursday, but the administration has already leaked some of the broad components to the press, including the pledge to reduce the $1.3 trillion deficit by more than half to $533 billion by the end of his term in office.

At first glance, it’s difficult to see how his math adds up. The Obama administration expects to reduce the deficit by allowing Bush tax cuts to expire on wealthier Americans and saving money in Iraq and Afghanistan. But according to a Tax Policy Center analysis (a group whose work was frequently cited by the Obama campaign during the election), Obama would only be generating $68 billion in additional revenue by 2013 compared to maintaing all of the Bush tax cuts. Also, in FY 2008, the entire cost of the wars in Iraq and Afghanistan was $188 billion. In other words, even if we reduce our presence in both countries to zero and roll back the Bush tax cuts on the wealthy, it doesn’t get the deficit to under $1 trillion under the most charitable of assumptions. In reality, Obama just announced an increase in our pressence in Afghanistan and even during the campaign, he spoke of continuing non-combat operations in Iraq. So while the total cost of the wars is likely to go down, it won’t bottom out to zero. Plus, his own tax plans come with a price tag, and during the campaign, the Obama team boasted that it would keep tax revenue at a lower rate than prevailed during the Reagan administration.

In addition, President Obama wants to establish universal health care, and in every state that this has been attempted, costs wildly exceeded projections. This doesn’t take into account the costs of any future bailouts, stimulus packages, or other foreign entanglements. And of course, such analysis does not take into account the fact that the weak economy is certain to put a drain on tax revenue over the time period in question, and at the very minimum render any sort of deficit projections useless.

But this is good. It’s part of being a chief executive. President Obama will put out a series of numbers setting clear budgetary goals, and if his numbers don’t add up (which we know they won’t) he’ll be held accountable.

The Mandate Trap

The New York Times reports on a series of regular health care policy meetings that have been taking place in the Senate between insurers, doctors, hospitals and business groups and staffers for Ted Kennedy. According to the article, there is an emerging consensus forming around the need for an individual mandate requiring that all Americans obtain health insurance.

During the Democratic primaries, one of the few major policy differences that existed between Obama and Hillary Clinton surrounded mandating the purchase of health care, and Obama argued fervently against the idea. However, his position was always untenable. Obama’s campaign health care plan called for requiring insurance companies to cover everybody who applied for insurance, regardless of risk factors or preexisting conditions. Yet every state that has tried this in the absence of a mandate has seen a mass exodus of insurance companies from the state, because healthy people make the rational decision to exit the insurance market, and insurers are stuck with the oldest and sickest patients. 

Obama wants to create a government-run insurance exchange in which individuals are given subsidies to purchase insurance, and given choice among private plans and a government option modeled after Medicare. The idea is to steer people to the government option over time, but in the near term, he needs private insurers to participate in the exchange to give him cover so that he can argue that he isn’t imposing government health care, and that consumers will have a real choice. Insurers will not cooperate with him unless he reverses his campaign position and supports mandates. So, he’ll likely have to come out in favor of them.

However, were Obama to propose an individual mandate, it will complicate matters for him from a public relations perspective. For one thing, opponents would have an endless amount of video clips from his debates in the Democratic primaries in which he passionately argued against mandates. Furthermore, an individual mandate is the most controversial and unpopular element of any universal health care proposal, and it makes it harder to argue that you aren’t supporting government-run health care when you are having the federal government require that everybody purchase health insurance. It can also be attacked as a giant handout to big insurers, since government is requiring that Americans purchase their product.

The mandate trap may end up proving the most effective way for conservatives to defeat Obama’s push for government-run health care.