The Next Budget Fights
Since last Friday night's budget deal, much of the reporting on the budget assumes that even bigger fights lie in the future.
Maybe and maybe not.
The agreement reached on Friday pretty much establishes a bottom line for the next few fiscal years, with a possible adjustment to increase the amount so that the current level of spending is annualized. That should not be controversial.
It is likely that the Tea Party will want its riders considered again, however this will likley occur in the regular order of business, with the House passing them, the Senatte stripping them and the House accepting the Senate's amendments or sending it to Conference Committee. Hardly a Battle Royale.
The debt limit legislation may be a stiking point - however two ways out are likely.
The first is the appointment of a renewed Fiscal Commission with the Senate Gang of Six, with six House members to balance and Vice Presidential leadership - this time with adequate staffing. The task would be to consider the Fiscal Commission plan, the Ryan Roadmap, the soon to be released Obama plan and possibly the Bipartisan Policy Center plan and to come up with legislative language to be voted up or down by each house.
The second is to simply deny that debt limitation legislation is unconstitutional under the 14th Amendment, which says that all debts must be paid. The language is fairly plain and, if relied upon, could be the basis for an executive order directing the Bureau of the Public Debt to disregard further limits.
I don't see either house having a majority with the stomach to default on the debt and before it happens, I suspect the second option will get serious discussion.
Much has been made about the urgency of entitlement reform. That is all talk and no reality. Entitlement reform is never urgent as long as the credit markets don't make it urgent and so far they have not. No one is in danger of not getting paid just yet. Indeed, the time for Medicare and Medicaid reform has not come. There are still too many questions about how consumers will respond to the health care reform and how the markets will respond to these questions.
Right now, opponents of reform are hanging onto the hope that mandates will be ruled unconstitutional or that the House Republicans will succeed in repealing the ACA. So far, the market, in a fit of wishful thinking, is still open to these possibilities - if only because if the economy tanks again a Republican may be elected who will repeal the Act, however bad the GOP field looks now.
Once these possibilities are gone, the world will take a look at how pre-existing condition reforms will shake out. Unless current mandate levels are perceived as adquate to keep people insured (it is doubtful that the current climate would allow them to be strengthened), the financial markets could push the health insurance market into bankruptcy or send them to the Treasury in hopes of a bailout. Either scenario means defacto and probably dejure single-payer. I suspect that before that happens, however, AHIP will suddenly begin supporting a public option for anyone who can't get insurance, subsidized by a broad based tax increase on the condition that mandates and pre-existing condition reforms be repealed.
The broad based tax increase will likely take the form of a payroll tax, a Value Added Tax or a business receipts tax (which would preserve exclusions for providing coverage for employees and possibly even retirees). The same kind of tax would undoubtedly include a fix for Medicare and Medicaid funding as well. Enacting such fixes before this question is settled is pretty far fetched, considering most health care analysts know that this storm is coming. Any such tax fix will likely be part of comprehensive tax reform, including reform of the Corporate and Individual Income Taxes.
Much is being made of the coming fight over tax policy. There need not be such a fight.
No one has seemed to notice that, even though 23 of the Senate seats up for election are currently held by Democrats, the prospect of Tea Party nominees makes taking the 13 seats required a slim prosect. Indeed, of the Republican Senate seats up for grabs, half could result in a Tea Party nominee, including Arizona. If Gabby Giffords can hold a press conference and speak a coherent sentence, the GOP will lose John Kyl's open seat to the Democrats. Meanwhile in Maine, Senator Snowe is almost assuredly to be challenged and the smart money should be on her switch in parties, possibly taking Senators Collins and Murkowski with her into the Democratic caucus.
If the GOP can't pick up the White House or 13 Senate seats (net), they have no leverage on tax policy, provided President Obama plays it smart.
In 2010, the ongoing depression tied his hands on playing hard ball on taxes. The GOP successfully leveraged the economy to hold him to his promise to not let tax cuts expire for any family making under $250,000 per year. A strong economy, which he needs for reelection anyway, means he can safely disregard this promise. When this promise was made, the economy had not crashed and we were not facing the prospects of trillion dollar deficits. The voters will understand, as for the middle class, a $20 per week tax increase in a growing economy is hardly crippling to any family budget, compared to the revenue it can bring in on the higher ends.
If Obama were to withdraw his promise to preserve the (upper) "middle class tax cuts" no other entitlement reform is essential. The Republicans would have to drop their promise to make the 2001/2003/2010 tax cuts permanent at all costs with no negotiation. Indeed, if the economy is down, President Obama should still play hardball. Liberals will vote for him anyway and in a down economy, he will already lose most independents. Either way, the perception that he is fine with the status quo will force the Republicans to compromise. Not doing so almost assures that they have the upper hand - even though, given their electoral prosepects, they don't deserve it.
Maybe and maybe not.
The agreement reached on Friday pretty much establishes a bottom line for the next few fiscal years, with a possible adjustment to increase the amount so that the current level of spending is annualized. That should not be controversial.
It is likely that the Tea Party will want its riders considered again, however this will likley occur in the regular order of business, with the House passing them, the Senatte stripping them and the House accepting the Senate's amendments or sending it to Conference Committee. Hardly a Battle Royale.
The debt limit legislation may be a stiking point - however two ways out are likely.
The first is the appointment of a renewed Fiscal Commission with the Senate Gang of Six, with six House members to balance and Vice Presidential leadership - this time with adequate staffing. The task would be to consider the Fiscal Commission plan, the Ryan Roadmap, the soon to be released Obama plan and possibly the Bipartisan Policy Center plan and to come up with legislative language to be voted up or down by each house.
The second is to simply deny that debt limitation legislation is unconstitutional under the 14th Amendment, which says that all debts must be paid. The language is fairly plain and, if relied upon, could be the basis for an executive order directing the Bureau of the Public Debt to disregard further limits.
I don't see either house having a majority with the stomach to default on the debt and before it happens, I suspect the second option will get serious discussion.
Much has been made about the urgency of entitlement reform. That is all talk and no reality. Entitlement reform is never urgent as long as the credit markets don't make it urgent and so far they have not. No one is in danger of not getting paid just yet. Indeed, the time for Medicare and Medicaid reform has not come. There are still too many questions about how consumers will respond to the health care reform and how the markets will respond to these questions.
Right now, opponents of reform are hanging onto the hope that mandates will be ruled unconstitutional or that the House Republicans will succeed in repealing the ACA. So far, the market, in a fit of wishful thinking, is still open to these possibilities - if only because if the economy tanks again a Republican may be elected who will repeal the Act, however bad the GOP field looks now.
Once these possibilities are gone, the world will take a look at how pre-existing condition reforms will shake out. Unless current mandate levels are perceived as adquate to keep people insured (it is doubtful that the current climate would allow them to be strengthened), the financial markets could push the health insurance market into bankruptcy or send them to the Treasury in hopes of a bailout. Either scenario means defacto and probably dejure single-payer. I suspect that before that happens, however, AHIP will suddenly begin supporting a public option for anyone who can't get insurance, subsidized by a broad based tax increase on the condition that mandates and pre-existing condition reforms be repealed.
The broad based tax increase will likely take the form of a payroll tax, a Value Added Tax or a business receipts tax (which would preserve exclusions for providing coverage for employees and possibly even retirees). The same kind of tax would undoubtedly include a fix for Medicare and Medicaid funding as well. Enacting such fixes before this question is settled is pretty far fetched, considering most health care analysts know that this storm is coming. Any such tax fix will likely be part of comprehensive tax reform, including reform of the Corporate and Individual Income Taxes.
Much is being made of the coming fight over tax policy. There need not be such a fight.
No one has seemed to notice that, even though 23 of the Senate seats up for election are currently held by Democrats, the prospect of Tea Party nominees makes taking the 13 seats required a slim prosect. Indeed, of the Republican Senate seats up for grabs, half could result in a Tea Party nominee, including Arizona. If Gabby Giffords can hold a press conference and speak a coherent sentence, the GOP will lose John Kyl's open seat to the Democrats. Meanwhile in Maine, Senator Snowe is almost assuredly to be challenged and the smart money should be on her switch in parties, possibly taking Senators Collins and Murkowski with her into the Democratic caucus.
If the GOP can't pick up the White House or 13 Senate seats (net), they have no leverage on tax policy, provided President Obama plays it smart.
In 2010, the ongoing depression tied his hands on playing hard ball on taxes. The GOP successfully leveraged the economy to hold him to his promise to not let tax cuts expire for any family making under $250,000 per year. A strong economy, which he needs for reelection anyway, means he can safely disregard this promise. When this promise was made, the economy had not crashed and we were not facing the prospects of trillion dollar deficits. The voters will understand, as for the middle class, a $20 per week tax increase in a growing economy is hardly crippling to any family budget, compared to the revenue it can bring in on the higher ends.
If Obama were to withdraw his promise to preserve the (upper) "middle class tax cuts" no other entitlement reform is essential. The Republicans would have to drop their promise to make the 2001/2003/2010 tax cuts permanent at all costs with no negotiation. Indeed, if the economy is down, President Obama should still play hardball. Liberals will vote for him anyway and in a down economy, he will already lose most independents. Either way, the perception that he is fine with the status quo will force the Republicans to compromise. Not doing so almost assures that they have the upper hand - even though, given their electoral prosepects, they don't deserve it.
posted by Michael Bindner at 5:01 PM
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