The President’s Budget and Health Care Reform

Published February 4, 2010

Kaiser Health News

President Barack Obama and Democratic leaders in Congress continue to insist that the push for health care reform is far from over. But the release of the president's budget for fiscal year 2011 marks another turning point in the debate, one that means the climb toward passage of the bill — or any bill for that matter — has only gotten steeper.

The problem for those trying to pass a version of the current plans pending in Congress starts with the avalanche of debt the nation is staring at in coming years. From 1789 through 2008, the U.S. government borrowed a total of $5.8 trillion. In 2009, the federal budget deficit exceeded $1.4 trillion. The administration now expects the 2010 deficit to break that record, topping $1.6 trillion. And in 2011, it would only fall to about $1.3 trillion. Thus, in just three years, the debt will have jumped an astonishing $4.2 trillion.

And it will only get worse from there. In 2020, the administration expects total federal debt to reach $18.6 trillion — and that assumes all of the president's budgetary policies are adopted in full, including a health care bill that the administration says will reduce the ten-year budget deficit by $150 billion. The average annual deficit in the president's budget for the next decade is $853 billion, and it would be rising rapidly at the decade's end as the full force of the baby boom retirement starts showing up in the numbers for Social Security, Medicare and Medicaid.

If the country has not gotten its fiscal house in order by then, it will be wrenching to do so at that time. Debt service payments alone will reach $912 billion in 2020, a full 20 percent of all federal revenue collections.

It is now readily apparent that piling up debt at the rates implied by the president's budget would all but invite an economic crisis. At some point, the flood of Treasury debt instruments worldwide would lead lenders to demand higher rates of return for their loans, or perhaps to runaway inflation — or more probably both. The result could be quite devastating to private-sector business investment, productivity and job growth, making it all the more difficult to get out from under the debt spiral that would ensue.

The very real prospect of a looming calamity has gotten people's attention. Economists from across the political spectrum are urging action to reduce the risks associated with out-of-control federal borrowing.

It's not that the president and his advisors don't recognize the problem. They speak frequently about the dangers of business as usual. The problem is that the president's stated solution will never work.

What the administration would like to do is to have Congress pass the health care bill and then follow it up with a bipartisan deficit-cutting plan, put together by a special commission assigned with assembling a medium and long-term solution to the nation's budgetary woes.

The first problem with this sequencing is its unrealistic political calculus. The president and Democratic majority in Congress are exhorting Republicans to cooperate in what will surely be a highly unpopular deficit-cutting exercise — after they have locked into place the most expensive new entitlement program in decades. There is virtually no chance this will work.

The other problem is the planned timing of the debt commission's recommendations and congressional action. The president would like the commission to issue its plan after the November congressional elections, and have a lame-duck Congress vote on it between early November and the start of new Congress next January. So the most far-reaching tax hikes and spending cuts in a generation would be recommended by an unelected commission and passed by an exiting Congress, all in a matter of days and weeks, even as newly elected members are set to take their seats. To say the odds are long is quite an understatement.

Still, congressional Democrats press on and continue their search to put this plan into action. In the wake of Scott Brown's election to the Senate, the latest tactical twist is to pass the health care plan in two bills, not one. The Senate has already passed a health care bill, which is now awaiting action in the House chamber. House leaders are suggesting that they might be able to pass the Senate bill and send it to the president for signature if Congress could simultaneously consider and pass a series of amendments to the Senate bill which would make it more palatable to House members. Moreover, these amendments would be taken up and passed in a reconciliation bill, which means they couldn't be filibustered in the Senate.

It's certainly a novel approach. The problem is that a Senate bill awaiting passage in the House is not a law. Reconciliation measures are supposed to address budgetary matters. How could amendments to something that is not yet in law change outlays or revenues in any rational way?

In normal years, the submission of the president's budget kicks off a new legislative session. The Congressional Budget Office resets its baseline and looks one more year into the future. The congressional budget committees start with a clean slate and write a new budget resolution governing legislation over the coming year.

All that machinery will be cranking up in the days and weeks ahead, making it even more difficult to turn back and try to pass a bill based on last year's assumptions.

The president and congressional majority should take the opportunity a new budget and legislative year brings to rethink how they are proceeding. The nation faces daunting challenges, economically and budgetarily.

There are opportunities for building bipartisan consensus on sensible solutions, including in health care, where both parties could come together to expand coverage and slow the pace of rising costs. But those opportunities will almost surely vanish if Democrats continue to insist on rewriting American health care their way — which is to say in a way that much of the country plainly does not support.

James C. Capretta is a Fellow at the Ethics and Public Policy Center. He served as an associate director at the White House Office of Management and Budget from 2001 to 2004.

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