The Reform Backlog

Published May 14, 2014

National Review Online

President Obama came into office promising sweeping change in domestic affairs. But nearly six years into his time in office, it is clear that, on many critical fronts, his presidency will be one of treading water. As a consequence, his successor will find a target-rich environment of issues ripe for serious reform.

The president’s supporters reject the characterization that little of consequence has been accomplished during this administration. They point especially to the Affordable Care Act as a major legacy achievement. But even Democrats generally admit that progress has been stymied on many issues since the health law passed in 2010. They blame the House GOP for this, saying Republicans as a group chose to block the president instead of working with him since taking control of the lower chamber in 2011.

Republicans have a different take on recent history, of course. From their perspective, the president chose to draft and push a partisan health plan in 2010 because, well, he could. He didn’t need Republican support to pass Obamacare, and he preferred not to have it, so Democrats could trumpet what passed as solely their achievement. He followed that up by scuttling a budget deal with House Speaker John Boehner in 2011 out of fear of alienating his party’s base, and then he ran a reelection campaign predicated on exacerbating partisan tensions. In his second term, he has gone out of his way to unilaterally rewrite legislation, especially on health care, so as to avoid working with Republicans.

With these competing versions of recent events in mind, it is easy to see why major bipartisan legislation has been hard to come by.

So, for now, the president can claim to have enacted a significant health-care law, but very little else, and the health-care plan he did enact remains on shaky political ground.

Meanwhile, the passage of time has only made more urgent the need for action on a range of other issues. This provides an opportunity for President Obama’s successor to reshape large areas of domestic policy.

Fiscal Policy: At the top of the list of urgent matters is the shabby state of the nation’s finances. The federal government has not had in place a multiyear framework for fiscal discipline since President Bill Clinton and House Speaker Newt Gingrich reached a five-year agreement in 1997. The Congressional Budget Office recently projected that debt under President Obama’s 2015 budget will never fall below 70 percent of GDP. In 2008, the debt stood at 39 percent of GDP. The steady and unrelenting growth of entitlement spending is already placing significant pressure on the rest of the federal budget, even before the full force of the retirement of the Baby Boom generation has hit. This is the most important reason that the defense budget is under such pressure these days. It will be imperative for a new president to put in place a fiscal plan that puts the nation’s medium- and long-term fiscal house in order.

Entitlements: It will not be possible to put the budget on a sustainable trajectory without serious entitlement reform. The last major Social Security legislation was enacted more than three decades ago, in 1983. In the past two decades, disability payments have soared, to the point that the trust fund is nearing exhaustion of its reserves. Moreover, numerous studies have shown that the Social Security tax-and-benefit structure discourages continued work by able-bodied seniors — the worst possible policy to have in place at this time. With a surge of new retirees about to enter the program, it is imperative to modernize Social Security to reflect economic and demographic reality.

Meanwhile, Medicare’s excessive reliance on government-administered pricing in the traditional fee-for-service program continues to distort the provision of medical care and spread inefficiency. The program needs cost discipline, but of the kind that comes from the bottom up, not the top down. In a reformed program, the beneficiaries could drive more efficient spending by selecting for themselves higher-quality and lower-cost care.

Taxes: It has been apparent for many years now that the United States is becoming less competitive in part because of a dysfunctional tax code. The last major overhaul, in 1986, has been undone by a steady stream of ad hoc amendments. The result is a law that rewards consumption over savings and offshore investment over domestic production. A broadening of the tax base, along with lower rates, has the potential to increase the size of the U.S. economy by trillions of dollars over the next decade.

Welfare: This year marks the 50-year anniversary of the War on Poverty. It has also been 18 years since enactment of the landmark welfare-reform law of 1996 that emphasized work and self-sufficiency. The existing array of low-income support programs has achieved one important goal — that of boosting the consumption of the nation’s most disadvantaged households. But progress toward the larger goal, of helping lower-income households climb the earnings ladder into the middle class, has been minimal, at best. It is long past time to reform these programs to provide a secure safety net while providing strong work incentives and better opportunities.

Government Reorganization: The federal government is woefully out of date. Corporate America has gone through at least three major phases of restructuring since 1980, using technology to downsize bureaucracy and improve customer service. But the federal government operates much as it did 40 years ago, just with more layers of bureaucracy. Both President Bush and President Obama sought but were denied authority to reconfigure parts of the executive branch by moving agencies among departments, eliminating duplication, and improving public service. For the next president to succeed, he or she must make this effort a top policy priority from the get-go, not an afterthought.

An agenda aimed at tackling these issues would be ambitious enough, but it will almost certainly need to be augmented to include energy and immigration reform — two areas of law that everyone agrees should have been updated long ago to reflect new realities.

And then there is health care. Passage of Obamacare in 2010 is a primary reason nothing much else has passed since. The irony is that, given the public’s continued unease, it too could be replaced in the next administration with a reform plan that addresses the problems in health insurance without the unpopular baggage of the 2010 legislation.

It is reasonable to doubt that a new president could really tackle all of these issues, especially all at once. After all, the same forces that stymied action in recent years (and in some cases, decades) will not fade away by 2017. But the opportunity will almost certainly be there for the right kind of president, and the passage of time will make action even more urgent.

To capitalize on the opportunity, the next president will need to learn two lessons from the Reagan presidency: It’s important to campaign on the agenda you want to enact; and a stable governing coalition that includes at least a few willing members of the opposing party can bring about lasting change in a way that purely partisan legislation usually cannot.

James C. Capretta is a senior fellow at the Ethics and Public Policy Center and a visiting fellow at the American Enterprise Institute.

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