There's No Avoiding 'Repeal and Replace'

Published October 20, 2010

National Review Online

Scores of House and Senate candidates are campaigning on a platform of reestablishing limited government. There could hardly be a more encouraging development for our republic. After decades of legislators' piling countless new programs on top of old ones, and two years of the most intense tax-and-spend binge ever conducted by an administration, government finances have reached the breaking point. Something is going to give, and probably sooner rather than later. Voters know this, which is why they are ready to take matters into their own hands and send a brigade of genuine change agents to the House and Senate on November 2. And these new members will come with clear marching orders: Cut government spending, hold the line on taxes, and shake up Washington in ways not seen in many years.

The crusade will no doubt start where it should, by reining in the obvious excesses of the sprawling and bureaucratic federal enterprise. Wasteful stimulus projects should be terminated immediately. Earmarking and pork projects should be banned from future appropriations measures. The federal workforce should be downsized, and government pay held in check until commensurate with wages in the private economy. Whole departments should be targeted for restructuring and elimination, and others scaled back dramatically. Obama's massive increases to appropriations should be reversed, and funding restored to its pre-2009 level. All of this, and much more, should be pursued with vigor, and without delay, come January.

But Washington's newcomers must not lose sight of the big enchilada on the government-reform menu: the repeal and replacement of Obamacare.

Because the hard truth is that the proponents of a supersized welfare state believe they have already won the fight. Their vision is now the law, with the government on course to control the flow of resources in the entire health sector. Even if every other idea to downsize the government is enacted, Obamacare as passed has us on the road to unlimited government — with America's middle class increasingly dependent on the benefits they receive from elected political leaders.

The Congressional Budget Office (CBO) estimates that Obamacare will add 35 million new people to the federal health-entitlement rolls by 2019, at a cost of $214 billion in that year alone. And that's almost certainly a vast underestimate of the true costs. Douglas Holtz-Eakin — a former director of CBO and now president of the American Action Forum — and Cameron Smith have estimated that Obamacare will lead to much more migration out of employer-sponsored plans than assumed by CBO: Tens of millions of workers — and the firms that employ them — will figure out that all involved will be far better off with the workers getting the massive subsidies provided by the federal government in the so-called “insurance exchanges,” rather than with the much smaller tax break they receive for getting job-based insurance. According to Holtz-Eakin and Smith, an additional 35 million people are therefore likely to end up in the government's new subsidized insurance system, on top of the 35 million already assumed by CBO in its cost estimate, putting the total entitlement expansion at 70 million, or more than Medicare's total enrollment today. The additional enrollees will drive up the costs of Obamacare's new premium subsidy program to $1.4 trillion over the first decade, or about $1 trillion more than CBO estimated.

And that would be just the beginning of it. Both CBO and the chief actuary of the Medicare program expect that once Obamacare is in place, the cost of providing benefits to tens of millions of new enrollees will grow just as rapidly in future years as Medicare and Medicaid have in the past. CBO forecasts that total federal health-entitlement spending will increase from 5.5 percent of GDP today to 10.9 percent of GDP in just 25 years. (This estimate uses different, but more realistic, estimates of future Medicare payment rates than Obamacare prescribes.)

What's needed to head off fiscal calamity is a market-based health reform that puts cost-conscious consumers, not the government, in charge. It's the opposite of the Obamacare prescription, and it starts with converting today's existing federal support for health-insurance coverage — Medicare, Medicaid, and the tax preference for employer-paid insurance premiums — into fixed-dollar contributions for the cost of coverage instead of open-ended programs that encourage and underwrite rising costs and inefficiency.

It's the kind of reform that Congressman Paul Ryan has proposed in his Roadmap. Indeed, it's the essential centerpiece of any serious conservative effort to reform the nation's entitlement programs and bring federal commitments over the long run in line with a rate of taxation that promotes strong economic growth.

Fortunately, and to their everlasting credit, most of today's fiscally conservative candidates are campaigning hard on repealing Obamacare, and many have also taken the courageous step of endorsing, in broad terms, the need for fundamental reform of both Social Security and the health-entitlement programs. They aren't shying away from the challenge, at least not yet.

But the climb will get much steeper once they get to Washington. For starters, the president wields a veto pen, which means repeal and replacement is likely to be a multi-year endeavor, not a short-term fix. Moreover, the entire Washington establishment, including the national media, will be lined up against them. When things look hopeless, it will be tempting to turn full attention and energy to lower hanging fruit.

But that would be a mistake. Yes, it's crucial to rein in government excesses wherever they exist. But if Obamacare is allowed to stand, the fight over the size and reach of the federal government will have been lost. Repeal and replacement is a must, no matter how hard or long the journey. The new troops coming to Washington must see it that way, and see themselves as laying the crucial foundation for a final victory when the time is ripe.

James C. Capretta is a fellow at the Ethics and Public Policy Center. He was an associate director of the Office of Management and Budget from 2001 to 2004.

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