The November election has certainly shaken things up in Washington, even before most of the newly elected members to the House and Senate arrive in town and take their seats in Congress. That's because all parties have begun recalibrating their positions in anticipation of the shifting balance of power that is coming in January.
Most notable, of course, is the president's recent deal with congressional Republicans on taxes. Once the voters had spoken, the president pivoted quickly and began direct negotiations with his adversaries on one of the campaign trail's most contested items: What should happen to the Bush-era tax rates scheduled to expire at the end of December. Democrats have spent the better part of the past decade decrying those rates as fiscally irresponsible. And yet the main result of the bipartisan tax deal is that those Bush-era rates on personal income, dividends and capital gains will all be left in place through the duration of the president's current term in office. Who would have expected such an outcome after the 2008 Democratic landslide? Moreover, the deal calls for a temporary reduction in the payroll tax, which is a far more acceptable approach to short-term stimulus for many Republicans than the spending programs adopted in early 2009.
Now all attention is beginning to shift to the nation's daunting short- and long-term budgetary challenges. Here, there is also a whiff of bipartisanship in the air.
The president's fiscal commission, chaired by former Clinton White House chief of staff Erskine Bowles and former Sen. Alan Simpson, R-Wyo., issued its recommendations earlier this month, with the support of 11 of the 18 commissioners. Among the supporters were all of the current Republican senators serving on the panel (Tom Coburn of Oklahoma, Judd Gregg of New Hampshire and Mike Crapo of Idaho). The budget framework they endorsed is based on the approach of the commission's co-chairs and thus commonly known as the Bowles-Simpson plan. It is far more ambitious in scope than was expected just two months ago, when many thought the commission wouldn't produce anything of consequence.
Bowles-Simpson starts with a plan to radically reform the nation's income tax laws by eliminating or scaling back many current tax expenditures while simultaneously instituting two much lower rates. The plan also calls for cutting the corporate income tax rate, capping discretionary spending, and reforming Social Security by raising retirement ages and limiting benefits for higher wage earners.
That's certainly a bold agenda, and it very definitely points in the right direction with its inclusion of some important entitlement and tax reforms.
But on the most important budget issue that the country still faces -- rapidly rising health care costs -- Bowles-Simpson is a major disappointment. Yes, the plan calls for long-overdue tort reform. But that's not nearly enough to overcome its downside -- the plan's implicit embrace of the entirety of the health care law enacted in March. The $1 trillion entitlement expansion; the $700 billion ten-year tax increase; the complete lack of any meaningful Medicare and Medicaid reform; the heavy reliance on arbitrary Medicare payment rate reductions to cut costs on paper; the poorly structured long-term care entitlement program that almost certainly will need its own bailout in future years; and, the ceding of almost all health sector regulatory authority to the Department of Health and Human Services -- all of those provisions and more would remain in place under the Bowles-Simpson framework.
Indeed, if anything, Bowles-Simpson would build upon the law by expanding the authority of the Independent Payment Advisory Board, which was established to control Medicare costs with payment rate reductions, to oversee the health spending that occurs in the new state-sponsored insurance exchanges.
The fiscal commission members appointed by House Republican Leader John Boehner – Rep. Paul Ryan, R-Wis., Rep. Dave Camp, R-Mich., and Rep. Jeb Hensarling, R-Texas -- all opposed the Bowles-Simpson plan when it came up for a final vote, thus preventing it from advancing to Congress for potential near-term consideration. And, to their credit, the main reason they cited for their opposition was the failure of Bowles-Simpson to change direction on health care from what was enacted in March.
The yearlong debate over health care was contentious and polarizing because the opposing sides have strongly held and difficult to reconcile views of what needs to be done. By and large, the Democrats believe that what is needed is much heavier governmental management of the health sector. By contrast, most Republicans believe that what is needed is a functioning marketplace and consumer control of the allocation of resources.
Ordinarily, difficult legislative initiatives require some degree of support from both major political parties to pass. That's particularly true with deficit reduction efforts. There's very little to gain politically from cutting spending programs or increasing taxes. As the president looks to bring future deficits down in coming years, he is almost certain to try to enlist Republican help in the effort, as bipartisan support would shield Democrats from some of the political risks associated with fiscal consolidation.
But it will be near impossible for the president to succeed in building a strong bipartisan coalition of support for a budget plan if he takes the same approach as Bowles-Simpson and builds a wall around health care. Health care is the largest line item in the federal budget, and it will only become more important in future years. Most Republicans will not agree to any short or long-term budget framework that essentially ignores their point of view on how to address such an important component of the budget equation. Rising federal debt is now widely recognized as a serious threat to the nation's long-term prosperity. It is essential that political leaders come together in a bipartisan fashion to put our government's finances on more stable footing. But that won't be done so long as the nation's approach to health care is supported by only one of the two major political parties. No, a bipartisan budget framework is going to require a bipartisan approach to health care too.