July 14, 2003

July 14, 2003 | Commentary on Health Care

Prescription for Trouble

Imagine for a moment that you are one of the Democratic presidential candidates searching for that breakthrough issue that will resonate with voters and propel you to 1600 Pennsylvania Ave.

 

You've already spent many weeks on the campaign trail and given many speeches criticizing President Bush for pursuing wrong-headed economic policies that have transformed Bill Clinton's massive budget surplus into an equally massive deficit.

 

Now you huddle with your best policy advisers to settle on what your breakthrough issue will be. Perhaps a bold new approach to providing health care for all, or more money for education, or perhaps you should tackle one of those quality of life issues such as transportation.

 

After some contemplation, you realize that "health care reform" appeals to your well-developed sense of justice, especially after your advisers inform you that health care ranks among the most important issues to voters and that more than 41 million Americans lack decent health coverage.

 

Your pollster adds that finding an attractive way to help the uninsured provides the added benefit of pleasing important political constituencies such as African-Americans and Hispanics, among whom lack of coverage has reached epidemic proportions.

 

Being a presidential candidate, however, you have to do more than simply announce that you favor some vague health-reform measure.

 

Your exalted status requires you to sweat the details and unveil a carefully crafted plan that will survive the inevitable scrutiny it will receive once you emerge as the frontrunner. The numbers must add up. You must pay close attention to the plan's potential ripple effects on employers, health providers, union workers and taxpayers. Most important of all, the proposal must be big and exciting enough to convince ordinary voters that you have found a plausible way to solve one of their core concerns.

 

This is where things get interesting.

 

Your economic adviser walks into the room and reminds everyone that in speech after speech you have attacked President Bush for those Mt. Kilimanjaro-sized deficits, and that your pledge to get a handle on the budget is one of your biggest applause lines. So, do not under any circumstances allow the health-reform proposal to add to all that red ink.

 

Painting with bright and bold colors just became considerably more difficult. After all, your health expert is telling you that that cost of providing generous subsidies to employers and requiring them, in turn, to offer comprehensive health plans to their employees will cost more than $200 billion each year when fully implemented. Even a scaled-back version that would allow many middle-income workers to qualify for health coverage under the Medicaid program would still cost close to $90 billion per year.

 

While you experience a full adrenaline rush whenever you describe the great benefits that would result from your plan -- the universal coverage, the economic stimulus, the explosion in unionized jobs -- this is all tempered by the realization that Bush's reckless spending on endless waves of tax relief, on the farm bill, on highways and homeland security, on the Pentagon and the war in Iraq, not to mention that Medicare prescription drug bill you had hoped to sign, will require you to find a way to pay for your signature issue.

 

This is no fun.

 

An intense, three-minute review of all 1,700 federal programs convinces you that this is a remarkably lean $2.2 trillion budget. Freezing programs, much less cutting or eliminating them, is a nonstarter. Federal workers and their families, moreover, are an important part of your constituency and would abandon you in a heartbeat if you tried to cut their agencies' budgets.

 

Where else to turn for that annual infusion of $200 billion? Your tax adviser explains that the Bush tax cuts of 2001 and 2003 will drain the federal treasury of $1.6 trillion over the next 10 years, approximately what you will need to fund your plan. As you experience flashbacks of Walter Mondale's candid acceptance speech at the 1984 Democratic National Convention, where he held his head up high and told Americans that he would gladly raise their taxes, you assess the political wisdom of proposing an even larger tax increase now.

 

Slowly, you talk yourself into supporting this approach. After all, you reason, study after study demonstrated that the cuts chiefly benefit a small number of extraordinarily rich Republicans who would never vote for you anyway, and your pollsters tell you there was never a public outcry for the tax cuts when health needs remain so dire.

 

As the above scenario demonstrates, Democratic presidential candidates such as former House Minority Leader Dick Gephardt, former Vermont Gov. Howard Dean, and Sen. John Kerry find themselves boxed into a political corner by their incessant criticism of federal budget deficits, the imperative they all feel to embrace sweeping policy agendas and their frustration that President Bush has pre-empted them on such traditionally Democratic issues as education and Medicare. All three have openly advocated large and, in the case of Gephardt, unprecedented tax increases to pay for their ambitious health-reform agendas.

 

Gephardt, Kerry and Dean want to increase income tax rates, lower the children's tax credit, revive the marriage penalty on working couples and dramatically increase the taxation of capital gains and dividends, all in order to transfer this additional tax revenue to corporations, state and local governments, and Uncle Sam to finance health coverage for the uninsured. While they defend this Robin Hood approach of raising taxes on the few to provide a much-needed benefit for the many, the real consequences of this approach are very different indeed.

 

For starters, repealing the Bush tax cuts would result in tax hikes for 109 million taxpayers. According to the Office of Tax Policy in the Department of Treasury, the annual tax burden on the average senior citizen would rise by $1,795, some 5 million low-wage workers whose tax burden fell to zero thanks to the 2001 and 2003 tax cuts would once again be on the tax rolls, and 25 million small-business owners would be required to fork over an additional $2,853 annually. More specifically, a married couple with two kids earning $40,000 would see their tax burden rise from $45 to nearly $2,000. A senior couple with the same income would be stuck with $720 in additional tax liability.

 

This is not a prescription for political success, to say the least, especially since many millions of those facing these higher tax bills already receive generous employer-provided health coverage. It is not clear how the health benefits accruing to them under the Gephardt or Dean or Kerry plans could improve on that.

 

Union members, in particular, would seem to come up short -- paying considerably more in taxes for either the same or new, and presumably inferior, health coverage. As we see in the ongoing congressional debate over prescription drug coverage for senior citizens, those who like their current coverage are always the first to perceive the threat and will fight with every fiber of their being to protect what they have. To saddle these "haves" with an unprecedented tax increase at the same time seems to qualify as a political death wish.

 

Maybe what the Democrats need is to rethink their positions on taxes, health care and overall federal spending. Of course, that might force them to admit President Bush was right about a few things here and there. And since we're talking about presidential politics here, that's the one thing we can be sure will never happen.

 

So Democratic candidates are in a lose-lose-lose situation. They can disregard their concerns over the deficit and propose a bold and bright health agenda that drives budget deficits to $600 billion or worse. They can paint with bold and bright colors on Walter Mondale's tax-increase canvas. Or they can go pastel: Take the Bill Clinton approach and focus on small issues ranging from school uniforms to urban sprawl. In short, they have no choice at all.

 

Michael Franc is vice president for government relations at The Heritage Foundation.

About the Author

Michael Franc Distinguished Fellow
Government Studies

Related Issues: Health Care

Appeared in The Orange County Register