Why Barack Obama Always Supported, But Couldn't Admit He Supported, Taxing Health Benefits
Dan Froomkin points to reports that Barack Obama is edging toward endorsing some form of a cap on the employer tax exclusion. Of course he is. For reasons I can't understand, the media has gone along with this months-long role-play in which Obama pretends to be against capping the employer tax exclusion and Max Baucus pretends to be cajoling him to change his position.
But administration officials have been assuming this revenue sources for months. I reported as much back in February. And that's no surprise. Most all policy experts -- liberal and conservative -- support capping or even eliminating the exclusion. It's close to a consensus position in health reform circles. And Obama is, in general, a guy who employs experts and listens to their opinions. It's also the main pot of money for health reform. And Obama is a guy who wants to pass health reform.
The problem was a political difficulty left over from the campaign: Obama had launched a series of extremely effective, but somewhat oversimplified, attacks on John McCain's proposal to remove the tax exclusion entirely. "The largest middle-class tax increase in history," he called it. His administration feared being tagged as inconsistent, or worse, politically opportunistic.
Their attacks had been opportunistic. But they weren't necessarily wrong. John McCain's health-care plan was a bad plan. It unwound the employer-based system and replaced it with ... nothing. Or, arguably, worse than nothing. (See the update at the bottom of the post for more on this.)
To repeat an analogy I used at the time, imagine a bad housing project. The maintenance has slipped. The buildings are crumbling. The crime rate is shocking. The residents are unhappy. The costs are inexplicably high. Everyone agrees that the status quo is terrible. That a better solution is required. But that doesn't mean that demolishing the housing project is an improvement if you don't have a better idea for where these people should live. Homelessness isn't an ideal policy outcome. That was John McCain's health-care plan.
Leaving people at the mercy of the private insurance market is probably the only option that's actually worse than our current system. Obama's proposal is different. Capping the employer tax exclusion doesn't end employer-based insurance. It just weakens it, a bit. And the reform plans he's supporting offer something better: The health insurance exchanges, where regulated private insurers will offer products in direct competition with one another, and with a public insurance option. Where individuals will be able to come together into risk pools far larger, and thus far better at extracting low premiums, than anything that individual employers could match.
Put another way, there's a real difference between dismantling a bad policy and replacing it with something better and dismantling a bad policy and replacing it with something worse. The Obama campaign will take some deserved knocks for relentlessly assailing a portion of John McCain's health-care plan that it disagreed with. But the administration is not embracing McCain's actual policy approach, and not compromising any of the principles embodied in its health-care approach. This is about campaign tactics, not policy reversals. And the Obama administration is right to choose good policy over consistency with past attack ads.
Update: Dellis rightly takes me to task in comments for saying that "it removed the employer tax exclusion -- the central financing feature beneath the current system -- and replaced it with ... nothing. Or, arguably, worse than nothing." That's unclear enough to count as untrue. McCain replaced the deduction with a refundable tax credit. What I meant was that he detonated the foundation of the employer-based system and didn't give individuals a new heath coverage system to enter. I lay that out in the next few paragraphs, which go into McCain's reliance on the individual market and Obama's construction of a new group market. But I should have been clearer in the initial graph.
(Photo credit: Brendan Smialowski -- Getty Images Photo )
June 10, 2009; 4:38 PM ET
Categories: Health Reform
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