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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 )

By Ezra Klein  |  June 10, 2009; 4:38 PM ET
Categories:  Health Reform  
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Next: It's The Doctors, Stupid


This post would be amusing if it were written by a sarcastic critic of the Obama administration. With an intelligent and excellent writer like Mr. Klein, it's merely disturbing. McCain did not propose that eliminating the employer-only deduction be replaced with "nothing" - he proposed that a universal refundable tax credit be given to all households that is set at a level well above the average annual health care cost that American households pay.

Obama viciously attacked this proposal throughout the campaign as a huge tax hike on the middle class, and demagogued the issue. Now Mr. Klein rationalizes these dishonest attacks ex post, arguing that, while they were opportunistic, he was right to attack the McCain plan. If Obama really was right, though, shouldn't he have attacked the McCain plan based on Mr. Klein's rationale that the non-employer private market would have been unable to private quality insurance and care? Obama did not do this. Instead, Obama repeatedly stated via many different mediums what was for all intents and purposes a lie: the idea that McCain wanted to raise taxes on health care benefits, as opposed to the real McCain plan which merely expanded the tax-favored status of health insurance to non-employer coverage. It baffles me that Klein attempts to conflate this fundamentally dishonest attack as somehow being justified based on a rationale that Obama never deigned himself to state himself.

Further, it is ridiculous that Mr. Klein states that he not surprised that Obama flip flopped. What was the point of the campaign then? What were people voting on, if not Obama's campaign platform, the commercials that it ran, and what Obama said in the debates? When Bush ran on '00, he promised tax cuts, a new senior drug benefit, a new education bill, and an attempt to create modest social security accounts. Agree with him or not, he was true to his word. Not so for President Obama. The fact that Obama appears to have deliberately lied during the course of the campaign, at least according to Mr. Klein's account, should disturb fair-minded people.

To be clear, I enjoy this blog a lot and I appreciate Mr. Klein's interesting analysis and writing. I think this post is seriously mistaken though.

Posted by: Dellis2 | June 10, 2009 5:20 PM | Report abuse

"Why Barack Obama Always Supported, But Couldn't Admit He Supported, Taxing Health Benefits"

Because he's a liar.

Posted by: johnhiggins1990 | June 10, 2009 6:15 PM | Report abuse

Dellis2..McCain did suggest taxation but replacing with a (I think) non-specified refundable tax credit. However, he suggested absolutely no reform of insurance markets except allowing policies to be sold across state lines. So underwriting and pre-existing conditions rules would trap millions of people, making his plan unworkable except for the healthy.

Maybe Obama should have attacked McCains's plan on this basis (lack of sufficient insurance market reform) rather than the tax issue. Reality? People would not get it. People still think the uninsured are uninsured because they are young and feel bullet proof, poor, or too lazy to go get a policy. All of these are largely false.

McCain did want to tax all the value of health benefits, which would have been a tax increase for all. Obama is suggesting a plan that would tax expensive plans, which will be a tax increase for some (not all). Some of these may be middle class, some may not.

Is this a flip flop? I'd say it is. I'd also posit that the situation of the country and economy during the election process was dramatically better than the reality we now face. So could it be that Obama is trying to meet campaign promises under the new reality?

Posted by: scott1959 | June 10, 2009 6:17 PM | Report abuse

So basically Obama could say or do anything in the pursuit of power and it would be okay as long as he pursued healthcare reform? Isn't this an example of why not to further politicize healthcare?

Posted by: fallsmeadjc | June 10, 2009 10:31 PM | Report abuse

It is of great concern that the President seems to have a penchant for saying one thing to one group and something else to another one. He did it during the campaign, telling California fund raisers about those bitter people in PA. He did it with Wright (who made news of his own today). Now he's doing it with military tribunals and health care. So basically he got elected because he lied about his opponent's plans (obvious to anyone who was paying attention) and he was younger and more charismatic.

It's time for the President to lay out clear policy regarding what he wants to do on health care and then show some leadership in driving it toward reality.

Posted by: ted22 | June 10, 2009 10:54 PM | Report abuse

It is great to be Obama; even extreme dishonesty is rationalized by his supporters such as Ezra Klein. He can viciously misrepresent and savage McCain's plan to tax employees benefits during the campaign, but per Klein as Obama knew McCain's trust in the private markets is wrong and since a government run health care is necessary, his lies and dishonesty are somehow morally necessary as his motives for lying are so pure. According to this view we must believe that Obama knows what's best for this country, so we must trust him when he lies to us or is even dishonest about the McCain ads--its for our good, so blind trust in the Messiah Obama is necessary.
Also if Obama says he is for pay-go as he did today, take him at his word even if the deficit balloons by 10 trillion more dollars by 2020 as a result of his budget deficits. They can both be true at the same time in Obamanomics--a deficit neutral pay go and a 10 trillion dollar extra deficit.
The economy can also be hemorrhage jobs by the millions, but somehow he saved 150,000 jobs due to the budget. Truth does not matter.
Most importantly he has such beautiful daughters and he bought them a great puppy, so who cares if his words are not truthful and if consistently lies. He is a great father and such a good role model, give him a break. We must understand that he knows best and is lying for our good; he is the Messiah after all, trust him he knows much better than us foolish ignorant mortals.

Posted by: davtepper | June 10, 2009 11:45 PM | Report abuse

I assume Orwell would have enjoyed this column: dishonesty = honesty.

Would it really have been so hard for then candidate Obama to have argued both (1) in favor of taxing health insurance premiums paid by employers and (2) against "leaving people at the mercy of the private insurance market" which EK fears so terribly? What makes the ever-so-certain Mr. Klein convinced that the Obama team faced some sort of 'impossibility theorem' wrt putting (1) and (2) together?

Posted by: rothmanp | June 11, 2009 2:03 AM | Report abuse

"it is great to be obama. even extreme dishonesty is rationalized by his supporters."

a very short memory.
do you remember mccain, even during the late days of the campaign, telling us that the the economy seemed sound? that a gas tax holiday would be a good way to solve our problems?
talk about lying, or was it just lack of knowledge?
that he actually chose sarah palin as a running mate, and said she was a fine and capable running -mate? that was an unforgivable choice.
and, whether or not you approve of the way obama is handling things, it would take a very short memory to overlook the negligence, incompetence and lying of the previous administration...remember how, in the last weeks of the bush administration, when the country was falling into complete economic turmoil, george bush appeared to be in hiding...nowhere to be found.....and with a press secretary who was so incompetent, she couldnt find countries on a map?

did you forget that barack obama didnt create these problems, he has inherited them? many are seeming to have a very short memory where this is concerned.
and arent you glad to have a president that actually represents "family values;" a president and vice-president, who are good and responsible husbands and fathers....without having their personal lives in shambles, distraction and disarray?
there is a lot to be said for a white house that is scandal-free...especially at this time.
i think we have a long and difficult road ahead of us. i hope that the country can hold together. but i feel hopeful that we are going to see progress over time.
most of us had no idea what kind of a mess he would be inheriting....eight years of neglect.
president obama has reached out to republicans, to all democrats...he has tried to bring people together.
i dont think he is a messiah, but i think he is doing the best job that is humanly possible under extremely difficult circumstances.

Posted by: jkaren | June 11, 2009 5:18 AM | Report abuse

there is a saying:
"the point of absolute certainty never arrives."
when one's heart and mind are working together, with the best intentions possible, that is all one can ask of another person.
i think barack obama is trying to solve extremely complicated, long-festering problems and ills, in a climate of polarized mistrust and uncooperativeness.
a herculean task, to say the least.

Posted by: jkaren | June 11, 2009 7:04 AM | Report abuse

How did he inherit the problems??? He was in the Senate...he helped create the problems. Did he stand up and introduce legislation to resolve the problems we facing now? Did he do anything about health care reform while he was a junior senator? Nope. But he was willing to argue that babies born alive during a botched abortion shouldnt receive aid. He should just tell those disgusting doctors to stomp on the babies heads if they are still breathing. Put them out of their misery! (Sorry...This fires me up!)

Any way...I dont see any of this as an inherited situation when you were there as a member of the party creating the problems.

Posted by: aprilandjesse2004 | June 11, 2009 9:13 AM | Report abuse

Obama did not vote for the particular bill mentioned as it was unconstitutional in how it was written. Babies born during bothched abortions did, do, and will continue to receive care.

The law was unnecessary and unconstitutional in how it was drafted.I realize that is an inflammatory statement as you are passionate about life (as am I) but take a close look at the record, and not just from right wing sources (again, I know you are fired up and I am NOT trying to throw gas on the fire)

Obama was in the Senate for a couple years, so he was part of the problem, if you will. But you are expecting a heck of a lot from a junior Senator in two years if you expect him to have addressed every problem that he would have to grapple with as a President.

Don't get me wrong, he is a politician. I do not view him as perfect, nor as evil. I think jkaren strikes a good tone. I think you have a guy who ran under one set of conditions that dramatically changed when the economy fell off a cliff in the fall. Not his fault, just is what it is. He is responding to that. Plus I think he is adjusting his position as he learns. I actually appreciate someone who listens and modifies his position as opposed to someone who is rigid.

Posted by: scott1959 | June 11, 2009 9:26 AM | Report abuse

"when you were there as a member of the party creating the problems?"
are you blaming the democrats for the failures of the bush administration?

Posted by: jkaren | June 11, 2009 9:31 AM | Report abuse

I think it is inane to call this the "pot of money". A tax increase to provide medical coverage for more people is a tax increase.

I think the proper premise is to reform health care such that we cover more people with the money currently available. After that is accomplished, I am open to looking at where we are and increasing taxes to cover more people, if and as needed. Otherwise this is a hoax it is not reform is is extending coverage. While I agree we need to extend coverage, it is not sustainable to do so without a reformed system. So refrom then extend must be the mantra.

Posted by: sailor0245 | June 11, 2009 10:35 AM | Report abuse

"Why Barack Obama Always Supported, But Couldn't Admit He Supported, Taxing Health Benefits"

I think you win the "Best Apology for a Bald-Faced LIE from a Politician" category.


Posted by: ElViajero1 | June 11, 2009 10:54 AM | Report abuse

Good and rational thought. But the economics don't work (unless everyone is willing to accept a very very significant cut in benefits)

Posted by: scott1959 | June 11, 2009 10:55 AM | Report abuse

El...nice to see you back! Was wondering where you had gone.

Posted by: scott1959 | June 11, 2009 10:56 AM | Report abuse

Mr. Klein is correct that his initial post later cleared up his initial mis-statement. I still stand by my more salient criticism that Obama was not justified in making the statements that he did during the campaign on this issue, and that McCain's plan was actually excellent.

Posted by: Dellis2 | June 11, 2009 1:14 PM | Report abuse

I have to reiterate that without legislating reform of the individual insurance markets to remove underwriting and pre-existing conditions, McCain's plan was deeply flawed. But I find it interesting that the more we post the more points we agree on---hopefully our politicians will act the same way (hahahaha!!)

Posted by: scott1959 | June 11, 2009 2:23 PM | Report abuse

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