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The importance of going back on your word

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Karen Tumulty was out in Massachusetts for the election, and her take strikes me as correct. Voters were unsettled, she reports, "by the process they saw going on in Washington. Rather than being drafted with the common good in mind, they said, the health bill was turning into a series of backroom deals — a Medicaid exemption for Senator Ben Nelson's Nebraska, tax breaks for unions, sweeteners for the hospital and drug industries."

I don't pretend my e-mail or letters or random conversations are a representative sample. But in the weeks before Massachusetts, I was struck by the way Ben Nelson's Medicaid deal had lodged itself in the public mind. This sort of horse-trading might be common in Washington, and this deal might be both small in the scheme of the bill and decent policy on the merits, but it had come to define the legislation. And people hated it. It got right to their fears that policy was being made on behalf of privileged interest groups (Nebraskans, in this case), and they were paying for it.

Luckily, there's a fairly easy fix for some of this. Obama, who isn't particularly connected to this deal, can demand the Senate pass a reconciliation bill stripping it from the legislation. That's actually a pretty good narrative for the reconciliation rider. And the neat thing about a reconciliation bill is that Nelson can even vote against it -- as can eight of his closest Democratic friends.

The other thing that reconciliation rider will have to handle is the excise tax. The outlines of that deal were finalized a week ago, but embedded within them is a slightly longer transition period for union members. Like the Nelson provision, that policy is defensible on the merits, and unimportant either way. But it looks bad. Keeping it will be a tough sell, as Republicans will immediately attempt to turn it into the next Nelson deal. The unions might want to think about negotiating a raised limit for everybody -- $25,000 rather than the $24,000 they already got, say -- instead of letting themselves become the next villain in this process.

Photo credit: Susan Walsh/associated Press Photo.

By Ezra Klein  |  January 25, 2010; 8:14 AM ET
 
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Comments

Yes, 'reconciliation rider' should have such provisions. But it does not seem that Congress wants to do anything here as well as Administration seems to be inclined to dump the whole HCR.

Posted by: umesh409 | January 25, 2010 8:33 AM | Report abuse

Ezra, could you post sometime on the prospects for our doing something meaningful about climate change?

a) Can the EPA regulate greenhouse gas emissions in a way that works?
b) What are the prospects that the threat of actual EPA regulation can convince some Republicans to sign on to a decent cap-and-trade bill?
c) What are the chances that a bill will pass this year?
d) And if not this year, and assuming the Dems are operating with much smaller majorities next year, what do you think the chances are that a bill can be passed while there's still time to make a difference?

Posted by: rt42 | January 25, 2010 8:34 AM | Report abuse

I would love to see the Cornhusker Kickback be one of the key portions of a reconciliation bill, along with shifting at least some of the excise tax to a simply tax on people making a million dollars or so. Nelson would then be forced to either vote in favor of the kickback or for taxing the rich, and we might look forward to the day when we don't have this scuzzy insurance executive muddling up the Democrat brand.

Posted by: flounder2 | January 25, 2010 8:43 AM | Report abuse

1) Kill the excise tax, 2) go after the rich, 3) get right with the people.

Then add a public option, and the public will be pleased.

Posted by: rat-raceparent | January 25, 2010 9:21 AM | Report abuse

rat-raceparent, why do you oppose the excise tax? I'm really asking here, not trying to be an ass. From what I've read, most healthcare economists support the excise tax, and I've seen it argued that it is one of the most important cost-containment provisions currently being considered.

I understand the populist argument for taxing the rich, but the excise tax is supposed to be good policy because it does more than just raise revenue, it puts downward pressure on health insurance costs.

Also, I've seen lots of people argue for one or the other, but why not both? Why not leave the excise tax as it is (or bump the cap up a little as Ezra suggests) and then tack on a small tax on millionaires to make the deficit numbers better and for the populist message?

Posted by: MosBen | January 25, 2010 9:33 AM | Report abuse

I agree 100% with MosBen. Do both. Just about every healthcare economist (as well as the CBO) has noted that the excise tax is one of the greatest cost control measures in this reform yet its being stripped out or emasculated depending on who you talk to. Even if the tax was extended to all people would see (and be told) that it was a "union deal". As a person who has been rightfully admonishing people for kicking the can down the road Ezra should be ashamed for wanting to kill or weaken the excise tax. I guess its just a matter of what can it is and who it benefits. An excise tax applicable to all is the right thing to do regarding cost control and everyone knows it. Sure tax the rich more but don't do it at the expense of cost control or the problem years from now will be much greater.

Posted by: visionbrkr | January 25, 2010 9:45 AM | Report abuse

@rt42:

You didn't ask what random commenters think, but I'm going to tell you anyway. ;)

"a) Can the EPA regulate greenhouse gas emissions in a way that works?"

That depends on your political viewpoint somewhat, but probably not. All it takes is a change of administration to roll that back and, until that happens, EPA regulation of greenhouse gas emissions will be hammered by the right as unelected bureaucrats taking over the country, killing the economy, etc. It would be bad political news for the administration, much more so than actually passing a cap and trade bill.

"b) What are the prospects that the threat of actual EPA regulation can convince some Republicans to sign on to a decent cap-and-trade bill?"

Right now, with blood in the water after the Scott Brown victory? Zero. If it had been Obama's first priority, before HCR, there would have been a very good chance. Now, post HCR, and post "Climategate", the chances of any Republicans deciding to flip the bird to their base on Cap and Trade is just about 0%. It's not going to happen.

"c) What are the chances that a bill will pass this year?"

Very slim. There's not going to be much concern from Republicans, most of whom consider anthropogenic unproven at best, and completely fraudulent at worst, and are elected by a base who generally agrees with that assessment. Some Democrats are also going to worry about the political downside to voting for Cap and Trade.

Obama didn't do them any favors when talking about climate change legislation during the campaign and before, talking about how individuals would have to have much higher utility bills (for the good of the planet) and how he was essentially going to put the coal industry out of business. That stuff is on tape, and the opposition has it cued up and ready to saturate the airwaves once climate change legislation actually comes up for debate. That alone could help kill it in the court of public opinion, and not just in states that are heavily dependent on the coal industry.

"d) And if not this year, and assuming the Dems are operating with much smaller majorities next year, what do you think the chances are that a bill can be passed while there's still time to make a difference?"

I'd say almost no chance. I think the best strategy is to come up with a Cap and Trade bill that's innocuous, and probably wouldn't satisfy environmentalists--or anybody--but one that exists to be mild, and defeated by the Republicans, so the Republicans can be spun as the bad guy on even mild environmental protections in future elections. A Cap and Trade bill as ambitious as healthcare reform originally was is likely to go down in flames, and the failure will only have upside for the Republicans.

My 2¢.

Posted by: Kevin_Willis | January 25, 2010 9:46 AM | Report abuse

For every 1/10th of a percentage point my taxes get increased - and here in Michigan, they've been increasing on a regular basis - that is another chunk of money I don't give to charities.

Somehow, I wonder if the rich aren't doing much the same. After all, a budget is a budget.

Posted by: whisperonthewind | January 25, 2010 9:49 AM | Report abuse

It's too late to walk back the backroom deals. Even if they strip them out, the damage is done. They're only going to add to that by watering down what's already there. Even walking back the deal on the excise tax, at this point, isn't going to make the bill more popular with those unhappy about the union exemption--but will make it less popular with the unions!

Maybe I'm wrong, but it looks to me as if, with all the wheeling and dealing, they've painted themselves into a corner. Trying to paint themselves into a little differently will still leave then in a corner.

Posted by: Kevin_Willis | January 25, 2010 9:49 AM | Report abuse

The rich are governed a little more by emotional concerns than the middle class--they still have plenty of money to give when the economy is looking down, but are less likely to give when they are unsure of the future of the economy. The rich tend to have lifestyles that are very expensive to maintain, and if they believe that new taxes are on the horizon, new regulations that will stifle their business, or that they're going to get punished by the government for their wealth in the near future, they are less likely to give. Though it's not because they don't have the money--it's because they're worried about needing the money later on. To, admittedly, maintain their lavish lifestyles.

Despite their being no specific penalty for the big bank executives yet, I'd expect you'd find most of them have decreased their charitable giving this year. Cuz, hey. You never know. You might end up needing that.

Posted by: Kevin_Willis | January 25, 2010 9:55 AM | Report abuse

Isn't what Ben Nelson was able to do part of his job and one of the big expectations Nebraskans would have for him. If the source of popular distaste is the spectacle of legislators with leverage pulling off things that voters from other states would expect their own representatives to pull off if they were similarly situated, then there's a fundamental problem in people's expectations.

Posted by: bdballard | January 25, 2010 10:03 AM | Report abuse

also this gets back to the whole idea that if you paint yourself to be "holier than thou" or "getting rid of the special interests" and that's what sweeps you into office and you do the exact opposite or just change or increase (UNIONS) the special interests then the populace will just look back and think they've been duped. As Obama said Scott Brown was swept into office in the same populist anger. If he doesn't deliver then they'll get rid of him too. Political affilliation or party is not immune to this.

Posted by: visionbrkr | January 25, 2010 10:07 AM | Report abuse

*Isn't what Ben Nelson was able to do part of his job and one of the big expectations Nebraskans would have for him. If the source of popular distaste is the spectacle of legislators with leverage pulling off things that voters from other states would expect their own representatives to pull off if they were similarly situated, then there's a fundamental problem in people's expectations.*

Yes, one could argue that the Senate, which is a body that represents individual states, was working as intended in this deal with Nelson. The problem voters have with the deal is not a problem with Nelson; it is a problem with the senate. Individual states are supposed to use the senate to have their interests represented.

Posted by: constans | January 25, 2010 10:13 AM | Report abuse

Ezra on the union deal, 1/15/2010:

"I'm not about to pretend that the union deal was anything but interest group politics"

Ezra on the union deal today:

"that policy is defensible on the merits"

So which one is it?

Posted by: ab13 | January 25, 2010 10:15 AM | Report abuse

It's unfair to conflate the excreable Nelson-Nebraska deal with the union delayed-phase in on the excise tax. The Nelson deal was a bribe, pure and simple (how is it 'defensible policy' to have one state be paid differently from all other states with no underlying justification, such as poverty level?). The union excise tax compromise was a recognition that the generous union health benefit packages now in place were negotiation in lieu of wages, and that they should have an opportunity to renegotiate to reflect changed circumstances before the tax takes effect.

It's this kind of false equivalencies that are distorting the health care and virtually every other domestic policy debate.

Posted by: exgovgirl | January 25, 2010 10:40 AM | Report abuse

exgovgirl, how many union benefit packages are in place right now that go beyond 2016? There is plenty of time to renegotiate future union contracts before the excise tax goes into effect in 2016, pretending as if this was necessary because of the current contracts is just silly.

Posted by: ab13 | January 25, 2010 10:46 AM | Report abuse

exgovgirl,

why can't the unions deal end when the mandate/exchanges begin? Can't unions renegotiate earlier for wages when and if the timing of the CBA's change? Sorry that sounds like a cop-out. I'd love to see some brave reporter ask Trumka, Stern et al that question when they're questioning their sweetheart deal they got.

Posted by: visionbrkr | January 25, 2010 10:57 AM | Report abuse

"Just about every healthcare economist (as well as the CBO) has noted that the excise tax is one of the greatest cost control measures in this reform yet its being stripped out or emasculated depending on who you talk to." - visonbrkr

Actually, a lot of economists have questioned the idea that the tax will reduce costs. It would definitely reduce insurance expenditures by companies but whether or not that would translate into significantly reduced costs of care is highly debatable.

In any case, even if you believe the meme that plans with high acturarial value encourage overuse and thereby contribute to cost inflation, the more rational approach would be to implement a subscriber paid tax on those plans. The current proposal constitutes a penalty on subscribers who, for whatever reason are part of high cost demographic groups.

Here is what most economists would actually recommend:

1. Transfer the health insurance exemption to the employee.

2. Set a maximum actuarial value for the exemption.

3. Include benefits paid as compensation and include both the amount and actuarial value on the W2. (Individual subscribers would get a form directly from their insurance companies detailing total premium paid and actuarial value)

4. Allow individuals with plans that are equal to or less than the limit to exempt the entire amount of premiums paid

5. Incrementally reduce the exemption when the individual's insurance exceeds the maximul actuarial value. Example: if the maximum allowed is 80 and the individual's plan is 85, he only gets to exempt 90% of his premium.

That's an a real economic solution designed to address the supposed issue -- not a tax designed to raise money for someone else's insurance.

It has the advantage of applying to everyone equally: those with employer paid insurance and those without and automatically incorporates adjustments for occupation, geography, age, etc. Everyone gets to exempt the premium necessary to obtain an agreed upon level of coverage no matter what factors determine the actual cost.

That though would be a modest reform of the financing model ...something that doesn't really interest supporters of the bills.

Posted by: Athena_news | January 25, 2010 11:17 AM | Report abuse

Your suspicion about Massachusetts voters’ disgust with the political process involved with the healthcare issue is supported by the recent Washington Post-Kaiser-Harvard Poll. One of the questions was a follow-up for people who said that healthcare was a reason for voting the way they did. It was open ended, so there were a large number of responses. The most popular one was the “Political Process”, which included “deal making, lack of transparency, and too confusing”. Obama’s people were fighting the last war by trying to avoid the Clinton failures (staying above the fray, allowing Congress to define the plan, etc.). This produced much of the disgust with the process. Given the anger of this period, Obama should have pushed a simple populist line (e.g. Medicare for all?).

Posted by: gregg9 | January 25, 2010 11:29 AM | Report abuse

Ezra, thanks for being one of the few columnists on the "Big Left Papers" to mention the payoff to the unions. It happens often, but liberals hate to mention these things?

Ratraceparent: Just what do you mean by "go after the rich" ? Is it tax them into poverty? run them out of the country? kill them?
You certainly can't mean to tax them fairly since they already pay the highest taxes of any group in the country. Do you know how much confiscatory taxation on small business and the 'rich' hurts job creation. Middleclass and poor do not hire people!

And by "getting right with the people" do you mean give them whatever you think they need or want at the expense of other taxpayers? Shame on you.

Posted by: cgm205 | January 25, 2010 12:25 PM | Report abuse

Athena,

I'd be absolutely fine with that suggestion. As I've said before the tax exemption given to employer sponsored plans wrongly buffers people from actual cost just as I fear the subsidies will do. I say that even though the subsidies will make my specific job abundantly easier (and make me more well off) because then someone else will be paying for it so people will become more immune to cost which I am 100% against. People need to feel the cost (each to their own level of affordability) so we finally get some level of cost control.

Posted by: visionbrkr | January 25, 2010 12:34 PM | Report abuse

*You certainly can't mean to tax them fairly since they already pay the highest taxes of any group in the country. *

Actually, the rich are paying lower taxes now than they have been for a long time. I've always wondered what they were complaining about-- Bush passed a set of tax cuts that placed taxes much lower than could be afforded by the federal government. Taxpayers had to know that this was a temporary state of affairs. There's nothing wrong with paying for the subsidies for health insurance by increasing marginal rates on high incomes: those are the same taxpayers who are going to be able to benefit from lower health care costs and not having to worry about how to insure employees.

Posted by: constans | January 25, 2010 12:34 PM | Report abuse

Actually, the rich aren't paying lower taxes now. The share of the over tax liability paid by the top 20% of earners was 78.70% before the Bush tax cuts, and went up to 81% after the bush tax cuts. However, the share of tax liability went down for pretty much everyone making under $68,295. Those "tax cuts for the rich" benefitted the folks making under $68k more than those making above it.

http://www.taxfoundation.org/news/show/323.html

In 2005. tax revenues were higher than they were in 2000. In 2001, they were higher than they were in 1999, or any year before 2001, except the year 2000. Only 2003 showed a drop back down to 1998 levels--which doesn't exactly support the argument that taxes were "much lower than could be afforded by the federal government". 2007 showed the largest tax receipts on record, in either adjusted or real dollars.

http://www.taxpolicycenter.org/taxfacts/displayafact.cfm?Docid=200

Additionally, the Bush tax cuts were small compared to either the Reagan or Kennedy tax cuts, yet the economy seemed to survive after both the Kennedy tax plan went into effect, and the late 80s and early 90s weren't necessarily great for the economy, but weren't that bad, and certainly tax revenues only suffered marginally.

Posted by: Kevin_Willis | January 25, 2010 1:52 PM | Report abuse

Exgovgirl has an excellent insight and raises a valid defense of the union exception, but only to a point. One can logically defend negotiated contracts only during the pendency of the contracts, not for a set term of years (as the legislation would provide). It's definitely unfair, and possibly unconstitutional, to change the rules midstream in such a dramatic way and to undercut assumptions upon which compensation was bargained for and agreed upon. In any event, it's not the pure bribery on display in the other schemes cooked up in this bill.

Posted by: mgyoung | January 25, 2010 2:56 PM | Report abuse

For crap sake, are the liberal bloggers pushing this latest ridiculous scheme ever going to acknowledge, even tangentially, that the public doesn't want this damn bill? Is that ever going to happen, or is it now all about how this plays out for the Democratic Party in November?

Posted by: Bob65 | January 25, 2010 8:32 PM | Report abuse

And the whole negotiated contract thing is not a "good point". There is no such thing as a contract that exempts you from taxes passed by the government. You can't have your employer say "Hey, if you come work for me, you can sign a piece of paper and you won't have to pay taxes." There is quite simply no possible way it can be argued that the union exemption is even remotely fair.

Posted by: Bob65 | January 25, 2010 8:34 PM | Report abuse

"... but embedded within them is a slightly longer transition period for union members..."


A slightly longer transition period? Are you even remotely capable of being honest when discussing this, or is there something that inherently forces you to use euphemisms to gloss over the numerous offensive portions of this bill. So now a space of several years is only "slightly" longer? In your universe, is the distance between NY and LA only "slightly longer" than the distance to your next door neighbor's house? And even if it were only a few days, how in the world is it fair that I am subjected to the same tax that union members are not?


Why don't you start being honest about the corruption of this bill instead of trying to hide it? And while you are at it, why don't you take at least one post to acknowledge that the overwhelming majority of Americans are opposed to this instead of insulting the intellgence of the American public by stating they don't like it because they are too stupid to know what is in it.

Posted by: Bob65 | January 25, 2010 8:41 PM | Report abuse

And it is a little bit odd, to say the least, to claim that Americans are so fed up with the process that the Dems should now start dusting of the parliamentary tomes to determine which portions can be rammed through via reconciliation and which can't. Because talk of "sidecar" bills etc. and the consideration of schemes for the SOLE purpose of avoiding Scott Brown won't bother people at all, will it.
But of course you are relying on the whole offensively condescending and arrogant "the American public is too stupid to understand what is in the bill, but once it passes it will be super popular" premise, so who cares what the American public has to say about the bill, right? The arrogance emanating from this blog and the DC Democrats is so thick, I can see it from my house.

Posted by: Bob65 | January 25, 2010 8:45 PM | Report abuse

"Karen Tumulty was out in Massachusetts for the election, and her take strikes me as correct"


Well of course it does, but it fits your narrative that the Brown win was not a rejection of Obamacare, EVEN THOUGH THE MAIN THEME OF HIS CAMPAIGN WAS TO BLOCK THE BILL.

Posted by: Bob65 | January 25, 2010 8:48 PM | Report abuse

"Well of course it does, but it fits your narrative..."

That should read "Well of course it does because it fits your narrative..."

Posted by: Bob65 | January 25, 2010 8:49 PM | Report abuse

"The unions might want to think about negotiating a raised limit for everybody..."

And when in the hell did the American public elect the unions to negotiate on our behalf before Congress?

Posted by: Bob65 | January 25, 2010 9:00 PM | Report abuse

Exgovgirl's inability to see the unacceptability of the delay in taxing union member Cadillac health plans is laughable. Essentially, the unions exercised their monopoly power to shift their compensation from a taxable form, such as salary, to a non-taxable form, excessive halthcare benefits. (Actually, they too often obtained both.) So, as a reward for their avoiding their fair share of the tax burden for years we should extend that unfair benefit, providing a discriminatory exemption vs. other employees who have Cadillac plans? If this is the level of her logical analysis, I am glad we no longer have her working in the government.
Submitted by one who has a "Chevrolet" plan.

Posted by: HarryMoser | January 25, 2010 11:09 PM | Report abuse

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