This goes back a couple weeks to a story I was working on before world events overtook everything else, but it’s something I’ve been pondering and I want to air it out here.
It goes back to the revenue-producing 1099 provision in the health care law, which the House and the Senate have each individually repealed. The Senate covered the cost of repealing 1099 by tasking OMB with rescinding tens of billions of dollars in discretionary spending. The House covered it in perhaps a more unfortunate way: by clawing back insurance subsidies for middle class consumers, guaranteed by the health care law. More on how that worked here and here, but the long and short of it is that the House provision would have put Americans of fairly modest means at risk of unexpectedly owing the IRS thousands of dollars. That’s a terrible way to run a health insurance system, and worse politics for the law itself, if the goal is to make it popular someday.
Enter Harry Reid, who surprised members of his own party by voicing a preference for the clawbacks over the spending cuts. Health care reformers were, of course, upset about this. And I too think he made the wrong choice between two awful policies. But I also think there’s another way to look at this, and it may be worth cutting Reid some slack.
First, the payfor in the Senate bill requires swift spending cuts — in addition to the federal programs Congress is currently preparing to slash. That means more economic contraction, and more government services that will suffer through the downturn. The clawbacks in the House bill, by contrast, won’t impact anybody until 2014 — perhaps enough time, if the economy picks up, for Congress to restore the subsidies and find a better financing scheme.
In the end I still think Reid’s on the wrong side of this issue. The health care law should be a “Bigger Picture” issue for Democrats — something they should treat politically with as much deference as they treat other entitlements they ushered into law. It’s really hard for me to imagine that Democrats would propose paying for 1099 repeal (which, let’s face it, basically entrenches a de facto subsidy for businesses) by reclaiming Medicare Hospital Insurance benefits from the elderly. If Democrats want to turn the Affordable Care Act into a third rail, they can’t use it as a slush fund to pay for other, less generational policies.
But we have a Congress that’s unwilling to raise income taxes on just about anybody, and a lot of Republicans who want to use issues like 1099 to chip away at the law who won’t allow 1099 it to be added to the deficit. I asked a senior Treasury official about this recently, and while it’s clear the administration hates the funding options on the table, they also don’t think they have any choice but to accept one of them, or some combination of the two.
So that’s where we are. And as much as I understand why reform advocates reacted with hostility to Reid’s position, I also think it’s worth pointing out that he’s coming from an understandable place.
