Will the President’s New Fiscal Commission Consider Repealing Obamacare?

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As Congress gears up to move health care reform through the budget reconciliation process, much attention has focused on whether the Senate will leave House Democrats hanging out to dry. Remember, because of the process requirements, House Democrats are being asked to pass a Senate bill that they strongly dislike, with the “promise” that the Senate will be able to subsequently pass all of the various “fixes” desired by the House in reconciliation – in order to make the underlying bill tolerable.

There is, however, another less-noted source of difficulty for supporters of the health care bills: President Obama’s Fiscal Responsibility Commission will almost surely have to (immediately) consider whether any of the so-called “Obamacare” provisions should be substantially scaled back.

President Obama established the bipartisan Fiscal Responsibility Commission on February 18, 2010. Its mission, according to the President’s Executive Order, includes offering “recommendations designed to balance the budget, excluding interest payments on the debt, by 2015.” It is also charged with proposing “recommendations that meaningfully improve the long-run fiscal outlook, including changes to address entitlement spending” – that is, spending like that in the health care legislation now before Congress.

In order for the Commission to seriously approach this task, however, it seems inevitable that any major new spending measures, such as the coverage expansion provisions of “Obamacare,” would need to be considered – and, in this case, considered immediately after they were created (or enacted). Whether or not the Commission officially recommends the spending provisions be altered does not eliminate the accompanying political embarrassment for the Members who just voted to add hundreds of billions in additional spending to already-unsustainable federal commitments.

To understand this, one must merely consider how the Commission must approach its task. First, it will review the federal budget picture under current law. According to the Congressional Budget Office, the budget would, under current law, meet the President’s target of balance by 2015 (excluding interest payments) – were it not for the President’s proposed policies, most notably the new health care plan.

Put aside for a moment the important question of whether it makes any sense to exclude interest payments when framing budgetary targets. Interest payments on the debt are, after all, a real and growing burden for taxpayers. Again according to CBO, the President’s policies would add a further $800 billion to these annual interest payments through 2020.

But even if we adopt the mindset that these interest payments should be ignored, the stubborn fact remains that CBO has identified the President’s policies as the principal obstacle to hitting the Administration’s budget targets. This means that the Commission will have little choice but to determine which of the Administration’s current policies to scale back or eliminate.

If the Commission works as outlined, it must first train its sights on the exploding entitlement spending –widely regarded by both political parties as the main source of our budgetary problems. As the budget currently stands, federal revenue collections (as a % of GDP) will exceed historic norms by 2013 and rise perpetually thereafter under the President’s submitted budget. The Commission thus cannot fairly conclude that the fiscal gap projected for 2015 is caused primarily by inadequate revenues.

By contrast, federal spending is at historic highs and is projected to only increase further. In 2010 and 2011, spending will remain at the historically high level of roughly 25% of GDP – dipping slightly to 23% of GDP in 2013 – then rising without limit over the long term. Thus, even at the future low point of federal spending, the government would be maintaining a level of largesse that taxpayers have never before been asked to support on an ongoing basis.

So where, and in what manner, will the Commission find ways to rein in federal spending? The fastest-growing portion of the federal budget is health care spending, which legislation currently before Congress would increase still further. Something will almost surely need to be done to pare that back – right?

Note that the Congressional health care bills contain some provisions that reduce deficits – such as the Medicare payroll tax increase, the Cadillac plan tax, and the Medicare spending cuts. In addition, the Commission will need to review the recently-enacted provisions that add enormously to federal costs – meaning the hundreds of billions – ultimately trillions – the health reform plan would spend on expanded coverage.

According to the CBO, the single policy of this Administration that adds most to federal spending over the next decade is the proposed spending increase under health care reform legislation. There is thus virtually no way that the Commission can approach its deficit-cutting work without putting any new spending from the health care bills immediately on the chopping block.

Indeed, the primary argument against the Commission putting Obamacare on the chopping block will not be substantive: it consists only of the political investment that the Administration and the Congress will have made if a health care reform bill does indeed get enacted.

This argument will likely count for exactly zero with the Commission’s notoriously independent chairs: former Senator Alan Simpson and Erskine Bowles. They have promised to take an objective look at the spending situation without regard for the political interests of elected officials. Only substantive arguments, not political ones, will carry great weight with them.

Moreover, the President, as well as the Commission chairs, has promised explicitly that there will be no “sacred cows” in the Commission’s work. The President stated at the time of its formation, “Everything’s on the table. That’s how this thing is going to work.” The co-chairs have been equally blunt. It would make an obvious mockery of the Commission’s work to attempt to preferentially exclude health care legislation from their critical examination.

Undoubtedly, Congressional Democrats on the Commission, as well as fellow Commission member SEIU chief Andy Stern, will fiercely resist any effort to scale back any cost increases arising from legislation this year. The Commission as a whole, however, cannot duck the debate. With deficits in the general range of $1.5 trillion annually, Commission members will have a difficult time justifying the enormous expansion of federal spending commitments embodied in the health care bills. This topic must surely be one of the first on the Commission’s agenda.

As Congress prepares to vote on health care reform, members should be fully aware that the final shape of any legislation will take some time to determine. The House may rush through a vote this week, but it’s well understood that any House passage will still leave them at the mercy of a protracted Senate budget reconciliation process. And, even if the bill is signed into law – health care’s interplay with the Commission will ensure that the broader debate does not end, once and for all.

The President’s Fiscal Responsibility Commission will still need to determine whether all of the new spending in the health care bills should stand. Many members of the Commission – including, its co-chairs – could well conclude that the “pain” of the health care bills (the Cadillac plan tax, the Medicare payroll tax increase, and the Medicare cuts) should stand, while the coverage-expansion provisions should not.

There is no way for the Administration to shield Members who vote “yes” from the risk of this outcome. To do so would require backtracking from the former promise that the Commission would enjoy independence and that every program would be on the table. The Administration has instead been publicly explicit that the health care bill, like everything else, is on the Commission’s table going forward.

Accordingly, it may well be that the first order of business for the President’s Fiscal Responsibility Commission would be to explore the repeal of any expansion of health care coverage that the House votes on this week. Members of Congress preparing to cast their votes should prepare themselves for this very possible outcome.

At the very least, Members on both sides of the isle would be wise to ask the Administration how they expect the Commission to treat (fair game or not) the latest health reforms, assuming they become law.