July 6, 2012
Now that a divided Supreme Court has ruled that the Affordable Care Act is constitutional, it appears that it will be implemented on schedule. The cost, however, has been considerable—politically, constitutionally, and economically.
To begin with, we must recall the circumstances of 2009, when health reform was first put on the table. An economic stimulus package had been enacted in February, but the economy was still very weak, suffering negative growth for the year.
We now know two things about Barack Obama’s economic policy his first year in office. First, the economy was in far worse shape than the administration’s public economic forecast projected. Below is the unemployment forecast published on January 9, 2009. As one can see, in a worst-case scenario where no action was taken to stimulate the economy, the national unemployment rate was expected to peak at 9 percent. With stimulus, it was only expected to peak at 8 percent.
In fact, even with the stimulus unemployment reached 10 percent in October 2009 and was 9 percent or better throughout the Obama administration until October 2011. Republicans assert that this is proof that the stimulus failed; better we should have done nothing, as they proposed. The truth is that the stimulus was too small and improperly designed to cope with the problems it was designed to address. Obama’s economists favored a stimulus package twice as large as the $780 billion program that was enacted based on a forecast that was much too optimistic. Had the severity of the downturn been anticipated properly, they might well have advocated a stimulus package twice as large as that—4 times greater than the one enacted.
At the time, I was concerned that the stimulus was inadequate, but it was clear that nothing larger than $780 billion was going to pass the Senate. However, I was certain that if the economy worsened that additional stimulus could be enacted through the normal appropriations process.
This is where I think health reform imposed a heavy cost. By turning his attention away from the economy and pivoting toward health, Obama did two things. First, he gave the impression, valid or not, that he was not very focused on the economy. Second, he lost the opportunity to enact additional stimulus.
The White House line is that additional stimulus was a nonstarter. But that is because Obama didn’t press the issue. If he had been focused monomaniacally on the economy—talking about it daily, pressing his advisers for better forecasts and better ideas, and demanding swifter actions from the departments and agencies—I think the political situation might have been very different and more stimulus might have been possible.
At a minimum, being far more focused on the economy would have helped Obama politically. Even when there is nothing he can do, people need to know that their president cares and is giving them his best. That is why Franklin D. Roosevelt’s popularity rose during his first term and he won easy reelection in 1936 despite a continuation of the Great Depression.
Intentionally or not, the shift toward health gave the impression that Obama was not sufficiently focused on the economy. And knowing how precious the president’s time is, I believe he was deprived of briefings from his economic advisors and missed opportunities to speak out on the economy and other ways that he could have if he hadn’t been preoccupied with health reform.
Having committed himself to health reform, I think Obama made another error. During the 2008 campaign he said repeatedly that the nation’s biggest health problem was cost. The cost of health care, both public and private, had been rising faster than growth in the economy for years. This was unsustainable and imposed on Americans a total cost for health twice as great as that in almost every other advanced economy as a share of the gross domestic product.
Reining in rising health care costs was the key to getting spending for Medicare and Medicaid under control, Obama said, and getting those two programs under control was the key to getting the budget under control. But rather than concentrate on cost control, where Obama might have found Republican support, he instead proposed a program that would expand health insurance for the uninsured. Cost control took a back seat.
At the end of the day, I thought ACA was worth doing. At least it was paid for, unlike the Republican expansion of Medicare for prescription drugs in 2003, which has added hundreds of billions of dollars to the budget deficit. But the political cost was heavy. I think it would have made more sense to have a national conversation about health reform during Obama’s first term, with action put off until the second term. It would have been far easier to accomplish after a solid re-election.
If Obama needed some other issue to focus on in his first term, tax reform would have made much more sense. In the process, health could easily have been dealt with. Almost all economists believe that the tax exclusion for employer-provided health insurance is a key source of excessive health care costs. Unfortunately, the exclusion was completely ignored during the health reform debate.
Finally, we must count the cost of a Supreme Court ruling that will severely constrain future legislative efforts based on the commerce clause of the Constitution. Although 5 justices agreed that the Affordable Care Act was constitutional under the government’s taxing power, 5 justices also agreed that it was unconstitutional under the commerce clause.
In other words, the price for ACA is that the federal government will be unable to act to deal with problems in the manner in which Roosevelt, Lyndon Johnson and Democrats in Congress have done for the last 70 years—by essentially ignoring constitutional constraints on the federal government’s regulatory power.
It may be that the Republican majority on the Supreme Court would simply have found some other opportunity to impose constraints on the commerce clause. But it is at least ironic that they did so on what may turn out to be the last major piece of liberal legislation. And by ruling that the government’s taxing power is even more expansive than it already was, we may be putting more of a burden on the tax system to deal with social problems than it is capable of bearing.
Time will tell whether greatly expanding health coverage to the uninsured was worth it. But at the moment, I am very doubtful that is the case.