Now What For Obama?

Now that President Barack Obama has achieved the long-time goal of the Democratic Party of passing a comprehensive health reform bill, he must ask himself what comes next. He has achieved a great political victory but now comes the difficult part of paying for and administering the now greatly enlarged government responsibility for the nation’s welfare.

He needs to do three things: radical truth-telling about the coming deficits, equally radical devolution of domestic programs, and visible efforts to stimulate private sector employment, particularly youth employment. This should be accompanied by accelerated and visible extrication of troops from Iraq and Afghanistan, and vigorous defense of the rule of law on terrorism questions, including Presidential and Congressional exposure of Vice President Cheney’s effort to militarize domestic law enforcement, repudiated after the objection of all 50 governors.

The truth-telling about deficits should center on raising the social security retirement age and that for federal employees, an end to over-generous indexing of benefits, a modest increase in payroll taxation, and a program of forced saving for retirement, a smaller version of the Singapore Provident Fund, with matching funds for low-income workers, and accompanying creation of private inheritable accounts, which would be compensation for the modest trims in existing pensions. This should be accompanied by a highly public campaign against state and local pension and employee health excesses. The new private accounts would take the form of low-cost index funds, with mandatory allocations between stocks and bonds, and limited choices within each category of investment.

The devolution campaign should seek to progressively raise, at quarterly intervals over a five or ten year period, the federal gasoline tax, with a portion of the proceeds dedicated to income tax reduction via a pre-school or family tax credit and the balance passed through as a credit to states that raise their own gasoline taxes. The proceeds of a tax on or denial of tax exemption to employer-provided health plans should also be passed through to the states, who should be left free to devise programs of catastrophic insurance and single-payer primary health care or, if they prefer, medical savings accounts or insurance subsidies of the sort proposed in the administration’s misbegotten bill, which should be amended to allow this alternative. Primary and secondary education programs should similarly be converted to revenue sharing, subject to two basic conditions imposed on states receiving it: that each school building should be largely managed by its own board, as is common abroad, and that no more than a term of education courses can be required of new teachers. Other federal regulations including IDEA and No Child Left Behind should be dismantled. A modest tax credit should be provided to members of cooperative old age clubs to foster home health care.

The employment program might consist of a temporary waiver of the payroll tax on employees under the age of 25 (among whom the unemployment rate now approaches a socially dangerous 35%) together with a modest tax credit for construction of accessory apartments in owner-occupied homes, which would stimulate the home improvement industry. Similar dispensations might be offered to newly organized land readjustment associations to redevelop urban and suburban blighted areas.

All this involves not feeding existing bureaucracies but dissolving them. This may be thought impossible, but the Roosevelt administration accomplished this quite successfully in a number of instances: the Glass-Steagall Act, the Public Utility Holding Company Act, the repeal of prohibition. If the Administration is willing to take on its public employee clients, it can acquire portions of the Perot-Tea Party constituency. If it is willing to take on its construction industry clients, it can foster pollution control, land-use reform, infrastructure improvement, and the renewal of cities. If it is willing to take on teachers’ unions, there are large constituencies in both inner cities and suburbs that will be pleased. There are also decisive suburban constituencies that do not favor recklessness in foreign policy or the militarization of law enforcement.

Mr. Obama has often taken the path of least resistance by pandering to the reactionaries in his own party and ignoring the fiscal realities and administrative difficulties of reform. His has been less of a reform administration than one that has subsidized defenders of a reckless and irresponsible status quo. He can now survive and prevail only by daring even more greatly, and getting serious about managing his government. The public would like to see him succeed with serious efforts to attack the real problems that threaten the financial survival and administrative integrity of the plethora of programs that now define Washington’s social policy.

Posted in: Health Care, News Series