Apr 26 2009

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Luca Brasi Politics

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Congress has finished its Easter recess and is now back in session, threatening again the Republic it ostensibly serves.

On deck are Obama plans to radically change federal health care and education policy.

In health care, the President and Democrats seek to provide coverage to all uninsured Americans, through expansion of Medicaid, mandated coverage for children, subsidies for low income Americans.  It would create a health insurance “exchange” that would allow the federal government, with unlimited purchasing power, to “bargain” with private sector insurers to provide coverage, eventually pricing the private insurers out of the business.

 On the same principle, the policy would allow the federal government to negotiate directly with prescription drug makers for regarding drug prices, essentially setting the market.  To control costs, participating entities would be denied reimbursement for procedures arbitrarily deemed “redundant” or “unnecessary.” In the real world, that is called “enforced scarcity.”

 Cost estimates for this expansion range up to $1.7 trillion in additional spending over the next nine years, currently without a funding source.

In education, the emerging issue is the empowerment of the federal government to strip financial support from private sector lenders for student loans, forcing all loan activity through the federal government.

The thumbnail sketch of pending activities is necessary to demonstrate that this isn’t congressional house cleaning; this is big stuff.

In addition to trillions in red ink, we are talking about the largest centralization of federal power in decades. There was a time when the consensus was that government should do what the private sector can’t or won’t.  Obama and the Democrats have turned that paradigm on its head, activity competing with the private sector with the goal of putting certain segments out of business and establishing government primacy on the rest through ruinous regulation and unprecedented intervention, such as the firing of GMs Chairman.

And beyond the philosophical change, there are practical implications beyond the eye-popping debt.

For instance, the United States is a leader in creating life-saving or life extending pharmaceuticals.  There is huge and fair debate about pricing, which normally pits partisans against one another regarding the extent to which the full life cycle of drug development and the billions in R&D that drug companies invest to bring a product to market, should be part of pricing. But now that argument will be voided. The federal government will have the power to arbitrarily set prices. While there may be short-term gain for consumers, where is the longer term incentive for pharmaceutical companies to invest in new cures if the government doesn’t take any of that investment into account as it arbitrarily set costs for the final product? The policy threatens an area of American technological preeminence with mediocrity.

And now by competing with the private sector in both health care and student loans, the government threatens private sector job retention. Private sector health care providers will be hard pressed to meet the artificial pricing for minimum services under a federal mandate and will have to withdraw from the sector, threatening employment. And as the financial services industry continues to stagger, Obama and the Democrats intend on taking away a line of business for exclusive federal control.

Again, the detail is intended to illustrate that this is consequential action we are talking about here. This is why the legislative method laid out by Obama and congressional Democrats is so disconcerting.

Obama came to office promising post-partisanship, an end to political bickering, as well as greater cooperation and transparency in the political process. In practice, he has come up short. The $787 billion Stimulus bill was drafted and passed exclusively by Democrats, with small exceptions made for three Republicans in the Senate who crossed the line to give Harry Reid the 60 vote majority he needed to pass the bill.

Now in setting up votes on Obama’s health care and education plans, Democrats have approved a plan to bring the Obama policy changes before Congress under a procedure known as “Reconciliation”. Stripped of the Washington-speak, Reconciliation sets strict limits on debate, and the ability to offer amendments. Most importantly, under Senate rules a simple majority of 51 could pass a Reconciliation bill instead of the normal 60.

To its credit, the Budget Committee has given authorizing committees until October 15 to bring complete bills back for reconciliation.  Ostensibly, this allows Republicans and moderate-to-conservative Democrats to voice opposition to the extent that they are brought into the process.  It also holds out the possibility that Congress will be able to pass a health care and education reform bills on their own, without the noose of Reconciliation around them.  But critics will always be aware that with Reconciliation in place, Obama and the Democrats will prevail in any policy fight and can deliver what the President wants.

This is “vice grip” politics not at all dissimilar from that described in a recent Duffy on climate change legislation where the EPA has unilaterally empowered itself to impose draconian rules regulating greenhouse gas emissions unless Congress comes up with its own plan.

For their part, Democrats say the dust-up on Reconciliation is much ado about nothing; that the Republicans have used it for controversial policy changes, most recently, the Bush tax cuts in 2001.  This is true, but consider the context.

In 2001, the Senate was divided 50-50, with Republicans in control as Vice President Dick Cheney would be the tie breaking vote. Despite the use of the Reconciliation procedure on the tax cut legislation, the Senate version of the tax cut bill passed 62-38; the final conference version of the bill agreed to by the House, the final Senate vote was 58-33.  In passing the Bush tax cuts, Republicans attracted between 8-12 Democrats in the Senate to support the bill.

Now, let’s look at the political terrain today.  Democrats have a very comfortable 76 seat advantage in the House.  In the Senate, the Democrats have 58 votes, and are likely to get their 59th vote when Al Franken is declared the winner in Minnesota.

In contrast to Bush and 2001, Obama and the Democrats are so uncertain of their prospects in garnering one or two Republican votes that they must employ Reconciliation. Or even worse, they have concluded that despite their lopsided advantage in the Senate that they cannot keep their Caucus in check and could conceivably lose 5-7 votes unless Reconciliation is utilized.

That demonstrates a stunningly narrow, ideological agenda, which like the Stimulus bill, could not withstand the scrutiny of the normal legislative process.

In either case, the presidential candidate who promised a defining, politics-free unity of national purpose is ready to employ a Chicago-style, brass knuckles procedure to pass an ideological bill with scant ability for debate or amendment.

It is provocative, breathtaking and chilling all at once.

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