Can House Democrats trust the Senate not to foul up a two-bill strategy for health care reform?

No.

While most of the public discussion focuses on the procedural challenges particular to reconciliation, a more important point is being overlooked.  The hardest part of the Pelosi/Reid strategy is trying to enact one massive package of legislative changes, spread out over two separate bills, one of which cannot change. Reconciliation is just the icing, and in some ways, reconciliation makes a two bill strategy easier since it avoids the filibuster threat.

The MSM has picked up on the sequencing challenge.  For Bill #2 (the new reconciliation bill) to be scored properly for Senate consideration, Bill #1 (the original Senate-passed bill) has to have passed both the House and the Senate.  But this means that House Democrats would have to vote for Bill #1 before knowing that Bill #2 would make it to the President’s desk.

This is being framed as a “trust” issue.  Can House Democrats trust Senate Democrats to pass Bill #2 and send it to the President?  After all, we know those Senate Democrats were happy to stop work with Bill #1, since that was their original bill.

This lack of trust is reinforced by centuries-old institutional tensions between the bodies, and by comments like Leader Reid saying at the recent Blair House summit that no one is talking about reconciliation.

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Team Obama says the President’s budget would reduce the deficit.  CBO says the President’s budget would increase the deficit.  What the heck is going on?  Who is right?

Let’s use Budget Bubble Graphs to see if we can understand what’s going on.

We begin by reminding ourselves that federal spending, taxes, and budget deficits have remained surprisingly stable over time.  Over the past fifty years the federal government has, on average:

• taken 18.0% of GDP in taxes;
• spent 20.3% of GDP; and
• run a deficit of 2.3% of GDP.

While there are annual fluctuations and short-term trends, these long-term averages are incredibly stable.  I believe they represent a sort of implicit political consensus about the appropriate role of government in American society, or at least a roughly stable political balancing point.

One lonely bubble

Here is that 50-year average on a simple Budget Bubble Graph.  As always, you can click on any graph to see a larger version.

As a reminder, the 20.3% of spending is plotted on the x-axis.  This 20.3% of spending must be apportioned between current taxes and deficits (= future taxes).  On average, we have collected 18.0% in current taxes, which we graph on the y-axis.  The 2.3% average annual budget deficit over the past fifty years is represented by the size of the bubble.  That size won’t mean much until we have another bubble for comparison.

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A Republican on Capitol Hill points out that we’re going through a health care press coverage time warp.  In each of the following four headline pairs, one is from this morning.  The other is from last year.  See if you can guess which is which.

Politico: President Obama takes reform on the road
AP: Obama takes health care pitch to people—again

Bloomberg: Obama Set to Fight ‘Uphill Battle’ on Health Bill
Bloomberg: Obama to Appeal to Public on Health Care as Senate Struggles

AP: Obama’s health care pitch to Democrats: Trust me
AP: Obama makes last-minute appeal to Democrats for health care votes

AP: Obama to appeal for public support on health care
AP: Obama appeals for health care votes

Similarly, see if you can determine which headline in each pair is from 2010, and which is from 2009.

CSM: To pass healthcare reform, Democrats may go it alone
CNN: Democrats May Pass Health Reform without GOP Support

NYT: Obama Takes Health Care Deadline to Democrats
AFP: Deadline looming, Obama urges health care action

Boston Globe: Obama steps up health care pressure
Politico: President Obama steps up health care push

AFP: Obama presents make-or-break health reform plan
NPR: For Obama, Health Care Overhaul Is Make-Or-Break

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Can Speaker Pelosi bring health care reform back from the dead?  Did it ever really die?

Doctors say that Nordberg has a 50/50 chance of living, though there’s only a 10 percent chance of that.

– George Kennedy as Ed Hocken in The Naked Gun: From the Files of Police Squad

In addition to my last health care post, Nate Silver summarizes well the forces pushing in both directions.  John Podhoretz also has a good strategic overview.  I’ll add a few assorted observations to begin the work week.

Vote counting & strategy

• Focus all your attention on Speaker Pelosi’s attempts to get 216 votes.  If she can lock them down I think there’s a four in five chance there will be a law (or two).
• The Stupak/abortion issue appears to be the biggest substantive hurdle.  Chatter about a possible three bill strategy (!?) to address this is stunning.  Two bills isn’t hard enough?
• The sequencing/trust problem still appears hard.  How does the Speaker get her members to vote for Bill #1 based only on a promise that Bill #2 will make it to the finish line?
• Occasionally a Congressional leader calls a vote without having the votes locked up, in the hope that the pressure of a floor vote will help close those last few remaining holdouts.  This is incredibly risky.  Sometimes there is no better option.

Probabilities

• Public signs of optimism from the President, his team, and Democratic Congressional leaders tell us little.  We don’t know if they actually think they will have the votes, or if they are asserting that to try to make it true.  Imagine the impact if Speaker Pelosi were to tell the press “We might not succeed.”  Doing so would further embolden those marginal Members she is trying to convince to vote aye.  They are telling us they think they will succeed, but they have to say this whether or not it’s true.
• The President’s chance of legislative success is way above the 10% I projected shortly after the Brown election when I declared a comprehensive bill dead.  Was I wrong, or have things changed dramatically?  A little of both, I think.

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Budget Director Peter Orszag and White House Health Policy Advisor Nany-Ann DeParle (who was a PAD in the Clinton OMB) write in today’s Washington Post:

But some critics complain that the administration has slipped in its commitment to fiscal responsibility in health reform.

These critics are mistaken. The president’s plan represents an important step toward long-term fiscal sustainability: It more than meets the president’s commitments that health-insurance reform not add a dime to the deficit and that it contain measures to reduce the growth rate of health-care costs over time.

I suspect this op-ed is aimed at moderate Democratic House members who are nervous about voting aye.  I am one of the critics Orszag and DeParle mention, and I’d like to respond to one of their arguments.

CBO says the Senate-passed bill would reduce budget deficits over the ten-year period 2010-2019 by $132 B relative to what those deficits would otherwise be under current law.  I want to focus on this comparison, and in particular on the $438 B of savings CBO scored from Medicare and Medicaid in that bill.  I do not question these aspects of CBO scoring, but do disagree with the conclusions drawn from it by others.

$210 B of these $438 B in net Medicare and Medicaid savings come from a single legislative gimmick known as “gaming the budget window.”  To a certain extent the Obama Administration isn’t to blame for this problem, but they are taking advantage of it in this legislation.  This is a fairly complex technical issue, and by no means the only problem a fiscally responsible person should have with this bill.  Still, $210 B and the Administration’s claim of fiscal responsibility rely upon this gimmick, so I’ll do my best to explain it.

Read the full post here

Here is a typical public debate about the budget deficit:

Republican:  Republicans are for smaller deficits.  You Democrats just want to increase spending.  Republicans want smaller deficits by cutting spending.

Democrat:  Hypocrite.  You Republicans increase deficits by cutting taxes without paying for them.  And you don’t really want to cut spending.  Democrats are for smaller deficits through a combination of responsible spending cuts and tax increases.

Republican:  When was the last time you enacted or even proposed a net spending cut?  Even when you do propose to cut spending, you just turn around and respend the money on some new government program.  You just want to raise taxes, then increase spending, leaving deficits exactly where they are.  Sometimes you don’t even bother with the tax increase, you just increase spending.  We are the party of lower deficits.

Democrat:  You mean, like you guys did with Medicare or you do with defense every year?  We are the party of lower deficits.

< one shoves the other and all hell breaks loose >

This kind of argument contributes more heat than light, in part because it focuses only on deficits and ignores a major philosophical distinction between the two parties:  different beliefs about the appropriate size of government.

I am going to do my best to illuminate this debate by expanding its scope and introducing a new kind of graph.  I call it a Budget Bubble Graph.

If this goes well we can use Budget Bubble Graphs to better understand the fiscal policy debate in Washington.  We can compare different budget proposals, analyze historic fiscal policy differences, and easily visualize the effects of various legislative proposals.  That’s a lot of responsibility for a little graph.  Today I’m going to introduce the graph format and begin to show how it can help you think about the above fiscal policy food fight.  I anticipate using Budget Bubble Graphs a lot in future posts.  Today’s post is therefore something of an investment for the future.

Introducing the Budget Bubble Graph

Bubble graphs are not new.  They are a standard graph type, a useful way to show three dimensions of data on a flat chart.  As far as I know, it is new to use them for the federal fiscal policy debate.

Let’s begin with the simplest possible graph.  Since the end of World War II the federal government has, on average, spent a little more than 20% of GDP.  Over the same time frame, it has financed this 20% by collecting a little more than 18% of GDP in taxes and borrowing the rest from future taxpayers, running an average deficit equal to about 2% of GDP.  I’m going to round the numbers to 20-18-2 to make it easy.  Frankly, the numbers matter little today.  We’re just trying to get used to the format.

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Speaker Pelosi, Leader Reid, and their Administration allies face seven challenges in implementing the two bill strategy:

1. Yes/no political question
2. Yes/no reconciliation question
3. Sequencing
4. Money
5. Procedural
6. Substance & vote counting, especially in the House
7. Timing

I have a companion post which describes the mechanics of the two bill strategy.  Warning:  the mechanics post is intended as a technical reference and gets into more detail than you may want.

Last August I posted a primer on reconciliation which may be helpful.

1.  Yes/no political question

Irrespective of the bills’ substantive details, can Speaker Pelosi and Leader Reid convince each of 217 House Democrats and 50 Senate Democrats that it is in their crass political self-interest to vote aye (multiple times) and have a major health bill become law?

Most Democrats are from safe districts so this isn’t an issue.  But there are some House Democrats who voted aye for House passage and are nervous about voting aye a second time.

Argument:  You already voted aye.  Your opponent this November can already run an ad against you for that vote.  There is therefore no political cost to you voting aye a second time.

Response:  If you vote aye a second time, the bills will become law.  You are then committed to defending these laws and your votes for them through the remainder of this year (and thereafter).  If you change your vote to no, the bill will not become law and you give yourself a response to that negative ad.  Your message changes to “I changed my mind, and here’s why I opposed the bills.”

The crass and self-interested political question is not “Do I do additional damage by voting aye a second time?”  It is “Given that my opponent will attack me for voting aye last October, am I better off (A) voting aye, having it become law, and defending it, or (B) voting no, having it not become law, and explaining why I changed my vote?”

Read the full post here

I am going to describe the mechanics of the anticipated “two bill strategy” to enact health care reform using reconciliation.

If you don’t care about all this procedural mumbo jumbo you can skip this post and head over to my strategic analysis:  Challenges of the two bill strategy.  I intend this to be a reference post for those who want the gory details.

This is a follow-up post to What is reconciliation? (posted 5 August 2009).

Last August I wrote two other posts analyzing the prospects for using reconciliation for health care reform:

• How reconciliation might be used for health reform (posted 5 August 2009)
• Doing health care through reconciliation is even harder than I thought (posted 6 August 2009).

This post in effect updates and replaces those two posts for the current legislative environment.

Thanks to two experts who helped check this.  I will update it to reflect suggestions and corrections from others.

Step by step

For this explanation I will assume success at each stage of the process, ultimately leading to President Obama achieving victory and enacting comprehensive health reform into law.  The following is what I believe would be the most “normal” scenario for a highly unusual procedural path.  It’s unusual not just because of the use of reconciliation, but because Congressional Democrats would be attempting to enact one substantive set of reforms spread across two bills, one of which realistically cannot change.  This is procedurally novel for policy changes of this magnitude.  It is also incredibly difficult to execute.  You will seen so that there are many potential failure points.

Read the full post here

Conventional wisdom says the tenure of President George W. Bush was dominated by partisanship.  There were deep partisan splits over the war in Iraq, enhanced interrogation, wiretapping, the 2003 tax cuts, and Social Security reform.

This conventional wisdom ignores significant bipartisan legislative accomplishments led by President Bush.  I will focus on domestic policy accomplishments.

Each of the following major laws was enacted on a bipartisan vote:

• The 2001 tax cuts;
• the No Child Left Behind Act in 2001-2;
• the 2002 extension of Trade Promotion Authority;
• the 2003 medicare law;
• the 2005 energy law focused on electricity;
• the 2006 pension reform law;
• the 2007 energy law focused on fuel;
• the 2008 stimulus law;
• the 2008 housing reform law; and
• the 2008 TARP law.

President Bush also reached across party lines to reform immigration law.  His bipartisan outreach on this issue was successful, but the legislation failed due to opposition from both wings.  In that effort President Bush’s team negotiated with a broad group in the Senate, led by Senator Kennedy on the left and Senator Kyl on the right.  President Bush’s attempts deeply split his own party, yet he persisted until it became apparent there was not a 60 vote coalition to succeed.

I imagine some readers are skeptical of the above list so, once again, I’m going to show you some pictures.  I’m going to show you a lot of pictures.  I want to hammer home the Bush-bipartisan success point.  I will then try to draw some lessons for Team Obama.

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While I oppose the President’s health care proposals (old and new), I have to give the White House staff credit for a slick new website in advance of Thursday’s Blair House health care debate.

I will highlight a few policy elements of the President’s new proposal, then turn to tactical analysis.

Major changes in the President’s proposal

1. Like the Senate bill, the President’s proposal would raise taxes on wages by 0.9 percentage points for individuals with incomes > $200K and families with incomes > $250K.  In addition, the President’s new proposal would impose a 2.9 percent tax “on income from interest, dividends, annuities, royalties, and rents” for those with income above $200K (individuals) and $250K (families).  Flowthrough income from ownership in a small business or partnership would not be subject to this tax.
2. The President’s proposal delays the taxes on pharmaceutical and health insurance companies.  It appears (but we can’t be certain) that they intend to raise the same amount of revenue from these industries, meaning that the per-year tax would go up.
3. The “Cadillac tax” has been delayed to begin in 2018 and the threshholds would be $27K for families (as opposed to $23K in the Senate bill).  The Senate-passed levels were so high as to be absurd – they would apply to almost no one.  This exacerbates that problem.  No word on whether union plans are still exempt.
4. The President would create a new federal Health Insurance Rate Authority “to provide needed oversight at the Federal level and help States determine how rate review will be enforced and monitor insurance market behavior.”  Health plans would therefore be subject to state and federal rate regulation.  I presume this is a reaction to the recent California/Anthem premium hike story.

Strategy and tactics

Far more interesting than the substance of the new proposal (which is excruciatingly detailed) is trying to understand what Team Obama is trying to do with it.

Speaker Pelosi released a statement that she “look[s] forward to reviewing it with House Members.”  I can’t find anything from Senate Majority Leader Reid yet.

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