James Pethokoukis

Politics and policy from inside Washington

A healthcare plan to save Obama’s presidency

Aug 17, 2009 19:22 UTC

President Barack Obama has told Americans to be skeptical of reports of an end to the recession, saying the downturn has “many more months” to run. Given the recent retail sales data, Americans seem to be listening to their economist-in-chief.

Obama may well be right in his dour forecast. Whatever the next quarter or two of GDP numbers say, continuing high unemployment and depleted personal wealth should keep the vibe more recessionary than expansionary. It’s tough to be cheerleader-in-chief, after all, when people’s pocketbooks are telling them a starkly different story.

But another issue is exacerbating Americans’ sour attitudes and raising doubts about the president’s competence: healthcare reform. Indeed, a recent Gallup poll shows identical pluralities of 49 percent disapproving of both Obama’s handling of the overall economy and his handling of healthcare policy.

Healthcare reform poses three problems for Obama. First, it seems to cost way too much in an era of trillion-dollar budget deficits. Americans are now as obsessed with budget deficits as they were in 1992, when fiscal concerns helped make Ross Perot a presidential contender. Second, many Americans are skittish about increased government involvement in the sector. Third, an inability to push healthcare reform through a Democrat-dominated Congress makes both the president and his Congressional allies appear ineffectual (as does the dithering over whether a public option needs to be part of any reform plan).

Now, political historians will note that a healthcare reform fiasco helped sink Democrats in the 1994 midterm elections — despite a fairly strong economy — and forced President Bill Clinton to shift to the right and work with congressional Republicans. Together, Clinton and the Republicans balanced budgets, cut taxes and reformed welfare.

But why wait for a political disaster to change course? If Obama wants to deliver meaningful change to the nation’s healthcare system, why not a grand compromise with Republicans that would also bring along centrist Democrats.

Call it the Purple Plan, one that brings red and blue together. Make health insurance mandatory and subsidize those who can’t afford it. (That’s the blue part.) But at the same time dismantle employer-based health plans, which prevent consumers from understanding the true costs of their healthcare decisions. In any case, employer plans are just an accident of history. (That’s the red part.)

The simplest way of dismantling them, according to an analysis by McKinsey, would be to make the money spent on health insurance by employers available as cash, tax free, to employees. “Insurers would then compete for customers with policies that offer better value for the money,” according to McKinsey. “The combination of invigorated supply and demand is the only healthcare reform plan that will avert the economic disaster that otherwise awaits us.”

A Purple Plan for the centrist – or purple — president many Americans thought they were voting for. It would bolster the president’s popularity, lift American spirits and help restore the economy.


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Taxes? Through the roof, America!

Aug 17, 2009 16:43 UTC

There was a Saturday Night Live skit after the 1988 election called “Dukakis after Dark.” In it, failed veep candidate Lloyd Bentsen asks failed presidential candidate Michael Dukakis, “You were going to raise taxes, weren’t you?” Dukakis, wearing a Hugh Hefneresque smoking jacket, shiftily replies: “Through the roof.”

Lots of Washington politicians could give the same response today. This blog post from TaxVox sums up the common wisdom around here:

Politically feasible tax increases alone won’t solve the problem. Neither will cutting spending. In fact, if history is any guide, we’re unlikely to do much of anything on the outlay side. We will certainly have to slash the growth of healthcare to keep the budget from spiraling totally out of control. But that’s likely to take the form of “bending the cost curve” to get gradual savings over many years. In the near term, I suspect taxes will do the heavy lifting. And that will require either major tax reform or tapping new revenue sources.


Sad little man James Pethokoukis seems to think Democrats are all tax and spend, while conveniently ignoring the 8 years under the Bush Administration where deficit spending skyrocketed to levels exceeding the Reagan era, and the national debt doubled.

Republicans have managed to trick many americans into believing that tax cuts are equal to spending cuts, when the reality is that it is a “deferred tax” that has to be paid later…..usually when the GOP falls out of favor and the democrats have to play cleanup, and then the tax increases come which are inevitable due to the fiscal irresponsibility of the republicans.

Repeat after me, tax cuts are NOT spending cuts.

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Oh, about that U.S. economic recovery …

Aug 17, 2009 14:37 UTC

What might stand in the way of a robust economic turnaround. Gary Becker outlines the following factors:

The federal government is creating many programs, such as reducing student loan repayments and mortgage payments for persons with low incomes, which discourage the unemployed from finding jobs, and encourage the employed to become unemployed. The proposed caps of various kinds on executive pay, especially in the financial sector, the large government debt being created due to huge fiscal deficits that will put upward pressure on interest rates, the European style reorientation of anti-trust policies toward protecting competitors rather than consumers, the enormous excess reserves that have a considerable inflation potential, the federal government’s likely incompetent management of two of the three American auto companies and a major insurance company, and the planned creation of a consumer czar that will interfere with the goods and services offered consumers are examples of policies that are likely to discourage business investment and risk taking.

Me: It is not about aggregate demand, gang, it’s about confidence.


I recently read your article I thought i would share it as it has some very interesting facts and insights on the crisis and expected recovery.

http://studentsblog2.blogspot.com/2009/1 0/great-ways-to-student-debt-recovery.ht ml