In domestic politics, Congress is behind schedule in pushing along reform of the health system. And as far as the economy is concerned: yes, the stock exchange is up, but consumer confidence is low. There is also no sign of recovery in the job market, with long-term unemployment on the rise. Given all this, no wonder President Obama's poll numbers have seriously dipped for the first time. Of all the problems contributing to Obama's recent decline in domestic public opinion, the health care issue is the most serious. Thus, Obama has decided to spend a big part of his vacation trying to reconnect with the people across America in town hall meetings, explaining why reforming health care is a better idea than leaving things as they are. Given the Democratic majority in both chambers of the American legislation, one may logically ask why under such uniquely favorable circumstances has the health care reforms process run into such trouble?
The failure has three separate aspects. First, there is a lack of clarity about President Obama's plan. Part of this is tactical. Learning the lessons of “Hillarycare,” when former President Bill Clinton's administration tried hard to overhaul the system, President Obama has set out broad goals for reform and some principles to guide the design. He wanted America to debate the issue in the absence of a concrete proposal about exactly what to do. This self-imposed distance is proving to be bad politics because the president appears to have squandered his political capital. The debate has moved on to specifics, leaving the president behind.
Obama's second failure is one of salesmanship. The president says the health care cost, which eats up close to one-fifth of the US economy, is creating an unsustainable deficit. So it is all about controlling costs: without reform, health care will bankrupt the country. Yet, widening coverage for America's 50 million uninsured citizens will only increase the cost. So while the president is talking about health care cost, he is also simultaneously trying to sell access to health care security as things worth paying for. Not surprisingly, the two priorities are conflicting because there seems to be entirely different propositions. So every time Obama stresses the need for cost control, he diminishes his credibility on the access question and vice versa.
So the question is who will pay for health care reform? Democrats in the House propose to tax the very rich -- a tax on millionaires. There is nothing wrong with asking the wealthy to pay for covering the uninsured. Yet, Obama may need to tax the wealthy again later to balance the budget.
“Read my lips. No new taxes.” George Bush Senior made that fatally memorable promise during his campaign for the White House. Later, he saw that for the sake of the economy, he would have to break it. When he did the right thing and went back on his word, he was vilified. It was a turning point in his presidency -- his one-term presidency.
President Obama now finds himself in exactly the same position. During his own run for the White House, he promised that taxes would not rise for families making less than $250,000 a year. If you are middle class, he said in his stump speech, “You will not see your taxes increased by a single dime. Not your income tax. Not your payroll tax. Not your capital gains tax. No tax.” Mr. Obama knows the risk if he, too, breaks his word.
But higher taxes on the broad middle class would be needed even without health care reform, infrastructure spending and the rest. The administration's fiscal stimulus to revive the economy leaves an enormous long-term deficit even after the economy returns to full employment. So the administration's options are limited. The fiscal gap is so big that closing it will be literally impossible without either broadening the extremely narrow base of the current income tax or raising other taxes on the middle class or both. Such policies will not make Obama more popular. This is why the best hope for the administration is that economic growth will come back soon, ideally before the 2010 midterm congressional elections. We will wait and see.
