The American Prospect / Send us a message at prospect@epn.org Copyright 1995 New Prospect, Inc.
Preferred Citation: Paul Starr, " Between a Swing and a Lock,"
The American Prospect no. 23 (Fall 1995): 6-10
Paul Starr
To their credit, the Republican leaders in Congress have had a highly strategic view of the uses of policy in consolidating political power. Newt Gingrich and his colleagues set themselves a clear agenda and they have stuck to it, conscious that their first priority, more important than any single piece of legislation, has been to demonstrate the capacity to govern and to make good on their word. They have put issues first that united them and deferred those that divided them. Rather than repeal liberal policies one by one, they have chosen broad legislative measures, such as block grants, that cancel out decades of legislation all at once. On everything essential, especially in the House, they have maintained party discipline--moderate Republicans may bite hard on some votes, but they have stuck with their leadership far more than conservative Democrats have stuck with theirs in the last Congress or the present one.
What unites the Republicans despite their rivalries and fissures is a historic project, which might be described as turning a swing into a lock. As Gingrich has made abundantly clear, his aim is to extend the swing to the right at the last election not merely to 1996, but into the next century. The last two times Republicans won the House, in 1946 and 1952, they lost it in two years; they seem determined not to repeat that again. Consummating the conversion of southern Democrats may well provide Republicans with the needed margin for locking in their position.
Moreover, the Republicans now offer corporate interests the full services of incumbency, and they have made it plain that they expect full tribute in return. Interest groups that used to split their political contributions more or less evenly between Democrats and Republicans are now giving more than 90 percent of their money to Republicans. Such measures as the telecommunications bill and the bills limiting environmental regulation and product liability reinforce alliances with corporate interests that give the Republican Party an increasingly dominant edge in political resources.
None of this is to say that what the Republicans are doing is actually popular. As Kevin Phillips has put it, the new Congress "has set a record for provoking disillusionment in just eight months of new party control." In December of last year, according to Times-Mirror polls, a majority of 52 percent to 28 percent approved of congressional Republican policies; by March, support was down to a plurality, 43 percent to 39 percent, and by June disapproval was ahead 45 percent to 41 percent. Stanley Greenberg ("After the Republican Surge," page 66) reports that by the summer, disapproval of the Republicans was up another ten points. The public's view of Gingrich personally has turned overwhelmingly negative.
Yet weakening support has not in the least deterred the Republican leadership. They know what they are about, and they are focused on digging in. Throughout this year's political jockeying, the truly important question has been not how the public responds in the short run on a particular issue, but whether the outcome serves the larger ambition of the right to establish a new "regime" in national policy and politics, so deeply entrenched that it can even outlast their congressional majority.
The constitutional amendments and seven-year budget plan being proposed by Republicans are critical steps toward cementing the new regime. As Kathleen Sullivan cogently argues in this issue ("Constitutional Amendmentitis," page 20), there is no modern precedent for the current rash of amendments. Normally, the political opposition accepts majority decisions in the confidence that it will have a chance to convince the voters of its case at the next election. Policies that are embedded in the Constitution, however, become extremely difficult to reverse, which of course is exactly the intent. For the opposition, winning a mere majority in the future is no longer enough; amendments raise the bar.
The proposed balanced budget amendment, which Bob Dole has promised to revive, includes a requirement for a supermajority of 60 percent of both houses of Congress to approve a budget with a deficit. In its original version, the amendment had a similar requirement for tax increases; to win extra support, the revised Senate proposal last March reduced that hurdle to an absolute majority of both houses, but if the Republicans pick up several extra seats in the Senate in 1996 and retain the House, they may well put back the 60 percent level. These requirements would give a conservative minority in the future the power to prevent a new majority from restoring public expenditure to earlier levels. They would help turn a swing into a lock.
No Congress can obligate a future one through ordinary legislation, but it can create presumptions and built-in pressures. So even without the amendment, the Republicans have used the budget as an instrument of long-term policy control. Of course, Democrats did the same with entitlements, and both parties have done so with tax expenditures and defense acquisition programs: It is not long-term effects per se that are objectionable but the substance of Republican budget plans. By prevailing on the three crucial premises of the budget debate--absolute elimination of the deficit, no tax increases, and a rise in defense spending--the Republicans have foreclosed on a litany of domestic programs and pulled back the boundaries of political possibility for the foreseeable future. They have made it seem inevitable, and even high-minded, to reduce or eliminate benefits to low-income people, from the earned income tax credit to Head Start and other programs that are demonstrably beneficial.
The critical, indeed historic change is not so much the reduction in spending as the termination of legal rights. If welfare, Medicaid, and even food stamps are subsumed under block grants as the Republicans have designed them, the poor will lose their federally enforceable right to benefits, indeed, all rights associated with those programs. The affected groups, primarily women and children, have raised no significant resistance, nor has any protest been conspicuously mounted on their behalf. As a result, this year could well mark the end of the effort, at least in our time, to build a national floor of social guarantees in America.
None of this has really hit home. The public has shown far more interest in the evidence at the Simpson trial than in what is going on in Washington. And by postponing the bulk of budget cuts until after 1996--indeed, backloading the most severe until the last years of their seven-year plan--the Republicans may have avoided an immediate backlash.
Except, perhaps, for one area.
Newt Gingrich once predicted that health care would be a "domestic Vietnam" for the Democratic Party, and some Democrats may now wish they had heeded his warning. So it may seem surprising that Gingrich and Dole should send their own troops into the same war by seeking to cut $270 billion from Medicare. If the Republicans were not trying both to balance the budget and to cut taxes by $245 billion, the coming confrontation over Medicare might have been avoided. Ending Medicare as we know it was not one of the promises in the Contract with America. But just as Democrats in 1992 saw health care as a way to revitalize their political coalition and policy regime, so Republicans have now chosen to make health care the central battle in solidifying their new regime. Controlling Medicare costs is critical to long-term fiscal discipline, and in their effort to change Medicare conservatives have the same formidable allies from the insurance industry and other business lobbies that helped them defeat national health reform.
Yet the Republicans have probably reached this issue sooner than some of them would have liked, and it has already led them into a quagmire--not necessarily a Vietnam, but a quagmire of deception. Before the August recess, Republican members of Congress were sent home with a script of "talking points" on Medicare that emphasized, according to the New York Times, that the changes they would propose this fall were necessary to "save" Medicare and would give "the elderly ‘the same rights as other Americans,' including ‘the right to choose'" a health plan.
I count five separate lies here. First, giving the elderly "the same rights as other Americans, including the right to choose a health plan," suggests that other Americans have such rights, which they do not. More than one out of six Americans under age 65, of course, has neither coverage nor any right to it. Of those who do get coverage from their employer, half have no choice of plan. The changes in Medicaid instituted or sought by many Republican governors include mandatory managed care--no choice there. The "right to choose a health plan" was precisely the right that the Clinton health plan and other reform proposals would have created. It is bizarre for Republicans to invoke such rights after they succeeded in defeating them.
Second, and even more bizarre, Medicare beneficiaries are now free to choose their health care--indeed, they have wider choices than most other Americans do. They can go to any doctor or hospital, and they can enroll in an HMO. What the Republicans mean but cannot say is that they want to change the terms of choice so that beneficiaries have to pay more to stay in fee-for-service Medicare.
Third, Gingrich and others in his party have repeatedly assured the elderly that they will be able to stick with the current Medicare program, without honestly explaining that they want to make changes that will make it unattractive to remain. Four-fifths of the elderly today combine Medicare with a supplementary (Medigap) package, which typically covers deductibles and copayments. Under a draft Republican proposal in circulation this summer, the elderly who bought such policies would be responsible for a higher share of costs than if they agreed to go without Medigap coverage. This would raise the cost of supplementary insurance for those who bought it and raise out-of-pocket costs for those who gave it up. The draft proposal also called for capping federal expenditures for Medicare. When health care costs rise faster (which they are virtually certain to do), payments to providers under Medicare's fee-for-service program would be automatically reduced. Because of the stringency of the cuts, Medicare beneficiaries' out-of-pocket costs would shoot up, or a growing number of doctors and hospitals would stop accepting fee-for-service Medicare, much as many providers shun Medicaid beneficiaries. Hence the end of Medicare as we know it.
Fourth, the claim that Republicans are cutting Medicare by $270 billion to "save" it brings back other Vietnam memories--the American officer explaining that his troops were destroying a village to save it. The $270 billion spending reduction target plainly has nothing to do with saving Medicare and everything to do with driving the deficit to zero and cutting taxes. Indeed, the Republicans' claim to be "saving" Medicare simply reflects findings from focus groups and polls that Americans were overwhelmingly opposed to cutting Medicare. For example, a Wall Street Journal/NBC poll ending August 1 showed the public opposed by a margin of 75 percent to 20 percent to cutting Medicare to pay for tax cuts; by a majority of 56 percent to 38 percent, the public disapproved of cutting Medicare to reduce the deficit.
Fifth, the shift to managed care being proposed by the Republicans is, in fact, unlikely to bring about anything like $270 billion in savings. Medicare has restrained costs about as well as the private sector because it has held down payments to doctors and hospitals. Managed care plans can't do much better on the unit cost of services, and while they can reduce the volume, the savings are offset by higher administrative costs and profits (which together run 25 percent to 30 percent of revenue in many for-profit managed care plans, compared to 3-4 percent in Medicare). Moreover, the American Medical Association is supporting the Republicans precisely in the hope that the voucher system will bring an end to the limits on physician charges--not exactly an auspicious omen for cost containment.
Nor does the evidence actually show any savings to Medicare from enrollment of the elderly in HMOs. Currently, when a Medicare beneficiary enrolls in an HMO, the HMO is paid 95 percent of the average adjusted per capita fee-for-service cost in the region. The most widely accepted research, however, suggests that HMOs do not sign up elderly people with average costs; they sign up healthier seniors, who would have cost Medicare less than 95 percent of the average if they had stayed in fee-for-service. So Medicare loses money on HMOs. Improvements can unquestionably be made in the payment system (though just paying HMOs less could lead them to underserve seniors), but no responsible analyst projects substantial savings from moving Medicare to managed care. This has been the view of the Congressional Budget Office--at least, until the arrival of the Republicans' new appointee as director, June O'Neill.
Yet even if we were certain that managed care would save money in Medicare, we can't count the savings twice. If the elderly are to pay less when they enroll in an HMO, as the Republicans have repeatedly said, that money can't also be saved by the federal government. If Medicare is to spend $270 billion less, the elderly will have to pay more or get less--or, most likely, both.
There is a good case for introducing an open enrollment for HMOs in Medicare, adjusting payment to HMOs more accurately to reflect the risk of each beneficiary, and letting beneficiaries benefit from choosing more efficient health plans. Republicans and Democrats could probably agree on those changes and more moderate spending reductions, if the Republicans weren't demanding $270 billion in cuts and a tax cut of similar magnitude. But the apparent intransigence of the Republican leadership on these goals has set up what is widely expected to be the great Train Wreck of the fall.
So it will come to this: who blinks first--the president or the Republican leadership--when the collision between them looms this fall. As the battle shapes up as of midsummer, the president will veto appropriations bills in October, congressional Republicans will threaten to withhold approval of a rise in the debt ceiling most likely in November (threatening the first default in history by the federal government), and conflict over the ill-named "reconciliation" bill (containing the tax cuts and changes in Medicare and other entitlements) will come to a head in November or December.
With so much at stake and the Republicans losing popular support, the president has every reason to hold firm and to dramatize the differences between his position and theirs. The prospect of a train wreck may not be quite as fascinating as the Simpson trial, but it could focus public attention on the substance of the budget. We need the drama of a train wreck to avoid a far worse result: the swing of ‘94 being turned into a lock for years to come. The Republicans' positions on environmental protection, Medicare, and other programs are deeply unpopular. In the end, the president will have to cede ground on many of the cuts, but he should fight to preserve the principles embodied in national programs. (The one virtue of backloaded spending reductions is that there is plenty of time to reverse them.) The entitlement status of Medicaid and food stamps is particularly important to maintain as a kind of minimum social protection. The cash benefits of the welfare system, in contrast, are so deeply flawed that it might well be better to start all over sometime in the future with a European-style family benefit, based on child-support assurance and a refundable tax credit. Still, if a modified national entitlement can be preserved, as Senate Democrats have proposed, that will offer some protection against a free fall in benefits as states face a growing fiscal crunch from devolution in the late 1990s.
That is when we are most likely to see the real train wreck. Budgetary debates leave most people's eyes glassy with boredom and confusion, but budgets ultimately have real consequences. It will be astonishing if Republicans can convince voters this year that their proposed $270 billion in cuts in Medicare and other changes will save the program and give beneficiaries more choice. But even if they pull that off, the reality is that their proposals will make beneficiaries pay more and face greater restrictions. The Republicans may succeed in devolving welfare, Medicaid, and food stamps to the states. But if they do, many states will cut back benefits to avoid becoming magnets for the poor; in the competition for state budget funds, poor women and children are unlikely to be the winners. And while some of the poor will find jobs when faced with a cutoff in benefits, many more will become destitute and will lose medical coverage for themselves and their children.
Perhaps Republicans can sell radical tax reform in 1996. But if they do replace the progressive income tax with Dick Armey's flat tax (which has no taxation whatsoever of capital gains, dividends, and interest), the burden of taxation will be lifted from capital and fall entirely on labor. Low-income workers will lose the earned income tax credit entirely, and millions of middle-income families will see their taxes go up.
The real train wreck will take place when reality collides with ideology, and a public furious about being lied to demands change. If the Republicans then have a lock on the political system, God help us--the resulting political instability could shake our constitutional foundations. The time to prevent that wreck ought to be now by awakening the public to the real harm that the Republican budget, tax proposals, and constitutional amendments would bring about.o
The American Prospect / Send us a message at prospect@epn.org
Copyright 1995 New Prospect, Inc.