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By Jay Cost

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ObamaCare is Politically Vulnerable

Liberal commentators are comparing the passage of ObamaCare to other landmark pieces of legislation - like Social Security and Medicare. I agree that in the provision of social welfare, this bill ranks nearly as high. But when you examine how the welfare is provided - it is strikingly inferior. Franklin Roosevelt and Lyndon Johnson made use of an ingenious social insurance system - promoting the idea that we all pay in today to take out tomorrow. It was consistent with American individualism. It was simple. It was intuitive. It was bipartisan.

Obama's new system has none of those virtues. It's an impenetrable labyrinth of new taxes, benefits, and regulations, passed on the narrowest of possible majorities with more than 10% of the Democratic caucus joining every Republican. Even Wile E. Coyote would be embarrassed by its inefficiencies.

Still, the thought among its proponents at the moment is that the legislation, once enacted, cannot be repealed. It will have the benefit of our system's strong "status quo bias." Accordingly, expect yesterday's critics of the filibuster to become its valiant defenders should push come to shove.

The status quo bias is a very real thing, and it makes the Republican efforts to modify or repeal challenging. The GOP must control the entire government by January, 2013 to enact major changes to the legislation. By then, the thinking goes among proponents, those with a personal stake in preserving the legislation will be in place to protect it, just as seniors have been on guard against raids on Social Security.

Yet it's not that simple. The Democrats crammed a $2 trillion bill into a $1 trillion package by delaying the distribution of most benefits for four years, until 2014. This creates two major political vulnerabilities for ObamaCare.

The first is an imbalance between winners and losers through the next two elections. Harold Lasswell defined politics as who gets what, when, and how. By this metric, ObamaCare is bad politics for the foreseeable future. Like any major piece of legislation, this bill assigns winners and losers. The winners will be those who today are uninsured, but who will (eventually) acquire insurance. But there will not be a major reduction in the uninsured until 2014. So, the actual winners are going to be pretty few in number for some time.

Meanwhile, the losers begin to feel the effects immediately. Between now and the next presidential election, ObamaCare is going to pay out virtually zero dollars in benefits, but it will take billions out of Medicare. This is bad for seniors. They have an incentive to oppose portions of this bill (while supporting others, like the closing of the "Doughnut Hole," which Republicans will never repeal). While the Democrats will claim that this reduction in benefits will have no effect on the quality of their care, CBO is much less certain:

Under the legislation, CBO expects that Medicare spending would increase significantly more slowly during the next two decades than it has increased during the past decades (per beneficiary, after adjusting for inflation). It is unclear whether such a reduction in the growth rate of spending could be achieved, and if so, whether it would be accomplished through greater efficiencies in the delivery of health care or through reductions in access to care or the quality of care. (Emphasis mine)

The italicized sentence is an enormous political problem for the Democratic Party. After decades of developing a reputation for defending the interests of senior citizens, the Democrats have put it in serious jeopardy with this legislation. And they've done so right at the moment when demographic shifts are making the senior population more powerful than ever.

Why create such an imbalance between winners and losers? The Democrats are not fools. Why would they do this?

The answer is pretty simple: to hide the true cost of the bill. They don't want to push a $2 trillion program now because this country is facing the greatest deficit crisis it's seen in decades - and such a price tag does not make for good politics these days.

These budgetary gimmicks enabled them to pass the bill, winning over enough self-described "deficit hawks" in the Blue Dog wing of the party to limp to 219 in the House last night. Yet their smoke and mirrors can only mask, not alter the reality, which is this: at a time when the country is facing an enormous deficit problem, the Democrats have created another significant financial obligation for Uncle Sam. This is the second major political vulnerability of ObamaCare.

It's easy to forget these days, seeing as how we've been on a 15-year break from the politics of deficit reduction, just how brutal it tends to be. If you want to know why the parties have become so polarized in the last 30 years, the deficit is a big part of the answer. When Reagan indexed the tax code and stopped runaway inflation, governmental bean counters couldn't depend on bracket creep to solve future imbalances between taxes and spending - and so the lines between the two parties were drawn starkly and clearly.

Deficit reducers always have to choose between two undesirable alternatives: cut spending or raise taxes. The problem with both tactics is that somebody loses while nobody really wins. The benefits of a reduced deficit are diffused across the population and are but weakly felt. Tax increases or spending cuts are felt directly and intensely. Typically, to balance the budget, somebody has to be made worse off tomorrow than they are today.

But not when it comes to ObamaCare, at least not prior to 2014. The benefits could be altered to ease the deficit burden without making anybody worse off tomorrow than they are today. Of course, the beneficiaries of the subsidies would not be as well off tomorrow as they expect to be, but that's different from being made worse off. That could be an important distinction if the politics of deficit reduction are as fiercely zero-sum as they have been in decades past. If it comes down to a choice between a new tax on the middle class or scaling back the unimplemented provisions of ObamaCare, guess what the policymakers in Washington, D.C. will choose.

We're definitely heading toward some kind of hard choice about the deficit. If we weren't, the Democrats wouldn't have employed all those gimmicks to claim that the bill costs less than $1 trillion. They know people are worried about this issue.

Last week, President Obama said again and again that the time for talk is over. Yet this week he's going on the road to defend his new bill. This is why. ObamaCare is politically vulnerable. It lacks the bipartisan support that created and protected new entitlements in decades past. The public does not have confidence in it. Worst of all, it creates an imbalance between winners and losers for four years, and it amounts to a staggeringly expensive new entitlement at a time when the country has to think hard about how to trim its sails.

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-Jay Cost