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Medicare and the Debt Ceiling



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Congressional Democrats have spent the last two days going out of their way to make public statements opposing the inclusion of any Medicare reforms in an eventual debt-ceiling deal. This seemed like it might be an odd aside when Harry Reid and Chuck Schumer first brought it up yesterday, but now it’s becoming clear that there is a concerted effort to send a message to the White House on this point, which suggests that the Biden talks have taken up some kind of Medicare reforms. The rumor on the Hill is that this might involve some elements of the Rivlin-Domenici proposal from last year, which would have transformed Medicare into a premium-support system, albeit with a higher growth rate for benefits than the Ryan plan and with traditional Medicare as one of the options competing for business. Presumably the White House wouldn’t accept that whole model, but if some key parts are on the table, that would certainly be interesting.
 
You can see why congressional Democrats would be alarmed. The Obama White House has given them no substantive policy agenda to run on next year—there is in effect no presidential budget, no presidential priorities, no theme, nothing—and instead had been helping them prepare to run on a “Mediscare” campaign, in which they would try to make seniors afraid of a Republican Medicare reform proposed in broad outline in the 2012 House budget resolution—a reform that, even if it were enacted in whole, wouldn’t actually affect any current seniors. Rather than take the Ryan proposal as an invitation to start negotiating, the Democrats would take it as an invitation to demagogue in the hope of avoiding another electoral massacre by pretending there is no Medicare fiscal crisis.
 
The prospects for success with such a campaign have always struck me as vastly overstated (Jeff Anderson offers some good data on this front at the Weekly Standard today), but at least it was something. If Obama now makes a deal that involves some step, however small, toward transforming Medicare into a premium-support system, he would make a campaign of Medicare demagoguery far more difficult for the congressional Democrats, leaving them nothing to run on, unless they want to run against their own president.
 
But you can also see why this might appeal to both Obama and congressional Republicans. Even if the Medicare component of a debt-ceiling deal (a deal that would presumably also include serious discretionary cuts and statutory spending caps) was by no means a comprehensive reform, it could easily be enough for Republicans to try to run on building on a first step and for Obama to try to run on having done something to address the problem. More important, it offers each the prospect of taking some of the edge off of the other side’s chief political argument—the Republicans’ spending and debt crisis argument against Obama, and the Democrats’ Mediscare arguments against Republicans—while also actually doing something (however small) to begin to address the main driver of our fiscal problems.
 
The upside is probably larger for Republicans. If the economy remains in the doldrums, the party that, as DNC chair Debbie Wasserman Schultz said yesterday, “owns the economy” will be in very serious trouble, and having made some modest start toward a Medicare reform will not be enough to save the president. For the GOP, though, neutralizing the Democrats’ Medicare attacks while not taking Medicare reform off the table (indeed, while endorsing the key premise of the Republican reform proposals) would be immensely helpful. The question for Republican leaders, however, is whether the larger deal would be significant enough to be taken seriously by fiscal conservatives in their caucus and their base. That remains to be seen, of course.
 
Indeed, all of this is only speculation at the moment, and the loud and clear signal from congressional Democrats about Medicare may well mean that a reform is taken off the table in the Biden talks—the Obama administration has certainly tended to be cowed by congressional Democrats in the past. Chances remain high that those talks will not produce a deal at all. But the fact that this has even come up suggests just how concerned the Obama team must be about the president’s reelection prospects—and rightly so.


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