Foolish

12.11.12

President Obama’s Looming Medicare Concession

If Obama is really considering hiking the Medicare eligibility age, he's off to a bad start with the base. Michael Tomasky on the potentially colossal blunder.

Sunday afternoon I received an email from Howard Dean. Not a personal one, but nevertheless seeing his name there made me look twice, because I never get emails of any kind from Howard Dean. This one warned me ominously about the looming cuts to Medicare, and while the Deanian digit of outrage was pointed at the Republicans, the email also noted that my voice was needed to ensure that the Democrats stood united against the assault. Translated, this means that liberals are terrified that the White House is about to agree to increase the Medicare eligibility age to 67. I don’t personally feel quite as strongly about this as many others do, for reasons I’ll get into. But my own views aside, I think the White House ought to know that by all existing evidence, if it agrees to such a deal, Barack Obama will lose liberal support far more quickly, more despondently, and more, if I may put it this way, ferociously and furiously than he ever lost it over the public option.

Here’s the talk that started over the weekend: That the White House was … well, the correct verb is an interesting question here … contemplating? Pushing? Offering? … a deal that quickly was dubbed 67-for-37. The Democrats would agree to raise the Medicare eligibility age to 67 from the current 65, and Republicans would agree to hike the marginal tax rate on taxable dollars earned above $250,000 to 37 percent (down from Obama’s desired 39.6 percent).  Both sides give, both sides get. It looks, to your average person, reasonable. It could be done before the New Year. As we say in Appalachia, Bob’s your uncle.

Except that it isn’t that simple. As clean and balanced as this might look to the unschooled eye, it would actually constitute a huge win for the Republicans—the party at the table, remember, that is presumed to have little to no leverage here. Why would that be? Because it’s a lot easier to change marginal tax rates around than it is to go back in and fiddle with an entitlement rule. Tax rates aren’t easy to change, mind you. But entitlement changes are really, really hard and rare. If the Medicare age got bumped up to 67, I can’t imagine a force in the future that could bump it back down, what with the deficit-obsessed establishment that we have in this town. So Obama would be giving the Republicans something much more likely to remain permanent in exchange for a thing the Republicans can change pretty quickly the next time they have a president and majorities in Congress.

But that’s only the start. It turns out that raising the eligibility age by these two years doesn’t really save any money. The economist Brad DeLong explains that spending in Medicaid and other subsidies would have to be increased to help cover the 65- and 66-year-olds who fall through the cracks.

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Michael Tomasky and David Frum on what the looming fiscal cliff means for Medicare.

Neera Tanden, head of the Center for American Progress, made this points and others on Chris Hayes’s MSNBC show over the weekend. Tanden is a powerful figure in Washington progressive circles, and CAP is close to the administration—a formula that usually means that a person in Tanden’s position would be sheepishly imploring viewers to see both sides of this complicated question. That she did not shows, well, that she has backbone (and she worked on Obama’s campaign!), and it reflects just how unhappy Obama’s base, even his establishment base, would be.

Those troublesome 65- and 66-year-olds, of course, raise not merely a fiduciary question, but a moral one. What about the people who fall through the cracks and are stuck without insurance for two years? And that raises the Really Big Issue here, which is what really has liberals climbing a tree: a Democratic president, fresh off a convincing reelection, is going to be the guy to take a huge bite out of the social safety net? You’ve got to be kidding me.

And so, we’re hearing it, or I’m hearing it, from some quarters already. He’s going to sell us out. He was never that liberal anyway. He said back in 2009 that he wanted to do big entitlement reform, so why shouldn’t we take him at his word? And so on and so on. Liberals, or at least some liberals, have already returned to the normal crouch position of anticipating the not-at-all theoretical day that Obama sells them out in one beat of their bleeding hearts.

For my own part, I’m not there yet. Matt Yglesias wrote last week that cutting a deal with this element is conceivable provided Obama gets in return something health-care related, and something that covers those 65- and 66-year-olds who risk getting caught in the cracks. Such a deal, depending on its particulars, wouldn’t be insane. But this too would be politically difficult. Raising the eligibility age to match the increasing Social Security retirement age (67 in 2028 under current law) could make sense provided the Affordable Care Act has been fully implemented and the new health-care exchanges are up and running, so people can buy into those at affordable rates. But Republicans, of course, are still looking for ways to kill off the ACA. And governors aren’t setting up the exchanges. Signs aren’t encouraging that the Republicans would bargain in good faith on this point, but at least in policy terms, a rationale would exist for going to 67.

A Democratic president, fresh off a convincing reelection, is going to be the guy to take a huge bite out of the social safety net? You’ve got to be kidding me.

But for Obama to accept a 67-for-37 kind of deal would be madness. Especially before January 1, when the tax rates go up. It’s hard to see why Obama should give something to get a win he stands a good chance of getting at no price a few weeks later. (I doubt the Republicans can afford politically to let all taxes go up, so they will be eager for a deal—almost any deal—very soon.)

Obama faces enormous establishment pressure to consummate a deal—from Wall Street, from much of the mainstream media, etc. I’m more willing than most liberals to concede that he has to take that pressure seriously. But he might also keep in mind that two thirds of the public, including a hefty majority of Republicans, opposes going to 67. And he might also remember his voters. The market might not care much about lower-income senior citizens, but he was elected to do just that.