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Democrats Win Lobbyists but Lose Basic Reforms

A Commentary By Michael Barone

Thursday, October 01, 2009

As Sen. Max Baucus tries to squeeze a health care bill out of the Senate Finance Committee, and as Sens. Barbara Boxer and John Kerry race to meet their latest deadline to introduce a bill to reduce carbon dioxide, some Democrats wonder whether their congressional leaders and the president who has deferred to them have sought only limited changes rather than more fundamental reform on both health insurance and carbon emissions.

On health care, the House committees and Baucus and Christopher Dodd in the Senate health committee, decided to build a makeshift addition to the health insurance system that grew out of a tax law decision made during World War II. That decision was to give a preference to employer-provided health insurance: The cost of insurance would be deductible for employers and would not be counted as income for employees.

The system insulates health care consumers from costs, with the result that insurance costs have recently crowded out wage increases. As Democratic Sen. Ron Wyden has pointed out, the tax preference is steeply regressive. High-earning employees with gold-plated, employer-provided health insurance get deductions that are worth many thousands of dollars.

Those without employer-provided health insurance, or low-earners who are among the 40 percent of earners who do not pay income tax, get exactly zero.

If a Republican Congress had designed such a system, it would be attacked as a favor to the rich, and rightly so.

During the 2008 campaign, Barack Obama attacked John McCain's proposal for equalizing the tax treatment of employer-provided and non-employer-provided health insurance, and so it would be embarrassing for him to advocate such a change (though no more embarrassing than reversing the position he took last March on the war in Afghanistan).

There is, however, a ready vehicle for such a reversal, and one with bipartisan support. It's a bill sponsored by Wyden and Republican Bob Bennett to provide equal tax treatment of health insurance and to provide more choices for consumers.

In addition, Wyden has an amendment in the Finance Committee to allow those with employer-provided insurance to get vouchers to buy insurance from the health exchanges available to those without employer-provided plans. They could buy cheaper policies and pocket the savings from expensive employer-provided options.

Labor unions, a strong Democratic constituency, want to maintain the current system because they have obtained very expensive policies for their members. But with only 8 percent of private-sector workers in unions, it seems clear that basic reforms like Wyden's would do more for low-earners and ordinary Americans than the Democrats' current plans.

On carbon controls, Democrats pushed through the House a bill larded with exceptions for politically well-positioned lobbies and with provisions for discouraging carbon emissions that are phased in years from now. Elaine Kamarck, one of Vice President Al Gore's top aides in the Bill Clinton years, points out that a far more effective policy would be the flat-out carbon tax that Gore has long proposed. Many environmental group leaders agree.

During the 2008 campaign, Obama promised to reduce the influence of lobbyists. But on health insurance and carbon emissions, congressional Democrats and the Obama White House have been making dozens of deals with lobbyists. Those deals have left them far short of their intended goals and threaten to increase voters' cynicism.

More fundamental reforms -- eliminating the tax preference for employer-provided insurance, imposing a carbon tax -- would leave voters and consumers free to adjust to change as they please, rather than trapped in systems constructed by adept lobbyists.

For those of us who are skeptical of government control of the health insurance market, the Wyden-Bennett bill falls short of opening up the marketplace. And for those of us skeptical of the need for imposing massive costs on current economic activity in order to prevent future environmental damage predicted by some but not all experts, imposing a carbon tax seems hugely unwise.

But at least those proposals address major issues in a relatively clear-cut way and tend to minimize the advantage that well-placed insiders can gain in closed-door Washington meetings. The Democrats are having trouble passing convoluted and plainly imperfect health care and carbon-control bills. Maybe they would be better off going back to basics.

COPYRIGHT 2009 THE WASHINGTON EXAMINER

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