Not so fast on health care reform

This is an article by syndicated columnists Dick Morris and Eileen McGann.

To quote the esteemed Rev. Jeremiah Wright, the chickens that were hatched in the stimulus package are coming home to roost in the health care proposal. The budget deficit that Obama racked up paying for the massive federal spending passed in January is now having a real economic and political impact, which is forcing the president and his congressional allies into hard choices as they face his health care legislation.

Of course, the prudent thing to do is postpone health care changes until the economy generates some revenues and trims the deficit. But he's got to strike while his congressional majority is hot. So he is forcing his administration and his party to choose among unpalatable choices to finance his program.

First of all, the very fact of a focus on health care reform inevitably stirs discussion of the deficit. Americans are allergic to deficit spending and worry the more the deficit grows. As interest rates rise and the government finds it more difficult to borrow enough to cover Obama's massive spending, the economy is likely to show the negative effects.

It is a matter of a few months, certainly no more, before voters start to realize that it is the deficit, not the pre-existing conditions Obama inherited, that is prolonging the recession. Already the jump in mortgage rates has slowed home refinancing, which was the only aspect of the Obama economic program that was working well.

But the foreign and domestic focus on the deficit has a harsher political impact: It forces the Democrats to come up with money to fund health care reform.

In other words, it makes them raise taxes. The Democratic Party is good at fooling itself that tax increases don't matter and are politically palatable, but they do and they are not.

The massive spending health care will require goes beyond the capacity for the rich alone to pay the bill, no matter how confiscatory Obama chooses to become. Only broader taxes will do the job. Obama faces two practical choices: a value added tax or taxing health insurance benefits.

The political harm either way will be enormous. Not only will Obama be breaking his pledge not to tax the middle class, but he will be doing so in a particularly pernicious way.

If Obama opts for the value added tax (VAT), Democrats will hope to cloak the increase in the price of the product. They reason that the consumer won't know how much the tax is since it will be added on throughout the sale and resale of the product, rather than at the cash register at the end as the sales tax is.


Obama's only good option is not to move so quickly on health care reform to give himself some wiggle room.

But, as the song says, "We're knee deep in the big muddy, but the damn fool says to push on!"


John F. Pack
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