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Obama's Deficit Plan Can Be Read Two Ways

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By Fred Hiatt
Monday, August 10, 2009

Here are two versions of the summer sizzler "President Obama and the Exploding Deficit," playing in a cineplex near you:

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In Version One, President Obama pronounces himself ready to make hard political choices to tame the federal debt. But after spending a trillion dollars to extinguish an inherited economic crisis, he proceeds to insist -- as if nothing had happened -- on the biggest expansion of federal government spending since Medicare: guaranteed health insurance for all.

He claims to want a bipartisan bill but refuses to consider any component that might offend a Democratic constituency, no matter how essential to a coherent plan: no malpractice reform (trial lawyers), no taxing of employer-provided health-care benefits (unions), no means-testing of Medicare benefits (middle-class seniors).

The president says this new entitlement will be "deficit-neutral." But he proposes to pay for it in part with "Medicare savings" that will be so unpopular that Congress will never let them kick in, and in part with a tax on the wealthy that might have been used for deficit reduction -- thereby reducing the prospects for real deficit reduction from dim to dismal.

Only after health care is in place -- as well as, oh yes, a second unprecedented expansion of federal power into the economy on behalf of energy reform -- will he put deficit reduction on the table. And when he does that, he will support, at best, an apolitical commission that will remove any need for Obama himself to put forth any unpopular proposals.

Plausible? Does this scenario mesh with the facts? Well, but consider Version Two:

President Obama cares deeply about controlling the federal debt, appreciating the existential risk it poses to America's future, and is ready to make hard political choices to deal with it. But he also understands a couple of fundamental truths: First, that rising health-care costs are one of two basic drivers of that debt (the other being the aging of the population), so no solution to the federal quandary is imaginable without getting a handle on those costs. Second, that America's political system simply will not swallow, even from a popular, persuasive president, a reform plan built exclusively on cost control -- a diet of spinach with no dessert.

So Obama sets out to marry cost control to a prize long sought by his party -- universal health care. He recognizes that controlling health-care costs will require constant adjustments, so he seeks to put decisions in the hands of a Fed-like board of experts insulated from politics. He knows reform will fail if it is forced upon the system, so from the start he enlists key players who in the past would have opposed reform automatically: insurers, the drug industry, hospitals, the American Medical Association.

Finally, he calculates that a win on health-care reform will give him the political momentum he needs to tackle the federal debt. But understanding that Congress, with its earmarks and appropriations barons, will never deliver fundamental fiscal reform, he will take the power away from the Pelosis and the Reids by means of a commission that can take the heat for the hard decisions he knows must be made.

This version is also consistent with the facts -- so which is the real movie?

We may get some sense when the story reaches its exciting climax -- when a health bill gets to conference, that is -- and we see how hard Obama will fight for the cost-control, deficit-controlling side of reform.

But, as with other Obama dualities that have vexed observers from the start (centrist or liberal? conciliator or partisan?), the real answer may be: both.

Obama wants universal health care for its own sake -- what president would want his legacy defined by the crabbed, thankless task of balancing the budget? -- but he also believes it can pave the way to fiscal reform. It's an audacious gamble. But, then, it wouldn't be an Obama movie without one.

fredhiatt@washpost.com


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