Between a Swing and a Lock



To their credit, the Republican leaders in Congress have had a highly

strategic view of the uses of policy in consolidating political power. Newt

Gingrich and his colleagues set themselves a clear agenda and they have stuck

to it, conscious that their first priority, more important than any single

piece of legislation, has been to demonstrate the capacity to govern and to

make good on their word. They have put issues first that united them and

deferred those that divided them. Rather than repeal liberal policies one by

one, they have chosen broad legislative measures, such as block grants, that

cancel out decades of legislation all at once. On everything essential,

especially in the House, they have maintained party discipline--moderate

Republicans may bite hard on some votes, but they have stuck with their

leadership far more than conservative Democrats have stuck with theirs in the

last Congress or the present one.



What unites the Republicans despite their rivalries and fissures is a historic

project, which might be described as turning a swing into a lock. As Gingrich

has made abundantly clear, his aim is to extend the swing to the right at the

last election not merely to 1996, but into the next century. The last two times

Republicans won the House, in 1946 and 1952, they lost it in two years; they

seem determined not to repeat that again. Consummating the conversion of

southern Democrats may well provide Republicans with the needed margin for

locking in their position.



Moreover, the Republicans now offer corporate interests the full services of

incumbency, and they have made it plain that they expect full tribute in

return. Interest groups that used to split their political contributions more

or less evenly between Democrats and Republicans are now giving more than 90

percent of their money to Republicans. Such measures as the telecommunications

bill and the bills limiting environmental regulation and product liability

reinforce alliances with corporate interests that give the Republican Party an

increasingly dominant edge in political resources.




None of this is to say that what the Republicans are doing is actually popular.

As Kevin Phillips has put it, the new Congress "has set a record for

provoking disillusionment in just eight months of new party control." In

December of last year, according to Times-Mirror polls, a majority of 52

percent to 28 percent approved of congressional Republican policies; by March,

support was down to a plurality, 43 percent to 39 percent, and by June

disapproval was ahead 45 percent to 41 percent. Stanley Greenberg ("After

the Republican Surge," page 66) reports that by the summer, disapproval of

the Republicans was up another ten points. The public's view of Gingrich

personally has turned overwhelmingly negative.



Yet weakening support has not in the least deterred the Republican leadership.

They know what they are about, and they are focused on digging in. Throughout

this year's political jockeying, the truly important question has been not

how the public responds in the short run on a particular issue, but whether the

outcome serves the larger ambition of the right to establish a new

"regime" in national policy and politics, so deeply entrenched that

it can even outlast their congressional majority.



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The constitutional amendments and seven-year budget plan being proposed by

Republicans are critical steps toward cementing the new regime. As Kathleen

Sullivan cogently argues in this issue ("Constitutional

Amendmentitis," page 20), there is no modern precedent for the current

rash of amendments. Normally, the political opposition accepts majority

decisions in the confidence that it will have a chance to convince the voters

of its case at the next election. Policies that are embedded in the

Constitution, however, become extremely difficult to reverse, which of course

is exactly the intent. For the opposition, winning a mere majority in the

future is no longer enough; amendments raise the bar.



The proposed balanced budget amendment, which Bob Dole has promised to revive,

includes a requirement for a supermajority of 60 percent of both houses of

Congress to approve a budget with a deficit. In its original version, the

amendment had a similar requirement for tax increases; to win extra support,

the revised Senate proposal last March reduced that hurdle to an absolute

majority of both houses, but if the Republicans pick up several extra seats in

the Senate in 1996 and retain the House, they may well put back the 60 percent

level. These requirements would give a conservative minority in the future the

power to prevent a new majority from restoring public expenditure to earlier

levels. They would help turn a swing into a lock.



No Congress can obligate a future one through ordinary legislation, but it can

create presumptions and built-in pressures. So even without the amendment, the

Republicans have used the budget as an instrument of long-term policy control.

Of course, Democrats did the same with entitlements, and both parties have done

so with tax expenditures and defense acquisition programs: It is not long-term

effects per se that are objectionable but the substance of Republican budget

plans. By prevailing on the three crucial premises of the budget

debate--absolute elimination of the deficit, no tax increases, and a rise

in defense spending--the Republicans have foreclosed on a litany of

domestic programs and pulled back the boundaries of political possibility for

the foreseeable future. They have made it seem inevitable, and even

high-minded, to reduce or eliminate benefits to low-income people, from the

earned income tax credit to Head Start and other programs that are demonstrably

beneficial.



The critical, indeed historic change is not so much the reduction in spending

as the termination of legal rights. If welfare, Medicaid, and even food stamps

are subsumed under block grants as the Republicans have designed them, the poor

will lose their federally enforceable right to benefits, indeed, all rights

associated with those programs. The affected groups, primarily women and

children, have raised no significant resistance, nor has any protest been

conspicuously mounted on their behalf. As a result, this year could well mark

the end of the effort, at least in our time, to build a national floor of

social guarantees in America.



None of this has really hit home. The public has shown far more interest in the

evidence at the Simpson trial than in what is going on in Washington. And by

postponing the bulk of budget cuts until after 1996--indeed, backloading

the most severe until the last years of their seven-year plan--the

Republicans may have avoided an immediate backlash.



Except, perhaps, for one area.





RECKONING WITH MEDICARE



Newt Gingrich once predicted that health care would be a "domestic

Vietnam" for the Democratic Party, and some Democrats may now wish they

had heeded his warning. So it may seem surprising that Gingrich and Dole should

send their own troops into the same war by seeking to cut $270 billion from

Medicare. If the Republicans were not trying both to balance the budget and to

cut taxes by $245 billion, the coming confrontation over Medicare might have

been avoided. Ending Medicare as we know it was not one of the promises in the

Contract with America. But just as Democrats in 1992 saw health care as a way

to revitalize their political coalition and policy regime, so Republicans have

now chosen to make health care the central battle in solidifying their new

regime. Controlling Medicare costs is critical to long-term fiscal discipline,

and in their effort to change Medicare conservatives have the same formidable

allies from the insurance industry and other business lobbies that helped them

defeat national health reform.



Yet the Republicans have probably reached this issue sooner than some of them

would have liked, and it has already led them into a quagmire--not

necessarily a Vietnam, but a quagmire of deception. Before the August recess,

Republican members of Congress were sent home with a script of "talking

points" on Medicare that emphasized, according to the New York

Times
, that the changes they would propose this fall were necessary to

"save" Medicare and would give "the elderly 'the same

rights as other Americans,' including 'the right to

choose'" a health plan.



I count five separate lies here. First, giving the elderly "the same

rights as other Americans, including the right to choose a health plan,"

suggests that other Americans have such rights, which they do not. More than

one out of six Americans under age 65, of course, has neither coverage nor any

right to it. Of those who do get coverage from their employer, half have no

choice of plan. The changes in Medicaid instituted or sought by many Republican

governors include mandatory managed care--no choice there. The "right

to choose a health plan" was precisely the right that the Clinton health

plan and other reform proposals would have created. It is bizarre for

Republicans to invoke such rights after they succeeded in defeating them.



Second, and even more bizarre, Medicare beneficiaries are now free to choose

their health care--indeed, they have wider choices than most other

Americans do. They can go to any doctor or hospital, and they can enroll in an

HMO. What the Republicans mean but cannot say is that they want to change the

terms of choice so that beneficiaries have to pay more to stay in

fee-for-service Medicare.



Third, Gingrich and others in his party have repeatedly assured the elderly

that they will be able to stick with the current Medicare program, without

honestly explaining that they want to make changes that will make it

unattractive to remain. Four-fifths of the elderly today combine Medicare with

a supplementary (Medigap) package, which typically covers deductibles and

copayments. Under a draft Republican proposal in circulation this summer, the

elderly who bought such policies would be responsible for a higher share of

costs than if they agreed to go without Medigap coverage. This would raise the

cost of supplementary insurance for those who bought it and raise out-of-pocket

costs for those who gave it up. The draft proposal also called for capping

federal expenditures for Medicare. When health care costs rise faster (which

they are virtually certain to do), payments to providers under Medicare's

fee-for-service program would be automatically reduced. Because of the

stringency of the cuts, Medicare beneficiaries' out-of-pocket costs would

shoot up, or a growing number of doctors and hospitals would stop accepting

fee-for-service Medicare, much as many providers shun Medicaid beneficiaries.

Hence the end of Medicare as we know it.



Fourth, the claim that Republicans are cutting Medicare by $270 billion to

"save" it brings back other Vietnam memories--the American

officer explaining that his troops were destroying a village to save it. The

$270 billion spending reduction target plainly has nothing to do with saving

Medicare and everything to do with driving the deficit to zero and cutting

taxes. Indeed, the Republicans' claim to be "saving" Medicare

simply reflects findings from focus groups and polls that Americans were

overwhelmingly opposed to cutting Medicare. For example, a Wall Street

Journal
/NBC poll ending August 1 showed the public opposed by a margin of

75 percent to 20 percent to cutting Medicare to pay for tax cuts; by a majority

of 56 percent to 38 percent, the public disapproved of cutting Medicare to

reduce the deficit.



Fifth, the shift to managed care being proposed by the Republicans is, in fact,

unlikely to bring about anything like $270 billion in savings. Medicare has

restrained costs about as well as the private sector because it has held down

payments to doctors and hospitals. Managed care plans can't do much better

on the unit cost of services, and while they can reduce the volume, the savings

are offset by higher administrative costs and profits (which together run 25

percent to 30 percent of revenue in many for-profit managed care plans,

compared to 3-4 percent in Medicare). Moreover, the American Medical

Association is supporting the Republicans precisely in the hope that the

voucher system will bring an end to the limits on physician charges--not

exactly an auspicious omen for cost containment.



Nor does the evidence actually show any savings to Medicare from enrollment of

the elderly in HMOs. Currently, when a Medicare beneficiary enrolls in an HMO,

the HMO is paid 95 percent of the average adjusted per capita fee-for-service

cost in the region. The most widely accepted research, however, suggests that

HMOs do not sign up elderly people with average costs; they sign up healthier

seniors, who would have cost Medicare less than 95 percent of the average if

they had stayed in fee-for-service. So Medicare loses money on HMOs.

Improvements can unquestionably be made in the payment system (though just

paying HMOs less could lead them to underserve seniors), but no responsible

analyst projects substantial savings from moving Medicare to managed care. This

has been the view of the Congressional Budget Office--at least, until the

arrival of the Republicans' new appointee as director, June

O'Neill.



Yet even if we were certain that managed care would save money in Medicare, we

can't count the savings twice. If the elderly are to pay less when they

enroll in an HMO, as the Republicans have repeatedly said, that money

can't also be saved by the federal government. If Medicare is to spend

$270 billion less, the elderly will have to pay more or get less--or, most

likely, both.



There is a good case for introducing an open enrollment for HMOs in Medicare,

adjusting payment to HMOs more accurately to reflect the risk of each

beneficiary, and letting beneficiaries benefit from choosing more efficient

health plans. Republicans and Democrats could probably agree on those changes

and more moderate spending reductions, if the Republicans weren't

demanding $270 billion in cuts and a tax cut of similar magnitude. But the

apparent intransigence of the Republican leadership on these goals has set up

what is widely expected to be the great Train Wreck of the fall.



THE WRECK AND THE LOCK



So it will come to this: who blinks first--the president or the Republican

leadership--when the collision between them looms this fall. As the battle

shapes up as of midsummer, the president will veto appropriations bills in

October, congressional Republicans will threaten to withhold approval of a rise

in the debt ceiling most likely in November (threatening the first default in

history by the federal government), and conflict over the ill-named

"reconciliation" bill (containing the tax cuts and changes in

Medicare and other entitlements) will come to a head in November or December.



With so much at stake and the Republicans losing popular support, the president

has every reason to hold firm and to dramatize the differences between his

position and theirs. The prospect of a train wreck may not be quite as

fascinating as the Simpson trial, but it could focus public attention on the

substance of the budget. We need the drama of a train wreck to avoid a far

worse result: the swing of '94 being turned into a lock for years to come.

The Republicans' positions on environmental protection, Medicare, and

other programs are deeply unpopular. In the end, the president will have to

cede ground on many of the cuts, but he should fight to preserve the principles

embodied in national programs. (The one virtue of backloaded spending

reductions is that there is plenty of time to reverse them.) The entitlement

status of Medicaid and food stamps is particularly important to maintain as a

kind of minimum social protection. The cash benefits of the welfare system, in

contrast, are so deeply flawed that it might well be better to start all over

sometime in the future with a European-style family benefit, based on

child-support assurance and a refundable tax credit. Still, if a modified

national entitlement can be preserved, as Senate Democrats have proposed, that

will offer some protection against a free fall in benefits as states face a

growing fiscal crunch from devolution in the late 1990s.




That is when we are most likely to see the real train wreck. Budgetary debates

leave most people's eyes glassy with boredom and confusion, but budgets

ultimately have real consequences. It will be astonishing if Republicans can

convince voters this year that their proposed $270 billion in cuts in Medicare

and other changes will save the program and give beneficiaries more choice. But

even if they pull that off, the reality is that their proposals will make

beneficiaries pay more and face greater restrictions. The Republicans may

succeed in devolving welfare, Medicaid, and food stamps to the states. But if

they do, many states will cut back benefits to avoid becoming magnets for the

poor; in the competition for state budget funds, poor women and children are

unlikely to be the winners. And while some of the poor will find jobs when

faced with a cutoff in benefits, many more will become destitute and will lose

medical coverage for themselves and their children.



Perhaps Republicans can sell radical tax reform in 1996. But if they do replace

the progressive income tax with Dick Armey's flat tax (which has no

taxation whatsoever of capital gains, dividends, and interest), the burden of

taxation will be lifted from capital and fall entirely on labor. Low-income

workers will lose the earned income tax credit entirely, and millions of

middle-income families will see their taxes go up.



The real train wreck will take place when reality collides with ideology, and a

public furious about being lied to demands change. If the Republicans then have

a lock on the political system, God help us--the resulting political

instability could shake our constitutional foundations. The time to prevent

that wreck ought to be now by awakening the public to the real harm that the

Republican budget, tax proposals, and constitutional amendments would bring

about.

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