The Dangers of Budget Blackmail

Republicans have a new set of pernicious demands regarding Obamacare and the debt ceiling.

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Talk about the tail wagging the dog. At the moment, Congress can't pass legislation to prevent a government shutdown or a default on U.S. financial obligations because House Republican leaders are handcuffed by their most conservative members' demands for a showdown over health reform.

While the political battles may be morbidly fascinating, let's not lose sight of what's at stake for budget and health care policy.

First, on health reform, the Affordable Care Act is the law of the land and Republicans don't have the votes in Congress to repeal it (and, of course, President Obama would veto any such bill anyway). Republican leaders know that, but their latest effort to appease the ACA's most rabid opponents and undermine support for it is more insidious. They are proposing a one-year delay in the individual mandate that requires everyone to acquire health insurance so long as it's affordable.

[See a collection of political cartoons on Obamacare.]

For understandable reasons, the individual mandate is one of the ACA's least popular provisions. But it's critically important for enabling health reform to achieve its goals of increasing coverage and controlling costs.

As my CBPP colleague Edwin Park explains in this analysis, starting in 2014 the ACA prohibits insurers from denying coverage to people with pre-existing conditions or charging sick people higher premiums. Without the individual mandate, those reforms would encourage older, sicker people to buy insurance but would give younger, healthier people an incentive not to do so until they became sick. Premiums would rise as the pool of insured people became older, sicker, and smaller. As Park reports:

Specifically, a one-year delay of the individual mandate would raise the number of uninsured Americans by about 11 million in 2014, relative to current law, and would reduce the expected coverage gains under the Affordable Care Act (ACA) by nearly 85 percent, according to a new [Congressional Budget Office] estimate. Delaying the individual mandate also would raise premiums for health insurance purchased in the individual market in 2014, CBO finds.

[See a collection of political cartoons on the economy.]

Proponents of delaying the individual mandate draw a false analogy between it and the Obama administration's delay in implementing the law's employer responsibility requirement for a year. As my CBPP colleague Judy Solomon has pointed out, the vast majority of large employers – the only companies that are subject to the requirement to offer coverage and the related penalty if they don't – already offer health coverage and are unlikely to stop. Moreover:

What's key is that the delay won't affect a core component of health reform: in 2014, workers who do not get coverage through their jobs will be able to get good coverage in the new marketplaces, with subsidies available to those with low and moderate incomes.

Second, on the budget, Republican leaders seem to recognize that risking a government shutdown by not enacting 2014 funding levels for discretionary (non-entitlement) government programs – those subject to annual appropriations – in a timely fashion is a dangerous political strategy for them, as is risking a government default by not raising the debt ceiling. But they can't seem to help themselves.

[See a collection of political cartoons on the Republican Party.]

The president and Senate Democrats have called for replacing sequestration's automatic spending cuts with alternative, balanced deficit reduction policies and setting 2014 discretionary funding levels at the level required by current law before sequestration is imposed. By contrast, House Republicans want much larger cuts in funding for discretionary programs in 2014 and have offered no constructive alternative to sequestration. Rather, Speaker John Boehner has demanded more spending cuts in return for raising the debt ceiling.

A government shutdown would be needlessly disruptive for government programs; a default would be disastrous for the economy. Congress will probably find a way to avoid either. But as this CBPP paper argues, averting these crises is not itself an adequate benchmark of success. What also matters quite a bit is how Congress does it. More about that next time.

Chad Stone is chief economist at the Center on Budget and Policy Priorities.

  • Read David Brodwin: Record High Income Inequality Threatens U.S. Growth
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