President Obama greets U.S. mayors on Feb. 20
As sure as the sun rises, the sitting President of the United States will promise to save our fiscal future by reforming entitlement spending. And as sure as the sun sets, each attempt at delivering on that pledge will end in failure. Bill Clinton vowed to change Social Security when he first addressed Congress in 1993 — and he was still vowing to do so in his last address, in 2000. He also promised to "slow the growth of Medicare" in 1994. Fifteen years later, that growth is still rocketing up. George W. Bush touted entitlement reform in both of his successful presidential campaigns. Then last month, just a few weeks before he left office, he was asked to name the mistakes he had made. "I believe that running the Social Security [reform] idea right after the '04 elections was a mistake," he said. "I should have argued for immigration reform."
The reasons for those unfulfilled promises are no secret. At bottom, entitlement reform means one of two things: less spending on things voters like, such as medical treatment or retirement checks, or unpopular higher taxes to pay for those things — and quite possibly it means both. Blocking each of those routes are powerful lobbies ready to whip supple members of Congress: antitax ideologues, liberal New Deal defenders, retiree groups, patient advocates, pharmaceutical companies and medical providers, to name a few. To make matters worse, while the financial crisis is both real and terrifying, it is not always apparent. Even as our fiscal position deteriorates, the world continues to buy U.S. government debt, allowing for magically low interest rates in spite of enormous deficit spending. (See 25 people to blame for the financial crisis.)
It is on this inhospitable terrain that President Barack Obama now plans to accomplish the impossible: reverse the trajectory of the political universe and make real progress on reforming Medicare, Medicaid and Social Security. The next step in this quest happens on Monday afternoon, when Obama convenes a "fiscal summit" in the White House's State Dining Room with about 100 high-profile guests, including chairs of congressional committees. (See who's who in Obama's White House.)
The event will be conducted like a corporate retreat, with better upholstery. There will be an address by the President and Vice President, Joe Biden, followed by discussion groups on topics like health spending, taxation, Social Security and the budget. Those groups will then report their results to the President. (No word yet on whether the Senators will be using Magic Markers, or those easels with the oversize notepads.)
As daunting as the obstacles to reform are, Obama is banking on a number of recent developments to allow him to succeed where Bush and Clinton failed. For one, there is significant appetite in the Democrat-controlled Congress for providing more health care to the growing ranks of the uninsured. It's a campaign promise that Obama made, which he now intends to pair with a demand to reduce long-term health-care inflation in what some observers have called a grand bargain. "We would not do an expansion of health care without a lot of savings," one high-level White House official told TIME last week.
In practice, this will mean giving uninsured Americans good news, while at the same time telling patients and health providers that bad medicine is on the horizon. "Someone is going to have to tell people you are not going to get the care you want," says Howard Gleckman, a research associate at the Urban Institute. "Covering the uninsured is easy compared to that."
The companies that depend on federal and state health largesse are already mobilizing to fight back against spending reductions that could hurt their balance sheets. One industry front group, called the Partnership to Improve Patient Care, mobilized last month to water down a House plan for more than $1 billion in the stimulus bill to study the relative effectiveness of certain medical treatments, a widely recognized first step in controlling costs. The provision passed, but not before its language was changed to decouple the effort from evaluating the costs of competing treatments.
In the meantime, other provisions of the stimulus bill, like money for new health-information technologies and preventative disease spending, have effectively jump-started the move to a more cost-contained health-care system. Early last week, Obama made no secret of his pride in these measures, declaring at the bill signing in Denver, "We have done more in 30 days to advance the cause of health reform than this country has done in a decade." The effort to reform Social Security, which is generally seen as a less complex problem, is likely to take a backseat over the coming months to health-care efforts. This is partly because of resistance by many House liberals to the idea of reducing Social Security benefits. This group includes House Speaker Nancy Pelosi, who was able to take over the reins in Congress in part because of the resentment caused by Bush's failed reform effort. Although Administration officials don't like discussing the problem on the record, the White House has not yet ruled out the idea of establishing an independent commission (outside the congressional committee structure) to look at creating a specific reform plan, an approach supported by many experts as the best way to break the political deadlock.
Tennessee Representative Jim Cooper, a centrist Democrat, recently discussed his proposal for such a commission during a White House meeting with Obama and other moderate, so-called Blue Dog Democrats. "We have to approach the topic very gingerly," Cooper said in an interview, noting the concerns of certain congressional leaders that they will lose jurisdiction with an independent commission. "The key is going to be a required congressional vote, so we can't duck the problem any longer."
Perhaps the biggest advantage that Obama has as he prepares to tackle entitlement is the financial crisis, which has forced everyone in Washington to focus on the nation's long-term fiscal problems. The recent explosion of government spending to handle the banking collapse and housing crisis has concerned nations like China, which buy government debt. A drop in international interest in U.S. debt could lead to a spike in interest rates, which would have a damaging impact on the U.S. economy. On Sunday, Secretary of State Hillary Clinton urged Chinese leaders to continue their investments in U.S. debt. "We are truly going to rise and fall together," she warned.
None of this, however, means that Obama's task will be much easier than the one that has bedeviled his predecessors. "This is not walking and chewing gum," joked Robert Reischauer, a former director of the Congressional Budget Office. "It's doing open-heart surgery and particle physics at the same time." But the difficulty has not dissuaded Obama. As he pivots to confront the nation's fiscal problems, his aides say he knows exactly what he is getting into.