Was the downgrade a rejection of ObamaCare?

posted at 10:30 am on August 7, 2011 by Ed Morrissey

“So make no mistake: Health care reform is entitlement reform.” — Barack Obama, April 14, 2009

“Health care reform is entitlement reform.” — Peter Orszag, OMB Director, February 23, 2009

Whenever Republicans insisted on debating entitlement reform and the looming unfunded liabilities of Medicare and Medicaid, which by some calculations amount to more than $100 trillion over the next few decades, President Obama had one handy answer: we’ve already accomplished it.  ObamaCare, he and his administration insisted, was the entitlement reform that we needed to address the crises in Medicare and Medicaid.  Obama claimed that going into the months-long battle that eventually produced the PPACA, commonly known as ObamaCare even when first introduced shortly after his remarks.  The quote above comes from an April 2009 speech, and the larger context of the quote shows that Obama sold his plan as a complete solution:

Along with defense and interest on the national debt, the biggest cost drivers in our budget are entitlement programs like Medicare, Medicaid and Social Security, all of which get more and more expensive every year.  So if we want to get serious about fiscal discipline — and I do — then we’re going to not only have to trim waste out of our discretionary budget — which we’ve already begun — we will also have to get serious about entitlement reform. Now, nothing will be more important to this goal then passing health care reform that brings down costs across the system, including in Medicare and Medicaid.

So make no mistake: Health care reform is entitlement reform.  That’s not just my opinion. That was the conclusion of a wide range of participants at the Fiscal Responsibility Summit that we held at the White House in February. And that’s one of the reasons why I firmly believe we need to get health care reform done this year.  Now, once we tackle rising health care costs, we must also work to put Social Security on firmer footing. It’s time for both parties to come together and find a way to keep the promise of a sound retirement for future generations.

The same is true for Orszag’s remarks two months earlier, in which we get the familiar refrain of “bending the cost curve downward” as a prelude to ObamaCare:

So, to my fellow budget hawks in this room and in the rest of the country, let me be very clear. Health care reform is entitlement reform. The path to fiscal responsibility must run directly through health care.

We also must recognize that reforms to Medicare and Medicaid will only succeed in the context of slowing the overall growth rate of health care costs.

Improving the efficiency of the health system so that we get better results for less money is therefore not just or even primarily a budget issue. It would also provide direct help to struggling families, since health care costs are reducing worker’s take-home pay to a degree that is both underappreciated and unnecessarily large.

And for many states, health care is increasingly crowding out other priorities like higher education, which, in turn, is leading to higher tuition and painful cutbacks at state universities.

All of this is why the president had said, time and again, that he is committed to reforming the health system this year. And with his leadership and the hard work of everyone in this room, we can reform health care, start to bend the curve on long-term costs, and get our economy back on a path of long-term fiscal sustainability.

Had ObamaCare done what the President and his former OMB Director claimed, then why would S&P downgrade the US over its debt and future liabilities?  Perhaps because, as Philip Klein writes at the Washington Examiner, investors weren’t impressed by supposed entitlement reform that consists of adding to those liabilities:

Defenders of Obama will attempt to pin the blame on his predecessor, President Bush, and on intransigent Tea Party radicals in the current Congress. But that would leave out the part in between. For his first two years in office, Obama’s party controlled both chambers of Congress – for part of that period, he had a filibuster proof majority in the Senate. During that time period, he and his fellow Democrats could have passed his supposedly ideal, long-term, deficit-reduction package — one that represented a “balanced approach” between spending cuts and tax increases. It also could have delayed the deficit reduction for several years, so it wouldn’t have affected the current weak economy or the “investments” he considers crucial. Forget about actually accomplishing serious deficit reduction — he didn’t even attempt it.

When Obama came into office, he argued that we needed deficit spending to boost the economy, so he passed a $800 billion stimulus package. Then, in one of his first supposed pivots to the deficit, he convened a ‘fiscal responsibility summit’ in February 2009. But that actually turned out to be part of a different pivot altogether. It was during that summit that then White House Budget Director Peter Orszag declared, “health care reform is entitlement reform.”

And so, for the next 13 months, Obama spent all of his energies trying to get health care legislation across the finish line. The end product was a plan that, according to both the Congressional Budget Office and actuary for the Centers for Medicare and Medicaid Services, did not bend the health care cost curve down.  Let’s even set aside the argument over the accounting gimmicks that were employed to obtain a CBO score that showed modest deficit reduction. The reality is this: the law used money raised through tax hikes and Medicare cuts that otherwise would have been available for deficit reduction, to instead expand Medicaid by 18 million beneficiaries and create a massive new health care entitlement.

There are clearly other problems to which S&P reacted; Klein mentions the fact that Obama didn’t bother to present the plans of his own deficit commission, for one, or offer any specific plan even after it became clear this year that accelerated deficit spending would not pass Congress.  But it’s an inescapable conclusion that S&P doesn’t consider ObamaCare an effective reform of the largest of the entitlement crises we face.  They have been looking for the US to reform its debt structure — and after ObamaCare, they’re still looking.

In other words, health care reform wasn’t entitlement reform — it was entitlement growth at the precise time we needed entitlement shrinkage.  We need to jettison this new entitlement structure and work on reforming the rest of it in order to eliminate that $100 trillion locomotive bearing down on the US economy, and we need to do it sooner rather than later.

Update: The downgrade on Friday does settle one argument, though.  Had Congress stalled and done nothing, S&P (and probably Moody’s) would have downgraded us at that point — and then the blame would have fallen on the Tea Party.

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Comment pages: 1 2

The downgrade on Friday does settle one argument, though. Had Congress stalled and done nothing, S&P (and probably Moody’s) would have downgraded us at that point — and then the blame would have fallen on the Tea Party.

For all of those harping on Boehner and company for passing the bill that they did, this is a good heads up.

beatcanvas

It’s more like a strawman, as no one was arguing that we should do nothing.

xblade on August 7, 2011 at 3:50 PM

tneloms on August 7, 2011 at 1:43 PM

Nice try. Thanks for playing.

Del Dolemonte on August 7, 2011 at 4:10 PM

Ed makes a perfectly plausible case that the White House’s sticking to the argument that PPACA was entitlement reform helped break down negotiations. Their refusal to include it in the Bowles-Simpson reforms has to factor into the timeline too: Recall this is the reason Ryan voted against the Bowles-Simpson recs.

DrSteve on August 7, 2011 at 5:18 PM

I think they should have downgraded the US when Obamacare was rammed through. That would have been a statement!

Vince on August 7, 2011 at 2:06 PM

Sure, but they didn’t. My only point was that I don’t think this is a “rejection of ObamaCare,” as Ed suggested. If they had downgraded us after ObamaCare passed, then it would have been. Is it is, this is a rejection of ObamaCare as much as it is a rejection of SS, Medicare, and defense spending.

tneloms on August 7, 2011 at 7:14 PM

Had Congress stalled and done nothing, S&P (and probably Moody’s) would have downgraded us at that point — and then the blame would have fallen on the Tea Party.

I’m still not getting or buying this. How can you come to this conclusion, when S&P says put of control spending is the reason for the downgrade. What has been the Tea Party’s message all along? “Stop out of control spending.” That’s what S&P wanted to hear, too.

Not blame, thanks. The Tea Party was prophetic.

You’re welcome.

Fallon on August 7, 2011 at 7:15 PM

To answer that specific question, S&P didn’t downgrade at this pointbecause we made a debt ceiling deal, but because the deal didn’t fix the entitlements problem. Since the timing of the downgrade was due to the fact that the deal didn’t change anything, then it’s obvious that the situation before the deal is the actual cause of the downgrade.

didymus on August 7, 2011 at 2:07 PM

Yes, clearly the situation before the deal is also the cause of the downgrade. My only point was that it was not a rejection of ObamaCare (the subject of this post). There is nothing specific about ObamaCare mentioned by S&P, and the timing clearly shows that the trigger was the debt ceiling debate. And as explicitly stated in S&P’s statement, the debt ceiling debate was a major factor for them because it showed them (I believe incorrectly) that the political environment means that a default due to lack of debt ceiling increase is more possible. It might be obvious to you that the debate wasn’t the cause, but that’s what S&P said.

tneloms on August 7, 2011 at 7:18 PM

The 2011 budget?
Did congress pass a budget this year and I missed it?
How did they do that w/out the Senate Dems even proposing a budget?

PackerBronco on August 7, 2011 at 3:12 PM

Yes, you missed it. The budget didn’t pass by the September deadline last year, and after several continuing resolutions, a budget for the rest of the year was passed in April: http://en.wikisource.org/wiki/Public_Law_112-10.

tneloms on August 7, 2011 at 7:24 PM

Nice try. Thanks for playing.

Del Dolemonte on August 7, 2011 at 4:10 PM

I wish you were a little more specific in your criticism.

tneloms on August 7, 2011 at 7:25 PM

Had Congress stalled and done nothing, S&P (and probably Moody’s) would have downgraded us at that point — and then the blame would have fallen on the Tea Party.

And the stalling by congress and the precedent the 2 previous years played no part whatsoever. If nothing else it convinces me that the democrats are nothing but a bunch of self serving cowards.

jdkchem on August 7, 2011 at 9:15 PM

tneloms on August 7, 2011 at 7:24 PM

A budget it is not. More of the same nonsense. Another continuing resolution with a convenient expiration date.

jdkchem on August 7, 2011 at 9:19 PM

The downgrade on Friday does settle one argument, though. Had Congress stalled and done nothing, S&P (and probably Moody’s) would have downgraded us at that point — and then the blame would have fallen on the Tea Party.

For all of those harping on Boehner and company for passing the bill that they did, this is a good heads up.

beatcanvas

It’s more like a strawman, as no one was arguing that we should do nothing.

xblade on August 7, 2011 at 3:50 PM

Technically, I think it is more of a trivial case, as anything wrong that happened after the agreement would have been blamed on the Tea Party.

Voyager on August 7, 2011 at 11:31 PM

Yes, ObamaCare is health care reform, and it bends the cost curve… we already know that.

http://hotair.com/archives/2010/09/09/obamacare-bends-the-cost-curve-upward/

I didn’t say which way it bent the cost curve. Look it reformed the entitlements so they’ll cost more in the long run.. what more do you want?

Oh, now you want them to cost less? But we went to so much time and effort to make them cost more… lets just leave it for now and see if you feel better about it later?

Maybe it’ll grow on you.

gekkobear on August 8, 2011 at 2:00 PM

Comment pages: 1 2