The hardest part of these negotiations will be the battle over entitlement reform. The bottom line for the GOP should be this: There should be no deal on long-term taxes without far-reaching reforms to health-entitlement programs. And what’s far-reaching? For starters, the entirety of Obamacare should be on the table for revision and retrenchment. The law sets in motion the largest entitlement expansion in a generation. It’s far better to scale the program back now before it gets started than to wait and hope it can be scaled back later.
Republican governors have substantial leverage in these negotiations because they can opt out of the Medicaid expansion in Obamacare, thanks to the Supreme Court. If 25 or so Republican governors refuse to put more people into an unreformed Medicaid program, it will put tremendous pressure on the Obama administration, which is desperate to see the Medicaid expansion occur during the president’s second term.
The congressional GOP should use this leverage to move Medicaid toward fixed financing and maximum state flexibility.