The Politics of Healthcare Post-2008

We still have to assume that Obama will win this race. But what we’ve seen is that the Republican coalition has a lot of fight in it left. What we’re seeing is the playbook for 2010. I’ve been talking a lot about how the environment issue will play, but healthcare will be key. Why? Among liberal progressives or progressive liberals or social democrats, the conceit is, Kaus-style: we’ll deliver a middle-class entitlement and we will have a solid majority for a decade or two. It isn’t crazy. But you see, it isn’t the delivery of a middle-class healthcare entitlement that does the work — it is the funding crisis that does the work.

Let’s say a plan is implemented, Medicare is expanded to include large number of non-old middle-class Americans, etc. And let’s say costs continue to spiral, as they most certainly will — Furman-style progressive cost-sharing is politically unpopular, and it won’t survive the political battle to come in any robust form. What happens next? It’s simple: a fight over adequately funding the system. The payroll tax won’t be enough. We could then impose a dedicated VAT on top of the existing payroll tax. That will be politically costly. We could instead impose a heavier tax on the golden goose — the entrepreneurs on the hamster-wheel who will magically materialize regardless of tax treatment. Or something. But a major expansion of Medicare to include middle-class workers will most likely be an irreversible ratchet.

The McCain plan is a solid one. I think it should be more expensive and should be more aggressive about cost containment and structural reform. I also think Obama was right to resist a mandate, as we’re seeing now — imagine what Palin would’ve done with a mandate. The problem is that Republicans don’t have a lot of credibility on this issue, which is why Republicans need to get smart. I’d love to see Jindal take the lead on this issue.

This post is way too brief to tackle this subject — I need to put on my thinking cap, fools.