Tags: Senate | Republican | tax | healthcare

New Congress Probably Won't Fix Healthcare, Taxes

By    |   Wednesday, 05 November 2014 09:57 AM

The question of the day is, What difference will it make that Republicans take the Senate?

The backdrop is a highly polarized political environment. Regardless of whether it's preferable for Congress to enact bipartisan laws, the moderates who produce them are so rare that only partisan legislation is likely to be considered. Getting such laws passed, though, requires that one party control not just the House and the Senate but also the White House. In a world where you need all three, having two as opposed to one doesn't matter much.

The need for greater control is especially the case in the Senate, where at least 60 votes are generally required to get anything done. The Republicans, to be sure, could use a process called reconciliation to pass budget-related bills with just 51 votes, but even then the legislation is subject to a presidential veto, which takes 67 votes to overturn. And while it's true that a noticeable number of Senate Democrats are moderates (and their ranks may swell a bit after the election), their votes will not be so easy for Republicans to obtain and are probably not sufficient to assemble a veto-proof majority.

So anyone who expects a Senate shift to produce broad tax reform or immigration reform in the next two years is likely to be disappointed. Tax reform is easy to say and hard to do; immigration reform is slightly more plausible but still very unlikely in the polarized environment. So what might happen?

One bad scenario is another outbreak of fiscal drama. The U.S. economy seems to be recovering, despite headwinds from abroad, in part because, for the past year, lawmakers in Washington have not created needless uncertainty. Next spring, however, the debt limit, the doc fix and other fiscal cliffs will rear their ugly heads.

Kevin McCarthy, the House Majority Leader, has already spoken publicly against the strategy of creating mountains out of these cliffs: "Why put cliffs up that hold us back from doing bigger policy?" Many newly elected members of the House and Senate, though, may be itching for a cliff-linked fight. Let's hope the McCarthy view holds, since the last thing we need is a repeat of the debt-limit crisis of 2013.

Even without cliffs, fiscal issues will create tensions. The temporary budget deal that Democratic Senator Patty Murray and Republican Representative Paul Ryan shepherded through Congress last year alleviated pressure on the discretionary budget, but that pressure will come back in force in 2015 and 2016. The caps on both defense and non-defense spending will become increasingly difficult to meet as time marches on, especially since the Obama administration and Congress have different spending priorities.

What about healthcare? Votes to repeal Obamacare may be inevitable, but they will not have sufficient support to override the inevitable presidential veto. Republicans may do better with targeted legislation aimed at provisions that are unpopular with a number of Democrats. On that list are the medical device tax and the Independent Payment Advisory Board. I am a supporter of both, and believe the Independent Payment Advisory Board in particular has been widely misunderstood, but they are politically vulnerable. The White House would be wise to start defending them now — or at least limit the damage any changes might impose.

The best thing that could happen would be for Congress and the White House to agree to improve the Affordable Care Act by passing legislation such as the Better Care, Lower Cost Act. That would settle the question of whether value-based payments should go to insurers (which Republicans generally support, in the form of Medicare Advantage plans) or to providers (which Democrats generally support, in the form of Accountable Care Organizations or bundled payments) — by allowing both. It would also reinforce the recent deceleration in Medicare spending, increasing the odds of reaping a bigger fiscal dividend than any direct policy agreement could plausibly achieve. Nevertheless, given the difficulties of moving forward in today's polarized policy world, it's probably too much to hope for.

A final item that becomes somewhat more likely with Republican control of the Senate is the Trans-Pacific Partnership (TPP), an international trade deal that has been languishing. The coalition in favor of free trade is harder to cobble together today than it was in the past, but Republicans are still generally more supportive than congressional Democrats are. Providing trade-promotion authority and ratifying the TPP, once the international negotiations wrap up, could let Republicans demonstrate effectiveness on an issue that happens to split the Democrats.

Mostly, though, we should expect continuation of not very much from Washington. Inaction, to be sure, is better than drama. That's why the recent comments from Mr. McCarthy, along with the Republicans' expected desire to retain their Senate majority in 2016, suggest that we may, at least, not have to put up with unnecessary distractions.

Peter Orszag is vice chairman of corporate and investment banking and chairman of the financial strategy and solutions group at Citigroup Inc. and a former director of the Office of Management and Budget in the Obama administration.

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The question of the day is, What difference will it make that Republicans take the Senate?
Senate, Republican, tax, healthcare
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2014-57-05
Wednesday, 05 November 2014 09:57 AM
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