Tax Reform and the Strong Treasury

Bruce Bartlett makes the case that the Obama administration should have taken a stronger role in guiding the health care debate:

Gene quite rightly points to the Tax Reform Act of 1986 as a model to follow. The essence of its success, he believes, was that the Treasury Department controlled the process from beginning to end. A three-volume report was prepared by Treasury staff that was critical in shaping the basic idea of tax reform and how it should be structured. This report is available online here.

One of the benefits of such a study, which would have greatly assisted the health reform debate, is that it forces the staff managing the reform effort to think it through systematically. Thus before the tax reform proposal ever went to Congress in 1985, Treasury already knew all the potential problem areas, which provisions were expendable and which ones were not. Consequently, Treasury was able to manage the inevitable trade-offs necessary to get a bill enacted without sacrificing the basic goal. […]

This sort of process never occurred with health reform. There was never a study from the Department of Health and Human Services laying out the options, discussing the pros and cons of various alternatives, or with the sort of reference data that is essential for developing really big policy changes. In fact, there has never really been a formal White House proposal. This has made it easy for Congress to take control of the whole health reform debate, with Obama often appearing to be a mere bystander.

I think the administration would have been better served by having followed the Tax Reform of 1986 model. It would have taken a lot longer, but the chances of actually achieving something worth doing at the end of the day would have been much greater.

Maybe. But the trouble with picking one example at random is that it obscures the other counterveiling examples. The Obama administration went into 2009 dealing with the fact that the overwhelming consensus among health care experts was that Bill Clinton erred in 1993–94 by not letting congress be involved enough. Given the existence of that conventional wisdom, whether or not the CW was right it would have been extremely difficult to cast it aside in favor of an executive-led effort. The other thing is that by 1985–86 Ronald Reagan had already been president for a long time and was thus better-positioned to really deploy the executive branch. Trying to do this as a brand-new president probably wouldn’t have worked.


Overall, though, I think the missing ingredient in getting a better reform bill isn’t different presidential tactics, but different presidential will. If congressional Democrats had been determined to block Reagan’s tax proposals sight unseen, then tax reform wouldn’t have happened. As best one can tell, that’s been a huge part of GOP opposition to Obama’s health plans — they don’t want to forge a compromise, they want to deal the administration a black eye. At the same time, it increasingly looks like very few members of congress of either party actually want to dramatically transform the health care system. Ron Wyden wrote a very nice bill that picked up a whiff or two of bipartisan support that would achieve a lot of the things that people say they want health reform to achieve. But ultimately it got very little support on the Hill because, basically, members of congress don’t actually favor the kind of moves that would shift us to a much cheaper and more efficient but still privately-based health insurance system. At the same time, there are always single-payer bills floating around but they have nothing close to majority support either because, basically, members of congress don’t actually favor the kind of moves that would shift us to a much cheaper and more efficient publicly based system.

I think to blame this on the White House is ultimately short-sighted. If anything advocates for more serious reform ought to blame ourselves as it turns out we’ve done a pretty bad job of convincing people that the health care system ought to change pretty dramatically. Thus even if we pass the ideas currently on the table, I think we’re going to find five or ten years out that the system is still pretty unsustainable, still creates perverse incentives for the delivery of unnecessary care, still costs tons of money, and still saddles people with vast quantities of paperwork. And we’ll have to pop open the hood again.