The Traumatic Birth of Health Reform

Kevin Phillips, publisher of American Political Report, is the author of "The Politics of Rich and Poor." His new book, "Arrogant Capital: Washington, Wall Street and the Frustration of American Politics," will be published in September

The collapse of Bill Clinton's far-reaching blueprint for a government-orchestrated national health program into much lesser legislation can be described best as: a) a historic achievement, nonetheless; b) a tragedy for the middle class; c) so much of a political face-saver that we'd be better off starting over, or d) all the above?

Take your time, because economists and historians will be debating this for years. But "all the above" does have a certain resonance. Important legislation may still be enacted. But, even so, Clinton's initial commitment to comprehensive health-care reform will go down as a major strategic miscalculation--perhaps the biggest since Jimmy Carter declared the energy challenge was the moral equivalent of war (only to learn it wasn't, and that the acronym was "MEOW"); and since George Bush told voters, "Read my lips, no new taxes."

As for whether this presidency, too, is failing, there are reasons to worry about fundamental flaws in Clinton's style of governing: his press-the-flesh, eager-to-please, people-oriented style is not suited to effective U.S. or world leadership; and his co-presidency with wife Hillary Rodham Clinton, which has so much staked on health reform, may already be crumbling.

While potential face-saving compromises are still in the offing, few observers still believe that Clinton has a major historic or political triumph on the horizon. The real question--reinforced by the nation's deepening disillusionment with the original Clinton plan--is whether Congress wouldn't be better off starting over next year instead of passing a patchwork mishmash that may still contain critical flaws.

Consider how five major circumstances explain why the Clinton blueprint was flawed from the start and why any patchwork compromise is also risky:

* Biting Off Too Big a Chunk of the Economy. As his reforms unfolded last year, Clinton paid too little attention to economic history. Between 1980 and 1992, the health sector's share of U.S. gross national product mushroomed from 8% to 15%. The only parallels to this were the growth of railroads in the decades after the Civil War and the rise of the huge U.S. aerospace and defense complex during and after World War II. And no Washington whiz-bang ever tried to reshape those two with grand national legislation at the peak of their power. The U.S. economy is too complex.

So huge was the health sector's rise in the early 1990s that health was frequently providing 10% to 40% of quarterly GNP growth. In Pittsburgh, health replaced steel as the biggest employer; and in economically crippled Southern California, health was one of the few sectors adding jobs. Trying to stop ballooning health-sector inflation was important, but Clinton simply tried to reform too big a chunk of the economy by government fiat.

* Expanding Social-Welfare Programs in an Era of Welfare State Decline. Here's a second strategic flaw. By 1993, the health component of the welfare state was in retreat from Australia to Canada to Western Europe. Weak economies could no longer afford their existing health-care burdens, and new benefits could only be added at the cost of curbing others.

Politically, health was turning into a zero-sum game. Somehow, the President failed to grasp two essential points: first, that with the welfare state shrinking in most Western nations, the health-care proposal involved the equivalent of going up a down staircase; and second, in virtually none of these nations were health-care issues helping the incumbent government.

* Fallibilities of Clinton's Own Leadership. The new President also brought a crippling personal predilection to the health debate. In the past, his method for success was a high-octane mixture of high intelligence and expert people skills--his warm and personal touch in "retail politics." This allowed him to be a successful big fish in the little pond of Little Rock, despite a tendency for disorganization.

Clinton didn't know grand strategy, because he didn't have to--in small Southern states, politics is a matter of personality and networking. His success had always been in thinking tactically--short-term, quick deal-making as opposed to long-term strategy in pursuit of far-ranging goals.

Because a U.S. President must be a big fish in a big pond, voters had previously declined to elect anyone from one of the nation's smallest states--not since Franklin Pierce of New Hampshire in 1852. Unfortunately, Clinton's Little Rock little pondsmanship gave him an arrogant belief in his own skills and charm that turned out to be misleading when it came to national affairs and issues. Miscalculations have flourished.

A second unfortunate Arkansas hangover is that Clinton also thought he could re-establish in Washington the sort of co-rulership with his wife that they carried out in their Arkansas web of governing and politicking. Health care was to be the test.

* Deepening Middle-Class Frustration. Clinton's July insistence that his broad health-care reform package was the last, best hope of the middle class was destined not to be believed. When he first announced his plan, polls showed a majority of the middle class supported it--but not a large majority.

Clinton had played up to the middle class at every rhetorical opportunity during the 1992 campaign, but his broken tax commitments--no middle-class tax cut as promised, combined with a major energy-tax proposal and hints of payroll and consumption levies to come--cost him credibility by mid-1993. When Clinton held back financial details in announcing his health-reform plan, skeptical middle-class voters, already burned once, withheld support.

Perhaps the man from Arkansas didn't fully understand what he himself had argued in his campaign. The middle class was hurting so much--and in most of the other Western nations, not just the United States--that it distrusted politicians' blandishments that a new social-welfare program would ease burdens rather than add to them. Moreover, Clinton's own image was eroding on moral as well as legislative grounds. By the end of June, a national survey by the Times Mirror Corp. found only 32% of Americans supported Clinton's blueprint. The middle class didn't believe his program would pass without major revision--and didn't want it to.

* Intensifying Interest-Group Politics. The final flaw in Clinton's plan to enact a sweeping national health-insurance program lay in the way he himself encouraged the role of interest groups in Washington. Clinton had railed against interest groups in 1992, but almost as soon as he arrived in the nation's Capital, he started hobnobbing with prominent lobbyists, cutting legislative deals and soliciting contributions--just as he had back in Arkansas.

The White House cut deal after deal with big corporations--tailoring portions of the 1993 budget and tax bill to their liking in order to get it enacted. More bargains were made to enact the North American Free Trade Agreement in November. The message to Gucci Gulch--the half-mile concrete canyon of lawyers and lobbyists offices along Washington's K Street--was simple: This President deals, he wants your campaign contributions for the Democratic Party and he has already lost his clean hands and moral ability to declare war on interest groups.

Such perceptions were crippling in the battle for a national health-reform program: Health-related groups with representatives in Washington had ballooned from 150 in the late 1970s to almost 800 by 1992--the medical equivalent of the Maginot Line. Interest-group clout would help stymie Clinton's proposal, especially once public opinion began to shift away from him.

Last week, the five converging circumstances took Clinton's quest for a sweeping national health program and chopped it down to size for the disillusioned, low-budget '90s. He can now claim an achievement if reform is passed this year that forces the insurance companies to make health insurance available to everyone and consolidates some recent gains in bringing health-care costs under greater control.

But Clinton has lost his chance for what his strategists talked about last autumn: health-care overhaul and creation of a new citizen entitlement to stand with Social Security of the mid-1930s in legislative and political significance.

New political eras are not built on miscalculations and waffles. But in the meantime, there is another possible problem: that Washington politicians--out to save face, save health reform or some of each--will cobble together a compromise that is worse than nothing because it includes gimmicks and deceptions for which we will all pay by the year 1998, 2000 or 2006. In this summer of shrinking expectations, guarding against that kind of compromise may be the political system's foremost responsibility.*

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