Obama right on health care, but how to pay for it?

President Obama is right to defend Medicaid, Medicare for seniors, and his own health insurance reforms. If we’ve made the policy decision that Americans should be able to obtain basic health care even if they’re poor, the least expensive and most efficient way to do that is through direct government funding. The health insurance reform enacted last year was an imperfect political compromise that is more complicated, inefficient, and vulnerable to legal challenge than simply extending Medicaid and Medicare to more Americans would have been.

The key to success for government-funded health care programs is managing costs, as the President recognizes. No government-funded program can be open-ended. I wish the President could openly acknowledge that managing costs requires rationing, the limiting of services provided to what the government can afford and budget. But openly embracing rationing would require standing up to the empty Republican bombast about “death panels”, which may be a political bridge too far. So President Obama is reduced to a vague promise to reduce health care spending “by reducing the cost of health care itself”, whatever that means.

President Obama proposes to increase tax revenue by eliminating tax expenditures to the rich, including unspecified itemized deductions and the so-called Bush tax cuts enacted in 2001 and 2003. But raising taxes for the rich only will not be sufficient to maintain the government expenditures that the President considers essential.

Political gridlock in Washington may have a silver lining. If Congress is unable to enact any legislation at all, the Bush tax cuts will automatically expire at the end of 2012, and taxes will increase in 2013 for all taxpayers, not just the rich, to where they were in the economic boom years of the Clinton administration.

The resulting across-the-board tax increase would be a giant step towards reducing the deficit and growth of the national debt, and adequately funding government services.