In Health Care Bill, Obama Attacks Wealth Inequality
By DAVID LEONHARDT
For all the political and economic uncertainties about health reform,
at least one thing seems clear: The bill that President Obama signed
on Tuesday is the federal government’s biggest attack on economic
inequality since inequality began rising more than three decades ago.
Over most of that period, government policy and market forces have
been moving in the same direction, both increasing inequality. The
pretax incomes of the wealthy have soared since the late 1970s, while
their tax rates have fallen more than rates for the middle class and
Nearly every major aspect of the health bill pushes in the other
direction. This fact helps explain why Mr. Obama was willing to spend
so much political capital on the issue, even though it did not appear
to be his top priority as a presidential candidate. Beyond the health
reform’s effect on the medical system, it is the centerpiece of his
deliberate effort to end what historians have called the age of
Speaking to an ebullient audience of Democratic legislators and White
House aides at the bill-signing ceremony on Tuesday, Mr. Obama claimed
that health reform would “mark a new season in America.” He added, “We
have now just enshrined, as soon as I sign this bill, the core
principle that everybody should have some basic security when it comes
to their health care.”
The bill is the most sweeping piece of federal legislation since
Medicare was passed in 1965. It aims to smooth out one of the roughest
edges in American society — the inability of many people to afford
medical care after they lose a job or get sick. And it would do so in
large measure by taxing the rich.
A big chunk of the money to pay for the bill comes from lifting
payroll taxes on households making more than $250,000. On average, the
annual tax bill for households making more than $1 million a year will
rise by $46,000 in 2013, according to the Tax Policy Center, a
Washington research group. Another major piece of financing would cut
Medicare subsidies for private insurers, ultimately affecting their
executives and shareholders.
The benefits, meanwhile, flow mostly to households making less than
four times the poverty level — $88,200 for a family of four people.
Those without insurance in this group will become eligible to receive
subsidies or to join Medicaid. (Many of the poor are already covered
by Medicaid.) Insurance costs are also likely to drop for
higher-income workers at small companies.
Finally, the bill will also reduce a different kind of inequality. In
the broadest sense, insurance is meant to spread the costs of an
individual’s misfortune — illness, death, fire, flood — across
society. Since the late 1970s, though, the share of Americans with
health insurance has shrunk. As a result, the gap between the economic
well-being of the sick and the healthy has been growing, at virtually
every level of the income distribution.
The health reform bill will reverse that trend. By 2019, 95 percent of
people are projected to be covered [in theory], up from 85 percent
today (and about 90 percent in the late 1970s). Even affluent families
ineligible for subsidies will benefit if they lose their insurance, by
being able to buy a plan that can no longer charge more for
pre-existing conditions. In effect, healthy families will be picking
up most of the bill — and their insurance will be somewhat more
expensive than it otherwise would have been.
Much about health reform remains unknown. Maybe it will deliver
Congress to the Republicans this fall, or maybe it will help the
Democrats keep power. Maybe the bill’s attempts to hold down the
recent growth of medical costs will prove a big success, or maybe the
results will be modest and inadequate. But the ways in which the bill
attacks the inequality of the Reagan era — whether you love them or
hate them — will probably be around for a long time.
“Legislative majorities come and go,” David Frum, a former
speechwriter for President George W. Bush, lamented on Sunday. “This
health care bill is forever.”
Since Mr. Obama began his presidential campaign in 2007, he has had a
complicated relationship with the Reagan legacy. He has been more
willing than many other Democrats to praise President Reagan.
“Reagan’s central insight — that the liberal welfare state had grown
complacent and overly bureaucratic,” Mr. Obama wrote in his second
book, “contained a good deal of truth.” Most notably, he praised Mr.
Reagan as a president who “changed the trajectory of America.”
But Mr. Obama also argued that the Reagan administration had gone too
far, and that if elected, he would try to put the country on a new
trajectory. “The project of the next president,” he said in an
interview during the campaign, “is figuring out how you create
bottom-up economic growth, as opposed to the trickle-down economic
Since 1980, median real household income has risen less than 15
percent. The only period of strong middle-class income growth during
this time came in the mid- and late 1990s, which by coincidence was
also the one time when taxes on the affluent were rising.
For most of the last three decades, tax rates for the wealthy have
been falling, while their pretax pay has been rising rapidly. Real
incomes at the 99.99th percentile have jumped more than 300 percent
since 1980. At the 99th percentile — about $300,000 today — real pay
has roughly doubled.
The laissez-faire revolution that Mr. Reagan started did not cause
these trends. But its policies — tax cuts, light regulation, a
patchwork safety net — have contributed to them.
Health reform hardly solves all of the American economy’s problems.
Economic growth over the last decade was slower than in any decade
since World War II. The tax cuts of the last 30 years, the two current
wars, the Great Recession, the stimulus program and the looming
retirement of the baby boomers have created huge deficits. Educational
gains have slowed, and the planet is getting hotter.
Above all, the central question that both the Reagan and Obama
administrations have tried to answer — what is the proper balance
between the market and the government? — remains unresolved.
But the bill signed on Tuesday certainly shifts our place on that spectrum.
Before he became Mr. Obama’s top economic adviser, Lawrence Summers
told me a story about helping his daughter study for her Advanced
Placement exam in American history. While doing so, Mr. Summers
realized that the federal government had not passed major social
legislation in decades. There was the frenzy of the New Deal, followed
by the G.I. Bill, the Interstate Highway System, civil rights and
Medicare — and then nothing worth its own section in the history
Now there is.