Strengthening Constitutional Self-Government

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Making Friends and Influencing American Political Economy

Chicago Mayor Richard Daley and New Bedford Mayor Scott Lang are both worried about the sustainability of municipal employee and retiree costs.  Lang argues for a "new public employment covenant."  Conservatives and state and federal-level Republicans should recognize that there is room for creative alliances with elected municipal officials (many if not most Democrats) and urban property tax payers.  These alliances could go a long way to making government both more efficient and sustainable at every level.  The key to the success of such alliances will be in conservatives offering constructive policies in non-alienating language.

One place where there is potential room for cooperation between conservatives, municipal officials and urban tax payers is municipal employee health care costs.  Rising municipal employee health care costs are damaging the ability of towns to pay for public services without ruinous tax increases.  This is where a conservatives could come in. Indiana's state government managed to save 11 percent on its health care costs by introducing and HSA/catastrophic coverage option for state employees.  Such savings would no doubt sound very attractive to both mayors and urban tax payers who are trying to maintain public services without tax increases.  It also helps that most Indiana state employees seem to like HSA/catastrophic coverage option.  The widespread adoption of HSA/catastrophic plans by municipalities would have the added benefit of increasing the number of people on consumer-driven health insurance plans and make it tougher to enact a full government takeover of the health care sector.

There would have to be a division of labor between state and federal-level Republicans (and sympathetic Democrats) and municipal officials.  State and federal-level legislators and state governors will have to pass laws to make such plans legal and allow municipalities to offer such plans.  Municipalities would then have to enact those plans.  There will be coalitional tensions.  Conservatives will have to resist the temptation to demonize public employees or cast their program as some kind of revenge or punishment on a large constituency.  Reformist conservative policy is good policy because it saves the tax payers money, maintains public services and maintains the health care security of public employees - not because it is a chance to settle scores.  The main opponents of an HSA/catastrophic health care coverage option for municipal employees are likely to be some union leaders and especially liberals who recognize that expanding the number of Americans on market-driven health insurance policies threatens he dream of government-run medicine.  This is a fight conservative can win if we pick our allies and our arguments wisely.     

Categories > Politics

Discussions - 4 Comments

Maybe a first step would be to increase the employee contribution and co pays in the public employee's plans, which may be possible without renegotiating the union contracts of public employees. And, of course, HSA/catastrophic health care coverage won't meet the criteria of Obamacare, and consequently must be replaced by omnibus policies (like the ones in place in those municiplaties "ruled" by union contracts, which are the source of the problem). This is one more reason for repealing Obamacare, and it is the source of one more constituency (a broad base of property, sales, and city income tax payers) for doing so.

A second, and in my mind more important reform would be to replace defined benefit pension plans for government employees with defined contribution (e.g., 401k's) plans, as the private sector has done over the past decade.

I don't think either of these steps will be taken until the Federal government stops bailing out the states, the states stop bailing out the cities, the and cities are permitted to and start declaring bankruptcy and renegotiating their public employee union contracts. Only then will there be sufficient incentive for the unions to make concessions on their health and pension plans.

Jim, you are right that new HSA/catastrophic coverage plans would have to get approval from HHS (we have seen that they are willing to grant waivers), and pressuring HHS to grant those waivers would give congressional Republicans something to do. I especially like the chance for such a waiver being granted if elected municipal Democrats are allied with the Republicans. I think that just having the argument at the state and federal level advances the cause of replacing Obamacare. You could make major policy gains without repealing Obamacare (either because of a presidential veto or because of a Democratic filibuster), while putting yourself in a better position to make the next major gain. I'm all for repealing Obamacare, but the Washington Democrats are in a strong postion to block repeal. I'm still for trying for repeal, but I'm also for policies that can gain majority support and erode the economic basis for government-run health care.

On pensions: I think that the federal government could have a very constructive role to play by conditioning aid to the states on pension reform.

HHS waivers have been granted to existing plans, not to new plans that do not meet the Obamacare criteria. As HSA's are anethma to Obama, I don't foresee any new plan, especially one that emphasizes HSA's, as being eligible for a waiver or otherwise acceptable to HHS.

Yes, the federal government could have a very constructive role to play by conditioning aid to the states on pension reform, but why would it. The pensions that need reforming are those of the public employee unions. To think that Obama would provide incentives to the states to reform them, which would necessarily require some contraction of the benefits they provide, and alienate his union base is a bridge too far.

Jim, Obama's HHS has only granted waivers to existing plans but that discretion could be deployed to grant waivers to other kinds of plans. This is especially so if you have broad based support (from congressional Republicans, governors, state legislators and local elected officials - some Democrats - and the organs of the right-leaning media) in favor of specific market-driven reforms. I would be interested to see if HHS would stand firm under such pressure. Even if HHS did, the resulting argument would be of benefit to advancing the political cause of market-oriented health care reform. And Obama won't be President forever. A combination of state-level action and a different HHS regime would allow for the possibility of increasing the number of Americans on consumer-driven policies even if the 60th vote for Senate repeal was not there.

On pension reform: I would think the federal government would play a constructive role because it could lead to better policy outcomes with a minimum of service disruption. Such a federal policy mgt be a good issue for congressional Republicans to push (and some like Scott Brown have) and for future GOP presidential candidates to embrace.

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