Reihan Salam

The big glitch in Dave’s ‘post-bureaucratic’ vision

Reihan Salam is a fan of Cameron’s plan for shifting power to citizens. The trouble is — as the row over Obama’s healthcare reform shows — technocrats can often be right

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Reihan Salam is a fan of Cameron’s plan for shifting power to citizens. The trouble is — as the row over Obama’s healthcare reform shows — technocrats can often be right

As neoconservatives pressed for the democratic transformation of the Middle East, curmudgeons on the right and left often wondered if the peoples of the region were in fact ready for democracy. Robust democracy is rooted in a flourishing civil society and a large and literate middle class that is capable of holding elected officials to account. Democracies also require mature and responsible leadership that is committed to the long-term survival of constitutional government. It was and is by no means obvious that Iraq and Afghanistan and Iran score particularly well on any of these metrics. And as we survey the wreckage of at least two decades of reckless fiscal and monetary policies in America and Britain, it’s worth wondering whether our own countries — long considered the world’s most successful democracies — should call it a day and invite Singapore’s ageing patriarch Lee Kuan Yew to take charge.

Granted, it’s hard to imagine Lee taking up the challenge. Budget deficits in the two Anglo-Saxon giants are such that Lee would have to conjure up otherworldly pots of gold even to begin closing them, and that’s an indignity no elderly statesman should bear. But more seriously, we’re facing a crisis that really is testing the viability of our poll-driven model of governance.

Note that this runs directly counter to David Cameron’s uplifting talk of shifting power from the state to citizens and from Whitehall to town halls. Britain’s excessive centralisation is indeed a problem, one that has drained the hinterlands of talent and industry. Yet it’s worth reflecting that more democracy might not be the answer. A recent survey found that while 48 per cent of the British public trust civil servants, only 21 per cent trust politicians. As a firm believer in fostering a post-bureaucratic age, I find this discouraging. Perhaps Middle England really wants a post-post-bureaucratic age, in which enlightened mandarins save the country from self-dealing MPs.

During last year’s presidential campaign, then-Senator Obama emphasised that ‘Yes We Can’ solve the deep structural problems plaguing the American economy, ranging from a broken healthcare system to what he memorably called ‘the tyranny of oil’. It was a sentiment that sparked manic grassroots enthusiasm. Whether or not Obama’s solutions are the right ones — I’m convinced that they’re not — it’s interesting to watch him steadily retreat from his campaign promises. ‘Yes We Can’ is slowly morphing into ‘No We Can’t’. The only way out of this trap seems to be, well, making our political arrangements less democratic — to empower sober technocrats rather than cowardly politicians.

Consider America’s interminable debate over how to reform our healthcare system, a bastardised and bafflingly complex marriage of the crudest kind of state socialism with crony capitalism. After insisting that Congress deliver comprehensive health reform legislation by August, President Obama has reluctantly accepted that the process will take at least a few months longer. Meanwhile, the President’s approval rating is sliding. Depending on which polls you believe, he is either hovering directly above or directly below 50 per cent. On health reform, his approval rating is now in the mid-40s. Interestingly, voters who strongly disapprove of Obama’s approach to health reform outnumber those who strongly approve by a wide margin. But it’s not Republicans who’ve most effectively countered the Obama White House. It is, quite unintentionally, a little-known bureaucracy called the Congressional Budget Office.

Since the presidential election, Obama has been making the case for health reform by arguing that it will help save the American welfare state. Recognising that he can’t present health reform as big-government liberalism, President Obama has framed it as a matter of far-sighted fiscal conservatism. The theory has been that expanding healthcare coverage would give the White House the political cover it needs to introduce structural reforms that would, over time, ‘bend the cost curve’ downwards. Rather than pay physicians on the basis of procedures and tests performed — however useless — they’d be compensated for delivering quality care. But do the numbers add up? That’s where the CBO comes in.

The Congressional Budget Office (CBO) is charged with scoring spending proposals on behalf of American legislators, the better to inform debates about what the country can and can’t afford. Given swelling budget deficits, American voters are getting squeamish about the prospect of trillions of dollars in new spending. As a result, the CBO, seen as an honest broker, is having an outsized impact on the debate.

To the chagrin of Peter Orszag, the President’s brilliant budget guru, the CBO has repeatedly issued inconveniently high cost estimates for a number of Democratic health plans. Because Democrats have been reluctant to change the tax treatment of employer-provided healthcare, the source of health coverage for the vast majority of American families, they’ve struggled to find politically palatable revenue sources. For example, Democratic Congressmen have proposed an income tax surcharge that would push marginal tax rates for affluent families in New York and California above the 50 per cent mark. Tax-cutting conservatives find the idea abhorrent, but so do rich Democrats, who have forced House Speaker Nancy Pelosi into a fumbling retreat. If raising revenues is difficult, paring back spending is even more so. Rocketing health inflation has been, along with the now-dead housing sector, the source of the lion’s share of job growth for the last decade.

Recognising that Congress is incapable of reining in cost growth on its own, the White House has proposed seizing sweeping new authority from Congress to rewrite the rules governing Medicare, America’s public health plan for the elderly. That is, they’ve called for making the system less democratic.

Every year, the new Independent Medicare Advisory Council (IMAC) would make recommendations designed to shave costs by, for example, adjusting reimbursement schedules for various medical services or mandating the use of certain kinds of information technology. If the President approves IMAC’s recommendations, they would be put into practice unless Congress took the affirmative step of overturning them. In that case, however, the President could then veto Congress. In effect, this creates a two-thirds supermajority for Congress to overturn the recommendations. Had Republicans had the same authority under Reagan or Bush, it is easy to imagine them gleefully hacking away at Medicare while Democrats in Congress fumed.

IMAC has been sold as a way to depoliticise Medicare — to remove it from normal democratic procedures and place it in the hands of experts. The CBO isn’t impressed: they estimate that IMAC would shave a paltry $2 billion from the cost of Medicare over ten years. They’ve concluded that Obama and his successors won’t have the guts to take a chainsaw to the system. I’m guessing that they’re wrong. Ten years from now, spending on Social Security, Medicare, and Medicaid will reach 12 per cent of GDP, with the bulk of the increase driven by cost growth in healthcare. Because the private insurers and physicians and the public-sector health workforce are so powerful, the political class has a decision to make: either abdicate responsibility and trust unelected bureaucrats to take action or accept a crushing tax burden and a crippled economy. Neither option is terribly attractive, but it is easy to see why Oba ma and Orszag are so eager to embrace benevolent, all-knowing bureaucrats as a deus ex machina.

And if the bureaucrats fail, there’s always Lee Kuan Yew.

Reihan Salam is a fellow of the New America Foundation.