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Labor ups the ante

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David Broder
January 14, 2010
— The best thing about American labor leaders is that they don’t beat around the bush. Judging from the reports I’ve heard from both sides, the union leaders who met with President Obama on Monday night to air their concerns about the nearly finished health care reform bill lived up to that reputation.

They made their objections clear, and they put them in a political context that no one could miss.


As a result, Obama and his White House are facing the first real test of their values and their backbone—a decision that will signal to friend and foe alike what is ultimately important to this administration in domestic policy.


From the start of the long health care debate, Obama has insisted that in addition to extending insurance coverage to millions of Americans, any bill he signs must be designed to reduce health care costs for the bulk of those already insured.


Both House and Senate versions of the legislation are chockablock with ideas for field trials and experiments with cost-saving ideas. But only the Senate version has something that the Congressional Budget Office and most outside experts think could—if it worked—produce billions of dollars of savings in the first decade after it passed.


It is the proposal to slap a 40 percent excise tax on the most expensive of private health insurance plans, those that cost individuals more than $8,500 and families more than $23,000 in annual premiums.


Supporters say the effect would be to persuade companies and individuals to opt for cheaper policies with fewer benefits, thereby reducing the upward pressure that has kept medical prices growing much faster than overall inflation.


No one can guarantee those results, but the only alternative anyone in Congress could come up with was the one embedded in the House bill—a surtax on millionaires that would presumably have much less effect on medical inflation.


The CBO estimates that 31 million people would initially be subject to the Senate tax and that the number would grow rapidly, as the cost of health insurance continues to rise.


Fewer than half those people, it is believed, are union members covered by insurance policies negotiated with employers through the years. But the unions have taken the lead in protesting this part of the Senate plan, and the main point of their meeting with Obama was to back him off from his support for it.


As I heard from both sides, it was not a theoretical discussion. To reinforce their plea, the union leaders reminded Obama that in the 2008 campaign, he had criticized John McCain for advocating an even tougher tax on such high-dollar plans. An AFL-CIO official told Obama, “We did seven pieces of national mail warning our members that McCain wants to tax your health benefits. We can’t tell them now that Obama is the one doing it.”


To underline the threat, AFL-CIO President Richard Trumka repeated to Obama a point he had made earlier Monday in a speech at the National Press Club, recalling what happened in 1994.


In that year, President Bill Clinton defied organized labor by pushing through Congress the North American Free Trade Agreement, strongly opposed by the unions. The NAFTA vote and the failure the same year to pass the health bill that labor had supported led to a massive falloff in turnout by union members in the midterm election. And for the next 12 years, Democrats were the minority in the House and Senate.


Trumka warned publicly it could happen again.


As another union official told me, “When this (health) bill passes, if our members find out their benefits will be reduced, they will be apoplectic. It would be like a stick of dynamite.”


Others are not so sure. A pollster with strong union ties told me, “This election is going to be about jobs, not health care.”


But Obama has a real dilemma. Can he afford to risk his alliance with labor in order to preserve his pledge to try to reduce health care costs?


David Broder is a columnist for The Washington Post. Readers may write to him via e-mail at davidbroder@washpost.com.

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