Obamacare, Debt and Disaster

October 10, 2013 Topic: Economics Region: United States

Obamacare, Debt and Disaster

The shutdown state of play.


The federal government is in a partial shutdown for the first time in seventeen years. Meanwhile, the U.S. Treasury is quickly exhausting its ability to borrow money under the debt limit. The stakes are high, yet lawmakers are far from bringing the fiscal debates to a successful conclusion.

Many important issues are feeding into this fall’s budget battles. But at the core of the debate is the size and scope of the federal government. It consumes more than one-fifth (22 percent) of gross domestic product. Meanwhile, the national debt—at nearly $17 trillion and counting—now exceeds the size of the entire economic product.


Entitlement programs are the main drivers of federal spending and debt. The single fastest-growing sector of federal spending is healthcare, and the not-so “Affordable Care Act” (aka Obamacare) would increase federal healthcare spending an additional 15 percent in only 10 years. Without reform, the three largest entitlements—Social Security, Medicare, and Medicaid with Obamacare—are on track to consume more than half of the U.S. budget by the end of the current decade. Yet few lawmakers are working to address this fundamental (and some might argue, existential) spending challenge.

The current budget debate consists of two main parts: Funding for Obamacare and the conditions under which the debt ceiling may be raised.

This summer, a disagreement over the level of funding for government agencies left lawmakers in both chambers all but resigned to the fact that the appropriations process would be stalled. Instead of passing 12 individual spending bills as the appropriations process calls for, lawmakers focused on passing a continuing resolution by September 30. When that did not happen, the federal government went into a partial shutdown.

The Affordable Care Act, or Obamacare, is at the core of the budget disagreement that led to the appropriations-funding lapse. The way in which President Obama and Senate Democrats rammed through the law—without popular or even bipartisan support—inadvertently set the stage for a funding challenge down the road. Since the law’s passage, it has grown even more unpopular, as its damaging side effects—ranging from higher premiums, to new and higher taxes, to loss of employer-provided health coverage and full-time work hours—have kicked in.

This is the Affordable Care Act’s fundamental challenge. The law passed using reconciliation, a budget-process mechanism intended to reconcile differences in Congress’s budget proposals and carry out deficit-reduction instructions. Instead, Senate Democrats hijacked the process to pass Obamacare with a simple and purely partisan majority. No other major social-policy change—not the Civil Rights Act, not Social Security, not Medicare—was successful at becoming anchored in American policy and law with absolutely zero bipartisan support.

Since President Obama and his allies need some Republican support to get funding for the law, a stalemate was born. The Republican-controlled House of Representatives repeatedly passed bills that would fund the entire government, except for Obamacare, and the Democrat-controlled Senate repeatedly rejected them.

Now, the House is attempting to reopen parts of the government step by step, in a bid to end the shutdown incrementally, without funding Obamacare. But the Senate and President have largely spurned this approach, too. Despite changing more than a dozen provisions in the Affordable Care Act already, and the President choosing to unilaterally delay parts of the law, and granting exemptions to well-connected parties, President Obama and his allies insist that the House approve full funding of Obamacare if it wishes to end the partial government shutdown.

Meanwhile government officials are quickly exhausting the extraordinary measures that have allowed the Treasury Department to continue meeting all payment obligations on time, despite hitting the debt ceiling on May 19, 2013.

The backstory of that saga begins in 2011, when Congress passed the Budget Control Act. The BCA cut spending by $2.1 trillion in exchange for an overall increase in the debt limit of the same amount. The problem: The spending cuts phase in over ten years, while the new debt ceiling was hit in less than a year and a half. Moreover, the law left the growth in entitlement spending nearly untouched, meaning chronic deficits continue and grow bigger over time. Without reform, growing deficits will necessitate ever larger increases in the debt limit—leaving the younger generations of Americans saddled with economy-crushing loads of debt.

Americans recognize that Washington faces a dual crisis of excessive spending and debt. That’s why, as reported by Bloomberg news service, nearly two-thirds of Americans believe that Congress should cut spending before increasing the debt limit.

Thus far, however, President Obama has refused to negotiate with Congress to identify spending cuts and entitlement reforms that can be agreed to before raising the debt limit.

It’s a sad state of affairs. While America faces a very real fiscal crisis, lawmakers have yet to put forth a credible plan to correct the problem. How the impasse over Obamacare and the debt ceiling will end is anyone’s guess.

Romina Boccia is the Heritage Foundation’s Grover M. Hermann Fellow in Federal Budgetary Affairs.