A tactical retreat on health reform

Yesterday, Barack Obama was God. Today, he's fallen from grace, the magic gone, his health care reform dead. If you believed the first idiocy - and half the mainstream media did - you'll believe the second. Don't believe either.

Conventional wisdom always makes straight-line projections. They are always wrong. Yes, Obama's aura has diminished. But by year's end he will emerge with something he can call health care reform. The Democrats in Congress will pass it because they must. Otherwise, they'll have slain their own savior in his first year in office.

But that bill will look nothing like the massive reform Obama originally intended. The beginning of the retreat was signaled by Obama's curious reference - made five times - to "health-insurance reform" in his July 22 news conference.

Reforming the health care system is dead. Cause of death? Blunt trauma administered not by Republicans but by the green eyeshades at the Congressional Budget Office.

Three blows:

1. On June 16, the CBO determined that the Senate Finance Committee bill would cost $1.6 trillion over 10 years, delivering a sticker shock that was near fatal.

2. Five weeks later, the CBO gave its verdict on the Independent Medicare Advisory Council, Dr. Obama's latest miracle cure, conjured up at the last minute to save Obamacare from fiscal ruin. The CBO said that IMAC would do nothing, trimming costs by perhaps .2 percent. A .2 percent cut is not a solution; it's a punch line.

3. The final blow came a week ago Sunday when the CBO euthanized the Obama "out years" myth. The administration's argument had been: Sure, Obamacare will initially increase costs and deficits. But it pays for itself in the long run because it bends the curve downward in coming decades.

The CBO put in writing the obvious: In its second decade, Obamacare significantly bends the curve upward and increases deficits. Obama's own first-decade numbers were built on arithmetic trickery. New taxes to support the health care plan begin in 2011, but the benefits part of the program doesn't fully kick in until 2015. That excess revenue is, of course, one time only. It makes the first decade numbers look artificially low, but once you pass 2015, the yearly deficits become larger and eternal.

Three CBO strikes and you're out cold. Whatever structural reforms dribble out of Congress before the August recess will likely not survive the year. In the end, Obama will have to settle for something very modest. And indeed it will be health-insurance reform. The president will in the end simply impose heavy regulations on the insurance companies that will make what you already have secure, portable and imperishable.

Nirvana. But wouldn't this bankrupt the insurance companies? Of course it would. There will be only one way to make this work: Impose an individual mandate. Force the 18 million Americans between 18 and 34 who forgo health insurance to buy it. This will create a huge new pool of customers who rarely get sick but will be paying premiums that subsidize nirvana health insurance for older folks.

Net result? Another huge transfer of wealth from the young to the old, the now-routine specialty of the baby boomers; an end to the dream of imposing European-style health care on the U.S.; and a president who before Christmas will wave his pen and watch as the newest conventional wisdom reaffirms his divinity.

© 2009, The Washington Post Writers Group