How Pelosi and Reid Beat Obama on the Cadillac Tax

December 21st, 2015

The Hill has a fascinating piece on the history of how Congressional Democrats prevailed over the President, and got him to sign a two-year delay (really a repeal) of the Cadillac Tax.

As recently as three weeks ago, one of President Obama’s top advisers warned Democratic leaders to leave the “Cadillac tax” alone.

Asked on Dec. 1 whether Obama would veto any measure that chipped away at the unpopular tax on healthcare benefits, White House chief of staff Denis McDonough was stern.

“Yes, it is true,” McDonough replied at a private luncheon that was attended by House Minority Leader Nancy Pelosi (D-Calif.) and Whip Steny Hoyer (D-Md.).

Democrats were undeterred.

Pelosi and her Senate counterpart, Harry Reid (D-Nev.), forged ahead with secret budget talks with GOP leaders in which they sought to delay or even repeal the tax before it took effect in 2018.

And two days after the luncheon, the Senate took a symbolic vote to repeal the ObamaCare tax by an overwhelming 90-10 margin.

The Senate’s vote marked a turning point in the Obama administration’s losing fight to preserve the tax, according to interviews with a half-dozen people familiar with the talks.

“I think that’s when the administration reluctantly began to see the light,” said Harold Schaitberger, head of the International Fire Fighters Association, who had asked the question of McDonough in the Dec. 1 meeting. …

“The [White House] understood where the two of them were coming from, and that’s why you saw their position soften over time,” a senior Democratic aide said Friday.

“They knew they weren’t going to get an extenders package without it,” the aide added, referring to the tax bill included in the package.

Throughout the fall, the White House–apparently tone deaf–didn’t even read its own caucus correctly about how strong the opposition was:

In early December, as talks inched forward on Capitol Hill, Pelosi and Reid heard new ideas from the administration about how to lessen the financial blow of the Cadillac tax.

The White House floated several tweaks, such as accommodations for people in regions where healthcare is more expensive. Most of them were not taken seriously.

“It was too little, too late. Frankly that was a conversation we should have been having when we had that meeting in April,” said Rep. Joe Courtney (D-Conn.), one of the loudest Democratic voices against the Cadillac tax.

Courtney had taken part in an April meeting with Pelosi as well as several administration officials about two months after reintroducing a bill to repeal the tax. At the time, he already had nearly 100 co-sponsors. A GOP version of the bill from Rep. Frank Guinta (N.H.) was also gaining traction.

“Frankly, I don’t think people took seriously the level of opposition we had [to the tax] at that point,” he added.

Months later, in September, Reid and Pelosi held a private meeting with Obama to again reiterate the growing problem of the Cadillac tax. They told the president they would be seeking changes as part of the year-end budget negotiations that were just getting off the ground.

They repeatedly heard the same message: No.

Let this story be known by all that there is really no interest in keeping the Affordable Care Act afloat. This delay was a kickback to unions that made the ACA even more unstable. The labor unions only supported the ACA with the cadillac tax, knowing that it would be conveniently repealed when the time came:

“Getting that through within the White House itself was a major area of conflict,” said Dr. Zeke Emanuel, an Obama administration health policy adviser at the time.

“The conflict wasn’t within the Republican Party, it was inside the White House. People were saying, ‘Should we just scrap it because it’s going to elicit some much union antagonizing?’ ”

The AFT withheld their endorsement of Hillary Clinton until she supported a repeal:

Several union groups, including the American Federation of Teachers, put the Cadillac tax in candidate questionnaires that determine presidential endorsements. Hillary Clinton only won the teacher group’s endorsement after announcing her support for repealing the tax.

And in a meeting last week, Schaitberger, the head of the firefighter union, warned Reid that failure to resolve the Cadillac tax issue could hurt Democrats in the polls.

“I told him … ‘You’re going to have workers, members, citizens, willing to take their wrath out in the political arena,’” Schaitberger said.

When the President insists that this is the Law of the Land, what he really means is that only modifications that advance liberal special interests will be allowed.

After the final omnibus package was revealed Wednesday, White House spokesman Josh Earnest downplayed any negative effect of the two-year freeze on the Cadillac tax.

“If I had a nickel for every time that somebody inside the Beltway suggested that the Affordable Care Act was at grave risk, I’d probably be able to buy an actual Cadillac myself,” he quipped.

The day before, Earnest had pledged “steadfast” support for keeping the tax in place.

Alas, there is blame for Republicans too. They caved on the Cadillac Tax in order to repeal the 2.3% medical device tax. This is also a special interest kickback to medial device manufacturers, a booming sector of the economy. This is no way relieves the suffering that the ACA has inflicted on millions of Americans.

In the nearly yearlong effort to roll back the Cadillac tax, the other major obstacle for Democratic leaders was the GOP.

Republicans were reluctant to give their opponents any win on ObamaCare, according to sources familiar with the talks.

Throughout negotiations, GOP leaders insisted that they would not advocate for any changes to the Cadillac tax, giving themselves a bigger bargaining chip for the budget and tax talks to come.

But the 90-10 vote in the Senate gave Democrats critical leverage: Pelosi and Reid now had proof that delaying the tax had support in both parties, forcing Republican leaders to change their game plan.

Republican leaders, however, made clear they would not accept changes to the Cadillac tax without changes to the 2.3 percent excise tax on medical devices.

I think this chapter of my book is just about done now.