The Obamacare meltdown continues, and that's good news

As I predicted last month and two months ago, Obama's signature domestic achievement is turning into a nightmare that will seriously and negatively impact the lives of tens of millions of people. Today Obama tried to limit the damage by effectively postponing the individual mandate for a year.

He didn't exactly postpone the individual mandate, however. As with the employer mandate, what the White House has done is to announce that it will not enforce the law that mandates individual compliance. Obama's style of governance is increasingly reliant on the non-enforcement of laws—even those of his own making—that, owing to the Law of Unintended Consequences, prove to be problematic and troublesome.

Obama probably figures that he has found a clever solution to the problem of millions of policies being cancelled. Now that he has announced that the individual mandate not be enforced, any insurance company that goes on to cancel an existing policy will be to blame for the cancellation. Insurance companies were eager to get in bed with the Democrats when ACA was being designed because they figured it would create millions of new healthcare policies. Now that same industry, once so eager to participate in crony capitalism, finds itself being thrown under the bus. Renewing millions of existing policies will subtract still more from the ranks of those buying policies on the Obamacare exchanges, and that in turn will result in heavy losses to an industry that banked on those people buying new, higher-priced policies.

This is not the way to fix the fatal flaws of Obamacare. It's also not the way to run a country, and it's not the way to transform one-sixth of the U.S. economy. We cannot continue down this path much longer, because the current system will not and cannot work to the satisfaction of everyone. The underlying problem with Obamacare is that it too reliant on government mandates, regulations, and subsidies; too much government, and not enough room for free market forces to figure out better and cheaper solutions. The way to proceed is not difficult to discern, as Ponnuru and Levin point out in their WSJ op-ed today: "A Conservative Alternative to Obamacare."

So even though the news is depressing, and even though sensible solutions seem to have little chance of taking root, I remain optimistic. That's because the path of least resistance at this point is shaping up to be very attractive: less government and more room for the private sector to tackle the healthcare problem.

Maybe, just maybe, politicians will at some point realize that we need to fix the broader economy in the same way that we can fix Obamacare. The private sector currently is heavily burdened with taxes and regulations that can be lifted. One of the biggest and best pieces of news these days is the ongoing collapse of the federal budget deficit, which has fallen from a high of 10.5% of GDP to now just 4% of GDP, and over the past 12 months has totaled only $652 billion, down from a high of almost $1.5 trillion four years ago. All this has happened thanks to an effective freeze in government spending accompanied by modest growth in the tax base (i.e., more jobs, higher incomes, more profits), and some modest hikes in tax rates.

Why don't we consider reducing the corporate income tax rate and limiting corporate tax subsidies and deductions? Why don't we do away with subsidies and deductions and lower marginal income tax rates for everyone? If legislation to this effect were to pass tomorrow, coupled with conservative, free-market reforms to Obamcare, I would immediately forecast 4-5% GDP growth over the next year or so. This happened once before, in mid-2003, with the Bush tax cuts, and it can happen again, especially now. The best solution to the current mess is a growth solution which transfers power from government bureaucrats to the private sector.

The bad news is that Obamacare is doomed; the good news is that it can be replaced by something far better.