Does Obama's Spending Freeze Change the Health Care Game for SMBs?

President Obama will deliver his first State of the Union address on Wednesday. Suddenly, all of the talk is about jobs, more jobs, and lower budget deficits. Scott Brown….backburner. Health care reform….stalled. Or is it? Health care has actually very little to do with Obama's plan to freeze a lot of domestic spending for three years.

What should small business owners think about the intersection between a federal spending freeze and escalating health care premiums? The answer has very little to do with running a small business. Why? Only about $448 billion is involved in the “discretionary” spending freeze. This is about one-eighth of the $2.8 trillion federal budget. And because new health care plans are not yet accounted for in the FY11 federal budget, they have no relation to business firms trying to maintain their health plans this year. And even the budget freezes will not take effect for an additional year. Yes, it is confusing.

How can a health care compromise be worked out in the midst of a spending freeze? Remember, anything is possible in politics. Also, a spending freeze is not a revenue freeze. Taxes can rise, as they have been — and will continue to do — at the state level. Budget games are not possible there; an annual balanced budget is the law.

We can create more jobs in the health care sector by passing bipartisan health care legislation, right? Well, yes, but that means a more limited federal health care law, as I predicted last week. Since the House will not pass the Senate bill with a filibuster-proof majority, it is unlikely that a quick solution is possible. Therefore, only a different healthcare bill — with tort reform, insurance reform, and some expansion to the poorest of the uninsured poor — will be possible. Is a compromise achievable? I say yes, but only down a “repaved” road.

Does the passage of health care reform have much to do with a federal budget freeze over things like education and science? I do not think so. Does it have much to do with small business struggling in 2010 to pay escalating premiums? No. Is this populism the result of a seemingly invincible president who has suddenly become unpopular and possibly vulnerable down the road? Absolutely. Does it make sense? You be the judge. And bring the popcorn.