Ah, The Good Old Days

Just a précis on budget negotiations today: the Big Five leadership has met over the last couple days, with more heat than light. The Governor remains committed to adding unrelated policy changes into any budget deal, items like changing contributions to public employee pensions, and tightening eligibility and rooting out fraud in programs like in-home supportive services for the disabled, Medi-Cal and Cal-Works. These items will do nothing to affect the current budget numbers, a fact Schwarzenegger has acknowledged, but he continues to leverage the impasse to capture long-sought goals. The Governor also has taken to lying about how these issues suddenly appeared in the negotiations, claiming that "reform issues were very clear" from the start, which is true if you define "reform" as "whatever Arnold wants it to mean." Karen Bass signaled her frustration with the Governor's clear unwillingness to close a deal by inserting unrelated items, boycotting today's meeting and questioning the Governor's figures on what reducing "fraud" would actually reap in savings (and since he's been consistently wrong on this front in the past, it's a good bet). The Governor did concede that suspending the Prop. 98 education funding mechanism would not be viable, but he keeps pushing for the amorphously defined "reform", no doubt because he thinks it plays well with the public (Matier and Ross transcribe that private polls show a jump in Arnold's approval ratings). This speaks more to the Democrats' inability to clearly explain reality than anything else, though Bass gave it a try today:

But Bass said she believes talks have gotten worse, not better. And she publicly blasted the governor for comments he made in Sunday's New York Times Magazine, in which he said he explained why he doesn't go home depressed by budget woes.

"Someone else might walk out of here every day depressed, but I don't walk out of here depressed," Schwarzenegger told the Times. Whatever happens, "I will sit down in my Jacuzzi tonight," he said. "I'm going to lay back with a stogie."

"He said he's happy to just go home and sit in his Jacuzzi every night," Bass said Monday. "I'm very, very concerned about this. He doesn't seem to be concerned that people are getting IOUs, and all he has to do is go out and blame the Legislature."

With squabbling and posturing like this, you'd think I'd agree with the Calbuzz take of why this crisis has dragged on for so long.

The constitutional requirement for a two-thirds vote of the Legislature to pass a budget is clearly the single most important reason why the Capitol is in a state of near-permanent political gridlock. But the two-thirds rule has been around since the New Deal and budgets used to get passed. So what’s the hang-up?

Power: Nobody’s got it.

The governor and the Legislature fulminate and flounder simply because no one in the Capitol in 2009 has the stature, clout or influence to cut a deal like Ronnie and Jesse or Pete and Willie once did.

Actually, the budget has ALREADY been passed once this year, closing a $42 billion dollar deficit. The new $26 billion dollar problem points to the unique nature of the current deep recession. I'd like to see good ol' Ronnie and Jesse and Pete and Willie deal with a $68 billion shortfall in the space of six months.

But beyond that, what is also missing from this analysis is the lengths to which the "big bully" theory of how to manage California government, where Democrats and Republicans get together and "cut a deal," is in a real sense RESPONSIBLE for the problem we now face. Take the assessment of the 1992 budget in the midst of a recession:

Contrast this year’s with the budget meltdown of 1992, the last time California issued IOUs. Although many of the same conditions applied, the big difference was that both Gov. Pete Wilson and Speaker Willie Brown wielded enough political authority to sit down in a room and cut a deal: Wilson took responsibility for rounding up Republican votes for tax increases and Brown for putting a lid on Democratic caterwauling over program cuts.

Somehow the inability of these major players to avoid a situation where IOUs had to be issued gets put to the side. But what Willie Brown did not use that clout to do, what no Democrat has done since 1978's Prop. 13 opened the structural revenue gap enforced by the 2/3 requirement for budgets and taxes, is actually solve the real problem. Instead he cut a deal, relying on a future asset bubble to bail him out again and again, and setting the table for today's crisis.

The 1980s saw the construction of the model. Sprawl was used to provide affordable housing. Special tax systems were set up to pay for suburban schools - the 1982 Mello-Roos Act - which were funded as long as there was enough credit to sustain sprawl. The loss of property tax revenue led cities to shift toward retail, further promoting sprawl (big box stores, malls). The jobs and spending created by sprawl provided enough prosperity to keep voters happy and the politicians in power. For those who were left behind - those living in the city centers, people of color, and the poor - 1978 had been partly about their political and economic marginalization, and the majority of Californians embraced it as part of the deal.

The ideal feature of the centrist system, from the view of its practitioners, is that it apparently neutralized the right-wing revolt of 1978. Low taxes could be paired with preservation of core services, albeit at a slightly reduced level, and thereby avoided another Jarvisite outburst. Well-paid consultants could run statewide TV campaigns to force the public to accept the consensus, without having to do the messy work of engaging a grassroots that would challenge the centrist status quo.

When the system came crashing down in 1991-92, the centrists found it possible to cut a deal to keep things going. Pete Wilson and Willie Brown had much in common, and were able to hammer out a package of tax increases and spending cuts that got a 2/3 majority. I don't romanticize that deal, but instead use it to show that it confirmed to the centrists that the system they'd built in 1980s could withstand crisis as long as everyone was willing to sit down and make a deal, damn the consequences.

However, the right-wing wasn't sleeping. In 1990 they managed to convince a bare majority of voters to approve Prop 140, a radical term limits measure that should have fallen afoul of the "revision" rule. But the real moment of change came in 1994, when the far-right in the Republican Party grabbed control of the agenda and launched a massive attack on Latino Californians. Pete Wilson wholeheartedly embraced the attack, and although it brought Republicans gains that year, it was a victory to make Pyrrhus jealous. Latinos registered for citizenship and to vote in massive numbers, and beginning in 1996 what had once been a state whose politics were fairly balanced shifted massively to the Democrats.

As long as Republicans stood a reasonable chance of winning control of California's legislature or its electoral votes, Democratic deal-cutting with Republicans could be sold to the base as a necessary move to stave off the Jarvisite hordes. But after 1996 this became less and less plausible. The California Republican Party became a captive of the extreme right, even more than usual, and in one of its last acts before leaving power in 1998, pushed through a massive and reckless series of tax cuts.

I don't disagree at all that we currently face a lack of leadership and clout to get deals done in Sacramento. Arnold Schwarzenegger has no role inside his own party, and Bass and Steinberg preside over a dysfunctional set of rule requirements and are term-limited out of gathering political capital. My point is that such leadership has ALWAYS been lacking from the Democratic side of the aisle, at least since 1978. When prosperity waned, it was clear that California's political structure would resist responsible governance at every turn. But instead of preparing for that eventuality by changing the rules, those good old boys of the past cut deals that exacerbated the problem. They forced the current crop of non-leaders into ringing up the state credit card and enabled the right-wing faction that holds a veto over economic policies. The center did not hold - but it could never hold. And the centrists who ruled California in the years after Prop. 13, the timid types who ran away from real solutions and put the state in the position to fail, should not be lauded. They should be ashamed.

Learn, Damn You, Learn!

Something fairly interesting happened today. It doesn't mean we will get a public health insurance option to compete with the insurance industry, but it doesn't exactly hurt. Apparently some Democrats thought that if they only watered down such a public option to nothing, they would get that vaunted bipartisan support, and everybody could go back to their districts and claim they did something when they in fact would have done nothing. But as those of us who have been observing this have known for some time, these aren't your father's Republicans, or your grandfather's, or any other relative. They are the rump conservative party, openly hostile to using government for any means other than profit-taking, and preferring to tell their constituents "good luck" instead of making any tangible difference to their struggles. And somehow, Democrats just discovered this.

Some Senate Democrats have considered nixing the public option proposal in order to win Republican support for the bill.

Schumer's role is important because he had been acting as an intermediary between liberal Democrats and moderates who are trying to strike a deal on the issue with Republicans on the Senate Finance Committee. Of the five House and Senate committees working on health care, Finance is the only one that appears to have a chance at reaching a bipartisan agreement.

Schumer said Finance Republicans had rejected several proposals designed to beef up the suggested nonprofit insurance co-ops. These included setting up a national structure for the co-ops, $10 billion in government seed money, power to negotiate payment rates to medical providers nationwide and creation of a presidentially appointed board of directors.

The Democrats tried to basically bury the public option as long as they could get any manner of support for the weak substitute. And the Republicans wouldn't budge. Like in 1993, their mission is to kill health care reform, period. Why anyone would think that any alternative would be true is beyond me, but Senate Democrats obviously needed to play Tic-Tac-Toe with the computer endlessly until they realized what a strange game it all is, and that "the only winning move is not to play." Ezra Klein comes to the same conclusion.

Republicans, (Schumer) suggests, are standing lockstep even against efforts to create a private co-op system that could offer an alternative to for-profit insurance. Their concern with the co-op plan is not that the government would be taking over the health-care system. It's that the current insurance providers would face unexpectedly aggressive competition in the marketplace. Which raises an interesting, and potentially clarifying, question: Are Republicans in this to preserve the healthy functioning of a competitive private market or preserve the profits of the currently dominant insurance companies?

Further proof of that learning experience came today from Kent Conrad, the man who devised this health co-op plan by throwing a dart against a board, as he appeared to acknowledge its limitations.

The wheels looked to be coming off with health care reform last week. But a poll showing huge public support for a public health care option and a strong bill from the House of Representatives have changed the dynamic.

Schumer and other backers of a public option insist that any plan must be national in scope, have substantial funding at the beginning from the federal government, and include national purchasing power in order to negotiate lower prices.

Conrad ticked off the areas of agreement that were reached Monday.

"National structure: I believe to be effective there has to a national entity with state affiliates and those affiliates have to have the ability to regionalize. I think his concern there can be addressed," said Conrad. "Second, he believes there needs to be national purchasing power. I think that's a good point that the national entity would be able to do purchasing on behalf of the state and regional affiliates and on behalf of the national entity itself."

Now, Schumer's vision of a public plan is a compromise from the House vision of a public plan, which is a compromise from single-payer health insurance. But things are moving in a better direction today than yesterday, when DiFi flat-out said Democrats don't have the votes to pass anything.

This teachable moment has a value for those outside the system who want to push for a real public option that can use bargaining power to force competition from insurers. Because now, as Matt Yglesias says, there's no excuse for Democrats to water down their bills in order to "seek bipartisanship" and make them durable. Republicans have revealed themselves. And given budget reconciliation and the imminent fact of 60 votes in the US Senate, Democrats have nobody else to blame. They can talk about political realities but those have essentially been voted out of existence, with respect to Republicans. Whether it's because of health industry campaign contributions or a desire to limit competition in small, rural states, a desire to get the glory for saving policy from the brink or just an ideological disinclination, individual Senate Democrats will have the collapse of any health care reform on their hands.

And yes, I mean Democratic senators. The Republicans, with a few possible exceptions, have decided to do all they can to make the Obama administration a failure. Their role in the health care debate is purely that of spoilers who keep shouting the old slogans — Government-run health care! Socialism! Europe! — hoping that someone still cares [...]

The real risk is that health care reform will be undermined by “centrist” Democratic senators who either prevent the passage of a bill or insist on watering down key elements of reform. I use scare quotes around “centrist,” by the way, because if the center means the position held by most Americans, the self-proclaimed centrists are in fact way out in right field.

What the balking Democrats seem most determined to do is to kill the public option, either by eliminating it or by carrying out a bait-and-switch, replacing a true public option with something meaningless. For the record, neither regional health cooperatives nor state-level public plans, both of which have been proposed as alternatives, would have the financial stability and bargaining power needed to bring down health care costs.

It helps to have clarity on who is blocking what the public desires. The grassroots will redouble their efforts, doing to the rest of the wayward Democrats what Change Congress did to Ben Nelson. Blue America are lining up a similar pressure Campaign for Health Care Choice on Blanche Lincoln, and you can contribute to that cause at this link.

Biting The Good Poll Numbers That Feed Them

To follow up on Tom Daschle's big fold on the public option, which is setting minds in Washington as we speak, the timing is truly impeccable. Not only did the WSJ and NBC come out with a poll finding 75% support for a public option in any reform, but an additional poll - put together by foes of health care reform - found even more support.

The poll — which was just released by the Employee Benefit Research Institute, a D.C. policy think tank — finds that a majority (53%) strongly back the availability of a public plan, while another 30% “somewhat” support it. That’s a total of 83% in favor of a public plan — a staggeringly large majority.

Even more interesting, guess who paid for the poll? From the release:

This survey was made possible with support from AARP, American Express, Blue Cross Blue Shield Association, Buck Consultants, Chevron, Deere & Company, IBM, Mercer, National Rural Electric Cooperative Association, Principal Financial Group, Schering-Plough Corp., Shell Oil Company, The Commonwealth Fund, and Towers Perrin.

Not exactly a band of raging lefties. The American Association of Retired Persons and Blue Cross Blue Shield were among the opponents of HillaryCare in the 1990s.

Meanwhile, instead of looking at those numbers and seeing that the public option must be preserved, Daschle and the Village thinks these guys must be preserved at all costs:

A Texas nurse said she lost her coverage, after she was diagnosed with aggressive breast cancer, for failing to disclose a visit to a dermatologist for acne.

The sister of an Illinois man who died of lymphoma said his policy was rescinded for the failure to report a possible aneurysm and gallstones that his physician noted in his chart but did not discuss with him.

....Late in the hearing, [Bart] Stupak, the committee chairman, put the executives on the spot. Stupak asked each of them whether he would at least commit his company to immediately stop rescissions except where they could show "intentional fraud."

The answer from all three executives: "No."

Rep. John Dingell (D-Mich.) said that a public insurance plan should be a part of any overhaul because it would force private companies to treat consumers fairly or risk losing them. "This is precisely why we need a public option," Dingell said.

Rescission is a serious problem. Here in California, Blue Cross and its parent company HealthNet have settled to the tune of about $37 million dollars in a variety of rescission lawsuits.

But no, private insurance must be preserved because it's so efficient. After all, that's why we pay twice as much for health care with worse outcomes than most of the industrialized world! (P.S. I know that doctors ordering up unnecessary treatments and tests contribute to this as well - our system's lack of integration provides perverse spending incentives.) And by the way, all of this is happening despite the fact that the Progressive Caucus has vowed to vote against any health care reform that does not have a robust public option. It's just assumed that they can be steamrolled.

Instead, we have this spectacle of so-called "centrists," supposedly concerned with fiscal responsibility, fighting against reform tooth and nail, even though that would be the only way to reduce cost.

The House's two most conservative caucuses, the Blue Dogs and New Democrats, are banding together to come up with shared principles on healthcare and counter a process many see skewing to the left.

The two groups, which combined have 131 members — more than half the House Democratic Caucus — have been holding meetings to see where they can agree on a healthcare plan [...]

There is concern among centrists in the caucus that the draft bill, to be released Friday, will reflect some of the more liberal ideas in the caucus, although leadership has already rejected the idea of a single-payer system. It is being put together by the House Education and Labor, Energy and Commerce and Ways and Means committees.

"You have a bunch of crazy liberal chairs and their crazy liberal staffers, and they want to lay down a marker," said a senior Democratic aide.

Crazy liberals, wanting to replicate the rest of the industrialized world's policy of less spending and greater effectiveness in health care!

It's really sad to see the Washington consensus just run like a truck over meaningful health care reform. Especially because the public won't buy anything without a public option as real reform, period.

UPDATE: Russ Feingold on the Senate floor:

Frankly, I am disappointed that this has become the topic of so much controversy, because it is such a fundamental part of making sure we provide the reform that my constituents, and all Americans, deserve.  Some have even suggested scrapping a public option in the interest of passing a bill with bipartisan support.  I want to pass health care reform and I hope very much we can do so with bipartisan support.  But I am not interested in passing health care reform in name only.  I am not interested in a bill that allows us to somehow tell our constituents we have done something but doesn’t really address their concerns.  We need real reform, and real reform means a strong public option.

And Americans want a public health insurance option.  According to a recent poll by NBC and the Wall Street Journal, over three fourths of those polled said they would like the ability to choose between public and private health insurance plans.  Providing a public health insurance option that does not discriminate against those with pre-existing conditions and illnesses will significantly improve the ability of people to access health care.

Wired For Conservatism

E.J. Dionne is one of the first traditional media journalists, to my knowledge, to openly state that the media tilts to the right, in the context of how the chattering class leaps at any utterance from the Newt Gingrichs and Rush Limbaughs and Dick Cheneys of the world, and he explains how this distorts the debate in Washington and what people pick up in the cultural milieu.

If you doubt that there is a conservative inclination in the media, consider which arguments you hear regularly and which you don't. When Rush Limbaugh sneezes or Newt Gingrich tweets, their views ricochet from the Internet to cable television and into the traditional media. It is remarkable how successful they are in setting what passes for the news agenda.

The power of the Limbaugh-Gingrich axis means that Obama is regularly cast as somewhere on the far left end of a truncated political spectrum. He's the guy who nominates a "racist" to the Supreme Court (though Gingrich retreated from the word yesterday), wants to weaken America's defenses against terrorism and is proposing a massive government takeover of the private economy. Steve Forbes, writing for his magazine, recently went so far as to compare Obama's economic policies to those of Juan Peron's Argentina [...]

This was brought home at this week's annual conference of the Campaign for America's Future, a progressive group that supports Obama but worries about how close his economic advisers are to Wall Street, how long our troops will have to stay in Afghanistan and how much he will be willing to compromise to secure health-care reform.

In other words, they see Obama not as the parody created by the far right but as he actually is: a politician with progressive values but moderate instincts who has hewed to the middle of the road in dealing with the economic crisis, health care, Guantanamo and the war in Afghanistan.

Dionne goes on to describe a panel he witnessed Tuesday with Jared Polis, Donna Edwards and Raul Grijalva - three of the most progressive members of Congress, but three whose names aren't in the Village Rolodex, and whose views have almost no impact on the way the debates in Washington are presented to the public. That doesn't mean they don't have power and importance - their decision along with the Progressive Caucus to pool their power and force the public option into the health care debate was masterful - but it confuses the way Obama is presented, and the space to criticize him from the left. Edwards explained this very specifically:

Polis, Edwards and Grijalva also noted that proposals for a Canadian-style single-payer health-care system, which they support, have fallen off the political radar. Polis urged his activist audience to accept that reality for now and focus its energy on making sure that a government insurance option, known in policy circles as the "public plan," is part of the menu of choices offered by a reformed health-care system.

But Edwards noted that if the public plan, already a compromise from single-payer, is defined as the left's position in the health-care debate, the entire discussion gets skewed to the right. This makes it far more likely that any public option included in a final bill will be a pale version of the original idea.

Her point has broader application. For all the talk of a media love affair with Obama, there is a deep and largely unconscious conservative bias in the media's discussion of policy. The range of acceptable opinion runs from the moderate left to the far right and cuts off more vigorous progressive perspectives.

And actually, this SUITS Obama. If he wanted to pick his enemies, he's much rather have Rush Limbaugh, Newt Gingrich and Dick Cheney than Jared Polis, Donna Edwards and Raul Grijalva. For one, the public has a fairly definitive opinion of those conservatives, at least relative to Obama, and the President wins those debates without saying a word. For another, Obama has no need to move from the moderate center if the Beltway criticism doesn't approach him from that perspective. His choice of advisers and policy options clearly put him in that moderate mainstream of the Democratic Party, and it's where he feels - has always felt - the most comfortable.

The media has an interest in defining the terms of the debate, indeed a self-interest, given the conglomerates that they are. When ABC News gives the same amount of space to Sean Hannity as they do to the Secretary of State, implicit in that editorial decision is the fact that Hannity has spent many years as part of the ABC Radio Network. When business stories betray a perspective more sympathetic to corporate America than the working class, the very fact of the corporate behemoths that populate modern media bear a lot on that decision. But these decisions also enable Obama to operate without equal pressure from all sides of the policy argument, essentially a free hand. This may keep conservatism alive, but it also co-opts the Democratic Administration by giving them the only pressure they consider important - pressure from the right.

Trigger'd

We're nearing a real fulcrum point in the health care debate. The sensible centrists and the corporate whores are trying to sink the public option by instead suggesting that it only be achieved through a "trigger" that would be pulled if the insurers didn't provide a base level of care and access.

As a starting point for his bill, Mr. Kennedy favors a public plan that looks like Medicare, the government-run program for older Americans created in 1965, when he was a young senator.

By contrast, Senator Max Baucus, the Montana Democrat who is chairman of the Finance Committee, has been working for months with the panel’s senior Republican, Charles E. Grassley of Iowa, in the hope of forging a bipartisan bill, which would probably play down the option of a public plan.

Mr. Grassley opposes creation of a new government insurance program and says “we cannot afford the public health plan we have already,” referring to Medicare.

President Obama has championed a public plan, saying it would help “keep the private sector honest,” though he has indicated he will be flexible on the details.

House Democratic leaders, including three committee chairmen drafting the House bill, are close to Senator Kennedy’s position.

Democrats on the Finance Committee said Mr. Baucus was exploring a possible compromise. Under this proposal, the public plan would be created only if private insurance companies had not made meaningful, affordable coverage available to all Americans within several years.

Senate Democrats said they believed that Mr. Baucus might settle for this “fallback plan,” which could win some support on both sides of his committee, from people like Senator Ron Wyden of Oregon, a Democrat, and Senator Olympia J. Snowe of Maine, a Republican.

Obama met with both Kennedy and Baucus today before leaving for the Middle East. (UPDATE: Dodd sat in for Kennedy)

A trigger mechanism is simply absurd. The insurers have had decades to provide decent coverage and have demurred every time. They have shown themselves to be untrustworthy that entire time, including just last month, when they backpedaled on the cost controls they vowed to offer. Mike Lux, who has seen these battles up close, senses that this is the big proxy fight right now.

The insurance lobby has had multiple tactics for stopping the public option idea, which they despise because they know if regular folks have choice to go to a public option, insurance companies won't have the same ability to treat their customers like garbage when they get sick. The first tactic was just to try to kill the public option outright, and the good news is that they appear to have failed at that. This so-called trigger proposal is the second tactic: the idea is to write a "trigger" that will allow for a public option only under certain conditions, but write the legislation so that those conditions would never get met in the real world. It's a classic DC tactic, right up there with calling for a commission to study something. Olympia Snowe is carrying the insurance industry water on their trigger proposal, proposing triggers that would only get tripped in some fairyland none of us have ever visited.

The great thing for the insurance companies in a tactic like this is that it gives "centrist" Senators (centrist in Washington, DC usually means those who have taken massive amounts of campaign contributions from the affected industry) an excuse to help the insurance industry while looking like they are open to the public option that their constituents have been demanding.

Barack Obama and Democrats in Congress have gotten some good things done so far, and are building real momentum in getting us moving in the right direction on health care. But if conservative Democrats force the adoption of the trigger, it will destroy Democratic unity and doom health care reform, because progressives will start attacking Democrats rather than insurance companies. We really are at a critical moment.

Baucus himself stayed away from dozens of town hall meetings on health care out in Montana in the last week, mainly because constituents were openly hostile to his vision of sham reform. Most everyone at these meetings argued in favor of single-payer, and Baucus obviously has no interest in that. But adding this trigger would shut off the only way for a single-payer system to flourish, through a robust public option that can be scaled up. Lux describes it perfectly.

The Progressive Caucus in the House has really stepped up, declaring their votes on health care only available in the event of a public option. But they have not determined what form that public option will take. The public needs to demand action without Washington compromises. This is worth calling your Congresscritter about.

...I remain convinced that health care will really hit the rocks when we start determining how to pay for reform, but I'll leave that for a later post.

...The Maryland Women's Coalition for Health Reform is calling on AARP to support a public plan. Advocacy groups like this would be vital in this fight. It's yet another pressure point.

Don't Make Me Save The Planet!

So those centrist House Democrats have bought into the myth that government can do too much, asking Nancy Pelosi to set aside their climate change bill in favor of health care - even though the Senate has managed the health care bill and the House the climate change bill, an appropriate division of labor. Pardon me for suggesting another reason - these centrists want to protect the polluting industries in their districts.

Democratic centrists are pressing House Speaker Nancy Pelosi to set aside a flagging climate change bill to focus on what they think is a more achievable goal: overhauling the nation’s healthcare system.

But those close to Pelosi (D-Calif.) say she is charging forward on cap-and-trade legislation, despite the potential defections of Democrats who represent states with industries that would be adversely affected by the bill [...]

Democratic aides say the sentiment for putting healthcare first is felt most strongly among New Democrats.

“A lot of our members feel that healthcare has a higher likelihood, so getting that done first and then doing energy makes sense,” said an aide to a New Democratic leader.

“New Dems are in a tough spot,” said one Blue Dog member, explaining that New Democrats are more likely to have an environmental constituency at odds with their business constituency. Blue Dogs, by comparison, have more freedom simply to vote no on climate change legislation.

Whew, I wouldn't want those Blue Dogs to feel conflicted about voting against doing something about a boiling planet! Thank Jeebus they have some "freedom."

We hear plenty about the costs of action. Artur Davis (D-AL) says in this article, "in the throes of a recession, more of a burden on industry is not a good idea.” But inaction has a cost, too. Bills that quantify a certain change in policy must be scored and the costs must be announced. The cost of doing nothing can more easily be ignored. That would be a grave mistake.

The real cost of carbon emissions is far from zero. Each new scientific report brings proof of a changing climate that promises to disrupt agricultural patterns, set off a scramble for dwindling resources, raise sea levels, propel population shifts and require massive emergency spending as we try to react to the growing crises. These are the costs of inaction.

A smart climate policy can create a mechanism to put the right price on carbon, and rapid economic change will follow that firm price signal, along with reduced climate risks. Our work with more than 100 economists nationwide and at RealClimateEconomics.org demonstrates the weight of economic analysis supporting this point.

The whole point of climate legislation is to price externalities that we already spend. When children acquire asthma from pollution, when naval ships ensure safe passage for petroleum from the Middle East, when droughts affect farm crops, when houses flood and rivers pour over their banks, those costs come, at least in part, from burning carbon. We have several options for pricing those carbon emissions, but the most important thing we can do is employ a cap, to bend the curve of the increased costs from climate change in exactly the same way that we must bend the curve of increased health care costs by eliminating the hidden costs of the uninsured. The problems are exactly the same.

If we fail to cap carbon because some coal-state lawmakers refuse to take a tough vote, then in 5 or 10 years, we'll return to Congress, talking about capping carbon after spending hundreds of billions as a result of making parts of the planet uninhabitable. The political system doesn't deal with the future very well, sadly.

Back Off So I Have Room To Stick The Knife In

Harry Reid wants all these liberal groups with their ideas and principles to just take it down a notch.

Senate Majority Leader Harry Reid said Friday that liberal groups targeting moderate Democrats with ads should back off, saying pressure from the left wing of his party won't be helpful to enacting legislation.

"I think it's very unwise and not helpful," Reid said Friday morning. "These groups should leave them alone. It’s not helpful to me. It’s not helpful to the Democratic Caucus.”

Reid, who said he hadn’t seen or heard the ads, added that "most of [the groups] run very few ads — they only to do it to get a little press on it."

In one respect, Reid is fulfilling his traditional role. The left pushes on the ConservaDems, and the Majority Leader comes to the rescue of the members of his caucus, and the ConservaDems thank him. Thusly bonds are made. Reid won't stop the calls to Senate offices, especially when the likes of Ben Nelson are vowing to vote asking the budget if it includes reconciliation.

In another respect, I have to agree with David Waldman.

But the thing is, you really need to add your two points together to get to something meaningful about how things are going in the Senate. There really are people who only join these groups so that they can say they're moderate. That's true. There's a lot of gaming of the system going on. And at the same time, you really don't like being told it's "my way or no way." No one does.

But just as there are people in those "moderate" groups who aren't really all that "moderate," it's also true that some of the people who say they're "moderate" really are people on the extremes, who are saying to you "it's only my way or no way."

That's the reason -- the only reason, really -- that voting blocs like Evan Bayh's exist. They're formed precisely so that they can use their numbers to say to you, ultimately, that "it's only my way or no way." The power of a voting bloc lies in its ability to deliver or withhold its votes. And as you know, there are only two ways to vote in the Senate. Further, because there's no way to set up a vote in the Senate such that you get to vote all at once for one or the other of two competing proposals, every single vote is really essentially a choice between "only my way or no way." Yes, the very next vote can be on whether or not to adopt some other, compromise way. But each vote, taken by itself, is "this way or nothing," and a no vote is a vote for nothing. Sometimes that's a good thing, sometimes a bad thing. But a no is a no.

That being the case, it's worth noting -- as I'm sure you do in your own internal dialogue -- that Evan Bayh's gang is all about "my way or no way." And that reveals them for what they are. (When and if they ever decide to actually hang together as a group, that is.) "Moderate" may be the label they're hoping people will allow them to cling to, but by your definition, they're people on the extremes.

In other words, Reid spends a lot of time and effort here calling out those on the left for making his life difficult, but precious little for those Democrats on the right who are... um, making his life difficult. Maybe that happens internally, but given this latest outrage, I think we can conclude that the Majority Leader believes exactly as the Evan Bayhs of the world believe.

Senate Majority Leader Reid said today he would drop a cram-down provision from a House-passed banking bill if the language threatened to keep the Senate from passing the overall bill. The provision would allow a bankruptcy judge to reduce a homeowner's mortgage principal. "If we can't get the votes for that, and I am hopeful we can -- I am semiconfident we can -- then what I'll do is take that off [the bill] and do the other banking provisions," Reid said at a Christian Science Monitor breakfast.

Harry Reid doesn't want liberals to back off so he can manage his caucus without intrusion - he wants them to back off so, you know, they back off, without criticizing the decisions for which he is ultimately responsible. Deep-sixing cramdown is just the beginning, if progressives fail to hold their leaders accountable. Reid just made the entire argument for why these calls and advertisements have to go forward - because he will do nothing worthwhile without pressure.

The (Blue Dog) Owls Are Not What They Seem

You have to be something of a Kremlinologist to decipher the true meaning of Senate Democratic statements these days. In all of these matters it helps to focus on actions. For example, Kent Conrad (D-ND). As the chair of the Senate Budget Committee, he has been the most vocal about the widening deficit, the new CBO scoring showing that deficit widening even further, and how President Obama's plans are simply too ambitious for words. Sounds like the old fiscal responsibility thing, right? Well, the actual budget summary from Conrad is entitled "Laying Foundation for Long-Term Economic Security With Investments in Energy, Education, and Health Care," and the proposals do track the President's major long-term goals. And the supposed "cost-savings" in his budget plan are mainly derived from a bunch of gimmicks.

...someone who was genuinely alarmed by the fact that the CBO scored Obama’s plans as leading to large deficits in the final years of his ten year budget would not have “solved” this problem by abandoning Obama’s ten-year budget window switching to a five-year window. Similarly, re-inserting the “let’s pretend will use the AMT to raise taxes on the upper-middle class and then not actually do that” approach to budgeting, though now a time-honored trick of the Bush years, is not an actual deficit reduction measure.

Long story short, Senator Conrad cares about the deficit and is taking some action to make it smaller. But he also cares a great deal about being seen as a deficit hawk, the kind of guy who’s not afraid to take an axe to the president’s proposals. And in this instance the administration rather smartly eschewed a lot of this kind of pain free “virtual” deficit reduction, thus making it possible for interested Senators to deploy favored accounting patches on their own initiative and take credit for more reduction than they actually produced.

The White House seems to have no problem with the changes made, because the changes for the most part are made of air. And in some sense, Conrad actually enhanced the prospect of health care reform, by offering revenue-neutral space for a reform fund and allowing that particular budget item to be scored on a 10-year timeline, so that the savings in the later years can allow for an up-front deficit. And while Conrad deleted reconciliation for health care and energy proposals, because they exist (at least for health care) in the House version, they can be imported at a later date, meaning the threat can still be held over the heads of Republicans.

So Conrad appears to me to be someone who wants to appear like a centrist while facilitating the needs of a progressive budget, in direct contrast to Evan Bayh, Tom Carper and Blanche Lincoln, who want to appear like supporters of the President while obstructing and hacking up his agenda:

We formed our working group because we recognize both the difficulty and the urgency of accomplishing a huge and ambitious agenda. We must act quickly and decisively to repair our financial markets and start to turn the economy around. In addition, we believe that President Obama is correct when he says that we cannot afford to wait any longer to fix health care and transition to a clean-energy economy.

These are titanic and complicated tasks, and we believe that many worthwhile policy solutions can be found in the practical center -- ideas that also have the benefit of appealing to vast segments of the American electorate. Unfortunately, the Republican leadership has basically decided to stay on the sidelines to let the Democrats carry the load of reform alone.

As moderate leaders, it is not our intent to water down the president's agenda. We intend to strengthen and sustain it. Moderation is not a mathematical process of finding the center for its own sake. Practical solutions are practical because they offer our best chance to make a difference in people's lives today without forcing our children to pick up the tab tomorrow.

The stakes are too high for Democrats to fear a policy debate. Such debates produce better legislation. On nearly all important votes, a supermajority of 60 senators will be needed to pass legislation. Without Democratic moderates working to find common ground with reasonable Republicans, the president's agenda could well be filibustered into oblivion.

It's really not possible to take these people seriously. The whole "practical solutions are great because they are practical" part really gives you the sense of who you're dealing with here. They live in a magical pony and fairy land where they, only they, can bring the nation together, despite all evidence to the contrary, by just clicking their heels and magically finding those "reasonable" Republican votes for anything but the most watered-down policy. They are also very worried that if Obama passes the agenda on which he ran, moderates who voted for him will be very upset and will throw Democrats out of office in 2010. That's really their response. And none of them, just like their partner in crime Susan Collins can actually name anything they'd cut, or explain why a 51-vote majority is undemocratic:

"I'm very concerned that the levels of debt that the president's budget would entail are simply unsustainable and would pose a significant threat to the health of our economy," said Sen. Susan Collins, a Maine Republican who plays a pivotal role in Senate negotiations. "I've had conversations with several centrist Democrats who have exactly the same concerns I do."

Well, what would you cut? "One of the areas I would look at are the huge agricultural subsidies," she said. Those farm payments are one of the few cuts Obama has already proposed, which Collins added was "to his credit."

Anything else? "I thought I did pretty well coming up with one right off the top of my head," she said [...]

Sen. Mary Landrieu (D-La.) said she leans no on Obama's budget because of its size but is open to being convinced. She's not looking forward to cutting it, however. "That's always the problem. How to cut back and what to cut back," she said.

Yet the main change that Landrieu would like to see highlights the political contradiction at work. Tax hikes on independent oil and gas producers, many of whom operate in the Gulf, she said, are a "non-starter." Removing that tax hike, though, increases the deficit [...]

"Reconciliation should not be used to impose a major policy change. It's unfair to those who hold a minority view," Collins added.

Isn't that undemocratic? Collins was asked why she and a handful of senators should wield so much power over the nation's policy.

"I don't really think I have all that much power but I'm glad you think so," she said, laughing.

"I don't think it has anything to do with the power structure of moderates," she added. "People want to see healthcare reform, want to see us deal with major issues, but not in an undemocratic fashion. I think people want to see fuller debate and deliberation and more involvement by the minority."

But isn't the need for 60 votes undemocratic? Didn't the nation have a full debate, followed by an election in which people voted for major change?

"I disagree totally with that," said Collins. "I do not believe the American people voted to short circuit debate and prevent people with a minority view on both sides of the aisle from having the ability to amend a bill."

Behold the reasonable, responsible moderates who will save us from this crisis and return America to glory again.

Pardon me while I go throw myself in the ocean.

Wheelin' Dealin'

The conference negotiations on the stimulus package are going fast and could be done by mid-day, which obviously makes it hard to find the pressure points and apply them. Americans United For Change and AFSCME are running ads against recalcitrant Republicans, and they're pretty good, but obviously they're not the issue anymore. It's the Axis of Centrism still driving the negotiations.

In a sign of their determination to reconcile the differences between the Senate bill and the $820 billion House version swiftly, the White House chief of staff, Rahm Emanuel, and the budget director, Peter R. Orszag, huddled at the Capitol on Tuesday evening with Speaker Nancy Pelosi; the Senate majority leader, Harry Reid of Nevada; and other lawmakers.

Participants in the talks said they wanted to reduce the overall price to just under $800 billion.

The officials worked late into the night, with Mr. Reid shuttling between meetings with senators in his office and House leaders in Ms. Pelosi’s suite. Centrist senators who were crucial to the stimulus deal, Susan Collins and Olympia J. Snowe, Republicans of Maine, Ben Nelson, Democrat of Nebraska, and Joseph I. Lieberman, independent of Connecticut, returned around 9 p.m. for the talks and left about an hour later.

The group broke for the night shortly before 11:30 p.m. “We’re not there,” Mr. Reid said. “But we have made a significant amount of progress in the last 10 hours.”

You read that right, they want to make additional cuts from what the House and Senate passed. Why? Because a cut is a universal good, silly.

There are differing stories out there. The New York Times piece claims that the Senate cuts to Medicaid and COBRA would remain in the final bill, while the cuts to Obama's signature middle class tax cut would be restored. But the Wall Street Journal sees Obama seeking lots of spending restorations:

The White House is seeking to restore funding cut by the Senate for schools, health insurance and computerizing health records as the economic-stimulus plan heads for a final round of negotiations in Congress this week.
...
To make room for added spending, the White House, joined by House Democratic leaders, is pressing to scale back certain Senate-passed tax breaks, including ... an $11.5 billion proposal to give car buyers a tax deduction covering local sales taxes and interest on auto loans, and a $35 billion proposal to create a new tax credit for home purchases.

Clearly the home buyer tax credit is ridiculous. It will go mainly to people who were going to buy homes anyway, won't create new home construction, and will simply reinflate the bubble rather than stabilize home prices. Max Baucus said that the home buyer credit and the auto credit would probably be modified but not eliminated. Hopefully the cuts to programs like school construction, which Obama was consistently supported, will come back. However, the aid for state governments appears gone for good, which is a shame.

Obama's negotiating team insisted on restoring some lost funding for school construction projects as talks began Tuesday in hopes of striking a quick agreement, but by late in the day it appeared resigned to losing up to $40 billion in aid to state governments.

To the extent that Republicans are impacting this at all, they are making robocalls in Pennsylvania and Maine against the bill, trying to squeeze Specter, Collins and Snowe. And a separate GOP group is threatening primary campaigns against these three and anyone else who supports the bill. This is the typical way that Republicans try to maintain party discipline, and while it can occasionally work locally, it wasn't enough to beat Specter in a statewide primary six years ago.

But that doesn't matter. The Axis of Centrism sees reducing the effectiveness of the bill as an end in itself. They've already reduced it to a half-measure, and they're coming back for more. Did Obama's early emphasis on post-partisanship rather than browbeating Republicans into acceptance change this reality? I'm not really sure. The moderates seem to be goring this bill and liking it, and no matter Obama's pose he would still be constrained by the essential nature of getting something passed.

It's Susan Collins and Ben Nelson's world, we're just living in it.

Senate Gets Cloture On Stimulus

It was a 61-36 vote, with Collins, Snowe and Specter voting to end debate, Gregg recusing, Cornyn not there for some reason, and all over Republicans opposed. Absolutely no surprises.

After tomorrow's vote on final passage, which will have the same margin, the action now moves to the conference committee, and we'll see if the House stands up for those 600,000 jobs the Senate slashed. The Axis of Centrism doesn't have logic on their side, just the self-masturbatory congratulations of each other for being so wise and judicious. But in Washington, that's often enough.

Feel The Centrist Pride

Presidents Ben Nelson and Susan Collins today were strutting their peacock feathers and engaging in a full round of back-patting for cutting back the stimulus package, using weasel words that would have launched 1,000 George Carlin bits:

Q: Do you agree, or how do you respond to Paul Krugman in the New York Times who said that centrists have done their best to “make the plan weaker and worse?”

NELSON: Well, first of all, they’re not cuts. Let’s just get that up front. These are adjustments downward from numbers that were offered by the House in their version and by the Senate in its version.

"Adjustments downward." Sounds like something an accountant would make. Just an eraser swipe and a stroke of a pencil in the ledger. Nothing harmful. Just an adjustment.

Except that those adjustments will cost hundreds of thousands of people their jobs, and more importantly, will cost them the ability to produce in the economy and provide income tax revenue and increase economic activity, which is the whole point of the bill.

The House puts greater emphasis on helping states and localities avoid wide-scale cuts in services and layoffs of public employees. The Senate cut $40 billion of that aid from its bill, which is expected to be approved Tuesday.

The Senate plan, reached in an agreement late Friday between Democrats and three moderate Republicans, focuses somewhat more heavily on tax cuts, provides far less generous health care subsidies for the unemployed and lowers a proposed increase in food stamps.

To help allay Republican concerns about the cost, the Senate proposal even scales back President Obama’s signature middle-class tax cut. The Senate plan also creates new tax incentives to encourage Americans to buy homes and cars within the next year.

As Krugman notes, the centrists "did their best to make the plan weaker and worse," and the sickest thing is that they seem to be proud of it, touting aid to education in their version of the bill when they actually slashed it:

I’m really shocked by the extent to which the architects of the Senate cuts to the recovery package aren’t being made to offer any kind of justification for their actions. And in the absence of pressure, they certainly aren’t doing it of their own accord. I wanted to see, for example, what Ben Nelson (D-NE) had to say for himself, and what he had to say was this, with his partner in crime Susan Collins (R-ME) chiming in:

“This bipartisan agreement delivers the help millions of Americans need in this time of economic turmoil,” said Senator Nelson. “It fuels two powerful engines: major tax cuts for the middle class, and targeted investments in American infrastructure and job growth. It also pares back $110 billion of spending that didn’t belong in the bill. We’ve trimmed the fat, fried the bacon, and milked the sacred cows. What remains will fund education, an energy Smart Grid, tax credits for homebuyers and other critical infrastructure.” [...]

Would you ever in a million years have guessed from this rhetoric that the primary change Collins and Nelson made was to implement big reductions in aid to states and, especially, in funding for education? I think not. In their rhetoric, Collins and Nelson preserved vital education funding and state assistance while eliminating various metaphorical animal products. Meanwhile, actual changes Collins and Nelson made include:

• Elimination of $25 billion in flexible funding for state governments.
• Cut $7.5 billion in funding for “state incentive grants” to help states make progress toward NCLB goals.
• Eliminated $19.5 billion in construction aid for schools and colleges.
• Reduced new aid for the Head Start early childhood program by $1 billion.

The absolute worst part is the cuts to state aid, which will force the states to cut their budgets and reduce jobs during a recession, ensuring that it will be longer and deeper. The proud as a peacock centrists made it so that the states will have to actively work against the recovery package itself.

All so they could make room for tax cuts to wealthy people who flip their houses, and the patch to the alternative minimum tax, which these supposedly fiscally responsible Senators are too cowardly to pay for. They stuck it in this stimulus so they wouldn't have to offset the $70 billion dollar cost with revenue increases. Nelson, Collins and all the rest can never call themselves fiscally responsible ever again. This is the most irresponsible thing I've ever seen.

The question is, as I've said repeatedly, what happens in conference. The centrists are talking tough, saying that any significant changes to the bill will be met by them with a no vote.

Reconciling the remaining differences won't be easy. Even before negotiations have started, one influential Republican supporter of the bill, Sen. Susan Collins of Maine, is stressing her desire for the cost of the final package to be held to $800 billion. She is suggesting that her support for a final compromise package can't be taken for granted. "I made no commitments," she said.

And it can be, by taking out these silly, non-stimulative tax breaks and adding back in precisely the kind of targeted, temporary spending, to schools and state governments and relief for the poor, that the bill was designed to do. The President said today at the Elkhart, IN town hall: "The Senate version cut a lot of these education dollars. I would like to see some of it restored." There is upward momentum from 3,000 local town hall meetings this weekend, many of which came to their own conclusions
about the importance of the type of things taken out of the Senate version. Will Susan Collins or Olympia Snowe or Ben Nelson or Arlen Specter tank the economy because they don't get everything on their wish list? I'm not so sure. Specter has acknowledged the pressure from the left side of the aisle leading him to support a compromise, and in his WaPo op-ed today he said that inaction is not an option. The moderates sat by idly when their compromises were dropped in conference during the Bush years time and again. Would they stonewall a different conference report this time, and be on the hook for economic disaster?

I think it's unclear. And it's worth keeping up the pressure to let Congress know that we want a big, bold plan that restores cuts to the states and education at the expense of non-stimulative tax cuts.

Capital switchboard

House

Senate

...Joe Lieberman nominates moderates for the Congressional Medal of Honor. If the chance to make Holy Joe cry doesn't get you to the phones, what will?

Senate Proud To Sink The States

Both the Washington Post and the LA Times have stories today about the budget crises facing the states, where governors and legislatures have exhausted every gimmick and now must enact painful cuts that will work against the federal program to bring us out of the economic downturn. The personal stories are significant:

Nevada resident Margaret Frye-Jackman, 71, was diagnosed in August with ovarian cancer. She had two rounds of chemotherapy at University Medical Center, the only public hospital in the Las Vegas area.

Soon after, she and her daughter heard the news on TV: The hospital's outpatient oncology services were closing because of state Medicaid cuts. Treatment for Frye-Jackman and hundreds of other cancer patients was eliminated [...]

"If this is what it's like in Nevada, with cancer stuff closing, is it like that everywhere?" said Frye-Jackman's daughter, Margaret Bakes, accompanying her mother to the doctor's recently. "Are all the other states closing stuff too?"

The answer, in at least 39 states, is "yes" -- or "soon." With personal, sales and corporate income tax revenue plummeting, state governments -- which recently trimmed their budgets to cover a cumulative $40.3-billion shortfall for the current fiscal year -- are now watching in horror as a $47.4-billion gap opens for 2009.

And for fiscal year 2010, they will face a $84.3-billion hole, according to the National Conference of State Legislatures. The total shortfall through fiscal 2011 is estimated at $350 billion, according to the Center on Budget and Policy Priorities, a nonpartisan think tank in Washington.

This article frames it as there being "no choice" but tough budget cuts or tax increases for states facing shortfalls, states that cannot print money or run budget deficits. But that's not entirely true. There was a good deal of help being offered by the federal government in the House stimulus bill, which included $79 billion in state fiscal stabilization aid. But among their other cuts, the Axis of Centrism cut that aid in half, by $40 billion dollars, and in so doing guaranteed additional layoffs to teachers and firefighters and cops and nurses and all sorts of other professions which rely on a state paycheck.

California law mandates that layoff notices to teachers be given out by March 15 for the next school year. Arnold Schwarzenegger is proposing $10 billion in education cuts. Republicans, which use our state's rule requiring a 2/3 vote of the legislature to pass a budget, are demanding these cuts as the price of a tax increase to close the remaining $40 billion and ensure that the cuts aren't bigger.

But all of us were hoping and expecting that the US Congress would come through with aid to stabilize state budgets, to help ameliorate the problem and save teacher jobs by providing stimulus money. It must be in the stimulus because, as I just noted, the layoff notices will go out within 5 weeks - there is no time to include it in another bill.

Now we are told that Ben Nelson and Susan Collins, two Republican Senators, have reached a deal to cut that education assistance and that the Senate is likely to accept it.

In short, what they have done is guarantee to my sister and to thousands like her that they will receive a pink slip within five weeks.

To call this fearmongering, as John Ensign did on Meet the Press today, just denies reality, par for the course for both Republicans and bipartisan fetishists like Claire McCaskill, who was at first giddy about cutting 600,000-700,000 jobs in the stimulus, and then passive-aggressively "defended" it by saying the alternative was no bill.

Claire McCaskill is now defending herself against Krugman on Twitter:

Just saw Krugman's comments on reduction in recov act. Question for him. Would no stimulus act be better than one thats 800 B instead of 900.

She follows that up with

Compromise had to happen or we would NOT have 60 votes. Period.

And for further evidence of how much the bill is the same, she claims:

Original Senate bill was 60% appropriationss, 40%tax cuts. Compromise was 58, 42.Senate bill is 90% the same as House bill.

I'm glad that's she expressing herself here, and that we're able to somewhat have a dialogue. But I'm not sure how much in good faith it is. McCaskill began by stating how glad she was that they got a $100 billion cut out of the bill, that the "silly stuff" that Republicans didn't like is now out. She then switches to a passive aggressive mode in defending the cuts - it's basically the same bill and it wouldn't have made it through the Senate - but glosses her own role in making the cuts. From the way she talks about the bill, wouldn't she have been among those voting against the bill if the cuts hadn't been made and new non-stimulative tax cuts hadn't been added in?

McCaskill doesn't want to admit her role in putting 600,000 Americans out of work on Friday, which will harm public safety and increase class sizes and shut down bus and rail lines and send the sick and uninsured looking in vain for treatment and a host of other inadvisable outcomes. And there's no rational economic reason for it, just that the Axis of Centrism choked on the price tag and had to compensate for the non-stimulative tax cuts the Senate tossed into the bill. Massive job loss or increased property tax rates (as states compensate for the loss to education funds) is on McCaskill and Nelson and Collins and Spector's hands.

The big question is what will come out of the House-Senate conference next week, whether the cuts, especially the state government relief, will be restored at the expense of things like the $70 billion dollar patch to the alternative minimum tax. Larry Summers left that an open question on ABC this morning.

One of President Barack Obama's top economic advisers forecast Sunday a difficult struggle with Congress over Senate cuts of $40 billion for state and local governments from the administration's massive spending and tax cut package to stimulate the failing economy.

The $827 billion Senate version of the plan -- designed to bring the economy out of the worst downward spiral since the Great Depression -- was expected to pass the Senate on Tuesday. The House had already passed its $819 billion version of the measure.

And in the opening moments of This Week, an exchange between George Stephanopoulos and Larry Summers went like this:

STEPHANOPOULOS: ...does that mean the President prefers the Senate version to the House version?

SUMMERS: No, the President feels that above all, we need a major program enacted very quickly that would create 3 to 4 million jobs. He believes we need to perfect it in every way we can.

If the cuts are restored, suddenly the sense of urgency works back in the direction of passing a bill more like the House version. The Republican business lobby is urging passage. I don't think the moderates signed on to the bill could break ranks on the final vote if the changes in conference are limited to, say, swapping the state cuts for the AMT patch, combined with an assurance from the President that they will make that fix down the road.

600,000 Jobs Is A Small Price To Pay To Keep David Broder From Crying

Paul Krugman:

According to the CBO’s estimates, we’re facing an output shortfall of almost 14% of GDP over the next two years, or around $2 trillion. Others, such as Goldman Sachs, are even more pessimistic. So the original $800 billion plan was too small, especially because a substantial share consisted of tax cuts that probably would have added little to demand. The plan should have been at least 50% larger.

Now the centrists have shaved off $86 billion in spending — much of it among the most effective and most needed parts of the plan. In particular, aid to state governments, which are in desperate straits, is both fast — because it prevents spending cuts rather than having to start up new projects — and effective, because it would in fact be spent; plus state and local governments are cutting back on essentials, so the social value of this spending would be high. But in the name of mighty centrism, $40 billion of that aid has been cut out.

My first cut says that the changes to the Senate bill will ensure that we have at least 600,000 fewer Americans employed over the next two years.

The real question now is whether Obama will be able to come back for more once it’s clear that the plan is way inadequate. My guess is no. This is really, really bad.

Considering that you need 60 votes in the Senate to pass this bill and any future bill that raises the federal deficit (which a stimulus bill will inevitably do), it was always going to be like this. I'm not certain that if Obama didn't pre-compromise the bill, that the moderates and Republicans wouldn't have pushed it to exactly where it is now. I'm sympathetic to the notion to an extent, but considering 36 Republicans wanted the entire bill to be straight tax cuts, I think the moderates would have went there anyway. Where Obama broke down was not whipping the public up to support his plan from the get-go. The fact that the rhetorical war got away from him made it easier for the moderates to run wild. Even then, the awful media coverage was unlikely to improve, though at least Obama's point of view would have been represented.

I mean, you have Republicans who are calling a $780 billion dollar bill a $1 trillion dollar bill because they are calculating in the debt service on the borrowed money. Funny, I don't remember them doing that for appropriations on Iraq, for example. They were always going to oppose in the most extreme way possible, and considering how some of our "sensible centrists" on the Democratic side think, I just don't agree that there was going to be a good strategy here.

Senator Claire McCaskill:

"Proud we cut over 100 billion out of recov bill.Many Ds don't like it, but needed to be done.The silly stuff Rs keep talking about is OUT."

That silly stuff includes big reductions (relative to the House Bill) in food stamps, school construction, head start, and COBRA subsidies for people who have lost their jobs.

How Senator McCaskill is spending her day:

"Going to Museum of Am History today.Haven't been since it re-opened.Want to check it out.Also grocery store and later a movie date with Joe."

Hopefully she enjoys the museum. Amusingly, she also voted for the Coburn amendment which forbids the use of any of the stimulus money for, among other things, musems.

With moderate friends like these....

The state spending has to go back in, the AMT fix has to go back out. That gives it just the slightest chance to succeed.

...I do agree with this comment, for future reference:

My advice to Obama is to never pre-compromise with Republicans unless he negotiates with specific Republicans whose votes he secures at the same time. I have no problem with putting in compromises worked out with Spector and the women from Maine in return for their support, but you can't just put in stuff Republicans might go for.

I don't think Obama gets a lot out of the "moral authority" of saying he tried to compromise the bill at first. Republicans don't really care. They should be able to get changes in legislation, but only in exchange for support, not for a theory of what they might support.

Big Bipartisan On Campus

A couple years ago at what was then Yearly Kos, I was quoted in the Washington Post saying that Joe Lieberman was more harmful to progressive policies than, say, Ben Nelson, because Nelson didn't undermine Democrats in the media or borrow Republican talking points.

Let me say that I was wrong, and that Nelson is trying his best to become the new Village darling with a package of cuts to the recovery bill that would negate all of the positive benefits it could possibly offer.

Total Reductions: $80 billion

Eliminations:

Head Start, Education for the Disadvantaged, School improvement, Child Nutrition, Firefighters, Transportation Security Administration, Coast Guard, Prisons, COPS Hiring, Violence Against Women, NASA, NSF, Western Area Power Administration, CDC, Food Stamps

*****************************

Reductions:

Public Transit $3.4 billion, School Construction $60 billion

*****************************

Increases:

Defense operations and procurement, STAG Grants, Brownfields, Additional transportation funding

The Axis of Centrism, in addition to all that, wants to cut aid to the states.

By Thursday evening, aides said the group had drafted a list of nearly $90 billion in cuts, including $40 billion in aid for states, more than $14 billion for various education programs, $4.1 billion to make federal buildings energy efficient and $1.5 billion for broadband Internet service in rural areas. But they remained short of a deal.

I'm sorry, but anyone who proposes cutting funding to state and local governments at this point is a complete moron. The fastest stimulus is government purchasing. The jobs most in need of saving are at the state level. With slashed aid to states, millions of teachers, firefighters, and cops will be out of work. And cutting food stamps is just as dumb, considering that poor people are most likely to spend just on their own basic necessities, increasing demand. The money they don't have to spend on food will go elsewhere in the economy.

Good to see as well that funding for the military, which we spend more on that every other country on Earth combined, is getting increases in the plan. That seems fair and balanced.

Harry Reid is trying to hold the line on this nonsense, but I'm sure Nelson and his axis will go lovingly into the arms of their media cohorts and decry all the "wasteful spending" on poor people that just has to go. Sen. Jeff Merkley, who can't get on the teevee because of all that patchouli oil and tie-dye, makes the obvious point: there's nothing wasteful about creating a job. That would be a unique perspective!

One project they're attacking hit close to home. They're calling funding to restore forest health and prevent wildfires in National Forests wasteful. Coming from Southern Oregon, I can tell you firsthand they are dead wrong.

I grew up in Southern Oregon. My father was a sawmill worker and a logger and his job put food on the table. Right now Douglas County, where I was born, has an unemployment rate of 12.8 percent. That's the highest it's been in decades and well above the current national average. Douglas County is home to many of Oregon's timber workers and they need the stability of a good paying job. The money that would be allocated to counties like Douglas to restore forest health and prevent forest fires would put these folks back to work.

Let me explain. Due to federal mismanagement, there are millions of acres of choked and overgrown second-growth forests. These forests are a complete menace. They are diseased and are very little use for strong ecosystems. Moreover, they are a huge fire hazard. Thinning these neglected forests is essential for restoring forest health and generating thousands of rural jobs.

Let me emphasize this: this provision will create thousands of rural jobs. This is a win-win for our rural economies and our ecosystems.

Preventing wildfires is something that desperately needs to be done in any economic condition and now has the added benefit of providing jobs in areas that need them most. How Republicans can call job creation for hardworking millworkers like my dad "wasteful spending" is a mystery to me.

If Nelson and his centrists are choking on the price tag of the bill, they can get rid of the tax cuts they all inserted that will do nothing for anyone.

Sen. Olympia Snowe (ME), one of the four Republicans considered genuinely open to cooperation with Democrats on a workable economic recovery bill, just released a statement saying she was approached by Majority Leader Harry Reid (D-NV) to come up with a list of trims from the $275 billion-plus tax section of the stimulus.

Pruning the tax section of the stimulus is an idea that could hold promise for liberals, many of whom are concerned about the hits that education and transit would take in the centrist senators' package of cuts. The portion Snowe is looking at contains plenty of cuts, for both businesses and individuals -- some of them added in the hopes of winning GOP support -- but also a number of tax credits that could take money out of government coffers in the short term while increasing economic growth in the long term.

If it suits you to make a bunch of phone calls, if there's anything to go to the mats over, it's this: defeating the Nelson-Collins amendment and preserving at least the good parts of the bill. Not to mention making David Broder cry. At least the bulk of the Republicans are honest neo-Hooverists; I respect them more. Ben Nelson and his "very serious" friends deserve to go down.

...by the way, Krugman is absolutely right about this:

Which raises the obvious question: shouldn’t Obama have made a much bigger plan, say $1.3 trillion, his opening gambit? If he had, he could have conceded to the centrists by cutting it to $1.2 trillion, and still have had a plan with a good chance of really controlling this slump. Instead he made preemptive concessions, only to find the centrists demanding another pound of flesh as proof of their centrist power.

Obama negotiated with himself, and this is the result. We can only speculate on what might have been if he didn't pre-compromise the bill.

...Ben Nelson, by the way: for state aid before he was against it.

Senate's Reverse-Midas Touch Turns Economic Recovery To Dung

When the initial Obama recovery plan came to the Congress, it had about a 40%-60% ratio between spending and tax cuts. That got reduced to around 33%-67% in the House bill. Based on the amendments that have passed and the inclusion of the AMT patch in the Senate, if the axis of Nelson-Collins are successful in scooping out $100 billion in spending that percentage could be closer to 50%-50%. This is especially true because the ridiculous home-buyer credit, passed last night, is now twice as costly as once imagined.

The measure, which had been championed by GOP Senator Johnny Isakson, would give $15,000 (or 10 percent of the purchase price, whichever is lower) to every person who buys a home in 2009.

As late as this afternoon, the overall price tag allotted for this measure was around $18.5 billion.

But the ultimate real world cost of this measure has been disputed, with some critics predicting that it would cost much more, given the expected levels of housing sales this year.

Turns out the critics may have been right. The nonpartisan Joint Committee on Taxation has just sent a letter to Chuck Schumer, who’s on the Finance Committee, responding to Schumer’s request that the Committee score an estimate of the measure’s cost.

The total price estimated by the Committee? $35.5 billion — double the original cost, says the letter, which was sent our way by Schumer’s staff.

So now we have a $35 billion dollar bailout for the mortgage industry in this bill, and the offsets are coming from state and local government relief, so county hospital workers and cops and firefighters can be thrown out of work?

This is lunacy. Robert Reich has an on-point explanation of how this debate SHOULD have gone, if we lived in a marginally sane country.

Regardless of your ideological stripe, you've got to see that when consumers and businesses stop spending and investing, there's only entity left to step into the breach. It's government. Major increases in government spending are necessary, and the spending must be on a very large scale. In the last several weeks the President has put forward the outlines of a stimulus plan, and has left it to the House and Senate to fill in the details. A tiny portion of the details that made it into the House version should be stripped away because they seem like old-fashioned pork. But most spending in the bill is absolutely appropriate. My worry is there's not nearly enough of spending to fill the shortfall in overall demand.

Yet at this very moment, Senate Republicans are seeking to strip the President's stimulus package of many of its spending provisions and substitute tax cuts. Part of this is pure pander: They know tax cuts are more popular with the public than government spending, even though spending is a far more effective way to stimulate the economy (more on this in a moment). Another part is pure partisan politics: Republicans are emboldened by Obama's willingness to court Republicans (taking three Republicans into his cabinet, bringing Republican leaders into the White House for consultations, putting all those business tax cuts into the stimulus bill in order to gain Republican favor) without getting anything at all back from the GOP. House Republicans snubbed the bill entirely. So, Senate Republicans say to themselves, what's to lose?

Plenty. Millions more jobs and a full-fledged Depression, for example.

We're adding in tax cuts that people will either give to bankers to pay down debt or keep in savings accounts in case they're the next to get fired. Maybe they'll buy some cheap crap from China. And we're taking out spending that can give people jobs and circulate multiple times through the economy to increase demand. This is so stupid.

Here's the deal. Obama pre-compromised with 40% tax cuts. That's too high, and I'd prefer having only the targeted, progressive tax cuts (like the child tax credit, tuition tax credit, and reduction in withholding) in there, but let's take the midpoint between Obama's initial offer and the House bill. That's 37.5% tax cuts. That ratio should be FIXED. If you add tax cuts in, you have to take tax cuts out so the ratio stays the same. If you want to give $35.5 billion to home buyers, you can eliminate those worthless business tax cuts in the exchange. Obama should announce that the ratio must be preserved or he cannot accept the bill. Veto threats work. These people cave.

...Maybe he'll do that this Monday. Greg Sargent reports that Obama will hold a nationally televised news conference. Maybe he can explain what a stimulus is and why it's needed, as well.

Just The Time For Entitlement Reform?

It was one comment over an hourlong interview, but "entitlements" is like catnip to Beltway journos, so that became the lede. Still, it's pretty troubling:

President-elect Barack Obama pledged yesterday to shape a new Social Security and Medicare "bargain" with the American people, saying that the nation's long-term economic recovery cannot be attained unless the government finally gets control over its most costly entitlement programs.

That discussion will begin next month, Obama said, when he convenes a "fiscal responsibility summit" before delivering his first budget to Congress. He said his administration will begin confronting the issues of entitlement reform and long-term budget deficits soon after it jump-starts job growth and the stock market.

"What we have done is kicked this can down the road. We are now at the end of the road and are not in a position to kick it any further," he said. "We have to signal seriousness in this by making sure some of the hard decisions are made under my watch, not someone else's."

In the same interview, Obama backed financial regulatory reform and endorsed a set of policies already put forward by Paul Volcker. In a way, he's much further ahead on that front than on this entitlements thing. As I said, catnip.

He also happened to say the right things about those specific entitlements. While I wasn't happy with his emphasis on Social Security in the primaries, it's important to remember that his SOLUTIONS were always progressive, like lifting the cap on payroll taxes from roughly $100,000 to something higher, and even adding a donut hole (so $100,000-$300,000 are exempt, and then incomes above that are subject to payroll taxes, which makes perfect sense).

"Social Security, we can solve," he said, waving his left hand. "The big problem is Medicare, which is unsustainable. . . . We can't solve Medicare in isolation from the broader problems of the health-care system." [...]

The president-elect has been in frequent conversation with lawmakers, including House Majority Leader Steny H. Hoyer (D-Md.) and the Blue Dog Coalition of fiscally conservative Democrats, who repeatedly told Obama they would be willing to support his stimulus package only if he pledged not to lose sight of the larger budget picture. Those who will be invited to attend the summit include the Blue Dogs, Senate Budget Chairman Kent Conrad (N.D.), ranking minority member Judd Gregg (N.H.) and a host of outside groups with expertise on the topics, the president-elect said.

If this is some bargain for universal health care, with light, progressive tweaks to make Social Security more sustainable, then we're on solid ground. But I'm sure that is not the intention of the Blue Dogs or a Judd Gregg. Obama is emboldening a group whose overriding goal is to break the social safety net, not strengthen it.

I believe that everything about this is a huge mistake. It validates incorrect right wing economic assumptions, incorporates their toxic rhetoric about "entitlements," focuses on the wrong problems and continues the illusion that social security is in peril when it isn't. The mantra of shared sacrifice sounds awfully noble, but it isn't very reassuring to talk about the government going broke at the moment, particularly when the cause of our problems isn't the blood-sucking parasites who depend on government insurance when they can't work, but rather the handiwork of the vastly wealthy who insist on operating without restraint and refuse to contribute their fair share. I would have thought that a bipartisan commission on financial system reform might have at least been on the agenda before social security.

Obama is empowering the Republicans and the Blue Dogs with this fiscal responsibility rhetoric and perhaps he believes they will reward him by acting in good faith. And maybe they will.Or perhaps he thinks he can jiu-jitsu the debate in some very clever way to actually bolster social security and enact universal health care. But it's a big risk. I believe that all this talk about "entitlements" and fiscal responsibility will make it much tougher to sell universal health care and easier to dismantle some of the safety net at a time when many people have just lost a large piece of their retirements, their jobs and their homes. It's very hard for me to understand why they think it's a good time to do this.

There's actually another way to go with all this, and that is claiming the mandate given by the voters, based on very clear elements of change. George Bush tried to privatize Social Security completely out of nowhere, and despite his majorities in Congress that was a key reason for its downfall. Social Security and Medicare were not tossed around during the campaign outside from a little bit in the primaries (and Obama was immediately slapped down hard for doing so and he never returned to it, except to explain that McCain thought Social Security was a disgrace). There's this Beltway disease where "entitlements" are always the most pressing issue, and in this case, it's really quite the opposite (By the way, there's never been a more descriptive word for how the Village thinks of the people than "entitlements" - how dare they think they're entitled to not starving and being cared for in their old age!). The economy is a mess and major spending is needed, and deficits don't matter for the near term. But responsible "centrists" think that a Grand Bargain must be made, and so the price for a moderately liberal policy on short-term spending must be the end of Social Security and Medicare. Tom Frank's op-ed is brilliant:

There is no branch of American political expression more trite, more smug, more hollow than centrism.

After all, as Mark Leibovich pointed out in Sunday's New York Times, transcending faction has been the filler-talk of inaugural addresses going back at least to Zachary Taylor's in 1849. When you hear it today -- bemoaning as it always does "the extremes of both parties" or "the divisive politics of the past" -- it is virtually a foolproof indicator that you are in the presence of a well-funded, much-televised Beltway hack [...]

The reason centrism finds an enthusiastic audience in Washington, I think, is because it appeals naturally to the Beltway journalistic mindset, with its professional prohibition against coming down solidly on one side or the other of any question. Splitting the difference is a way of life in this cynical town. To hear politicians insist that it is also the way of the statesman, I suspect, gives journalists a secret thrill.

Yet what the Beltway centrist characteristically longs for is not so much to transcend politics but to close off debate on the grounds that he -- and the vast silent middle for which he stands -- knows beyond question what is to be done.

And centrism's achievements? Well, there's Nafta, which proved Democrats could stand up to labor. There's the repeal of the Glass-Steagall Act. There's the Iraq war resolution, approved by numerous Democrats in brave defiance of their party's left. Triumphs all.

These things don't typically work out. Obama, responsible centrist that he is, had better opt for what ACTUALLY works. Even if it is, Heaven to Betsy, ideological.