Public Option Nears Finance Committee Vote

The public option debate in the Senate Finance Committee was originally scheduled for a vote today, but it was pushed back to Tuesday. While the chief cheerleaders on the committee are not entirely hopeful about its prospects in the committee, they certainly sounded confident about it overall.

"The health care bill that is signed into law by the President will have a good, strong, robust public option," (Chuck) Schumer said.

How that will happen remains an open question. But the Senators assured reporters on the call that we're all going to get a taste of their passion and persuasiveness on this issue at the ongoing Senate Finance Committee hearings on Friday.

"I think it's a great idea," (Jay) Rockefeller said of the public option. "Chuck Schumer thinks it's a great idea. And we're going to be all over it tomorrow." [...]

Schumer said that "a large majority of Democrats are for a public option" -- but that the ratio is higher in the House than the Senate, and higher in the Senate than in the Senate Finance Committee.

"I think we have a real good chance on the Senate floor," he said.

Schumer and Rockefeller have a lot of weapons at their disposal. First off, there's the pure popularity of the measure, which has ticked up in recent weeks, at 65/26 in the latest New York Times poll. This is also true in the case of swing district Democratic seats, who not only express a fundamental desire for health care reform this year, but support a public option and reject a trigger. This is also a crucially important piece from that polling:

It's wrong to think about the public option in isolation from other elements of reform. Forcing an individual mandate without a public option is a clear political loser (34% Favor / 60% Oppose), and only becomes more palatable when a public option is offered in competition with the private sector (50% Favor / 46% Oppose)

And swing district voters have already decided the private sector has failed to keep healthcare affordable, and want a public option now (48%) instead of waiting for a trigger (36%).

A mandate without a public option will be extremely unpopular because people can sense that the idea of a forced market for private insurers is designed in the interests of those insurers, not them. This is really elementary stuff.

I don't know if whether this report about Blue Dogs fading in their opposition to the public option relative to other health care goals is a sign that they're learning from these reports or not. They seem to be more interested in the regional disparities in Medicare reimbursement rates, which is really a payoff, but if those rates were adjusted, opposition to a public option tied to Medicare rates in some fashion would probably fade away. Especially considering that it's the fiscally responsible thing to do, per the CBO.

The original House bill required the public plan to pay providers 5 percent more than Medicare reimbursement rates. But as part of a package of concessions to Blue Dogs, the House Energy and Commerce Committee accepted an amendment that requires the HHS Secretary to negotiate rates with providers. That version of the plan will save only $25 billion.

In total, a public plan based on Medicare rates would save $110 billion over 10 years. That is $20 billion more than earlier estimates, a spokesman for House Speaker Pelosi said.

We'll see if this arsenal of evidence can convince Senators who really just want to protect the status quo, and more important, protect industry profits. We're finally going to see where they stand when the Finance Committee votes. We'll be watching.

Kent Conrad Killing Health Reform?

When I first read this story about Kent Conrad increasing the budget window for health care reform to 20 years, I thought it would actually help the cause. Most experts predict that the savings would come in the later years, and so those could be built into the reform from the start, producing a favorable budget score. Then I thought about how the CBO was unlikely to measure savings 20 years down the road, and typically in those cases they punt and score them as zero. Which means that the outlook would appear far worse in a 20 year window than in a 10 year one. And the President has vowed deficit neutrality in the bill. So this would mean that, if the President and the Congress adhered to CBO numbers, some substantial increase in revenue or cut to the overall cost of the bill in the short term. Ezra Klein has more.

In other words, he thinks the CBO is underestimating the savings that reform will deliver, but he wants to see those savings underestimated over a longer period of time, which will make the total gap between the revenues the CBO predicts and the savings it misses appear larger. It's a bit like the restaurant review from "Annie Hall": The food was terrible, and such small portions!

The end result is likely to be a new hurdle for health-care reform: a CBO report that makes the bill's total cost sound higher, as it's measured over 20 years, and its savings seem smaller, as they're underestimated over 20 years. The Huffington Post caught up with Conrad and asked him whether this would kill the reform effort. "No," he replied, "but it makes it more challenging." The question is why Conrad wants to make health-care reform more challenging.

This is the same Kent Conrad who voted for the Medicare Modernization Act in 2003, which added $600 billion dollars to the deficit and was financed with nothing but debt.

There are three possibilities for this. One is that the 20-year projections will look bad, but not as bad in Max Baucus' bill, and Conrad is just putting his thumb on the scale for it. Two is that Conrad wants to embarrass the Congressional Budget Office in 20 years, which doesn't make sense because the CBO Director was a close colleague in the Gang of Six meetings, and also Kent Conrad isn't likely to be alive in 20 years. Three is that Conrad is just a bastard who senses health care reform slipping away from his grasp and wants to drive a stake through it.

I don't know what I vote for yet. I do know that it's time to end the tyranny of Congressional Budget Office numbers. For certain things they do a good job. For long-term projections they are admittedly conservative and uncertain, and when they don't have a clear answer, they assume zero, which distorts potential savings. The Institute of Medicine thinks the CBO is misreading the numbers and wants their numbers to take precedence.

The U.S. can cut health-care spending by $250 billion a year within a decade, a congressionally chartered panel will say this month in a bid to show costs can be contained even if all Americans are insured.

A report from the Institute of Medicine, which advises the federal government on health care, will counter “stingy” estimates from the Congressional Budget Office, said Arnold Milstein, planning chairman of the institute’s working group on health costs. The panel’s annual figure is five times the amount the budget office says the U.S. will save under a bill in the House of Representatives, according to the budget office’s July 17 letter to House Ways and Means Committee chairman Charles Rangel.

The preliminary findings from the institute, part of the National Academies in Washington, will be issued amid a growing debate over the health-care overhaul proposals that President Barack Obama is urging Congress to pass. The report will help bolster the argument that covering the nation’s 46 million uninsured won’t bust the budget, advocates of the bill say.

“The institute will make it very clear that we are right,” said Senator Benjamin Cardin, a Maryland Democrat who backs health legislation because he says it will save money. “It gives us the lift we need and the encouragement to say, ‘We’re right to do this.’”

The CBO numbers set the benchmark in Washington. But there is no balanced budget amendment, so their numbers don't carry major import. They're just what media and politicians use to identify the costs and savings in bill. It's not etched in stone, and as the Institute of Medicine shows, it can frequently be wrong.

Maybe this is part of Kent Conrad's devious plan. But more likely, he's one of these fiscal scolds who only come out under a Democratic President to thwart a progressive agenda.

The Big Lie On Fiscal Conservatism

Perhaps my favorite moments in the speech were the parts where the President had the temerity to mention that "fiscal conservatives" don't give a damn about being fiscally conservative.

Part of the reason I faced a trillion dollar deficit when I walked in the door of the White House is because too many initiatives over the last decade were not paid for – from the Iraq War to tax breaks for the wealthy. I will not make that same mistake with health care [...]

Add it all up, and the plan I’m proposing will cost around $900 billion over ten years – less than we have spent on the Iraq and Afghanistan wars, and less than the tax cuts for the wealthiest few Americans that Congress passed at the beginning of the previous administration.

Sarah Palin lashed out at this by saying that the President hates 9/11 (no link because I don't want to validate her), which proves they've got absolutely nothing to rebut this. I'm not Andrew Sullivan's biggest fan, but he nailed this a couple days ago.

If you believe in fiscal conservatism, the last place on earth you should look for salvation is the GOP. They have single-handedly destroyed America's finances since the 1980s, with the sole exception of George H W Bush, who was rejected by his own party precisely because of his fiscal sobriety. The current debt is overwhelmingly inherited by Obama, and it would have been nuts to enter office in the downdraft of the sharp recession and set about cutting spending. Bush had eight years to restrain it and he didn't. He let it rip. Think of the GOP's phony concerns about the cost of the current healthcare bill and compare it with the GOP's prescription drug entitlement that Rove rammed through the Congress when the GOP held total power. The costs then were about eight times as great as the proposed costs now. But that was a Republican measure and so it doesn't somehow count as evidence of fiscal irresponsibility. But Nancy Pelosi only has to raise an eye-brow and the alarms go off.

You cannot say this enough. The fiscal scolds who only pop up under Democratic Presidents are out of their minds if they think progressives should let them get away with their selective outrage designed entirely to forestall a progressive agenda. They have no credibility.

...John Dingell on this. In general Democrats have been very feisty today:

Q: Republicans, though, say that the bill explodes the deficit after 10 years because the revenues don't keep pace with spending growth.

A: Well, I'll give you several answers. First, that's fully consonant with Republican practices. They did it all the time, and can speak with authority to the evil of it. But that doesn't mean it's so. I don't honestly believe that's the case [that deficits expand], and the work has not been concluded. But if this is as factual as some of the other things they've said about the bill, I wouldn't pay too much heed.

The Trillion Dollar Question

In my (bungled) attempt to look at drug company advertising, I noted that the House Ways and Means Committee looked at, then discarded, the option of cutting out their deduction for advertising as a business expense to help pay for reform. One commenter rightly observed that this is a function of having to scrape for cash anywhere it can be found to pay for a policy that must remain deficit-neutral within a 10-year budget window, despite numerous up-front costs, and a completely artificial ceiling placed on how much can be spent in those ten years.

For a while now, the conversation about health care has been all about costs--in particular, the cost to the federal government. Somewhere along the line, somebody decided that health reform shouldn't involve the government sending out more than $1 trillion over ten years, even if we can provide that much money through some combination of higher taxes and savings in the medical care system.

There is no magic reason why $1 trillion should be the theshold. My colleague Jonathan Chait recently suggested that it's all because of way our bodies look. If we all had twelve fingers and toes rather than ten, he said, the magic number would be $1.2 trillion. I guess that would mean it's god's fault.

My own theory is that conservatives and centrists complaining about the price of reform don't think guaranteeing affordable coverage is really so important. I include among them a certain Democrat from North Dakota who runs the Budget Committee and keeps talking about what we can't afford to do. To be clear, Senator Kent Conrad is not god, although I wonder sometimes if he thinks he should be.

The problem is that capping the cost of the bill at $1 trillion over ten years (and by the way, in that time America will spend something around $24 trillion annually on health care) has led to fiscal scolds cutting the kinds of things out of the plan that would increase access, like lowering the subsidies that would make insurance affordable to everyone, or shrinking the benefits package so individuals would have worse coverage and higher out-of-pocket costs.

"We are very concerned that [lawmakers] have that fixed and arbitrary total dollar amount and this is it," said Stephen Finan, senior director of policy for the American Cancer Society Cancer Action Network. "Either it's not going to be enough to pay for adequate insurance or we just dumb down the level of benefits. We are concerned we could wind up with a package that is neither adequate nor affordable coverage."

Lead fiscal scold Kent Conrad gets quoted in this article too, telling us that we all "have got to be realistic about what is possible" and "We can’t do everything we’d like to do and pay for it and bend the cost curve the right way."

First off, this is actually untrue. A viable public option which didn't firewall out those with employer coverage and has a provider network and rates similar to Medicare could bend that cost curve. As could giving Americans more choices in their coverage by breaking regional monopolies through an insurance exchange. The same with expanding access and eliminating the hidden fee of paying for costly ER visits for the uninsured. And empowering an independent board to make changes to Medicare rates and structures while partially insulated from the political process. And a host of other ideas where more reform, of the kind that people like Kent Conrad don't want, can lower costs.

But this amounts to playing on the other side of the field. Americans trust Democrats on health care issues, for the most part, because they have traditionally emphasized more access to care and treatment. That's not to say that the cost issue is meaningless - it's actually in many cases complementary to the cause of access - but it's a matter of emphasis. And the moral case for health care reform has been almost entirely extinguished.

This year, however, it's not just been the opponents of the policy who have relied on the "mellifluous language of the standard economic theory of markets." It's been the advocates of reform. Ask yourself what the administration's one-line goal is on health-care reform. Is it "equal treatment for everybody?" Is it "if every American is guaranteed a lawyer, why not a doctor?" Is it even "guaranteed health care for everyone?"

No. It's "bend the curve." And the problem with "bending the curve" is that it's a broadly testable proposition. This is, in part, why the Congressional Budget Office's skeptical assessments pose such a threat to health-care reform. If the White House's primary objective was health care for every American, or guaranteed care that you could keep even if you lost your job, or choice of insurance plans for every American, you could spend a bit more on health care and say you were achieving your goal. But if you say that the point of health-care reform is to save money, and then the outfit charged with estimating such things says it won't, that strikes at the heart of the project.

Now, we're getting some better news from the CBO in the last 24 hours, as they have announced that the House bill will increase the number of people receiving employer coverage, and that a public insurance option can exist in tandem with private insurance. But the way the health care fight has played out, it has privileged these messages from the CBO. And to the media, they only matter when they matter anyway.

Somewhere along the line, Democrats in Congress and an Obama Administration obsessed with not following in the footsteps of the Clinton health care failure have forgotten to make the simple case that they support quality, affordable health care for every man, woman and child in the country. They've made a case about costs, but not a case about imperatives. There are plenty of economic arguments to make, but the moral arguments - about insurance companies denying coverage to those with a pre-existing condition, or dropping customers for the flimsiest of reasons when they ask to use their health insurance - but those have been pushed into the background. Health care is one of the more profound moral issues in public policy, and right at the moment that we're nearing a major shift in policies, we're talking cost curves and independent advisory boards. It's all important, of course, but consigning tens of millions of Americans to the horrors of no medical coverage adds a certain oomph.

If this moral case were made, a true argument about the human consequences of delay, maybe that $1 trillion dollar number inches upward. And maybe some deficits are floated within the 10-year budget window. But we turned this debate into one primarily about costs. This played right into the hands of the fiscal scolds.

The End Around The Blue Dogs

One of my co-guests on NPR today was Henry Cuellar, a Blue Dog. And 30 minutes goes fast with three guests, so I didn't get to confront him and his arguments as much as I wanted. For instance, McAllen, TX, is in his district, and that was the subject of the widely touted Atul Gawande piece in The New Yorker about disparities in health care delivery and effectiveness. But Cuellar pretty much harped on costs, costs, costs as an impediment to getting something done. I countered that cost control and expanding access, in many cases, are complementary. This makes the Blue Dog argument incoherent. They want to cut costs, but they are reluctant to enact the reforms that actually would do it. Not to mention the fact that they talk of fiscal responsibility while trying to carve out funding for rural health care, for example, which is the exact opposite of cost-cutting. And Steven Pearlstein picks up on this today.

The challenge for the Blue Dogs is that they want an America where everyone has insurance but are reluctant to force workers to buy it or employers to help pay for it.

They understand that achieving universal coverage will require subsidies for low-income workers and small businesses, but they insist that none of those changes add to the federal deficit or raise anyone's taxes.

They want to introduce more competition into the private insurance market, but not if it comes from a government-run insurance plan.

They complain constantly about the need to rein in runaway Medicare costs while at the same time demanding higher Medicare reimbursement rates for doctors and hospitals in rural areas.

You see what I mean about mushy centrism?

Yes. Yes I do.

The truth is that the Blue Dogs are slaves to entrenched power, serving the interests of powerful lobbies rather than the middle-income voters in their districts. Cutting subsidies to 300% of poverty level from 400% would make health care less affordable to working people - and it's only being considered in the House because Blue Dogs want to protect those making half a million a year from a surtax.

Henry Waxman refuses to let the Blue Dogs make chicken salad out of the House plan. He's talking about bypassing his committee entirely and bringing the bill already voted out of two other committees to the floor.

Chairman Henry Waxman (D-Calif.) says there is "no alternative" but to have healthcare legislation bypass his Energy and Commerce Committee if Blue Dog Democrats don't accept a deal worked out Friday.

Waxman is now playing a game of legislative chicken with the Blue Dogs. He's hoping the inclusion of a study on Medicare reimbursement rates in the healthcare overhaul will be enough to placate the centrist Democrats, who say the government program short-changes hospitals and physicians in their rural districts.

If that’s not, the seven Blue Dogs could join with the committee's Republicans to "eviscerate" healthcare reform, and that’s something Waxman will not tolerate.

"I won't allow them to hand over control of our committee to Republicans," Waxman told reporters.

Just like that, this morning, word leaked that Democrats in the House have agreed to include President Obama's "MedPAC on steroids" proposal to assemble a team of health care policy experts to make annual recommendations about Medicare, including reimbursement rates and delivery changes, that would face an up or down vote in Congress. This deal was the result of late night negotiations between Rahm Emanuel and the Blue Dogs. But they do not seem to have fully satisfied them.

At some point, I think you do have to pull the trigger. Matt Yglesias makes the moral case, that good legislation matters more than good process.

Something a lot of progressive legislative leaders seem to have forgotten until this Congress actually got under way is that historically congressional procedure is a challenge to be surmounted when you want big change to happen. It’s not actually a fixed feature of the landscape that people “have to” accommodate themselves to. For years you couldn’t get a decent Civil Rights bill because segregationists controlled the Judiciary Committee that had jurisdiction. This problem was “solved” by just deciding to bypass the Judiciary Committee. When you decide you want to get things done, you find a way to get them done. Even the allegedly sacrosanct filibuster rule has been changed repeatedly over the years. The law is the law and the constitution is the constitution, but the rules of congressional procedure are not law. They’re internally made rules, they’re subject to change, and the criteria for a good set of rules is that you want rules that produce good legislation and good governance.

If the internal rules are in place you should work to change them if they obstruct a change both the majority of Americans and the majority of the Congress clearly want.

...by the way, I agree with Pearlstein that Medicare might not be the best program to use for reforming the system:

The problem with using Medicare to serve as the leading edge of reform, however, is that it relies on a patient population, the elderly, that is least able and willing to embrace change. A better vehicle would be the new government-run insurance option that has become a political must-have for House leaders and President Obama. In return for dropping their opposition to such a "public option," the Blue Dogs could have insisted that it not be structured as a fee-for-service plan along the lines of Medicare but rather offer services through a network of high-quality, lower-cost hospitals and clinics that use teams of salaried doctors to provide coordinated care, along the lines of the Mayo and Cleveland clinics that Obama is always touting. In a competitive market, the success of such a government-run plan would force other insurers to follow suit.

...so the Blue Dogs claim that talks broke down today to resolve differences with Waxman, and I have to say he appears to be full of it. He says that Waxman took things off the table that, an hour before, Waxman was hailing in public as part of a breakthrough agreement? Doesn't pass the smell test. Someone's lying.

The Interview With Fred Hiatt

I guess the President made more news last night in this interview with Fred Hiatt than at his press conference. Reporters should have been briefed on it.

First, the President basically confirmed that expansion of MedPAC, to have an independent body of experts determine reimbursement rates and reforms to Medicare, would be a component of the House and Senate bills. I was initially skeptical of this idea, but I think the Speaker's addition of Congressional input on appointees makes it a nice compromise, and taking the complicated business of delivery system reform away from parochial interest makes sense as well.

At this point, I am confident that both the House and the Senate bills will contain what we've been calling MedPAC on steroids, the idea that you continually present new ideas to change incentives, change the delivery system, understanding that because this is such a complex system we're not always going to get it exactly right the first time, and that there have to be a series of modifications over the course of a series of years, and we have to take that out of politics and make sure that an independent board of medical experts and health economists are providing packages that are continually improving the system. So I think there's general consensus that that is one of two very powerful levers to bend the cost curve.

Second, the President endorses some modified version of the employer deduction, along with John Kerry's idea of taxing insurance companies' highest-cost benefit plans as a way to get at the same pot of cash:

Obama: Now, the second idea, which is the one that got more attention, even though Elmendorf, I think, has emphasized the benefits of a MedPAC board, as well, was the elimination of the tax exclusion [on employer-provided health insurance]. And I've been very clear on my position that I think to add additional costs to families right now when they're already seeing their premiums doubled is not the kind of health reform that I'd like to see, but I believe that there may be ways of getting at the same principle.

For example, you could conceivably set up an index of some sort that makes sure that health care inflation -- or to make sure that the exclusion only accommodates a certain amount of health care inflation -- as opposed to 8 percent or 9 percent, or what have you -- without burdening current plans, but over time assuming -- if we're assuming that health care inflation is going to continue to be a problem, that you could get at the problem in that way.

Hiatt: A kind of cap, but one that doesn't hurt anybody --

Obama: Currently.

Hiatt: -- at the current level?

Obama: Exactly. You're also seeing, I think, some interesting discussions in the Senate Finance Committee about a variation that goes after the insurance companies, as opposed to directly taxing the benefits.

Because this is Fred Hiatt he was talking to, the conversation was consumed with long-term costs and entitlements. Hiatt is practically the king of the fiscal scolds. The President still wants universal access and lower costs for individuals, which is separate from lower budget costs. But I agree that you can do both at the same time, and that now is a great time to do that. As Obama said in this interview, "I think it's important for us to make sure that 46 million people who don't have health insurance get it. And I think it's important for us to bend the cost curve, separate and apart from coverage issues, just because the system we have right now is unsustainable and hugely inefficient and uncompetitive."

And both go hand in hand. Removing the hidden tax of the uninsured visiting ERs will lower costs, and the mechanism is expanding access. Offering a public plan will expand access, and by forcing competition, in the process lower costs. There's a lot in health care reform that can be symbiotic, just as there's a lot that works at cross-purposes.

On long-term budget issues, I think it's important to recognize this:

Obama: We have a structural gap that has to be closed.

Hiatt: So can I ask you how you think about the timing and politics of closing that structural gap?

Obama: What I think has to happen is if we can show that we have a disciplined health care reform package that is serious about cost savings and is deficit-neutral, you combine that with the pay-go rules that we have been promoting and I believe that we can get through Congress, and you are imposing some discipline on the appropriations process -- and I thought that the F-22 victory yesterday was a good example of us starting to change habits in Washington -- then I think we're in a position to be able to, either at the end of this year or early next year, start laying out a broader picture about how we are going to handle entitlements in a serious way.

It may start with Social Security because that's, frankly, the easier one. And I think that it's possible to also look at tax reform and think about are there ways that we can maybe even lower marginal rates but eliminate all the loopholes and have that a net revenue generator. I think there are going to be a bunch of things that we can take a look at, but I think health care reform combined with pay-go, combined with how we deal with appropriations bills over the next six months will help lay the foundation for us to be able to make some of these broader structural changes.

The challenge I've got, Fred, is that obviously -- our biggest problem right now in terms of short-term deficit is the recession. And nobody -- no economist I've talked to thinks that it would be wise for us to start early, start now, in reducing government outlays, when states are already cutting back drastically, and you'd have a hugely destimulative effect on the economy. But we have to begin to prepare on the midterm and the long term. And that's why I think health care reform is so important.

The House actually passed paygo legislation yesterday. And I get from this that Obama is open to reducing the defense budget over time - he checked himself at one point, saying that non-defense discretionary spending cannot be lowered to bring us in line on the budget. But people might go nuts about his fleeting mention of Social Security. The only way Social Security changes are "easy" is through raising the cap. Anything else will be met with howls of disapproval from Obama's own base. And they won't pass Congress. I think the tax reform idea in the main, lowering rates but broadening the capture by getting rid of loopholes, is a good one as well.

There can be a lot of minefields in talking to Fred Hiatt, but I think the President did well. He held firm against deficit reduction at a time of near-Depression, and he forced Hiatt to live up to his rhetoric and recognize that the main reason our long-term budget outlook is bleak right now is due almost entirely to health care.

A Small Victory

The F-22 fighter is built in 44 states. The military contractors who build it and provide supplies spend many millions in lobby costs. Armed Services Committee appropriators in particular get slathered in special interest money and reward their contributors with as many contracts as possible. The overall trajectory of military spending since World War II is that the military part of the budget is magic and we can spend whatever we want on it. As a result, we spend more on the weapons and tools of war than every other country on Earth, combined.

So it's not every day that a major weapons program gets phased out through the appropriations process. It happened today, as 58 Senators voted to cancel additional spending on the F-22 fighter, a plane which the Pentagon doesn't want, which the Air Force doesn't want, which hasn't flown a single mission in Iraq and Afghanistan, and which has been found in tests to be vulnerable to rain.

It was a parochial vote that had more to do with whether a Senator's state builds major portions of the F-22 than anything else. And it will not signal any kind of near-term sea change in the military budget, which will increase this year. A lot of the F-22 money will just re-route into other fighters like the F-35 and unmanned aerial drones. But there's a symbolic significance here. The President and the Secretary of Defense took on the military-industrial complex by threatening to veto the entire defense bill if this funding stayed intact, and in this case they won. If we're ever going to break their stranglehold on the process, we have to win this kind of vote. Over time, we may even have a President that says "hey, it's kind of insane to spend more on the military than every other country combined" - don't laugh, it could happen - and by showing the ability to cancel weapons projects like this, it will be easier for that future President to maneuver. And I particularly like some of the language Obama used in his comments about this, saying that our budget is a zero-sum game and our "citizens lose" if more money goes to unnecessary weapons systems. With all the talk from the fiscal scolds, there is an opportunity to channel that toward a military budget full of bloat and waste.

It's a good first step, nothing more. But showing we can get by without weapons systems designed for the Cold War is important.

...some additional good news here. Though he voted against stripping the funding, Robert Byrd took a vote on the bill. We've been hearing with respect to health care that Democrats really only have 58 Senators, due to two ill members. Byrd is now back and voting. And you cannot tell me that wild horses could keep Ted Kennedy from a health care vote. The Democrats will have 60 votes. What they do with them is their choice.

The Fiscal Conservative Twins

Funny how these right-wing governors have trouble holding to their principles.

Mark Sanford and Rick Perry held a "Tea Party II" a couple months ago, where they came out against stimulus spending and for fiscal responsibility. That was then, and this...

In March, Texas Gov. Rick Perry rejected $555 million in federal stimulus money that would have expanded unemployment benefits for Texans. Perry argued at the time that accepting the stimulus dollars would force the state to expand eligibility to include thousands of low-wage workers — including part-time employees like single mothers, college students and senior citizens — which Perry bemoaned would burden tax payers with “higher taxes and expanded obligations.” When explaining the decision, Perry told Fox News, “this was pretty simple for us.” But now Perry is reversing his decision. Texas has asked the federal government for a $170 million loan to ensure the state is able to continue paying out unemployment benefits.

...is now:

South Carolina Gov. Mark Sanford shed his fiscal conservatism on several taxpayer-funded international trips, including a South American jaunt that included time with his mistress, choosing expensive first-class or business-class seats while his aides sat in coach.

Sanford, who once criticized other state officials for costly travel, charged the state more than $37,600 for one first-class and four business-class flights overseas since November 2005, expense records show. Other state employees flew in the back of the plane at a fraction of the price, according to the documents.

The Republican governor, who balked at taking federal stimulus money after arguing it was an unwise use of taxpayer funds, charged the state $8,687 for a Delta Airlines trip to Brazil last year that included a leg in business class, state expense records show.

I really can't listen any more to these privileged men talking about being good stewards of taxpayer money and then treating themselves to perks, or talking about rejecting a handout from Washington and then asking for a bigger handout.

The Opening On Tom Coburn

Other than it being a breach of ethics, I don't care about the mini-Peyton Place going on with John Ensign and the Hampton family who worked for him, including Cindy, with whom he had an adulterous affair. I guess Ensign paid the family, but he didn't actually do it, his mother did. Adulterer, conservative, hypocrite, got it.

What does interest me is the role of Tom Coburn (R-OK) in all of this. Hampton's husband Doug suggested that Coburn came up with the idea to pay off the family. Now remember, Coburn is the guy who goes on and on in the Senate about fiscal responsibility and debt and how we can't afford anything. The hundred-grand to clear up your wandering willie problem, I guess, is OK. But here's the kicker.

Sen. Tom Coburn (R-Okla.) on Thursday said he would not testify in court or before the Ethics Committee about any advice he gave Sen. John Ensign (R-Nev.) on how to handle his affair with a former staffer, citing constitutional protections for communications during religious counseling, as well as the patient confidentiality privilege.

“I was counseling him as a physician and as an ordained deacon. ... That is privileged communication that I will never reveal to anybody. Not to the Ethics Committee, not to a court of law, not to anybody,” Coburn said.

First of all, Coburn is an Ob/Gyn. Unless Ensign was trying to grow a womb, I don't know what the medical nature of their conversations would be. Second, I don't think any of this rises to the level of criminality or even a breach of Senate rules. But it's sublime to see Coburn, the self-styled pillar of moral rectitude in the Senate, arrogantly deny any view into his own behavior at the Ethics Committee. Smart Democrats would throw this right in his face every time he tries to derail a bill by talking about the cost or the possibility of corruption. They could make his life miserable. After a few months of it, I'll bet the WATB would decide not to run for re-election. He's only happy being a thorn in the sides of others, after all.

...now, if this was federal campaign money being tracked through Ensign's parents, then we have some kind of hush money deal. But I think he structured it with just enough plausible deniability to get away with it.

Carrots for Barney Frank

I criticized Barney Frank last week for his demonizing of progressives and slavish defense of the Administration's horrid DOMA brief. He deserved the criticism. Now he deserves some plaudits.

First, Frank offered an amendment that would strip out unnecessary funding from the Defense Authorization Bill for the F-22 program, which the Pentagon, the President and even the manufacturer agree should be shuttered. Not only will this offer clarity on who wants to put parochial interests above the needs of the country, it will offer a good lesson on how "fiscal responsibility" goes out the window when it comes to defense spending, which of course to Blue Dogs and Republicans is magic and doesn't impact the bottom line. I don't think this amendment will be successful, actually, but House members should be up front about adding needless weapons spending that has not been used in the Iraq or Afghanistan theater while at the same time they scream about the deficit.

Then, Frank introduced a bill to decriminalize marijuana use, one of the first bills to upset the bipartisan consensus on the failed war on drugs that I've seen in decades.

A controversial law in Massachusetts could go national if Congressman Barney Frank gets his way.

Frank has filed a bill that would eliminate federal penalties for personal possession of less than 100 grams of marijuana.

It would also make the penalty for using marijuana in public just $100.

"I think John Stuart Mill had it right in the 1850s," said Congressman Frank, "when he argued that individuals should have the right to do what they want in private, so long as they don't hurt anyone else. It's a matter of personal liberty. Moreover, our courts are already stressed and our prisons are over-crowded. We don't need to spend our scarce resources prosecuting people who are doing no harm to others."

Frank says it best there. We should not be warehousing nonviolent offenders who do no harm to others and send them to what amounts to violent crime college. It's destructive to those individuals who need treatment and not jail, destructive to our budgets which runneth over with prison spending, and destructive to law enforcement who could be pursuing criminals but instead have to bust people for pot. Digby has more.

While Frank sometimes uses his prodigious skills to front for elite interests, and while he seems to unduly criticize those who attack his point of view from the left, he's a very useful lawmaker because he's willing to fight these battles that practically nobody else will fight.

...True Majority wants you to call your lawmaker and tell them to vote against purchasing F-22's that the Pentagon doesn't even want.

...Great quote by Rep. Frank:

I am of course struck that so many of my colleagues who are so worried about the deficit apparently think the Pentagon is funded with Monopoly money that somehow doesn’t count... These arguments will come from the very people who denied that the economic recovery plan created any jobs. We have a very odd economic philosophy in Washington: It’s called weaponized Keynesianism. It is the view that the government does not create jobs when it funds the building of bridges or important research or retrains workers, but when it builds airplanes that are never going to be used in combat, that is of course economic salvation.

It makes the hand-wringing over paying for health care completely ridiculous.

Bai Finds The Two Santa Clauses

Matt Bai, in his largely unremarkable and far from revelatory article about the Obama White House and the coming health care debate (Obama lets the legislature legislate! Sometimes he invites Senators to the White House!), does make an important point near the end. I've been talking a lot about how health care reform may crash on the rocks of having to pay for it, as enough members of Congress find fault with the multitude of options so that no consensus is reached. Bai recapitulates that nicely, and then makes a fine closing point:

THE NETTLESOME THING about leaving the details of the health care plan to Congress, though, is that this Congress, like most every other Congress, doesn’t appear inclined to pay for much of anything. And it is this part of the health care debate — where to find the money — that seems most likely to derail the process. Most discussions of America’s health care woes begin with talk of the uninsured — some 46 million of them at last count. How much a new health care system will cost depends primarily on how close to universal coverage you really want to get. On the high end of the scale, insuring every American might well cost as much as $1.5 trillion over the next decade at a time when deficits are gobbling up a greater share of the nation’s income than at any time since World War II.

The White House has focused mostly on new efficiencies in health care, insisting that lowering the costs of medical care could easily save $2 trillion in public money over the next decade. A coalition of providers, drug makers and insurance companies — no doubt looking for the best possible deal in health care legislation — helpfully vowed in a White House photo-op last month to institute changes that would lead to such savings, but their promise was maddeningly vague and utterly unenforceable (and in any event, the industry groups almost immediately distanced themselves from it). Short of realizing these projected savings, there are only so many ways to pay for health care — and, not surprisingly, congressmen and senators aren’t exactly lining up to embrace them. One way, as McCain proposed, is to rescind the tax exemption for some workers who receive health care benefits from their employers; Baucus is open to at least capping the exemption, but labor unions are adamantly opposed, and Rangel has publicly renounced it (though he and other House Democrats appear to be re-evaluating that stance). Another way is to slap new taxes on some of the products that cause health problems in the first place, like soft drinks, but industry lobbyists are already spending satchels of cash to head that off. Congress can always choose to slash Medicare benefits or the payments that doctors receive, but that idea generates about as much enthusiasm as you might find for putting George W. Bush’s face on the $5 bill.

In a larger sense, this may be the nagging flaw in Obama’s notion of the Congressional presidency, this strategy that leaves the lawmaking to Congress, even as it enables him to claim credit for one legislative success after another. Professional legislators can be great at devising complex language and finding creative ways to get a deal. What they are not especially good at — at least not in the current era — is making the difficult decisions that governing responsibly often requires. Left to their own devices, legislators rarely seem to ask the voters to sacrifice anything by way of taxes or entitlements or services, if only because voters don’t find the entreaties of legislators all that persuasive. And so, absent his own engagement, Obama’s vow to reverse our “collective failure to make hard choices,” as he put it in his inaugural address, may well be pushed aside for another day.

Bai's wrong about McCain, who wanted to eliminate the employer deduction entirely for all workers and replace it with a refundable tax credit to buy insurance. But overall he gets the dynamic right.

Obama actually has waded into this debate this week by announcing his support for using MedPAC to cut Medicare costs. But even that doesn't get you all the way to a deficit-neutral bill. And Bai is completely correct in arguing that Congress so often punts the tough decisions in the face of concerted lobbying efforts. He views it in the context of "sacrifice," which is the dead wrong way to sell it to the public, especially if he intends to mean that the best way to achieve health care reform is to inform the public that the government will take their Medicare away. But yes, he is basically laying out the Two Santa Claus Theory, the idea sold to the public by Republicans that Americans can have endlessly lower taxes and endlessly increased services with no parallel cost. That DOES have to change, and he's right that only a President can call on the American people to change their views on the matter. Democrats have refused to show leadership in this area for so long. Obama actually campaigned on it, at least in part. Health care reform probably hangs in the balance.

New Leader Of The Fiscal Scold Gang

Well, if you hadn't heard, the crisis in the financial markets ended, and everything's fine now. The banks were able to raise more capital than needed to comply with the stress tests, as investors swallowed all their stock offerings. And why not? The federal government put a virtual guarantee that the top banks would not be allowed to fail, and the stocks are already low, low, low, so there's almost no risk to the purchase. CEOs aren't buying the stock, so maybe they know this to be a bear-market rally, but they also know they have what amounts to a federal backstop. Sure, the next wave of foreclosures will degrade the quality of loans and mortgage-backed securities even further, but then the government will just buy the bad ones out. In fact, the banksters don't like the price right now, so they've put a plug in the legacy loan program:

The Federal Deposit Insurance Corporation indefinitely postponed a central element of the Obama administration’s bank rescue plan on Wednesday, acknowledging that it could not persuade enough banks to sell off their bad assets. . . .

Many banks have refused to sell their loans, in part because doing so would force them to mark down the value of those loans and book big losses. Even though the government was prepared to prop up prices by offering cheap financing to investors, the prices that banks were demanding have remained far higher than the prices that investors were willing to pay.

Just last week at least some banks wanted to participate in the program – to buy assets from themselves. Once Sheila Bair rejected that idea, I guess they lost interest. Essentially the stress tests placed a big government stamp of approval on their balance sheets, so their current strategy is to wait out the recession and hope the prices of their legacy loans recover. There’s no downside risk, because if the economy gets worse and they ever need to unload those loans, they can count on the plan being resurrected.

The Federal Reserve asked the banks to raise additional capital to comply with repaying their TARP money, but if they found it this easy to sell stock already, they should have no problem reaching that hurdle. Basically the industry made it through the worst, and now they exist on this fantasy plane where they remain too big to fail, socializing the risk while privatizing the profit.

So it should come as no surprise that, now that the crisis has lifted, I guess, the successor to the Maestro is immediately calling for fiscal discipline.

The Federal Reserve chairman, Ben S. Bernanke, said on Wednesday that the United States needed to develop a plan to restore fiscal balance, even as the government builds huge budget deficits as it tries to spend its way out of the worst economic crisis since the Great Depression.

In remarks to the House Budget Committee, Mr. Bernanke said that the government must address the immediate problems of a crippling recession that has erased trillions of dollars in household wealth, hobbled investment portfolios and raised unemployment to its highest levels in a generation. Still, he said, the government needs to think about putting its fiscal house back in order.

“Unless we demonstrate a strong commitment to fiscal sustainability in the longer term, we will have neither financial stability nor healthy economic growth,” he said [...]

“Even as we take steps to address the recession and threats to financial stability, maintaining the confidence of the financial markets requires that we, as a nation, begin planning now for the restoration of fiscal balance,” Mr. Bernanke said.

I thought the Fed dealt with monetary policy and the Treasury Department fiscal policy, but what do I know.

Let me pinpoint the years where the words "deficit" or "fiscal sustainability" never crossed the lips of someone of Bernanke's stature: Jan. 1981-Jan. 1993 and Jan. 2001-Jan. 2009. At that time deficits didn't matter. Now all of a sudden, in the midst of cleaning up the wreckage of the Bush regime, no discussion of economic policy can go by without the important mention of getting our fiscal house in order.

I believe deficits do matter, eventually. But it only makes sense to work on "fiscal responsibility" if you believe the crisis is over. And if that's what Bernanke thinks, we have serious problems. Because the housing market remains in free-fall. And unemployment is still going over the edge. What's happening here is that Bernanke is fronting for the fiscal scolds (so is Peterson Institute fellow Simon Johnson, who dresses up this talk in prettier language sometimes) who seek to eliminate the social safety net through "entitlement reform." Going back to the same old arguments as if the Great Recession has transformed into some boom time seems really premature.

The Cognitive Dissonance, It Burns

Here are just three unrelated, and yet somehow related, stories, that make me wonder how any Republican can keep all these ideas in their head without it exploding.

• The fiscally responsible House GOP, always railing against how President Obama is spending "the people's money," is funding their re-branding effort with taxpayer dollars by using Eric Cantor's House account.

• Bill O'Reilly, who has made a cottage industry out of ambushing liberals by directing reporters to accost them on the street, actually recorded a video where he decries the loss of privacy from public figures. Really.



• And in the most insane example, Rush Limbaugh tries to explain the "quest for power" by a group other than him, in this case the Democratic Party, by referring to his own drug addiction, assuming of course that every single person in the party has exactly the same obsessions as, well, him.



I really don't even know what to say about that one.

Not So Fast With The Cost Cutting

I do understand the impulse for Obama to portray an image as a good fiscal steward of the people's money. And I agree that government can occasionally be wasteful and spend money on things that don't make sense. And I'm fairly sure that all of these cuts, $100 million or so, being made by Cabinet Departments have a sound basis and will not really influence the proper workings of government - in fact, they are far too small to do so. Government should run a tight ship and use efficiencies where necessary to cut costs. In the end, these are symbolic efforts.

But like Robert Reich, I don't want to see this get out of control in the midst of a Great Recession and a huge shortfall in demand. Government needs to continue being the spender of last resort, and any waste that creates a job is at this point not waste. In other words, this impulse toward fiscal restraint cannot go off in any other directions, particularly when it comes to entitlements.

Over the longer term, Obama must be careful not to put entitlement programs on the chopping block as part of a "grand bargain" to elicit Republican support for health care and cap-and-trade. Social Security is not in dire straights; it can be made flush for the next 75 years by ever-so-slightly lifting the ceiling on the portion of income subject to Social Security payroll taxes (and if Democrats are reluctant to do that on incomes over $100,000, then they could do so on incomes over $250,000).

Medicaid and Medicare are in trouble because health care costs are rising so fast, which argues for health-care reform rather than cuts in these important programs. Yet if health-care reform has any prayer of controlling the rising tide of health care costs, the plan must allow beneficiaries to opt into a public insurance plan -- something Republicans and the health-care establishment are determined to fight. So it's critically important that the Senate wrap health care into a reconciliation bill that can be enacted by a majority vote in the Senate.

The good news is that cost savings and real reform can actually go hand in hand. The Administration has argued that health care reform equals entitlement reform, period, and by bending the curve on health care costs we can improve the health of our budget while providing more health care to more Americans than ever before. Another more provocative example would be Tom Ricks' call to shutter the service academies and use campus-based ROTC schools in their place, saving money and breeding a better type of officer.

So let's not get too cozy with these calls for budget-tightening in a time where government needs to spend. And when we get around to saving money, let's do so in a way that INCREASES services and effectiveness for the American people. I actually think that Obama's team gets this, and are trying to do some rebranding on this stuff.

Remember What Pol Pot Said...

More wingnuts and their enablers are out there describing the Obama-Gates increase in the military budget as a "cut." I've already said my peace on this, but it's certainly interesting to see this Wall Street Journal op-ed from some AEI functionaries invoke the founder of the KKK to defend their position:

However, warfare is not a human activity that directly awards virtue. Nor is it a perfectly calculable endeavor that permits a delicate "balancing" of risk. More often it rewards those who arrive on the battlefield "the fustest with the mostest," as Civil War Gen. Nathan Bedford Forrest once put it. If Mr. Gates has his way, U.S. forces will find it increasingly hard to meet the Forrest standard.

I should hope we do find it hard to meet the Forrest standard! In fact, the nature of our President's origin practically ensures it!

I tire of arguing from the "no, it's really an increase" position as if that's a good thing, because I don't agree with that position. But, it's not hard to note the facts. There are no budget cuts to the military. There OUGHT to be, and considering the uproar over slighter increases they might as well have made cuts, but they didn't. The authors tweak Gates for saying that the budget talks were "almost exclusively influenced by factors other than simply finding a way to balance the books," but that's pretty clear from the result.

It's also amusing to see the self-styled "fiscal conservatives" go apeshit that the military budget isn't increasing as fast as they'd like.

America's Worst People

I mentioned that Congress passed a budget yesterday. In the Senate, the vote played out almost exclusively among party lines, with only two Senators - Evan Bayh and Ben Nelson - crossing the aisle. They are the two most conservative Democrats in the 111th Congress, by voting record. And they didn't only vote against the budget - they voted definitively FOR a motion to recommit, which essentially would have substituted this budget for a Republican version.

Enter Mike Johanns, the freshman Republican senator from Nebraska whose amendment preventing the Senate from passing climate change legislation through the reconciliation process passed on Tuesday.

He also authored a different measure--not an amendment, but a "motion to recommitt"--which would have scrapped the budget that passed and replaced it with a much more conservative version. Most significantly, it would have indexed non-defense, non-veterans discretionary spending to the expected rate of inflation. It failed 43-55--for all intents and purposes a mirror image of the vote on the final budget resolution. Which is to say that Bayh and Nelson voted for the "Johanns Budget".

So how did these two Republicans, who voted affirmatively for a Republican budget, justify their votes? They said it costs too much.

Nelson defended his vote in a prepared statement:

"The administration inherited a lot of red ink in this budget, along with our ailing economy. But this budget still has trillion dollar-plus deficits in the next two years, and adds unsustainably to the debt. These are tough times, and the federal government needs to take a lesson from American families and cut down on the things we can do without.

I respect the Administration offering an honest budget…but it just costs too much."

Similarly, Bayh issued a statement saying he opposed the budget in an attempt to be the voice of “fiscal responsibility“:

"[U]nder this budget, our national debt skyrockets from $11.1 trillion today to an estimated $17 trillion in 2014. As a percentage of our gross domestic product, it reaches a precarious 66.5 percent. The deficit remains larger than our projected economic growth, an unsustainable state of affairs. This budget will increase our borrowing from and dependence upon foreign nations. I cannot support such results. We can do better, and for the sake of our nation and our children’s future, we must."

These same two Senators, the ones whining and crying about fiscal responsibility, voted last night to shield millionaires from taxes on their estates, costing the government $250 billion dollars.

WASHINGTON (AP) -- The Senate has voted to cut taxes on multimillion-dollar estates as it gets ready to pass a budget backed by President Barack Obama.

By a 51-48 vote, the Senate embraced a nonbinding but symbolically important amendment by Arkansas Democrat Blanche Lincoln and Arizona Republican Jon Kyl to exempt estates up to $10 million from the estate tax. Estates larger than that would be taxed at a 35 percent rate.

Tim Fernholz has more on this nonsense, including the good news that this will likely never make law. But let's just soak in this for a minute. The two ConservaDems who voted against the budget on the grounds of fiscal responsibility voted to give a handout to families with estates over $7 million dollars. Tremayne at Open Left has a chart showing just exactly who this tax policy would affect.

Hard to see it, but those with annual incomes in the millions are represented by the vertical red line on the left and those making less than a million (i.e., almost everyone) are the horizontal red line on the bottom. Lincoln and Kyl are concerned about the people on the vertical red line.

So are Bayh and Nelson, America's worst people.

The Problem Of The Senate

Last week saw a paroxysm of opposition to Barack Obama's budget plan from leading Senate Democrats. Evan Bayh formed his moderate working group, and Kent Conrad whittled down the budget proposal (in many respects by reinstating helpful budget fictions that make the deficit look smaller). And opposition to the Administration-supported cram-down proposal may scuttle that piece of the housing bill.

Jonathan Chait senses a pattern.

The last Democrat who held the White House, Bill Clinton, saw the core of his domestic agenda come to ruin, his political support collapse, and his failure spawn a massive Republican resurgence that made progressive reform impossible for a decade to come. The Democrat who last held the White House before that, Jimmy Carter, saw the exact same thing happen to him [...]

George W. Bush came to office having lost the popular vote, with only 50 Republicans in the Senate. After his disputed election, pundits insisted Bush would have to scale back his proposed massive tax cuts for the rich. Instead, Bush managed to enact several rounds of tax cuts that substantially exceeded those in his campaign platform, along with two war resolutions, a Medicare prescription drug benefit designed to maximize profits for the health care industry, energy legislation, education reform, and sundry other items. Whatever the substantive merits of this agenda, its passage represented an impressive feat of political leverage, accomplished through near-total partisan discipline.

Obama has come into office having won the popular vote by seven percentage points, along with a 79-seat edge in the House, a 17-seat edge in the Senate, and massive public demand for change. But it's already clear he is receiving less, not more, deference from his own party. Democrats have treated Obama with studied diffidence, both in their support for the substance of his agenda and (more importantly) their willingness to support it procedurally.

I'm of two minds on this. On the one hand, no co-equal branch of government SHOULD be a rubber-stamp (certainly the Hastert/DeLay/Frist Congress under George W. Bush shouldn't be emulated), and Congress has every right to carry out their legislative agenda under their own terms. At the same time, the endless whining from Democratic "moderates" to modify the Obama agenda, not out of any principle or belief that a middle course makes the most sense from a policy standpoint, but because they have been seduced by the high Broderist idea that the middle distance between two points is a virtuous end in itself, is both grating and irresponsible. The moderates use selective outrage - we must close the deficit, but we can't cap subsidies to wealthy agricultural interests to save money, just to use one example - to frustrate progress and make recovery more difficult.

However, Ezra Klein argues that the peculiar structures of the Senate are a far greater obstacle than the glory-seeking Senate moderates:

Which isn't really to argue with the substance of Jon's article: The Senate is a broken branch. If we don't properly respond to the financial crisis or avert the crushing blow of rising health costs or slow the advance of catastrophic climate change, it will be because the institution is no longer capable of governance. But that is not, as Chait would have it, a purely Democratic problem. It's an institutional issue. The local obsessions that Chait attaches to Conrad and Nelson are similarly prevalent among Republican Senators. The tremendous power of swing senators is as undeniable and capricious when Republicans rule as when Democrats hold power. The allure of obstruction is an compelling to minority Democrats as minority Republicans (the early Bush accomplishments were actually more bipartisan than Obama's, though that was because Democrats controlled the chamber rather than because Bush was the gracious and cooperative type).

I don't argue this point to be churlish. You can understand the problems of the Senate in two ways. The first is that it's a problem of party discipline. The second is that it's a problem of rules. If you think it's the first, the answer is to put resources and effort into mounting a primary challenge against Ben Nelson. If you think it's the second, then the answer may be to put time and energy into repealing the Byrd Rule, or lowering the filibuster limit, or making it easier to replace chairman, or otherwise transforming the structural incentives that makes legislative success such a delicate and unlikely outcome and thus allows individual Senators to exert so much control over it. Moreover, if you think it's the second, you can actually make something of a bipartisan argument, rather than a purely partisan one. The Senate, as currently composed, doesn't work for Republicans any better than it works for Democrats. And it really doesn't work for the country. And that's probably an easier argument than trying to convince Nebraskans that Ben Nelson's incredible power isn't good for them.

We have already seen and may yet see more progress from this Congress - the ConservaDem backlash to using budget reconciliation, for example, may just be a pose to force Republican compliance. But I think I lean more toward this being a structural problem requiring structural solutions, particularly in the Senate. The country really cannot afford a set of rules that tilt so heavily in favor of the status quo, especially in this time of profound challenges. In fact, the resultant reaction we've seen continually by the executive branch is to usurp the power of the Congress in the name of getting something done, which is unadvisable. Only by empowering Congress to actually act can we really have equal branches of government.

The Contractors Strike Back

Looks like the military industry-welfare lobby isn't going to take kindly to Barack Obama's call to end waste in government contracting and procurement. They're preparing for battle like you'd expect of people who build weapons systems for a living.

Defense bloat has stunned auditors. A report last year from the Government Accountability Office found that 95 ongoing major defense programs exceeded their budgets, providing an accumulated excess cost of $295 billion to taxpayers. The programs include big-ticket items beloved by the military services, including the Army’s Future Combat System, the Navy’s Littoral Combat Ship and the Air Force’s Joint Strike Fighter, which are built by defense-industry giants like Lockheed Martin Corp., Boeing Co., and Raytheon Company, all of which have aggressive lobbying arms and excellent relationships with defense barons on Capitol Hill. According to the government’s Federal Procurement Database, which tracks federal contracts, the Defense Department reported over $394 billion worth of business with private contractors in fiscal 2008 alone.

Defense contractors and their allies in government will not let that money go without a confrontation, say defense reformers [...] Their “ground game,” the official said, will be run from the services’ legislative outreach and public-affairs offices, feeding talking points and strategy information to sympathetic members of Congress — something that “got the services in trouble in 2002″ with Defense Secretary Donald Rumsfeld when the Army resisted his ultimately-successful plan to scrap an archaic artillery system called Crusader. An “air game” will feature “a lot of ominous whispers on background to the press and conservative think tanks and commentators about endangering the American people and costing lives in some future fight.”

Gates, whom Obama tasked with working closely with OMB, has told confidantes that he views a sustainable long-term rebalancing of defense priorities as one of his most important tasks now that Obama has given him the chance to continue on as Pentagon chief. His service under the Bush administration was more about supporting the immediate needs of the Iraq war after Bush fired Rumsfeld in November 2006. “The services are accustomed to reviews that start out with a lot of talk about setting priorities and making tough choices but in reality usually end with leaving everything more or less intact,” the Pentagon official said. “This time they have a secretary who really means it.”

As Matthew Yglesias notes, what we're talking about here is the armed services - part of the federal government - using their own taxpayer-funded public affairs shops to lobby for more wasted contracting and against reform. The fact that the door between the Pentagon and the defense industry is constantly revolving means that a government official who steers contracts to the right company is simply fattening their own resume for the inevitable post-public service career. This is why it's called a military-industrial complex, after all.

And under the Bush regime, this kind of coziness between government officials and their cronies was simply rampant. In a little-discussed tidbit in yesterday's press briefing, Secretary of Agriculture Tom Vilsack mentions a $400,000 consulting contact with the USDA that he recently cancelled because career staffers considered it "inappropriate." There's a follow-up, and the information had to practically be dragged out of Vilsack, but the picture he eventually paints is one of a mob boss creating make-work jobs for his henchmen (Major Garrett is the questioner, trying to make some case for the necessity of useless contracts to avoid lawsuits, or something):

Q Secretary Vilsack, you talked about a $400,000 consulting contract deemed inappropriate. What was inappropriate about it? And just generally, to both of you, one of the problems in federal contracting is when you cancel a contract, sometimes a contract will sue the government because they disagree with the cancellation. How do you end up saving the taxpayers money if you get involved in protracted litigation if it's not for cause?

SECRETARY VILSACK: Well, I don't want to go into great detail about this particular contract, other than to say that the career folks who watched this process unfold in the last waning days of this last administration were very concerned about the process, the connections and relationships between people receiving this half-a-million-dollar contract, and what they intended to do with the resource, which the career folks felt was unnecessary and inappropriate.

They made a very strong and powerful case to me that the process wasn't followed as it should have been; their input was not valued as it should be. We put a lot of confidence in people who have been through this process before, in terms of knowing precisely how best to use these tax dollars. And this particular consulting contract -- I've looked at the details -- I didn't see any value to USDA from it. I will tell you that it was rather startling to see that a substantial amount of money had already been spent on foreign travel, which, under the circumstances, we did not think was appropriate.

In terms of litigation, I feel fairly confident on this one that we will prevail, and I'd be surprised if it's questioned.

Q Can you tell us, Mr. Secretary, who this involved and more details? It sounds like a rather startling discovery that you've made, and taxpayers probably would like to know more about it.

SECRETARY VILSACK: Well, I think what taxpayers need to know is that every single department of government has now been charged by the President to review in detail the nature of contracts that we've entered into. In order to do what American families are doing -- American families are sitting down today and trying to decide, how do we save money, how do we eliminate unnecessary spending -- their expectation is the government does the same.

I don't want to get into details about this, but I will tell you that I think it's appropriate for us to do this. I'm glad the President has instructed us to do this, and I think we'll probably continue to find savings.

Q But why not get into details? This is government funds -- the public has a right to know, with all due respect.

SECRETARY VILSACK: I'm happy to share -- I don't want to step on protocol here -- I'm happy to share, if Mr. Gibbs expects it to be --

Q Transparent? (Laughter.)

MR. GIBBS: Lay it out. I'm all for it.

SECRETARY VILSACK: Well, it involves an individual by the name of Stan Johnson who had a close connection with the previous administration. It was a consulting contract for half a million dollars; a substantial amount of money was spent for foreign travel. To be honest with you, we saw very little, if any, value to the USDA. And a number of career folks were very concerned about how the process unfolded. And had their input been valued, the contract would not have been entered into.

Q Is this like a favoritism thing, Mr. Secretary?

SECRETARY VILSACK: You know, I don't know about that. I don't know. I just know that there was a close connection. It was a contract that I think was unnecessary, and I know the career people were very concerned about the way in which it unfolded.

Q Consulting on what issue, sir? Consulting on what issue?

SECRETARY VILSACK: Well, that's a good question, and I can't answer it.

Q Can we get more details from your department later?

SECRETARY VILSACK: Yes, be happy to.

Here's a little interview with Stan Johnson. He tried to give some background to what he actually did for the USDA, but mainly it appeared to involve flying from his home in Reno to Washington to work for something called the National Center for Food and Agricultural Policy. Their senior fellows include John Block, the Secretary of Agriculture under Ronald Reagan, and Dan Glickman, Agriculture Secretary under Bill Clinton. And by the way, the NCFAP still has two other contracts with the USDA.

As these things go, NCFAP doesn't even sound all that bad, but this is just one example of the insidious web of official Washington, between think tanks and contractors and politicians and journalists and staffers and hangers-on, that Obama is basically taking on with this effort. It's necessary, but it's going to be a very hard road that's bound to be more than a little disappointing along the way.

Tackling Waste

This is a good way for the Obama Administration to deflect the rise of the fiscal responsibility scolds. There is plenty of room for cuts in the federal budget, but they are typically places that the so-called "moderates" don't want to go. In that Politico tick-tock Ben Nelson objected to reductions in Big Ag subsidies because, well, he's from a farm state. And there are plenty of these moderates with defense contractors in their districts who won't like the effort to clean up that process.

President Barack Obama said on Wednesday the U.S. government was paying too much for things it did not need and ordered a crackdown on spending he declared was "plagued by massive cost overruns and outright fraud."

Obama said wasteful spending was a problem across the whole government but he zeroed in on the defense industry after earlier citing a project to build a new presidential helicopter fleet as an example of the procurement process "gone amok."

"The days of giving defense contractors a blank check are over," Obama told reporters.

He ordered a reform of the way the government did business, a move he said would save taxpayers $40 billion a year and help cut the budget deficit, which he has forecast will hit $1.75 trillion for the 2009 fiscal year.

$40 billion a year in savings is more than every federal earmark over the last two years. At least those actually create something. Procurement overruns are just a handout.

If you want spending cuts, there are plenty of places to cut. So, it's up to the moderates to decide whether they believe in fiscal responsibility or not.

...Spencer Ackerman has quite a bit more, and it's a pretty big deal.

Obama today issued a memorandum to the heads of all the executive departments agencies directing them to restrict no-bid contracts; to rein in outsourcing of “inherently governmental activities”; and to, if necessary, cancel wasteful contracts outright. The crucial paragraph, even if it’s written in bureaucratese, particularly calls out the Defense Department:

"I hereby direct the Director of the Office of Management and Budget (OMB), in collaboration with the Secretary of Defense, the Administrator of the National Aeronautics and Space Administration, the Administrator of General Services, the Director of the Office of Personnel Management, and the heads of such other agencies as the Director of OMB determines to be appropriate, and with the participation of appropriate management councils and program management officials, to develop and issue by July 1, 2009, Government-wide guidance to assist agencies in reviewing, and creating processes for ongoing review of, existing contracts in order to identify contracts that are wasteful, inefficient, or not otherwise likely to meet the agency’s needs, and to formulate appropriate corrective action in a timely manner. Such corrective action may include modifying or canceling such contracts in a manner and to the extent consistent with applicable laws, regulations, and policy."

Clearly, this has applications far beyond the Pentagon. But the list of big-ticket defense items that have experienced huge cost overruns is a long one. Future Combat Systems in the Army; the Littoral Combat Ship in the Navy; the Joint Strike Fighter in the Air Force — all of these programs, near and dear to the services, have run massively over budget. If I was a lobbyist for Lockheed or Boeing, I’d be dialing my contacts in the Pentagon and the Hill to figure out what the prospective damage to my company was. And then I’d come up with a strategy to fight this forthcoming Office of Management and Budget review.

Here's the memorandum. In it, the President notes that contracting costs have doubled since 2001 (well, that's an interesting date to start with), with increases in no-bid contracts and overruns. The cost-plus system actually creates an incentive to contractors to spend taxpayer money lavishly. We're talking a lot of money.

A GAO study last year of 95 major defense acquisitions projects found cost overruns of 26 percent, totaling $295 billion over the life of the projects. Improved contract oversight could reduce such sums significantly.

Obama really took a shot across the bow today, not only to end waste and abuse, but to END THE PRIVATIZATION OF GOVERNMENT FUNCTIONS and the greed it engendered.

However, the line between inherently governmental activities that should not be outsourced and commercial activities that may be subject to private sector competition has been blurred and inadequately defined. As a result, contractors may be performing inherently governmental functions. Agencies and departments must operate under clear rules prescribing when outsourcing is and is not appropriate.

Great work. But we have to make sure there's a good follow-through. One of the point people on this procurement reform is deputy Secretary of Defense Bill Lynn, who was a Raytheon lobbyist. The military-industrial complex is not going to be easily calmed or dismantled. But we now have the words of the chief executive, who is willing to fight.

The Scolds Never Stop

John McCain had another "old man yells at cloud" moment yesterday, complaining about earmarks in last year's spending bill, and trying to eliminate all of them. His effort lost on a bipartisan basis, probably because this is last year's spending needed to keep the government running, a shutdown at this point would be completely counter to economic fiscal stimulus, earmarks are 2% of the total bill and half of them were inserted by Republicans, including $76 million from Thad Cochran (R-MS), the overall leader.

However, this hasn't stopped the Democratic worry warts to fret about spending, at a time when there's practically no other economic activity other than that coming from the federal government.

Moderate and conservative Democrats in the Senate are starting to choke over the massive spending and tax increases in President Barack Obama’s budget plans and have begun plotting to increase their influence over the agenda of a president who is turning out to be much more liberal than they are.

A group of 14 Senate Democrats and one independent huddled behind closed doors on Tuesday, discussing how centrists in that chamber can assert more leverage on the major policy debates that will dominate this Congress [...]

Asked when he’d reach his breaking point, Nebraska Sen. Ben Nelson, one of the most conservative Democrats in the Senate, said: “Right now. I’m concerned about the amount that’s being offered in [Obama’s] budget.”

Another attendee, Sen. Mary L. Landrieu (D-La.), said she expected the newly formed caucus to shape Obama’s budget proposal as it moves through Congress.

“We want to give the president a chance, but our concern is going to be on the budget, looking forward,” Landrieu said. She added that she agrees with Obama that there needs to be “fundamental change” in fiscal policy, but she said “we do have to keep our eye on the long term, on intermediate and long-term fiscal responsibility.”

Sen. Evan Bayh, the Indiana Democrat who assembled Tuesday’s skull session, added that he was “very concerned” about Washington’s level of spending, especially in a $410 billion “omnibus” spending bill to fund the government until the start of a new fiscal year in October.

As for the tax increases on high-income earners called for in Obama’s plan, Bayh said, “I do think that before we raise revenue, we first should look to see if there are ways we can cut back on spending.”

“The American people and businesses are tightening their belts,” Bayh added. “I think we need to show that the government can economize as well.”

Ladies an gentlemen, your almost-Vice President, Evan Bayh.

Once again, the path for a Democratic President must go through Democratic fiscal responsibility scolds. And this is coming in the middle of a Great Recession, where investment is non-existent, trade is stalled, and consumer spending isn't going anywhere, meaning that ONLY GOVERNMENT IS SPENDING. Cutting that spending translates directly into losing thousands of jobs. That's reality for the next year or so.

If anything, Obama is being modest in his plans. And he is paying for the big investments in his budget by making the tax code more progressive and fair. And that's the reality of the fiscal scolds - they want to protect the status quo for their buddies and contributors. They would rather the 30-year cycle of radical conservative economic policy continues unabated. Obama's budget is a a threat to the DC estabishment that is best represented by these "moderates."

It was his boldest acknowledgment yet of what is slowly becoming clear to the rest of us: That his proposals represent such a dramatic reversal from the course the nation has been following over the last eight years -- and even the last three decades -- that they will inevitably face intense resistance from Washington's traditional power centers [...]

It's worth revisiting Obama's explanation of "how we arrived at this moment" from that joint address:

"The fact is, our economy did not fall into decline overnight. Nor did all of our problems begin when the housing market collapsed or the stock market sank. We have known for decades that our survival depends on finding new sources of energy, yet we import more oil today than ever before. The cost of health care eats up more and more of our savings each year, yet we keep delaying reform. Our children will compete for jobs in a global economy that too many of our schools do not prepare them for.

"And though all of these challenges went unsolved, we still managed to spend more money and pile up more debt, both as individuals and through our government, than ever before. In other words, we have lived through an era where too often short-term gains were prized over long-term prosperity, where we failed to look beyond the next payment, the next quarter, or the next election.

"A surplus became an excuse to transfer wealth to the wealthy instead of an opportunity to invest in our future. Regulations... were gutted for the sake of a quick profit at the expense of a healthy market. People bought homes they knew they couldn't afford from banks and lenders who pushed those bad loans anyway. And all the while, critical debates and difficult decisions were put off for some other time on some other day."

The inevitable conclusion here is that establishment Washington is complicit in what went wrong. That includes all the people in positions of power who accepted what was happening as simply politics as usual -- even as the country was slowly but inevitably headed to that day of reckoning.

After all, since the Reagan era, even mainstream Democratic leaders have internalized the trickle-down, free-market, small-government mentality which Obama now blames for our woes. Few in the Democratic party -- or the mainstream media -- did much more than watch as the economic playing field tilted further and further to the advantage of the rich.

And yes, it's true that many of Obama's initiatives could well be described as pent-up Democratic goals. But you might also call them nearly-forgotten goals, as far as the current batch of Democratic leaders is concerned. Even when they controlled Congress, they failed to block budgets that turned out to be blueprints for disaster. And they either didn't fight for their principles or flinched in a pinch. I described some of their capitulations to former president George W. Bush in this December 2007 column. These very same leaders may well be motivated to -- at least -- complicate or modify Obama's proposals to validate their own previous inaction.

Exactly, I don't remember Evan Bayh or Ben Nelson or any of these scolds raising an eyebrow to any of the radically destructive policies the Bush Administration trafficked in on a daily basis. It's only with a Democratic President attempting to lead on Democratic principles that their spines stiffen.

Fortunately, Obama remains extremely popular, and he has shown an growing aptitude for this kind of conflict. However, his favorability is favored more than his policies at this point. I'm not sure if Republicans will get their act together to exploit this, but they can certainly get a boost from these "moderates" to revive their political fortunes.