Rockefeller, Harkin Sparring With Insurance Industry

(Sick for Profit)

Senate Democrats are trying to extract some embarrassing information from the insurance industry about their deceptive practices.

First, Tom Harkin, who is seeking to subpoena insurers for failing to provide information requested by his committee.

Harkin, the chairman of the Senate Health, Education, Labor and Pensions (HELP) Committee, said his committee may demand information from health insurance companies about the reasoning for steep increases in premiums faced by small businesses.

"I've been inundated with letters and information about the exorbitant increases in premiums for small businesses in this country," Harkin said during an appearance on MSNBC. "I asked them to come and testify at a hearing I had yesterday. They refused."

"So now I'm asking them to give us information on which we can make some decisions on why these premiums are going up so much for small businesses," he added.

Here's the video:

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Jay Rockefeller also wants some information about the industry's "medical loss ratio," and how they cook the books to pretend that they spend a substantial amount of premium money on treatment and care.

The New York Times reports: "The health insurance industry likes to cite figures showing that 87 cents of every dollar in premiums is spent on medical claims. But a new Senate analysis suggests that for-profit insurance companies are spending much less than that, especially for policies sold to individuals and small businesses. Instead, as little as 66 cents of each dollar paid in premiums goes toward doctor and hospital bills, while the rest covers administrative expenses, marketing and company profits, according to the analysis. .... The [health reform] legislation that may reach the House floor later this week would initially require insurers to spend at least 85 cents of every dollar in premiums on medical claims."

A long-standing complaint from individuals and small businesses is that they get less for their money. "But insurance companies generally do not disclose how much they spend in different segments of the market. The Senate analysis of the figures does not include information from California, because that state's filings are not available through the National Association of Insurance Commissioners. ... The insurance industry's trade group, America's Health Insurance Plans, said Monday that the 87-cent figure it cited as the industry average was based on information collected by the federal government and was an accurate reflection of how much of each dollar in premiums was spent on medical claims." (Abelson, 11/2).

This comes at a time when the Senate is about to unveil their health care bill. This information could be crucial to massing public opinion against the industry and keeping the entire Democratic caucus on board with reform.

Obama's Up, But The Jobs Still Must Come Back

The President is slowly moving back up the ladder.

President Barack Obama's approval ratings are starting to rise after declining ever since his inauguration, new poll figures show as the country's mood begins to brighten. But concerns about the economy, health care and war persist, and support for the war in Afghanistan is falling.

An Associated Press-GfK poll says 56 percent of those surveyed in the past week approve of Obama's job performance, up from 50 percent in September. It's the first time since he took office in January that his rating has gone up.

People also feel better about his handling of the economy and his proposed health care overhaul.

The tea parties of August appeared to be a dead cat bounce. Obama still has problems on the war in Afghanistan, but otherwise he's slowly starting to come back. Perhaps it was his assumption of authority in the Congressional speech. Perhaps it's that things are moving forward, however glacially, on health care. Perhaps it's a recognition that he's one of the few adults in the room, as the right descends into madness and begins to scuffle amongst themselves. For whatever reason, he's getting some goodwill.

Again, I still believe that ultimately, his fate is inextricably tied to the economy. Perhaps we will see some job creation efforts, although I'm still wary of the job creation tax credit because it can be so easily gamed. I trust EPI to come up with a decent version, though.

One version of the approach, to be unveiled next week by the Economic Policy Institute, a labor-oriented research organization, would give employers a two-year tax credit if they increased the size of their work force or added significant hours of work (for example, making a part-time worker full time). Employers would receive a credit worth twice the first-year payroll tax for each new hire, amounting to several thousand dollars, depending on the new worker’s salary [...]

States have dabbled with similar tax credits in recent years, with mixed results. The federal government last tried this measure in 1977-78. During that period, employment — which had been soft from the 1973-75 recession — climbed at a record pace. The creation of one out of three jobs that was awarded the credit then was attributed directly to the policy. But the permanence of those jobs was less clear, and some dispute how many of those positions would have been created eventually anyway.

Supporters say that improvements upon the 1970s policy would increase its potency. These include better publicizing the credit; making it available even to concerns that are not making money, in the form of a direct payout to nonprofits and companies in the red; and distributing the credit quarterly so that companies see it sooner.

One thing this will do is just freeze the job market until the moment it passes. If you're a business and you're going to get a tax credit for hiring workers, of course you would lower your workforce as much as possible to qualify for the maximum credit. In that sense, it really is corporate welfare. Not to mention that corporations just aren't as likely to hire people they feel they don't need if there's no work for them to do.

You know what could really help hiring? Fixing the credit markets for small business in particular. Those markets are still tight, and just returning to the 2007 system of shadow banking, instead of having banks just make loans out of their capital, won't work. If that doesn't get done, this small Obama bounce won't last long.

Coming Around On The Jobs Crisis

Bob Herbert wonders today if the Obama Administration understands the nature of the jobs crisis. He says that millions of Americans need to get back to work, and if the private sector is unwilling or unable to produce those jobs, then the government must step in. This was the most crucial passage:

The survey for the Economic Policy Institute was conducted in September by Hart Research Associates. Respondents said that they had more faith in President Obama’s ability to handle the economy than Congressional Republicans. The tally was 43 percent to 32 percent. But when asked who had been helped most by government stimulus efforts, substantial majorities said “large banks” and “Wall Street investment companies.”

When asked how “average working people” or “you and your family” had benefited, very small percentages, in a range of 10 percent to 13 percent, said they had fared well.

I think the White House got an advanced copy of Herbert's column, because their message today has a lot to do with jobs. Peter Orszag reiterated that the President is "exploring additional options to promote job creation." Bloomberg covers it as well:

President Barack Obama is considering a mix of spending programs and tax cuts to respond to widening job losses that would amount to an additional economic stimulus without carrying that label.

The discussion of the initiatives, including a boost in transportation spending and an extension of an expiring tax credit for first-time homebuyers, comes as the White House is balancing rising concern about unemployment and a budget deficit the Congressional Budget Office estimates will total $1.6 trillion for 2009, and $1.4 trillion in 2010.

Administration officials have told allies in Congress that a broader transportation bill, and extensions of a homebuyer tax credit and unemployment benefits are all on the table, a Senate aide said.

As well as Herbert's paper, The New York Times:

President Obama’s economic team discussed a wide range of ideas at a meeting on Monday, following his Saturday radio address in which he said it would “explore additional options to promote job creation.” But officials emphasized that a decision was still far off and that in any event the effort would not add up to a second economic stimulus package, only an extension of the first [...]

Among the options for additional steps is some variation on Mr. Obama’s proposal during the stimulus debate to give employers a $3,000 tax credit for each new hire, which Congress rejected last winter partly out of concern that businesses would manipulate their payrolls to claim the credit. Another option would allow more businesses to deduct their net operating losses going back five years instead of the usual two; Congress limited the break to small businesses as part of the economic stimulus law.

Not to mention the WSJ and a separate Times article.

Calculated Risk worked through some of the safety net options the other day. Extending unemployment benefits and COBRA reductions sounds fine, but I don't see exactly how they create jobs - though added consumer spending may save some. The homebuyer tax credit, while popular, is a complete waste of money, costing tens of thousands per new home sold, and it isn't boosting housing and construction to any great degree.

As for the rest, infrastructure spending through the transportation bill would be great, but is the Administration willing to waive paygo rules, or do they have some idea to pay for it? The business tax credit for new hires seems ripe for abuse, as does the "carry-back" provision allowing major tax breaks for corporations. That just sounds like trickle-down economics to me, and thus far it hasn't worked.

Robert Reich has some much better ideas, though he does side with the new jobs tax credit.

Use existing authority under both the stimulus package enacted earlier this year and the nefarious TARP bailout fund -- extending and combining them into a fund to make up for state and local cuts in public school budgets, childrens' health, public health (we need workers to administer swine flu vaccine) and public transportation. Instead of bailing out banks and giant automakers, we should switch to bailing out public services that average people need.

Propose a one-year payroll tax holiday on the first 20,000 of income. Republicans as well as Blue Dog Dems could go along with this, and it would be a highly progressive tax cut since 80 percent of Americans pay more in payroll taxes than they do in income taxes.

Give small businesses a "new jobs tax credit" for every net new job created over the next year. Granted, under normal circumstances this sort of jobs credit doesn't have much effect, and it's difficult to separate hires that would have happened anyway from net new ones. But we're not in normal circumstances; small businesses, which are responsible for most new jobs, still aren't hiring. They need a boost.

Dramatically expand the Small Business Administration's lending programs and have the Fed buy up the SBA's debt. Big banks are not lending to small businesses. TARP has been an utter failure in this regard. The SBA and the Fed should circumvent them and help small businesses get the capital they need, so they can start hiring again.

These might work in separate bills instead of one big stimulus bill that would have a target on its back. There's no question that state aid should be on the top of the list, and I think accelerating infrastructure spending is vital enough that deficit spending makes sense; government interest rates remain low, after all.

More than anything, the Obama Administration has to show through their actions a concern for those struggling right now. The jobs picture is intimately tied to their economic fortunes, so they have every incentive to do so.

Yacht Party Rushes To Tout Snake Oil That Works, Works, Works!

Around 11:00 this morning some senior Yacht Party members and their acolytes will stand in front of microphones in Sacramento trumpeting a report about state labor regulations and small businesses. They can be expected to say that the real problem with the California economy is all those gosh darn regulations, and if only businesses could free themselves from the iron boot of - I don't know, the 40-hour work week, child labor, the right to have an employee saw off his fingers in a lathe without responsibility, it's a different thing every week with these people - the state could be saved.

It's worth understanding what this report that makes them go ga-ga is all about. John Myers had a sketch of it the other day.

The document, wonkishly titled Cost of State Regulations on California Small Business Study, was quietly made public late yesterday. You can read it here [...]

The summary says it all, at least in the eyes of the business community:

The study finds that the total cost of [business]regulation to the State of California is $492.994 billion which is almost five times the State's general fund budget, and almost a third of the State's gross product. The cost of regulation results in an employment loss of 3.8 million jobs which is a tenth of the State's population. Since small business constitute 99.2% of all employer businesses in California, and all of non-employer business, the regulatory cost is borne almost completely by small business. The total cost of regulation was $134,122.48 per small business in California in 2007, labor income not created or lost was $4,359.55 per small business, indirect business taxes not generated or lost were $57,260.15 per small business, and finally roughly one job lost per small business.

Basically, regulations take your wives, enslave your children, throw your ice cream on the ground, and write "loser" on your chest in sun tan lotion when you fall asleep at the beach. It's amazing how in line this study is with standard conservative tropes about onerous regulations and big government. I wonder why that is? Here's Myers.

So how do (authors Sanjay Varshney and Dennis Tootelian) reach their conclusions? The 33 page report (85 pages if you include the charts) relies heavily on Forbes Magazine and its annual report of the best -- and worst -- states in which to do business. The 2008 report ranks California #40 in the nation, and that's the relative placement the authors used for their calculations.

"Forbes data is reliable," says the study, "in that it uses credible sources of secondary data that are well recognized and respected as credible independent research in the business world."

Perhaps, but Forbes' proprietary methodology isn't entirely transparent. Its website does note the sources for its rankings: data from both the federal government and nonprofits like the Tax Foundation and the conservative-leaning Pacific Research Institute.

This "academic" study cribbed their data from a MAGAZINE profile? One owned by a movement conservative, which includes materials from wingnut welfare think tanks? And we're supposed to just let that go?

Myers goes on to note that the way Varshney and Tootelian transform the Forbes data into dollar amounts is entirely inscrutable, but designed to advance the proposition that every single state's set of regulations are harmful to business. "Even Forbes' #1 state for business friendliness, Virginia, comes out with a regulatory climate that's a net loss to the state of $4.4 billion." The study also neglects to determine which regulations harm business more or less. It's a partisan mess of a report and it should not be taken seriously. Which is why the Yacht Party has taken to it so quickly, with classy headlines like "California Businesses Waterboarded by Governmental Overregulation."

Look, labor regulations serve a particular purpose. It's true that they have a cost to business, but they also provide a significant cost savings to the individual, to the public health system, to the overall quality of life for the laborer. We have made these trade-offs over hundreds of years. The Yacht Party may think that The Jungle is a fantasy utopia, but in my experience, Californians and pretty much everybody else appreciate safe food and clean air and the minimum wage.

You can get a good sense of the intellectual honesty of a politician - and the media - by seeing if they bite at this crap sandwich of a report.

The Waxman Book Report Continues

Henry Waxman must be coming up with one hell of a document about the insurance companies. He's been researching them since at least July, and yesterday he requested even more information. This time, he's investigating the extension of the rescission process to the small business arena.

"I began looking into the practices of the health insurance industry in the last Congress and was deeply disturbed by what we uncovered," said Chairman Waxman. "As part of our ongoing investigation, we are now looking into the practice of health insurance companies terminating the coverage of small businesses when their employees become ill and their health insurance claims increase. We need to better understand how widespread this harmful and destructive practice has become, and how it is impacting small businesses and their employees across the country."

"As we continue our investigation into business practices in the health insurance industry, the treatment of small businesses remains a concern," said Chairman Stupak. "We have documented examples of insurance companies raising small business premiums by an unsustainable amount or canceling a policy once it is discovered a covered employee is sick. Much like rescissions in the individual market, this practice is alarming. To better understand how prevalent this practice is and precisely how many small businesses are impacted, we are asking some of the largest insurers to provide information on their small business policies."

The Committee is requesting information and documents for small group policies, including their renewal rates, factors used to determine premium rates, and the maximum premium rate increases.

Because insurers basically guarantee issue to the businesses with whom they deal, the only way they can punish - and hopefully force to drop - a business from continuing to work with them is by unsustainably raising the premiums. You cannot do this with a large company like a Wal-Mart, but small businesses are essentially just a step removed from the individual marketplace in terms of their leverage. So insurers can afford to price those businesses out of the market, if they have employees on their books who actually need to use their health insurance.

That's an incredible admission by the insurance companies that they simply cannot afford to maintain their profits and pay for anyone's health care. So they engage in terminating coverage whenever humanly possible, even when the individual gets it through an employer, to avoid that payment.

Waxman typically engages in slow, deliberate investigations that gradually extract a maximum of damaging information out of the opponent. In this case, he's asked for all of these materials in a rush, and some of the deadlines coincide with Congress' return to Washington. I think he's writing a book - the definitive study of how the health insurance business really works, to be delivered at precisely the moment when Congress reaches the final stages of debate on health insurance reform.

The Charge Of The Hack Brigade

If the Capitol Weekly is going to have a right-wing corporate shill on their editorial pages, the least they could do is get a good one. Because I don't know where anyone, even John Kabateck of the National Federation of Independent Business, gets the cajones, after the legislature just passed a cuts-only budget completely on the backs of poor people, to fret about the plight of possible taxes for the business community.

"Get the monkey off your back and relocate to Las Vegas", barks a new ad trying to lure hard-working small businesses away from California. If legislators don't listen, small businesses that have already been hit hard by the effects of a fragile economy and the billions in taxes that were passed earlier this year will go under.

Um, right, this "rich people and businesses are leaving California" Galt-ism is not true and has never been true. But do go on.

The Legislature is back and up to its old tricks. The budget that was passed in February and revised in July will need to be "fixed" again this fall. If history is our guide, we all know that it will be an uphill battle and an unpleasant environment for small businesses. There are currently $2 billion in tax hikes being proposed, including taxes on everything from gas, internet purchases and vehicle license fees.

Oh noes! Oil companies might have to pay for the natural resources they take out of California's ground for the first time in a century of drilling! Get the smelling salts! The vehicle license fee might return to still-well-below-the-average-percentage relative to every state in the nation! This is terrible!

You'll notice that Kabateck fails to mention the $2.5 billion annually in corporate tax cuts passed in the previous two budget agreements, which miraculously exceed the tax hikes - beaten back by the Yacht Party and the Governor in July - about which he is fretting so. These massive corporate tax cuts do nothing to keep the largest corporations in America doing business in California - they would hardly abandon a market of 38 million people. It's nothing more than a kickback for services rendered. And if that's a transaction of prostitution, then John Kabateck is the guy who cleans up the courtesan's antechamber afterward, eager to grab a buck for himself for the privilege of working for whores.

It's amazing how little the California office of the National Federation of Independent Business speaks for independent business. He could have written a nice little article about how corporate behemoths are screwing small businesses when it comes to state purchasing, which currently favors out-of-state multinationals. Instead, he offers the party line that the structural revenue gap is fine and leaving citizens out on the street to die is a small price to pay for protecting oil and cigarette companies. Kabateck doesn't seem to understand that this mentality is destroying the California economy, and with it all of those small businesses he claims to represent.

Hacktackular job, CapWeekly! With any luck, you'll get Jon Coupal or Joel Fox to offer a rebuttal.

Glenn Beck Explains The Failure Of The For-Profit Health Care System

(This is part of my blogger fellowship for Brave New Films and its Sick For Profit campaign)

Bernie Sanders discussed health care today as part of his "Senator Sanders Unfiltered" series.



He brings up a very good point about what could happen in the absence of a strong public option or single payer system. You would generally have the federal government subsidizing private insurance companies without any cost containment. Individuals forced to buy insurance would only have the options among private companies, and they could raise their premium rates as much as they want every year, without being forced to compete with a more efficient alternative like a public option.

This is exactly what we're seeing in the market right now. And you don't have to believe me. Just believe none other than Glenn Beck.

Before leaving for his "vacation" this week, Beck taped a show about small businesses and the struggles they're having staying ahead. The show, aired August 17, got around to Beck asking some small businessmen about their health care costs. This extraordinary passage followed.

BECK: I just had a meeting with my staff, because I'm a small business owner, my company's called Mercury, and we're an entertainment company, we do all kinds of stuff. And I cover 100% health care. And we have the best that we could get for New York. This year, I think our health care went up 40% and then the next year it was up like 47%. And they keep taking away options. This year when we renewed, the health care provider came into my office and he said, "Are you really going to pick that?" And I said, "Well, yes, as long as I can." And he said, "You are the last person in the state of New York that is covering your employees like this." And I said, "Well, I just had a meeting with my employees and I said, 'I don't know how long I can do that, but we'll do it as long as we possibly can.'" But they're making it impossible. Does anybody else find it impossible? They make it impossible for you to do the right thing for your employees!

Beck doesn't want to fill in the "they" there, and I'm sure he figures his viewers will just substitute "government". But of course, the unnamed "they" is, clearly, the private insurance market and the health care industry in general. There has been no limit on their growth, no effort to control costs, and in fact the incentives go in the opposite direction. And it's crushing small businesses. Even GLENN BECK understands that. Without any need for competition, with regional monopolies across the country, with no meaningful checks on their power at the federal level, insurance companies can charge more and more for premiums and deny enough care to enough people to make exorbitant profits that allow them to pay CEOs hundreds of millions of dollars in compensation, stock options and perks.

And it's worse for the individual, who has no leverage, and often, no insurance. The health care market sees these people coming a mile away, and their eyes light up.

For example, one doctor billed $4,500 for an office visit when Medicare would have paid just $134. Another doctor billed $14,400 for removal of a gallbladder when Medicare would have paid $656. And a hip replacement cost $40,000 when Medicare would have paid $1,558.

....[Jeffrey] Rice said people should know they have a choice even when their insurance company is paying the bill. "Everyone knows you don't buy a car without knowing what the Blue Book value is. Well the same should be true in health care," he said.

....Previous research published in 2007 in the journal Health Affairs showed the "uninsured and other 'self-pay' patients for hospital services were often charged 2.5 times what most health insurers actually paid and more than three times the hospital's Medicare-allowable costs." The study by Gerard Anderson also found the "gaps between rates charged to self-pay patients and those charged to other payers are much wider than they were in the mid-1980s."

The lack of leverage in health care feeds the skyrocketing costs. Nobody should have to go broke because they get sick. Individuals empowered through collective action and purchasing power should be able to drive down those costs, without bankrupting health care providers. But the insurance companies would rather funnel that savings, the difference between what providers charge for the uninsured and the insured, into their own bank accounts. Without an incentive to make the product cheaper, the system will limp along and lots of people will get rich at the expense of tens of millions, who either have no insurance, or who find themselves denied coverage when they need it.

For all the talk of the insurance industry being a "constructive partner" in health care, they have not banned their own shameful practices of denying coverage and care, because even though they claim to support those changes, they will wait until the last possible moment to shut down their racket.

And things are going great for them at the moment. According to the Kaiser Family Foundation, the average premium for a family plan in 1999 was $5,791. By 2008, the average premium was $12,680. So over a decade in which inflation increased prices by 29 percent, the price of family health insurance went up 119 percent. UnitedHealth, probably the most despicable of America's health insurers (look at any health-insurance industry scandal, and UnitedHealth is likely leading the way) just announced that in the second quarter of 2009, they made a profit of $859 million, every dollar squeezed from patient premiums and through the avoidance of what the industry calls "medical losses," meaning when they reluctantly pay for care [...]

So if the insurance industry really wants to demonstrate its good faith on health-care reform, here's what it could do: End these practices now. Don't wait to see what's in the final bill. Do it now. Stop denying coverage for pre-existing conditions. Stop rescinding the policies of people who get sick. Let people keep their coverage when they leave a job if they keep paying the premiums. Stop discriminating against pregnant women. You want to atone for your sins? Changing these policies would be a good place to start.

But they won't do that, most surely. They'd rather continue to profit off the pain and suffering of their customers. And until the politicians step in and change things, it will continue.

The Lack Of Investment, Protecting The Rich And Connected

It's hard to choose the most cruel or the most thoughtless among Arnold Schwarzenegger's line-item cuts added to the budget revision. But you could make a case for the slashing of all state funding for domestic violence centers, for a savings of about $16 million dollars. LAist profiles one center, in the Santa Clarita Valley, that will probably now have to close:

The Domestic Violence Center in the Santa Clarita Valley is the only agency that provides domestic violence services in the 200-square mile valley. As a result of Schwarzenegger's cut, which is immediate, they've lost 45%, or $207,222.00, of their annual funding, which they say will force them to close their doors later this year unless the community supports them with donations. In 2008, they served over 1,000 victims of domestic violence.

“As the Center’s Executive Director, I think about every client who has come through our doors and their horrific stories of abuse - I cannot help but cry when I think about what the loss of our services will mean to victims," said Executive Director Nicole Shellcroft in a statement. "Those who walk through our doors have suffered through broken bones, beatings, strangulation, food deprivation, arson, torture, genital mutilation and unspeakable sexual violence. They have been thrown down flights of stairs, have been victim to violent physical attacks during pregnancy and have even faced the prospect of murder. Victims seek our services to escape incredible violence aimed at them and their children."

Here's another profile, from Oroville in Butte County.

This is what we are talking about when we say that people will die from the decisions made by Arnold Schwarzenegger and the Legislature. The $16 million in cuts represent a pittance of the budget and far less than the $2 billion dollar annual tax cut for the largest corporations in America instituted back in February. But, we are told, those businesses would flee the state if they were forced to contribute a fair share of taxes for the commons that they use, so instead, women and their children will have practically nowhere to turn to save themselves from spousal abuse.

It turns out that some businesses are dismayed enough to consider leaving California - not because of the lack of tax breaks, because of all of the budget cuts and the impact on the workforce.

Wilbur D.Curtis invented the globular glass coffeepot, that staple of coffee counters everywhere, in 1940. Since then his son and grandsons have turned Wilbur Curtis Co. into a manufacturing concern that earns revenue approaching $100 million by turning out commercial coffee brewing equipment from a sprawling factory in Montebello.

But their long history in California doesn't exempt the Curtis family from the costs and hassles that give this state its reputation as one of the hardest places in the country to do business [...]

Yet it's plain that the state government has failed in precisely those areas where it can make a difference. Laws' main concern isn't strictly how much money the state spends -- it's that the bucks don't go where they count.

His two biggest issues are education and infrastructure. "We pay a fortune here to educate people on basic things like writing and math skills that they should have learned in high school," he says. The company, whose workforce is mostly Latino, also provides training in English as a second language -- including for some employees who came through the public schools [...]

Then there's that lifeblood of any firm whose products can't be shipped through cyberspace -- transport.

Traffic congestion in the L.A. basin has become a round-the-clock hassle. Laws says one of his biggest customers, a coffee company with a national reach, opened a local facility here to be near its own big customers, only to find that navigating the overstressed road system drove its costs to twice its expectations.

And these complaints about infrastructure and education exist before budget revisions that would decimate the future of higher education for a generation of students, and only harm the ability to create the infrastructure necessary for densely populated areas in the 21st century.

We're picking away at safety net programs and increasing the danger and suffering for a whole class of citizens, while protecting the largest corporations and the wealthiest campaign contributors. And the actual lifeblood of job creation, the small business community, would rather see investment than the current hijacking of state government by those who want to dismantle it.

Related: Marc Cooper's cover story on California at The Nation.

The Blue Dogs Go To Work

Mike Ross, apparently the point person for the Blue Dogs on health care, says he has the votes to defeat the bill in the Blue Dog-heavy Energy and Commerce committee, if he doesn't get certain changes.

A leader of the conservative "Blue Dog" Democrats told CNN Wednesday he and other group members may vote to block House Democrats' health care bill from passing a key committee if they don't get some of the changes they want.

"We remain opposed to the current bill, and we continue to meet several times a day to decide how we're going to proceed and what amendments we will be offering as Blue Dogs on the committees," said Rep. Mike Ross, D-Arkansas.

Ross said the bill unveiled Tuesday by House Democratic leaders did not address concerns he and other conservative Democrats outlined in a letter late last week to Speaker Nancy Pelosi.

The conservative Democrats don't believe the legislation contains sufficient reforms to control costs in the health care system and believe additional savings can be found. Their letter to leaders raised concerns about new mandates on small businesses. Blue Dogs also say the bill fails to fix the inequities in the current system for health care costs for rural doctors and hospitals.

Of course, this is inconsistent. You cannot control costs in the health care system while demanding higher payments to rural doctors and hospitals. I wonder if anyone has pointed that out. The same with the mandates on small businesses. House Democratic leaders actually exempted small businesses from the employer mandate with a higher amount of payroll than what was initially in their discussion draft - up to $250,000. But the Blue Dogs want larger small businesses to be exempted as well. That means less money in the system, because businesses would pay 8% of payroll for each employee if they don't provide health care. So the Blue Dogs want both cost controls, less cost controls, and more targeted health spending. It's not supposed to make any sense.

In addition, freshman Jared Polis is trying to derail the surtax on the wealthy used as a mechanism in the House bill to pay for it.

And Rep. Jared Polis (Colo.), meanwhile, was circulating a draft letter among freshman Democrats to Pelosi opposing the $544 billion income tax surcharge on the wealthy, arguing it would hit many small businesses and manufacturers.

“Especially in a recession, we need to make sure not to kill the goose that will lay the golden eggs of our recovery,” Polis wrote. “By concentrating the cost of health care reform in one area, and in one that will negatively affect small businesses, we are concerned that this will discourage entrepreneurial activity and job growth.”

That objection was gaining steam Wednesday among freshmen and others from wealthy suburban districts, as business groups stepped up their attacks.

Actually, what the surtax does is add extra brackets, which should have been done long ago and should actually go further.

The lack of an instinct for self-preservation strikes me. If health care doesn't pass, the primary part of the President's agenda, the 2010 midterms could get ugly. And the first people to pay the price would be Blue Dogs in conservative districts and freshmen, the same people grousing at the provisions of the bill. Some of that is legislative sausage as they look to get paid off - but the cost of not having a bill for these members of Congress is great. Henry Waxman puts it best:

Energy and Commerce Chairman Henry Waxman (D-Calif.) said he will meet with Ross, along with others, and plans to amend the bill again tomorrow himself.

But he urged them to work to pass the bill instead of tearing it down.

“Can a bunch of Members bring a bill down? Yeah. Then what? ... Democrats have a lot at stake in this legislation, the president has made this his No. 1 priority,” he said. “We’re going to have to come together.”

(notice, too, that the public option was not part of any of these concerns. The blogosphere is missing the mark here)

...Here's Ben Nelson also being an idiot and attributing the idiocy to his constituents.

You Get A Rescue, You Get A Rescue...

Initially, the top 20 banks received bailout funds from the TARP program. Number 21 on the list was CIT, a small-business lender. And predictably, without bailout money they are a threat to go under, and in turn dissolve a lot of funding for small businesses. So the Obama Administration may rescue them as well.

While CIT has about $75 billion in assets, it was not included in the government's stress tests of major financial firms, and most analysts agree that its failure would have relatively modest consequences for the financial system. But it has grabbed the administration's attention because of its focus on small-business lending, an area of outsize political importance. The New York company is mounting an increasingly public case that its failure would crumple thousands of fragile firms.

Administration officials met yesterday afternoon to review CIT's problems and to consider possible responses, according to a person familiar with the matter. Some officials would like to leave CIT alone, to show that the economy is strong and that the government will not rescue every faltering firm. But at a time when the administration already is working on ways to increase lending to small businesses, other officials see rescuing CIT as a necessary and obvious step.

This isn't playing out on the necessity of rescuting CIT, but the politics. And that's the wrong way to determine this. Whether or not people take lessons from CIT, their presence or absence will have an effect on the economy at large, and we can plot that in a cost-benefit fashion. Basing these decisions on political questions is why we rescued Wall Street and offered no conditions or strings on much of that aid in the first place.

It looks as if the aid package will go through. Hopefully that makes sense on the merits.

Simon Johnson has more on this, coming down on the side of not allowing a rescue to CIT.

The issue of the day is obviously CIT. It’s hard to sort out the real news from clever PR/planted stories in this situation, but it looks like the FDIC is coming out strongly against being involved in a rescue package. Given Sheila Bair’s successful political positioning and strong popular appeal, it’s hard to see how – once dug in – the FDIC can be moved [...]

Essentially, by trying to refloat an undercapitalized banking system, Treasury has created pervasive financial vulnerabilities to CIT-sized shocks. These are now the basis for more bailouts and even great fiscal costs.

If CIT is determined to be “too big to fail” in today’s context, this has far reaching implications. Instead of financial entities with assets of at least $500bn creating systemic risk, we now have to worry about anyone who has not much more than $50bn. This is a profound change – and a point that seems to have escaped the Financial Services Roundtable, which is pushing hard for a CIT rescue.

Gay Marriage, The Real Financial Crisis

It's not bigotry or homophobia, but the cost to small businesses as a result of putting a new set of spouses on the health plan. That's why Republicans oppose gay marriage.

Let's set aside the multiple efforts during the Bush Administration to encourage marriage, which would place the exact same burden on those small businesses, only not with the ickiness of teh ghey.

But if we really want to talk about the high cost of spousal benefits for businesses, um, Michael? I've got a way around it for you. Stay with me on this one.

NATIONAL HEALTH CARE.

The Fairness Doctrine

I was on Bill Scher's Liberal Oasis radio show this morning (it airs tomorrow - you can get the podcast on iTunes here) talking about the federal budget, and if there's one word I can use to describe it, I'd pick "fairness". Peter Orszag is simply soft-selling the implications. The budget returns us to an era of tax fairness where everyone in society invests according to their means for the greater good. There are certainly some on the right who would call that socialism - I hope they have no use for the police, fire department, libraries, post offices, or roads. The fact is that there are public goods that we all must contribute to because only government can provide them, and with this budget, we begin to engaging the whole country in that project once again.

Paul Krugman is pleased that progressive priorities on health care and the environment are pushed forward in this budget and will be paid for.

This budget allocates $634 billion over the next decade for health reform. That’s not enough to pay for universal coverage, but it’s an impressive start. And Mr. Obama plans to pay for health reform, not just with higher taxes on the affluent, but by putting a halt to the creeping privatization of Medicare, eliminating overpayments to insurance companies.

On another front, it’s also heartening to see that the budget projects $645 billion in revenues from the sale of emission allowances. After years of denial and delay by its predecessor, the Obama administration is signaling that it’s ready to take on climate change.

And these new priorities are laid out in a document whose clarity and plausibility seem almost incredible to those of us who grew accustomed to reading Bush-era budgets, which insulted our intelligence on every page. This is budgeting we can believe in.

Krugman believes that eventually, taxes may have to be raised more broadly to deal with long-term budget snags, perhaps with a value-added tax. But for now, Obama is boldly creating a fairer vision for who pays in society.

The budget that President Obama proposed on Thursday is nothing less than an attempt to end a three-decade era of economic policy dominated by the ideas of Ronald Reagan and his supporters.

The Obama budget — a bold, even radical departure from recent history, wrapped in bureaucratic formality and statistical tables — would sharply raise taxes on the rich, beyond where Bill Clinton had raised them. It would reduce taxes for everyone else, to a lower point than they were under either Mr. Clinton or George W. Bush. And it would lay the groundwork for sweeping changes in health care and education, among other areas.

More than anything else, the proposals seek to reverse the rapid increase in economic inequality over the last 30 years. They do so first by rewriting the tax code and, over the longer term, by trying to solve some big causes of the middle-class income slowdown, like high medical costs and slowing educational gains.

Reducing inequality is a major goal of this budget, and the right way to re-create a broad middle class to spur sustainable economic growth. In a tremendous post, Charles Lemos discusses how inequality has crushed us economically and why this budget is so hopeful.

Just how far have we fallen during that three-decade era of economic policy dominated by the ideas of Ronald Reagan and his supporters? Well, a UN report last year on urban poverty found that out of the world's 120 major cities New York was found to be the ninth most unequal in the world and Atlanta, New Orleans, Washington, and Miami had similar inequality levels to those of Nairobi, Kenya and Abidjan, Côte d'Ivoire. In western New York state nearly 40% of the black, Hispanic and mixed-race households earned less than $15,000 compared with 15% of white households. The life expectancy of African-Americans in the US is about the same as that of people living in China and some states of India, despite the fact that the US is far richer than the other two countries. Is this right? Is this America? It is the America that Reagan has wrought and that President Obama seeks to undo. Undoing Reagan, how sweet the sound.

Unequal societies have throughout history been prone not just to social upheaval but also to economic turmoil. Beginning in the 1970s and accelerating after 1980, the US began undoing a series of policies that dated to FDR led to what historians call the "Great Compression" a flattening of income so that by 1964 the ratio of CEO pay to average worker pay was 24:1, the narrowest in the nation's history. Before the financial meltdown the ratio was around 400:1, or back to levels last seen in the late 1920s. And this is actually down from a high of 525:1 in 2000 (the reason is that executive compensation is largely paid in stock). In 1970, the top 1% of Americans controlled 8% of the nation's wealth, by 2000 they controlled 15%. In 1973, the income of the top 20 percent of American families was 7.5 times that of the bottom 20 percent. By 1996, it was 13 times. By 2006, it was 18 times.

The last 30 years have ushered in a New Gilded Age, with all the trappings of the robber barons prevalent at the outset of the last Depression. The moral as well as economic implications of this have been tragic. Just as the reinvention of the middle class with shrinking inequality drove the tremendous expansion of the post-war era, so can too the radical change Obama is proposing here.

So of course, Republicans and so-called Democrats are blasting it, and using the same small-bore nonsense of twisting the meaning of a program to make it sound crazy ($200,000 for tattoo removal, when it's an anti-crime program), as well as the persistent lie that taxes on the rich hurt small businesses, which will never get old for them and also never be true.

bama is proposing to raise taxes on households earning over $250,000 by increasing the rate on the top two tax brackets and limiting deductions, starting in 2011.

Republicans and other critics, knowing they will get little mileage from defending the rich, instead are casting the plan as a tax hit on people who run industrious little companies driving job growth.

That's not likely, according to one in-depth analysis, which found that more than 95 percent of small business owners would be off the hook.

Then there are clueless Blue Dogs like Gene Taylor, who returns to his tried and true hobby horse of fiscal responsibility - but see if you can find the incongruity:

(CNN) – Mississippi Democratic Rep. Gene Taylor blasted the budget outline President Obama submitted to Capitol Hill today, saying “I don’t like it…change is not running up even bigger deficits that George Bush did.”

“That’s what George Bush did very well. Apparently that’s what President Obama is doing.”

Taylor, a conservative “blue dog” who voted against the stimulus bill, noted he was still reviewing the plan but was troubled by the additional amount of spending for many government programs on top of the recent increased funding many agencies received in the economic stimulus bill.

As a member of the Armed Service Committee, Taylor noted the budget only gives the Defense Department a “small increase,” which he said would barely cover the cost of living adjustments for the military.

Get that? Obama's running up huge deficits, but he deserves a scolding for only giving the Defense Department a "small increase." Because military spending is magic spending, the largest expenditure in the federal budget but one that somehow never hits the bottom line.

I don't want to paint too rosy a picture. The economy is in big trouble and we're probably going to have to go back for another round of stimulus. But the principles of this budget - with a focus on the middle class, and tax fairness, and investment in national priorities - is what will eventually lead us back to prosperity.

1.75 Trillion.

Wow, he really honestly looked at the numbers.

President Barack Obama is sending Congress a "hard choices" budget that would boost taxes on the wealthy and curtail Medicare payments to insurance companies and hospitals to make way for a $634 billion down payment on universal health care.

Obama's first budget, which will top $3 trillion, predicts the deficit for this year will soar to a whopping $1.75 trillion, according to administration officials who spoke on condition of anonymity before the public unveiling of the budget Thursday. The huge deficit reflects the massive spending being undertaken to battle a severe recession and the worst financial crisis in seven decades.

That's what it probably should have been - and actually was - for several years now. Remember that Obama's goal is to cut the deficit in half by the end of his first term. In this document he sets the deficit at that time at $533 billion, but half of the topline number would be more like $900 billion. This gives him some space to work with.

As expected, Republicans are already freaking out about the repeal of the Bush tax cuts:

"Everyone agrees that all Americans deserve access to affordable health care, but is increasing taxes during an economic recession, especially on small businesses, the right way to accomplish that goal?" asked House Minority Leader John Boehner, R-Ohio.

It's good that Republicans have to play on Democratic turf when talking about health care - that's a shift and a sign of the weakness of their position. The "small businesses" canard is based on the false idea that a business making $250,000 in revenue would have to pay taxes in individual tax brackets. That's, um, not how it works, and Republicans know that.

...Obama's remarks on this piece:

In keeping with my commitment to make our government more open and transparent, this budget is an honest accounting of where we are and where we intend to go. For too long, our budget has not told the whole truth about how precious tax dollars are spent. Large sums have been left off the books, including the true cost of fighting in Iraq and Afghanistan. And that kind of dishonest accounting is not how you run your family budgets at home; it's not how your government should run its budgets, either. We need to be honest with ourselves about what costs are being racked up -- because that's how we'll come to grips with the hard choices that lie ahead. And there are some hard choices that lie ahead.

What Was That About Small Businesses?

Tesla Motors is feeling the economic crunch.

Tesla Motors, the fledgling maker of electric sports cars, admitted today it is losing money and in a “critical phase” financially. An undisclosed number of Tesla’s 250 employees will be laid off (and the current chief executive will move to the board of directors), and its Detroit-area office will be shut down.

Further delays and setbacks for the company’s production and growth plans were also announced. Interestingly, these developments come at a time when the public’s interest in electric cars seems to have taken off, given the reaction to General Motors’ recent showing of the production-ready Chevrolet Volt and the introduction of several new electric protypes at the Paris Motor Show this month.

Elon Musk, the Silicon Valley entrepreneur who has been the chief investor in Tesla, said in a blog posting Wednesday on the company’s Web site that with SpaceX, his separate project to develop private-enterprise rockets for outer space, having achieved its first successful launch, he now has more time to devote to turning Tesla into a profitable venture.

This is really awful. Tesla has a dealership by the 405 freeway in West LA, and Governor Schwarzenegger pushed really hard to keep their production in California. Right now their brand is pretty high-end, though they were moving toward making a sedan version, so that could be part of their troubles. The cars, however, are amazing. Faster than a Porsche and can go hundreds of miles on a single charge. They have had some fits and starts with mass producing them, but clearly their future appeared to be bright until the recent economic woes.

What's keen to keep in mind here is that the major auto companies just got a $25 billion dollar bridge loan from the federal government to keep producing the garbage cars they make. Here's a company pushing a green technology and bringing it to market faster than anybody else. I hear all this talk in the election about small businesses being the backbone of America and here is one. So where's their help?

Joe The 285 Million Other People Who Can't Buy A Plumbing Business

If you want to know why Barack Obama is poised to win this election, it's because of circumstances like this:

To monitor the multiple sclerosis attacking Ann Pietrangelo's central nervous system, her doctor recommends an annual MRI. Last year, the 49-year-old Winchester, Va., woman had to pay a $3,000 co-payment to get the imaging done.

This year, she's skipping the test. Even with insurance, it's more than her budget can tolerate, especially with the roller coaster on Wall Street devouring her retirement savings.

"I'm doing everything I can to avoid going to the doctor," she said.

From Park Avenue dental offices to the Arlington Free Clinic, the global economic crunch is forcing a growing number of Americans to scale back on medical care. Consumers are attempting their own form of triage, pushing off seemingly less-urgent services in the hope that their financial health will improve. But the danger, say physicians, is that the short-term savings may translate into more severe long-term health implications [...]

Nationwide, the number of consumers who went without a prescription, tapped into retirement savings to pay for health care or skipped a doctor visit for themselves or a child has risen since last year, according to a survey released this summer by the Rockefeller Foundation and Time magazine. One-quarter of the 2,000 respondents, for example, said they had decided not to see a doctor because of cost in 2008, up from 18 percent the year before. Ten percent said they did not take a child to the doctor for the same reason.

This is about more than just the subject of health care, which even the head of the Congressional Budget Office agrees must be dealt with as soon as possible or it'll threaten the entire federal budget and make the financial bailout look like the give-a-penny take-a-penny tray. But indeed you could have chosen any topic that the vast majority of Americans interface with. Their wages haven't gone up, their gas prices are still twice as much as they were before, their food costs are higher, the student loans for their children are a crushing burden, the jobs are scarce and aren't much more promising than service-sector McJobs, their credit cards are full, their home prices (if they're lucky enough to own one) are falling and they owe more on their houses and cars than they're worth, and their quality of life, between commutes, carrying two or three jobs to get by, etc., is, to put it mildly, in the crapper. They aren't making it. The American dream that's been sold to them for decades is dead. And it's been that way for a while.

And yet our profoundly stupid political discourse continues to focus on the aspirational class and small businessmen and the methods to trickle wealth down. And they use these insane shibboleths, icons that stand in for human beings who have actual struggles, to make it seem like there's any respect left for the common man. The common man has been kicked. He's been punched. He's laying on the side of the road. And he doesn't give a damn about someone screeching about a $900 tax increase.

Joe the Plumber, or whoever the fuck he is, means nothing. Neither does the media conception of white working-class voters. They are absurd caricatures, disconnected from any truth and really just pawns in the depressing reality show that has become politics. The more we look at some sideshow, the more muzzled the truly voiceless in this society become. For all the faults of the Democratic Party, there is finally a recognition this year that people vote, not pastiches or sketches but hundreds of millions of people, and maybe, just this once, we ought to pay attention to what the hell they are going through.

My Take On Clinton Dropping Out

I talked a little last night with Chris Stampolis, a DNC member who is backing Senator Clinton. He was precisely using the phrase "automatic delegates" to describe superdelegates, a frame supplied by the Clinton campaign. He made a compelling case for Clinton staying in the race to see where the momentum lies, let everyone have a voice in the process, and have the eventual nominee face the kind of barrage that they'll face in the fall. And that's all fine. I've said that I want Obama to win the race as opposed to not losing it and backing his way in (although reports that he blocked the Michigan revote is a lot of spin by Democratic officials in that state who are backing Clinton). But to me, the Clinton campaign can stay in the race as long as they pay their goddamn bills. I don't think they're hurting the party necessarily, but they're hurting local vendors for no reason. Instead of holding a fundraiser on their website to pay for yet another ad in Pennsylvania, how about a fundraiser to pay for the small business owner in Iowa who provided a couple thousand dollars in food for the campaign?

Hillary Rodham Clinton’s cash-strapped presidential campaign has been putting off paying hundreds of bills for months — freeing up cash for critical media buys, but also earning the campaign a reputation as something of a deadbeat in some small business circles.

A pair of Ohio companies owed more than $25,000 by Clinton for staging events for her campaign are warning others in the tight-knit event production community — and anyone else who will listen — to get their cash upfront when doing business with her. Her campaign, say representatives of the two companies, has stopped returning phone calls and e-mails seeking payment of outstanding invoices. One even got no response from a certified letter.

Their cautionary tales, combined with published reports about similar difficulties faced by a New Hampshire landlord, an Iowa office cleaner and a New York caterer highlight a less-obvious impact of Clinton’s inability to keep up with the staggering fundraising pace set by her opponent for the Democratic presidential nomination, Illinois Sen. Barack Obama.

Honestly, they can hold off paying the $2.5 million owed to Mark Penn forever. But pay the small business people who depend on that money. And don't feed me a line about how you care about the little guy until then.