Regardless of what you think about the current health care legislation being debated on Capitol Hill, being able to read it before it goes to the floor for a vote is the right thing to do and I’m glad to see a Senator from Missouri calling for it.

But will the Dems listen?

From Politico:

As the health care reform bill moves to the Senate floor, a key bloc of moderate Senate Democrats and an independent called on Senate Majority Leader Reid to increase the process’ transparency.

Specifically, the senators called on Reid to post legislative text and CBO scores online 72 hours before the first floor vote. They asked that all amendments be posted before debate begins. And the amended bill and CBO score should be posted three days before a final Senate vote and before the Senate votes on a conference committee report.

Democratic Sens. Blanche Lincoln, Evan Bayh, Mary Landrieu, Claire McCaskill, Ben Nelson, Mark Pryor, Jim Webb and Independent Sen. Joe Lieberman signed the letter.

“As their democratically-elected representatives in Washington, D.C., it is our duty to listen to their concerns and to provide them with the chance to respond to proposals that will impact their lives,” the senators wrote. “At a time when trust in Congress and the U.S. government is unprecedentedly low, we can begin to rebuild the American people’s faith in their federal government through transparency and by actively inviting Americans to participate in the legislative process.”

Simply put, this administration promised transparency and they should push the Congress to deliver…especially with legislation this contentious. Because it’ll expose anything truly controversial and save a lot of headaches in the long run.

Anybody disagree?

It’s pretty easy…the only people that voters like less than Congressional Democrats and Congressional Republicans.

Add in the facts that Republicans have no coherent plan, no definitive leadership and are allowing right wing pundits to organize and promote this Tea Party movement and you have a reality where Dems might actually pick up seats next year.

Personally I think it’ll be a wash, but let’s take a look at what the Independents in a recent Research 2000 poll had to say about Dems and Repubs.

• Nancy Pelosi
  22 Favorable, 71 Unfavorable
• Harry Reid
  27 Fav, 65 Un
• Mitch McConnell
  10 Fav, 73 Un
• John Boehner
  3 Fav, 70 Un
• Congressional Dems
  32 Fav, 65 Un
• Congressional Repubs
  9 Fav, 76 Un

And before you say this is just one poll…here’s another one from Gallup…

Last, and I think this fact sometimes gets lost in the shuffle, Americans remember who was at the helm when the train derailed. Also, it’s not like Dems are running Congress in some woefully inept manner. Are they bipartisan? For the most part, no. But, again, the only people voters think are less bipartisan than Congressional Dems are…you guessed it.

So to all of my fellow politicos who claim that Dems are in for historic defeats next year…you might want to pay less attention to the Tea Partiers and more attention to the swing voters.

This is a joint post of Justin Gardner (Donk Quixote) and Mike Wallach (Phanto), wherein they endeavor to tilt at windmills (with many apologies to Miguel de Cervantes):

“And no sooner did Donk Quixote see them that he said to his squire, “Fortune is guiding our affairs better than we ourselves could have wished. Do you see over yonder, friend Phanto, the hulking healthcare insurance giants? I intend to do battle with them and slay them. With their spoils we shall begin to have healthcare for all, for this is a righteous war and the removal of so foul a brood from off the face of the earth is a service God will bless.”

“What giants?” asked Phanto.

“Those you see over there,” replied the blogmaster. “With their long corporate arms. Some of them have arms well nigh two leagues in length.”

“Take care, sir,” cried Phanto. “Those over there are not giants but bureaucrats and political windbags. Those things that seem to be their arms are purses which, when they are filled with contributions, weigh heavily on the laws that control our lives.”

Those familiar with Justin and Mike from reading this blog, know that we are generally at odds, disagreeing more than we agree. Justin is a registered Democrat, and considers himself a liberal with independent leanings. Mike most recently registered as a Republican, but considers himself primarily a fiscal conservative, deficit hawk, and a libertarian leaning independent.

But lo and behold: We found common ground in the Health Care Reform debate.

If we were starting with a blank slate, we would support vastly different and incompatible health care systems. But we are not starting there. We have different objections to the existing system, but agree that the current system is in need of reform. We also agree that the reform most Americans want includes three critical criteria:

1. Universal coverage for all Americans
2. Insurance against financial ruin if struck with an illness.
3. The reform program be fiscally responsible, manageable and have understandable costs.

What currently existing bill hits all three?

Wyden-Bennett.

Yes, we both support (S-391) The Healthy Americans Act and agree it represents a good foundation on which to build rational Health Care reform.

Donk Quixote (JG):

“Wyden-Bennett has my support because it does away with the pre-existing condition clause, reigns in costs and has the potential to cover more Americans than the current legislation being proposed.”

Phanto (mw):

“Wyden-Bennett has my support because it meets the critical criteria for reform, does it better than HR 3200 and does it without increasing the deficit or requiring net new taxes. Wyden-Bennett has my support because it directly and honestly attacks the central problem of employer based health care insurance as the primary delivery vehicle for non-public health care in America. Wyden-Bennett has my support because it is not (yet) saddled with questionable deals for big pharma, big insurance, and payoffs for big union contributors.”

Saying we support Wyden-Bennett does not mean we have no reservations about this bill. Au contraire mon frère…

Donk Quixote:

“Wyden-Bennett feels like it’s the co-op idea only it takes EVERYBODY’s health coverage away who currently has it through their employer and makes them buy it again. Basically, no more tax breaks for health care. I’m in favor of the principle of that, especially if it could cut costs, but I do think that the radical restructuring of the system would be opposed by many more Americans because it’ll be seen as taking something away from them and would require a lot more work on their part. How do you think a plan that starts off with “First, you lose your insurance…” would play with Americans? Because you know that’s how it would be positioned. This could be a non-starter for many. And to that point, do you really think members of the right wing who kept on saying “Obama is going to raise your taxes!” would stay quiet and accept Wyden-Bennett?

Also, getting back to the co-op idea…does anybody really think creating a system that would dump EVERYBODY off of their insurance is more politically palatable than one that simply opens up options and provides subsidies for those w/o health insurance or those working for small businesses? Bipartisan or not, this bill represents a VERY radical reshaping of how we buy and sell health insurance in this country and such a seismic shift doesn’t seem politically feasible to me.

Phanto:

“I describe myself as a “libertarian-leaning independent”. There are elements of Wyden-Bennett that cannot be reconciled or rationalized with anything that resembles libertarian principles. This is where I have my greatest heartburn with this bill. Chief among them, this bill has mandated coverage. The bill does not work financially without mandated coverage. It works very well with it. It could be rationalized that individuals will have a much wider range of choices under Wyden-Bennett. But I won’t call that a libertarian argument, because individuals will not have the option to not participate.

The trade-off for this mandated coverage is that we get a fiscally sound health care system that covers everyone, that puts no one at risk of financial ruin from getting sick, and does it without raising the deficit or requiring net new taxes. I am willing to take that trade-off. This is why I describe myself as libertarian-leaning as opposed to libertarian or Libertarian. Once in a while, I feel compelled to lean another way.”

Are the politics of Wyden-Bennett within the “art of the possible”?
No idea. It feels like it should be. Universal coverage for all, catastrophic illness protection for all, no increase in the deficit and no net new taxes. What’s not to like?

Clearly there is a constituency on the left who will find nothing less than a Single Payer system to be acceptable. They will never accept this bill and are excluded from the pool of potential supporters. Clearly there is a constituency on the right who will find nothing less than a market based system with little or no government participation to be acceptable. They will never accept this bill and are excluded from the pool of potential supporters. But for the rest, for the wide range of liberals, conservatives and independents who would like to find some common ground and believe there is a need to reform our healthcare system – this presentation is for you:

(There is a four slide “Keep It Simple Stupid” version linked here and embedded at “Divided We Stand United We Fall”.)

Does Wyden-Bennett actually have bipartisan support?
Commenter Mike (not mw) kicked off an interesting discussion among the Donklephant commentariat, questioning whether there is sincere bipartisan support for this bill, or whether Republicans were simply using it for political cover. There is one way to find out. Get behind it, and if there is enough popular support, we will see what happens. Our guess, the compelling fiscal calculus – true reform with no net new taxes and no increase in the deficit – permits the inner fiscal conservative of many Republicans (and Blue Dog Dems) to overcome their other concerns.

Outside the halls of Congress, bipartisan support in the new and traditional media is visible, broad and deep:

• “[Wyden-Bennett] is probably a better approach than the consensus Democratic plan, which doesn’t have hard cost controls at all, and so doesn’t really explain how it’ll save enough money to be sustainable over the long haul.”
  - Ezra Klein
• “Now you might think that in these circumstances someone might take a second look at the ideas incorporated in the Wyden-Bennett plan, which already has a good C.B.O. score, bipartisan support and a recipe for fundamental reform”
  - David Brooks
• “The Senate’s smartest health-care wonk, Ron Wyden of Oregon, believes we should move away from job-based insurance. He has introduced a bill that would do this by converting the tax deduction for employer-provided health insurance into a tax credit and requiring individuals to use it to buy insurance. This would achieve universal coverage, apply meaningful cost controls, and—according to the Congressional Budget Office—pay for itself within a few years.”
  - Jacob Weisberg
• “The Wyden-Bennett bill is less expensive, covers just as many people and has actual bipartisan support. So far nine Democrats and five Republicans are sponsors, while no Republicans have backed the president’s plan yet.
  - Salt Lake Tribune
• “Despite being the darling of health policy bloggers and the first bill to be certified by the Congressional Budget Office as covering nearly everyone and fully paying for itself, the measure is being roundly ignored by those actually trying to put together a health overhaul measure on Capitol Hill and in the White House.”
  - NPR
• “A divorce of health care benefits from employment would increase social mobility, provide more individual investment in our health, and the reforms present in the Wyden-Bennett proposal would also ensure that people, regardless of pre-existing conditions or age, could still attain health benefits.”
  - E.D. Kain
• “Under the Wyden-Bennett system, health dollars would be controlled by the individual (a long-time conservative goal) and used within a restructured, heavily regulated, totally universal, insurance marketplace (a longtime liberal goal). Each state would create Health Help Agencies, who would provide easy access to insurance products, along with information, guidance, and advice on how to choose. Insurers would have to meet a minimum standard for comprehensiveness (equivalent to the standard Blue Cross/Blue Shield plan currently offered to members of Congress), and they could not discriminate based on pre-existing conditions, occupation, genetic information, gender or age. Nor could they deny insurance to those who ask for it. In return, every American would have to buy health insurance, and there would be hefty subsidies for those further down the income ladder.”
  - American Prospect
• “The idea has a lot of appeal. It would give most people far greater choice than they have now, and they could take their benefits with them when they change jobs. It also provides generous subsidies for those who cannot afford to purchase health care on their own, and yet the Congressional Budget Office has said the proposal would be “revenue neutral,” which means it wouldn’t add to the deficit. It would include a minimum defined-benefits package, with no exclusions for pre-existing conditions.”
  - TIME

UPDATE: Simon complains in the comments that the right is underrepresented in this sampling. We strive to please and are adding two more quotes:

• “The plans favored by Massachusetts Sen. Ted Kennedy or President Barack Obama rely on a “public option” in which government insurance would supposedly “compete” with private insurers, a move many see as leading to a single-payer system. By contrast, the Wyden-Bennett Healthy Americans Act relies on the private insurance market while imposing a series of regulations to squeeze savings from the private sector… The idea, Mr. Wyden says, is to harness the Democratic desire to get everyone covered to the Republican interest in markets and consumer choice. “Everything I’ve been up to with this coalition is designed to make reconciliation irrelevant,” he explains, referring to a political maneuver whereby Democrats might try to force through health reform on a bare majority of 51 votes rather than the filibuster-proof 60 votes normally required. ‘People can’t be tricked into fixing health care.”
  - WSJ
• “Republicans should embrace universal healthcare by supporting the Wyden-Bennett Healthy Americans Act. There is no another viable way to get rid of the tax-free treatment of employer-provided healthcare benefits that is severely distorting the healthcare market. Once you throw in on top of that greater benefits than those currently offered for families and individuals, consumer choice among competing healthcare plans, portability of health insurance, and (adding in the inevitable under-estimate of total cost) a price tag that costs a trillion dollars less in the next decade than any Democratic plan, you end up with the best bill in either chamber.”
  - Tom Church

It should also be pointed out that, unsurprisingly, there is bi-partisan opposition to this bill. :END UPDATE

In the end, tilting at windmills can be an exercise in futility, but oddly, we still feel pretty good about it.

With that, Donk Quixote and Phanto ride into the sunset.

Cue “Man of La Mancha”

This is my quest, to follow that star …
No matter how hopeless, no matter how far …
To fight for the right, without question or pause …
To be willing to march into Hell, for a Heavenly cause …

And I know if I’ll only be true, to this glorious quest,
That my heart will lie peaceful and calm,
when I’m laid to my rest …
And the world will be better for this:
That one man, scorned and covered with scars,
Still strove, with his last ounce of courage,
To reach … the unreachable star …

“…the situation this summer has slipped completely out of control for President Obama and Congressional Democrats. Today, The Cook Political Report’s Congressional election model, based on individual races, is pointing toward a net Democratic loss of between six and 12 seats, but our sense, factoring in macro-political dynamics is that this is far too low.

Many veteran Congressional election watchers, including Democratic ones, report an eerie sense of déjà vu, with a consensus forming that the chances of Democratic losses going higher than 20 seats is just as good as the chances of Democratic losses going lower than 20 seats. A new Gallup poll that shows Congress’ job disapproval at 70 percent among independents should provide little solace to Democrats. In the same poll, Congressional approval among independents is at 22 percent, with 31 percent approving overall, and 62 percent disapproving.”

This is consistent with my expectations for 2010. There is no realistic likelihood of the GOP regaining a majority in either the House or Senate, but they are certain to cut into the Democratic majorities. This is also consistent with history, as the party out of power will usually pick up seats in the midterm election of a first term President (GWB being a notable exception).

If I was a betting man, I’d put the over/under at a net 12 seat gain for the GOP in the House of Representatives. Looks like Charlie Cook is setting the early line at 20 seats. This is surprising, as it is comparable to the Democratic Party gains in 2008 when they had everything going in their favor.

Charlie also notes that this sentiment in the electorate may effect our congresscritters behavior when they return from recess.

We’ll see how it develops… Cheers.

Past the constant calls for saving money by eliminating wasteful spending, which never seem to materialize into actual legislation, we need to find new forms of income to pay for this bill. They seem to be failing at convincing enough senators to support taxing benefits and the more affluent, so what else is left?

For the most part, we pay for our governmental services through income taxes (both individual and corporate), property taxes and consumption taxes. Property taxes are used for other things and rightfully shouldn’t be on the table here. The two proposals that were trotted out for discussion by the Democratic leadership were both taxes on types of income. What remains are consumption taxes.

In a way, consumption taxes are the most fair. For instance it makes perfect sense to tax gasoline and tires to pay for roads, as those driving on those roads need those things to do so. So doesn’t it make sense to tax those behaviors that create high health care costs? The American people seem to think so.

Kaiser Family Foundation poll

A poll by the Kaiser Family Foundation, from back in April, found that reforming health care is one of the public’s highest priorities, that a majority of Democrats and Independents believe that we need reform now and that a majority support taxing unhealthy behaviors as an acceptable way to pay for some of these reforms. When asked it they would support raising taxes on “items that are thought to be unhealthy, such as soda, alcohol, junk food and cigarettes,” 61% approved (39% strongly favoring, with 22% somewhat favoring the idea). I’m a huge fan of proposals that kill two (or more) birds with one stone, and I think this is a textbook example of such.

To fund a health care program, it makes much more sense to tax behaviors that lead to health problems than it does to tax income in general. By doing so we can, in one fell swoop, put more of the costs of the system in the hands of those who are causing the most problems, lower the consumption of these products AND help pay for universal health care. We already have taxes on cigarettes, alcohol and items deemed luxuries like jewelry, hotel stays and amusement parks. So why not extend similar taxes to the most unhealthy ‘food’ items in the market? (I put food in quotes because one could argue that high fat and sugar content items like pop, potato chips and many fast food items can hardly be described as food)

First on the cutting block is alcohol, with 68% of respondents strongly or somewhat favoring raising taxes on it to help pay for health care reform. Smoking is more demonized in our country, but alcohol related health costs actually outweigh those related to smoking. The Marin Institute lists several alcohol related health care costs, among them $175.9 billion on alcohol related problems, also saying that they bring about “$184.6 billion dollars per year in health care, business and criminal justice costs, and cause more than 100,000 deaths.” This being the case, I see it as nothing but reasonable to levy a higher tax on alcohol, possibly in relation to which forms of it result in the worst outcomes, that is equal to the cost to society it incurs.

Still with a few hundred billion dollars to go, we come to tobacco. I was a bit surprised that a higher cigarette tax was supported by fewer than the increased alcohol tax, but this may be because tobacco products are already taxed at a high rate. Florida alone loses $20 billion dollars when you compare the taxes it collects to the money it pays out, amounting to nearly $7,000 per smoker. A study released by the CDC in 2002 showed that “For each of the approximately 22 billion packs sold in the U.S. in 1999, $3.45 was spent on medical care attributable to smoking, and $3.73 in productivity losses were incurred, for a total cost of $7.18 per pack.” These numbers are sure to have risen since then, and with somewhere in the neighborhood of 30 billion packs of cigarettes sold in the US last year, it seems more than fair to tack on at least another few dollars per pack.

Whether or not this fills the gap entirely, we also should look at taxing the most unhealthy food items. A study at University of Victoria (British Colombia) found that all income groups would benefit, although more so near the top of the economic spectrum, from a tax on junk foods that sent money towards health care programs. I would suggest that this disparity would be less pronounced in the US, where many people near the bottom of the economic spectrum have much more to gain from such an arrangement, given that it will help pay for health insurance that many of them currently do not have.

Put all of these together, and you might piece together enough to get over the hump. At the very least we could make it easier to pass one of the income tax ideas by lowering the amounts they’d have to raise through it.

One might argue that this would cause people to consume less of these products, thereby reducing the income from the levies. My response would be that we should then increase the taxes to keep up with the costs. This would hopefully create a cycle where more people would consume less, making the purchase of such products even more expensive, driving more out and lowering costs to treat those people over the long run. Herein lies the killing two birds with one stone situation.

One might also argue that this is a regressive tax. In effect it will be that way, at least at first. It is the lower end of the spectrum that spends a larger amount of their overall income on food. They also tend to eat less healthy foods. However, nobody forces them to choose to purchase these particular food items. Nobody should force them to quit, but if they want to continue to lead an unhealthy lifestyle, the rest of society should not be forced to subsidize it.

If people want to smoke, drink or eat themselves to death, then they can make a down payment on the hundreds of thousands of dollars the government will pay to take care of many of them during the last months of their lives. If we can save some of them from that fate by enacting the proposals mentioned above, thats even better.

This is Mike Fritz and David Murdock from ANP.

Senator Lindsey Graham was a passionate critic of the Bush Justice attorneys during this past summer’s Armed Services Committee hearings on interrogation.

Lately, however, Graham seems to have had second thoughts on the matter. At a recent Judiciary subcommittee hearing investigating the torture memos, Graham mounted a feisty defense of Jay Bybee, John Yoo and the lawyers who provided legal cover for detainee abuse.

This performance sent producer Mike Fritz back to the ANP archives to confirm that this was indeed the same Lindsey Graham we remembered from the summer, and sure enough, it was. As this video reveals, same guy – different message.

Click to view the whole story at Huffington Post.

If you read the C.B.O. testimony and talk to enough experts, you come away with a stark conclusion: There are deep structural forces, both in Medicare and the private insurance market, that have driven the explosion in health costs. It is nearly impossible to put together a majority coalition for a bill that challenges those essential structures. Therefore, the leading proposals on Capitol Hill do not directly address the structural problems. They are a collection of worthy but speculative ideas designed to possibly mitigate their effects.

The likely outcome of this year’s health care push is that we will get a medium-size bill that expands coverage to some groups but does relatively little to control costs. In normal conditions, that would be a legislative achievement.

There’s worse things than a medium-size bill that mitigates some negative aspects of our health care structure – except, as Brooks reminds us, President Obama is counting on significant savings in health care to pay for the trillions he’s pumping into stimulus projects.

The theory is this: we’ll be able to pay off the debts we’re generating today if we can reduce our health care costs in the future. But what if we don’t reduce those costs? What if we have to pay back our debts AND still handle increasingly high health-related costs? That’s not going to be good for our economy. But it’s the bargain we’re trying to make. And it’s something we need to keep in mind as we debate health care reform.

The current Congress loves nothing more than marshalling the power of government to save failing businesses. As Justin previously wrote, the latest is an effort to rescue newspapers:

“Despite the 24/7 availability of news from print, broadcast and digital sources, there remains one clear fact: When it comes to original in-depth reporting that records and exposes actions, issues, and opportunities, nothing has replaced a newspaper,” Sen. Benjamin Cardin , D- Md. , told a Senate Commerce Communications subcommittee .

Cardin introduced a bill he calls the Newspaper Revitalization Act. It would allow newspapers to operate as educational nonprofit entities with a tax status similar to public broadcasters, churches and hospitals.

The bill also stipulates that papers wouldn’t be able to endorse political candidates. And that, right there, is a massive problem. If endorsing a candidate is not allowed, what other political speech would newspapers avoid out of fear of losing their nonprofit status? Are we really saving the industry by subjecting it to editorial restrictions? Why not just exempt media from taxes altogether and avoid the tricky nonprofit status designation?

The recent failures of major newspapers has worried a lot of us. I do think, at this moment, newspapers still play a role us new media folks simply can’t and the broadcast media simply won’t. But would the eventual demise of newspapers really be the demise of the government watchdog? Is there no new media model which can keep people in power honest? I don’t know the answer, but I suspect in-depth reporting would find a way to survive even if its traditional medium doesn’t.

Whatever the case, I’m wary of any government plan which disrupts even a minor aspect of a newspaper’s autonomy.

On Thursday, President Obama announced support for a new bill aimed at protecting credit card holders.

As early as next week, House Democrats expect to act on a bill that would make it harder for the industry to slap new fees and rates on cardholders while also requiring clearer disclosure of the costs and risks for cardholders. The bill would codify and expedite rules already proposed by the Federal Reserve Board, rules that would not be implemented until 2010.

Legislation pending in the Senate would go further, barring lenders from imposing interest rate increases on existing balances.

As usual with these things, the specifics will be hashed out in Congress. But the credit card companies are already warning that new restrictions will inhibit their ability to provide credit in these tough times. And Republicans are calling Obama a hypocrite for going after credit card companies when his own policies are unfairly heaping debt onto the American public.

I do not doubt that some credit card companies knowingly participate in ethically questionable business practices. But, in my mind, the central problem isn’t that new fees are created without warning or that finance charges are applied without explanation, but that too many of these companies actively exploit consumers by handing out credit to those without the means of paying off debts and by creating too-good-to-be-true offers which are designed to fool consumers into making bad decisions. Even for savvy credit card holders with good habits, picking through the small print on a new offer can be a frustrating and confusing undertaking. It’s no surprise some people end up with massive bills, choked with unaffordable finance charges.

I’m not sure what the appropriate government solution to these problems would be. Transparency in credit card offers would be a good start. No more advertising 0% finance charges for 18 months while hiding the fact that being late on one payment by one day will cause you to lose the deal and end up with 20-something percent in finance charges.

After that, I’d support some form of initiative that holds credit card companies partially liable for extending credit to consumers who clearly lack the means to pay off debts. That’s a subjective matter, so the issue would probably need to be handled through bankruptcy court. But creating some form of shared liability would help prevent cases of blatant exploitation.

Obviously, credit card companies need the freedom to earn profits and wastrel consumers shouldn’t be protected from their mistakes. But I do believe there is an unhealthy imbalance between credit card companies and their consumers. As always, I fear Congress will overreach and/or focus on the wrong aspects of the problem, but I’m not upset that the matter is being considered.

This is Danielle Ivory, reporting from the American News Project and Alternet.

Back in February, in the House Financial Service Committee, when asked a question about the value of Citigroup’s assets, CEO Vikram Pandit provided a less-than-clear response: “It’s an extraordinarily difficult question.”

Click the video below to WATCH the exchange between Rep. Louis Gutierrez (D-IL) and Vikram Pandit.

Rob Weissman, director of the corporate watchdog group, Essential Action, and author of a new report called Sold Out: How Wall Street and Washington Betrayed America, said that, in addition to what Pandit said, there’s an additional factor that could fog the test results: off-the-book assets.

“If you don’t include the off-balance sheet assets in the stress test, then it’s not a legitimate stress test,” Weissman said. “It’s pretty plain that the off-balance-sheet operations are a central part of the story of why we don’t know what the banks own.” The Treasury Department declined to comment on whether they would take off-book-assets into account when running the stress tests.

Weissman says that recipients of bailout money, like Citigroup, Bank of America and JP Morgan, have been engaging in “fanciful accounting” of what they owe and what they own by relocating of their less-than-healthy assets off the books, in shadow corporations. Rep. Brad Sherman has described the process as, “apples on one balance sheet and oranges on another.”

According to RGE Monitor, off-balance-sheet operations have skyrocketed over the last 15 years. From 1992 to 2007, on-balance-sheet assets grew by 200 percent, while off-balance-sheet assets grew by 1,518 percent. In 2007, it was estimated that there was 15.9 times more money parked in off-balance-sheet operations than in on-the-book operations. Not all off-book assets are toxic. Some financial institutions might park assets off their books if they are planning, for instance, to sell them. However, in rough economic times, off-balance sheet accounting allows banks to veil their losses from investors, regulators, and even insiders.

“This turns out to be a really important benefit [for a bank] if it happens to be insolvent,” Weissman added. “And many believe that if you total Citigroup’s assets and liabilities, it is insolvent.”

As of July, Citigroup appeared to have the most off-book assets — an estimated $1.1 trillion. But they aren’t alone. As of July 2008, JP Morgan Chase & Co. had more than $400 billion off their books. Bank of America had $48.2 billion off the books before it bought Merrill Lynch. “If you start adding up all the potential exposures, it’s a huge number,” Sam Golden, former ombudsman for the U.S. Office of the Comptroller of the Currency, told Bloomberg. “The banks will say that it was disclosed. Investors are saying, ‘Yeah, but it was cryptic.’”

Disclosure rules for off-balance sheet operations are notably less strict than those for assets on the books. Neri Bukspan, chief accountant for Standard & Poor’s told Bloomberg, “A lot of information tends to disappear.”

The use of the off-balance-sheet assets was a core part of the Enron scandal, where they were able to wrap debt inside of debt, using obscure corporations, so no one could track what they owed and what they owned. After the Sarbanes-Oxley Act of 2002 was set in place, there were efforts to address the problems with off-book assets. But after heavy lobbying by two main trade groups, the Securities Industry and Financial Markets Association and the American Securitization Forum, banks were given special exemptions.

In September of 2008 as the financial crisis was coming into full view, the Senate Baking, Housing, and Urban Affairs Committee held a hearing, discussing off-balance sheet operations. Senator Jack Reed recalled Enron: “This phenomenon of moving assets off the balance sheets is eerily familiar. We recall back in the days of Enron that its schemes to manufacture false profits included special purpose entities that conducted transactions off-balance sheet. The goal was to avoid financial reporting. While no one is necessarily suggesting scandals of the Enron kind, we cannot fail to admit the irony. We are dealing with a similar problem yet again, only six years later.”

George P. Miller, Executive Director of the American Securitization Forum, said that moving assets off-book back on to the books would cause dangerous swelling of balance sheets. He added, “There are many other steps that the industry can and should undertake to promote broader and better transparency about risk exposures in these vehicles, whether they are on or off-balance sheet.”

But Donald Young, former member of the Financial Accounting Standards Board countered, “We just had an investment bank [Lehman Brothers] go bankrupt with a fair value balance sheet that showed it had plenty of assets and liabilities. And it almost seems like financial reporting is out of control and not trusted and not believed in. And I think what we do here has got to establish transparency. If the transparency is such that we’re going to bring out some bad news that wasn’t there before, that’s a risk. But I think the benefits of reestablishing confidence in the markets will overwhelm that.”

The Financial Accounting Standards Board (FASB) are revising the rules so some off-book assets will have to be reported on the books. However, the changes won’t be effective until January 2010 at the earliest. In March at a House Financial Services Subcommittee hearing, Rep. Sherman complained about this lag. He told the chairman of the FASB, Bob Herz, “If you guys can’t act quickly and logically, perhaps the regulatory accountants need to act and depart from what is a somewhat illogical and certainly slow process that you’ve got.”

In the meantime, in a recent letter to his employees, Pandit has said Citigroup is having its best quarter since 2007 and the bank had conducted its own internal stress tests with positive results. But Weissman says something doesn’t add up. “Either they’ve done a lot of due diligence in a short amount of time that they hadn’t done before, or the stories are incompatible.”

Crossposted at Alternet.

What is reconciliation? Here’s the summary:

Reconciliation is a procedure under the Congressional Budget Act of 1974 by which Congress implements budget resolution policies affecting mainly permanent spending and revenue programs. The principal focus in the reconciliation process has been deficit reduction, but in recent years reconciliation has encompassed revenue reduction generally and spending increases in selected program areas.

So, since healthcare reform is expected to be part of the new budget, it can be swept in through reconciliation.

Bear in mind, Reid has also stated that the bipartisan bill currently in the works from Democrat Max Baucus and Republican Chuck Grassley should be given a chance. I hope this is the opinion of President Obama as well, because resorting to reconciliation on such significant legislation would probably destroy any chance of bipartisanship in the future. Yes, some Republicans will obstruct whatever healthcare bill comes up for a vote, but there are still enough reasonable Republican Senators for the Democrats to be able to craft a balanced bill that can avoid a filibuster.

I understand Democrats are eager to reform healthcare and that it is an issue that needs some form of government action (to, if nothing else, correct previous, bad government actions from the municipal level to the federal level). But passing the first bill which can win 51 Senate votes is very unlikely to yield balanced, smart legislation. Giving Republican Senators a voice will ensure the regulation-happy contingent of the Democratic party will be somewhat subdued by smart deregulatory ideas that exist on the right.

I’m pretty sure a large majority of Americans want healthcare reform. Hopefully we will get reform that the majority can support.

[In the signing statement,] he objected to provisions of the bill that he said the Justice Department had advised “raise constitutional concerns.” Among them are provisions that Obama said would “unduly interfere” with his authority in the foreign affairs arena by directing him how to proceed, or not to, in negotiations and discussions with international organizations and foreign governments.

Another provision, Obama said, would limit his discretion to choose who performs specific functions in military missions.

Many Presidents have used signing statements in lieu of an all-out veto, presumably because vetoes come with a political price and, in the case of omnibus bills, would throw out the good with the bad. Nevertheless, this signing statement is yet more proof that Obama has yet to get the reins on Congress. Not only did the president feel as if he couldn’t take a stand on earmarks, he apparently lacked the clout to keep congress from meddling in executive powers pertaining to foreign affairs and military operations.

I won’t be so silly as to ask what foreign affairs provisions were doing in a spending bill (those things are a nasty stew), but I don’t think it would have been too much for the president to ask congressional leaders of his own party to eliminate the provisions before sending the bill his way. A signing statement hardly fulfills Obama’s desire to lead a government where the branches work better together. Let’s hope Obama doesn’t feel the need to make a habit out of signing statements.

 

Thanks to the powerful stand taken by two Democrats, Evan Bayh, a centrist after my own heart, and Russ Feingold, a staunch, principled liberal, both of whom will vote against the $410-billion spending bill as long as it contains 9,000 earmarks, the Senate leadership came up one vote short on moving the bill forward.

 

Congress is now giving itself another five days to pry the needed vote, probably from the Republicans, many of whom want their own earmarks to pass although they are stalling for the moment to embarass the Democrats.  But some other Republicans, led by John McCain, are leading the charge against this unconscionable waste at a time when federal dollars are needed for more important things.

 

Throughout his campaign last year, President Obama promised repeatedly to change the tired ways of Washington, reform the “old politics,” and specifically go “line by line” through the federal budget to restrain wasteful spending. In his inauguration address and other speeches since January 20, he has again and again struck the same rhetorical notes of change, reform and fiscal responsibility.

 

Now, he has the perfect opportunity to make good on his words.  Reform-minded Democrats and Republicans have exposed this especially smelly bit of old-style Washington politics and slowed down its enactment.  By announcing that he would veto the bill unless it is stripped of earmarks, the President could guarantee that the House and Senate leadership would do just that and present him with a clean bill.  They would have no choice, since they would not be able to muster the two thirds majorities of both Houses to override his veto.  In any case, the Democratic leadership would not have the stomach to engage in battle with their own party’s new, very popular President. 

 

President Obama would not only fulfill the spirit and letter of his campaign promises. He would gain enormous respect among voters and opinion makers throughout the country and across the political spectrum, opening up new opportunities for genuine post-partisan cooperation on other, pressing issues.  And not incidentally, it would also be good policy — good for the nation and good for all Americans.

 

So why is he calling this ”old business” and doing his best to duck the issue?  Why won’t he take a stand?  Alas, the answer is that the old politics of Washington against which he campaigned to eloquently is alive and well.  Key Congressional committee chairs and ranking members, along with many of their colleagues, regard pork projects as theirs by right and will never part with them without a fight.  No doubt, Obama fears that these powerful people on Capitol Hill will retaliate against him in many less-than-public ways if he screws them out of their earmarks.

 

No doubt some will try to do that. But did we not expect that Obama would at least try to rise above these political considerations and show some courage in bringing “change we can believe in” to Washington?  

If he does, he will be able to count on even stronger popular support to offset any fallout among Congressional grandees.  If he doesn’t, he will fully deserve to face the consequences of further public disappointment and gathering opposition.  It’s up to him.

 

What are your thoughts?  Post a comment.

 

(Visit me at The Purple Center)

It’s not just out-of-touch Republicans and us lonely Centrists who are disturbed by the profligate spending of Congress. Joining the call for fiscal sanity is none other than Democratic Senator (and one-time VP hopeful) Evan Bayh. In a Wall Street Journal editorial, he writes:

This week, the United States Senate will vote on a spending package to fund the federal government for the remainder of this fiscal year. The Omnibus Appropriations Act of 2009 is a sprawling, $410 billion compilation of nine spending measures that lacks the slightest hint of austerity from the federal government or the recipients of its largess.

The Senate should reject this bill. If we do not, President Barack Obama should veto it.

The omnibus increases discretionary spending by 8% over last fiscal year’s levels, dwarfing the rate of inflation across a broad swath of issues including agriculture, financial services, foreign relations, energy and water programs, and legislative branch operations. Such increases might be appropriate for a nation flush with cash or unconcerned with fiscal prudence, but America is neither.

Here’s the thing: you don’t have to be a do-nothing Republican in order to be disturbed by the bloated spending bill making its way through Congress. Just like you didn’t have to be anti-progress in order to have taken issue with the over-indulgent stimulus bill. There is middle ground between not acting and overreacting.

Democrats were not put in power to continue the wasteful ways of Republicans. Bayh understands this. Why doesn’t the rest of his party? And why has President Obama decided not to take a stand against the excesses of this spending bill?

Bayh concludes with:

But the bloated omnibus requires sacrifice from no one, least of all the government. It only exacerbates the problem and hastens the day of reckoning. Voters rightly demanded change in November’s election, but this approach to spending represents business as usual in Washington, not the voters’ mandate.

Now is the time to win back the confidence and trust of the American people. Congress should vote “no” on this omnibus and show working families across the country that we are as committed to living within our means as they are.

Yep. That should be self-apparent. Clearly, it’s not.

In 2008, both major presidential candidates promised to curtail earmarks. The only one who has yet to blink on the issue lost his fight today to reign in the excesses of the new spending bill.

John McCain just can’t win.

The story:

The Senate voted overwhelmingly to preserve thousands of earmarks in a $410 billion spending bill on Tuesday, brushing aside Sen. John McCain’s claim that President Barack Obama and Congress are merely conducting business as usual in a time of economic hardship.

McCain’s attempt to strip out an estimated 8,500 earmarks failed on a vote of 63-32. The Arizona senator’s proposal also would have cut roughly $32 billion from the measure and kept spending at last year’s levels in several federal agencies.

Last year’s Republican presidential candidate said both he and Obama pledged during the campaign to “stop business as usual in Washington,” and he quoted the president as having said he would go line by line to make sure money was spent wisely.

McCain has a distinguished career battling earmarks and I’m glad he’s still fighting the good fight. I’ll hold off calling Obama an earmark hypocrite until after he’s had more time to impose his will. He did keep earmarks out of the stimulus bill (although he hardly reigned in the excess). Hopefully the continued anti-earmark actions by McCain and others will push Obama into keeping his promise on future spending bills.

We’ll see…

Taxpayers for Common Sense, a watchdog group, identified almost 8,600 earmarks totaling $7.7 billion; Democrats say the number is $3.8 billion.

Either way, it is far more than Obama promised as a candidate. He refused earmarks for the economic stimulus package he championed and a children’s health bill.

He similarly pledged to reject tailored budget requests that let lawmakers send money to their home states. [Administration budget chief Peter] Orszag said Obama would move ahead and overlook the time-tested tradition that lets officials divert millions at a time to pet projects.

“We want to make sure that earmarks are reduced and they’re also transparent. We’re going to work with the Congress on a set of reforms to achieve those,” said Orszag, director of the Office of Management and Budget.

The official excuse is that Obama’s real budget will go into effect this fall. This current spending bill is just a holdover from the Bush Administration. So, you know, blame Bush. Although he’s no longer in office. And his party is in the minority.

This is politics as usual. Obama is popular, his administration is barely out of the shrink wrap and, frankly, he owes a lot of the Congressional Democrats for helping him get elected. He’s going to let them have their earmarks now, when he’s still too popular and it’s still too early in the next election cycle for Republicans to gain much traction on the issue. Come fall, when the next spending bill comes up, look for Obama to take a harder stance on earmarks. Or develop a more eloquent excuse for allowing them.

Too bad Obama chose expediency over confrontation this time around. Putting his foot down now would have sent a crystal clear signal that he really does intend to change things.

On Wednesday, the House will consider a proposed $410 billion spending plan for the rest of fiscal 2009 — and there’s been no attempt to hold down spending:

That package would spend about 8 percent more than the same programs got last year, the second biggest annual increase since 1978 for discretionary spending, programs that the government isn’t required to fund, unlike Social Security and Medicare.

…

House Speaker Nancy Pelosi , D- Calif. , on Monday defended the coming spending spree, which includes an estimated 9,000 earmarks, or local projects, said to cost about $5 billion . She called the bill “the unfinished business of last year, when the president refused to address the priorities and needs of the American people.”

The stimulus bill was rushed through Congress. Look for this spending bill to go through even faster. The bill has to get passed by March 6th to keep government programs from running out of money. No wonder the Democrats feel unpressured to show some restraint. This thing could be sign, sealed and delivered before most Americans know any of its details.

Granted, Congress is obliged to pass enormous spending bills every year in order to keep the federal government running. But, with the stimulus bill already signed into law, does Congress really need to be increasing other types of spending? Let’s not forget, the more we spend now, the more we have to pay back in the future. In fact:

The CBO projects that the GDP in 2015 and beyond will be as much as 0.2 percent smaller than it would have been without the stimulus package, dragged down by financing all the debt that’s being piled up. In addition, noted the Committee for a Responsible Federal Budget, a bipartisan fiscal research group, the bill will “have a permanent impact on the deficit through higher interest payments on additional public debt.”

Clearly President Obama is right to be pushing for fiscal responsibility. But he’s going to have to do more than make speeches to get his own party to comply. If his pledge to cut the deficit in half by the end of his term is an earnest one, he should start by demanding Congress decrease the spending proposed in the upcoming bill.

Sunlight Before Signing: Too often bills are rushed through Congress and to the president before the public has the opportunity to review them. As president, Obama will not sign any non-emergency bill without giving the American public an opportunity to review and comment on the White House website for five days.

That is not going to happen with the stimulus bill.

On Feb 10, the House of Representatives unanimously passed a resolution with these instructions for the stimulus bill [From the Congressional Record]“:

Mr. LEWIS of California moves to instruct the managers on the part of the House that they shall not record their approval of the final conference agreement (as such term is used in clause 12(a)(4) of rule XXII of the Rules of the House of Representatives) unless the text of such agreement has been available to the managers in an electronic, searchable, and downloadable form for at least 48 hours prior to the time described in such clause.

That didn’t happen either.

This is what actually happened:

Happy Valentines Day everyone! Send your Congressman and Senator some love.