House Passes Sweeping Climate Change Bill Dramatically, How Far "In the Wilderness" Is the GOP?

House Narrowly and Dramatically Passes Climate Change Bill
The House of Representatives on Friday passed by a very narrow margin, the most sweeping environmental bill in this nation's history. It basically would give President Obama everything that he wants from an environmental policy perspective: cap and trade, increased requirements for renewable energy, tax subsidies to help lower income individuals cope, subsidies for hybrid and electrical vehicles as well as tariffs for countries that do not have similar rules in place.

Republicans decried the cost to the consumer and the potential to spark a trade war. In the end, the vote of 219-212 was extremely close, with 8 Republicans joining 211 Democrats to vote in favor and 44 conservative to moderate Democrats joining the remaining 168 Republicans in opposition. This gives the house vote a 0.78 on our partisanship index or a "fairly partisan" ranking.

If you are in favor of these provisions, don't rejoice too much. There is zero chance that this bill, as written, could pass the Senate, where to break a filibuster, it will have to appeal not only to liberal Democrats but to moderate Democrats like Ben Nelson and Arlen Specter and moderate Republicans like Susan Collins and Olympia Snowe. Passage of the House bill greatly improves the chances of passage of sweeping legislation this year, but I have no doubt that if a bill ultimately passes both houses of congress, it will be more moderate than the version that just moved through the House.

A History of Political Power -- How Much Trouble is the GOP In?
There has been a lot of proclamation on the left that the GOP is dead in the water. A shrinking proportion of the electorate, we are told, they are at record low levels of political power and will continue to shrink over the next few years.

History might suggest otherwise. Sure, the GOP faces structural problems -- an aging party base, a lack of appeal to ethnic minorities who will soon be the majority, but parties have reinvented themselves before. Richard Nixon had the Watergate scandal -- just a cycle and a half later the Reagan revolution happened. George H.W. Bush had some of the worst approval ratings of any sitting President -- just 2 years later the Contract with America swept Republicans back into the House and Senate.

Of course, some returns take longer than others. Hebert Hoover's dealing with the start of the Great Depression cast the Republicans into the woods for a long time. Andrew Johnson's ineptness in dealing with reconstruction shoved Democrats out of power for years (in spite of the fact that he had run on a ticket with Republican Abraham Lincoln.)

So, where does the current GOP malaise rank? Let's start by looking at a chart of national political power in this country. The percentages are weighted 1/3rd based on House seats, 1/3rd based on Senate seats and 1/3rd based on control of the Presidency.


I find the ebbs and flows on this chart telling, but incomplete. Presidents are binary by nature, either one party wins or the other does. But congress can move by small percentages. So, let's look at the history of congressional power.


We can see that the GOP is nowhere near the lows of FDR's administration, not even as low as the post-Watergate era.

Don't get me wrong, the GOP has problems. They lack a unified platform or good spokesmen. They have a weak field for 2012 at this point. They don't seem poised to have a real shot at either house of congress in the next cycle. I'm simply saying history tells us that things can change quickly in politics.

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Another Political Affair, Stimulus Update, Congress Heads to Recess

Just Another Couple All-Too-Human Politicians
I had intentionally withheld comment on the affair revelation of Senator John Ensign (R-NV) as I generally find it extremely distasteful to psychoanalyze the personal lives of politicians. But, the revelation this week of Gov. Mark Sanford (R-SC) that he has also been having an affair with a woman in Argentina, not to mention the bizarre set of circumstances surrounding it, compels me to make a few observations about the political implications of these revelations.

First, let me state unequivocally that I feel the personal affairs of these men should be none of our business. We we elect leaders, we hire people to do a job, whether it is Governor, Senator or President. It is not a fair or reasonable expectation that we hold them accountable for everything that happens in their personal life. Relationships and marriage are complex enough, that far be it from me to presume to be able to judge the personal decisions of someone that I have never even met.

In the case of Governor Sanford, there is clearly a job-performance issue in that no one in government knew his whereabouts for days. It's a bad thing, for sure, but absent the affair, I'm not sure it would be damning. And Senator Ensign had an affair that did not impact his job in any way.

Having stated my personal views, let me also state that I fully understand that this is not how the game is played. While I don't agree with it, it is abundantly clear that such things obviously have an impact on political futures. This is especially true in the Republican Party, where those who strongly promote "traditional values" and appeal to Christian Conservatives add the element of personal hypocrisy in addition to the gory details.

The reality is that both men are finished as far as national ambitions are concerned. Senator Ensign was considered a rising star in the party and Governor Sanford had been considered a 2012 prospect. No more. Senator Ensign may or may not retain his job in the future (he isn't up in 2010), Governor Sanford is almost certainly done in politics after his term expires at the beginning of 2011.

I never loved either of these guys politically, but I feel sorry for them personally. The standards that we hold our politicians to are ridiculous. How many Fortune 500 CEO's would pass the same tests? Something has to give before every potential great leader steers clear of politics and all we are left with is blowhard ideologues. Remember, "Honest" Abe Lincoln got his nickname for repaying a debt to a hooker and John F. Kennedy had more affairs than years as President. Would we be better off if we had disqualified them from office?

Stimulus Update
Latest numbers from the Feds:
Authorized: $152.4 billion (30.5%) up $5.2 billion from last week
Spent: $52.9 billion (10.6%) up $4.0 billion from last week

The gap between authorized projects and spent money continues to grow. Transportation spending continues to lag with only $370 million spent so far, but $153 million of that is in the past week, so the pace has definitely accelerated.

Congress Heads to Recess -- Health Care Very Much in Question
Congress is headed to its 4th of July recess with a lot of unfinished business to complete this summer. There is the nomination of to the Supreme Court of Judge Sonia Sotomayor. There are all of the appropriations bills for the fiscal year that starts in October and there is that whole health care issue, which will likely wind up being intertwined with a heated debate over the HHS appropriations bills.

So far, appropriation actions have been taken as follows:
Senate -- no action on any bills (all bills must originate in the House, per the constitution)
House:
(1) Commerce & Justice
After Democratic leaders decided to limit amendments and debate, the GOP cried foul but was basically powerless to stop the movement of the bill (House rules do not give nearly the latitude to stall to the minority that Senate rules do.)

Final Vote: 259-157
Date Passed: June 18th
Partisanship Index: 0.83 (fairly partisan)

(2) Legislative Branch
A tiny bill in the grand scheme of things, but subject of much grand-standing about congressional spending.

Final Vote: 232-178
Date Passed: June 19th
Partisanship Index: 0.78 (fairly partisan)

(3) Homeland Security
A bill with lots of amendments but surprisingly high bipartisanship

Final Vote: 389-37
Date Passed: June 24th
Partisanship Index: 0.21 (highly bipartisan)

(4) Defense
Few amendments and broad bipartisanship

Final Vote: 389-22 with 1 voting "Present"
Date Passed: June 25th
Partisanship Index: 0.07 (highly bipartisan)

(5) Interior
Consideration begins tomorrow

Yet to be debated: Health and Human Services (likely to include Universal Healthcare debate), Veterans Affairs, Agriculture, Defense, Education, Energy (likely to include Cap and Trade debate), Housing and Urban Development, Labor, Transportation and Treasury.

That's a lot of work to do since both houses have to pass a bill then repass the conference report. And major, game-changing debates to be had. But, hey, Congress never got a budget in place last year, so at least things are moving along.

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Obama Dips His Toes into Iran, Is This the New Economic Normal?, Things That Annoy Me

President Obama Wades Carefully into Iran Situation
In his press conference today, President Obama declared that he was "appalled and outraged" at violence against protesters in Iran. It was the most direct statement made by the administration to date calling to task the powers that be in Iran. President Obama continued to stop short of directly criticizing the election process or result.

This appears to be par for course for President Obama, whose tendencies on both foreign and domestic issues to date has been to take a measured approach and slowly ramp up rhetoric in response to conditions. We had a glimpse of this in the campaign -- think back to the Jeremiah Wright controversy.

I doubt that his press conference today will appease conservatives who sought much more direct influence from the White House from the get-go. President Obama's measured approach is the polar opposite of former President Bush's. If you are a liberal, he is thoughtful, contemplative and intellectually geared. If you are a conservative, he is wishy-washy, indecisive and lacks courage. PoTAtoes, potTAHtoes.

It's Stopped Getting Worse, but Will it Get Better?
The gains in the stock market has stalled, unemployment is still at a record high and the World Bank just revised its global economic forecast down to a 2.9% contraction in the global economy this year.

It has many thinking -- you call this a recovery?

The problem the markets are experiencing right now is that while we no longer appear on the verge of a global economic meltdown, as we did to many in late Februrary and some of the economic statistics (home sales, retail sales, etc.) have stopped declining, all of the economic indicators have stabilized at a lower level.

It has led many to ask the question -- is this the new norm? Will we be living with 9-10% unemployment, zero growth and hard-to-get credit for generations to come?

I don't think so. The engine that drives long-term economic prospects is productivity growth - and productivity is still growing. The economy is performing under capacity right now -- too many people out of work, too many people working part time, too many people underemployed. But these are transitional, not structural issues. In fact, the history is that recessions often spawn productivity growth as businesses find creative ways to be more efficient out of survival instinct. We certainly saw this in the last 3 recessions. So, rest assured, things WILL get better again.

What may be fundamental changed is credit conditions. The S&P may take years to get back to 1,500 because corporations have realized the risk that massively debt-ridden balance sheets can cause (ask a few casino companies or maybe some banks.) Individuals are saving again because they realize that they can no longer rely on their home value and their 401K always going up. So thrift may be back in, at least for a while. But we grew the economy pretty well in the 1950s and people were relatively a lot more thrifty then. Innovation drives productivity, not spending.

Things That Annoy Me
A new feature -- suggested by my wife -- some short-takes on some things I find very annoying, in the political world and elsewhere. So, here it goes...things that annoy me:

(1) Glenn Beck. You can't like him unless you think Rush Limbaugh is too civil and liberal.
(2) Democrats who say they are feminists but defend David Letterman because the teenage girl he joked about isn't "on our team"
(3) Sarah Palin -- not over the Letterman controversy, but because she can't complete a sentence
(4) People who think that I care who won the U.S. Open
(5) People who call Sonia Sotomayor a racist. Oh, the poor opressed white guy. We just don't ever catch a break.
(6) Drivers who don't use turn signals
(7) Congressional Democrats, especially Harry Reid and Nancy Pelosi -- for never being organized on anything, never being united on anything and never having any backbone on anything

And finally, my annoyance of the week:
(8) Righteous ex-smokers (yes, I'm talking to you, President Obama), who want to legislate that we do what they had a choice about doing.

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The Costs of Health Care Reform, Stimulus Update, Some Historical Perspective

The Cost of Health Care Reform
It struck me as I was listening to some of the debate on the Sunday morning talk shows this morning, that we have lost all perspective in the health care discussion. Here are some facts to form the basis for an informed discussion. Where spending numbers are cited, they are based on CBO estimates.

(1) The federal government approximately $1 trillion per year on health care, excluding the costs of health insurance for federal employees. This is comprised of $700 billion in Medicare and Medicaid spending, $250 billion for tax preferences and subsidies for health insurance and $50 billion in veterans care and other miscellaneous health care initiatives.

(2) The leading proposed health care reform proposal, Senator Kennedy's (D-MA) bill, is estimated to cost $100 billion per year. You have probably heard a $1 trillion price tag, but this is over 10 years (1 trillion divided by ten is 100 billion.)

(3) The war in Iraq is estimated to have cost over $1 trillion over the course of 6 years.

(4) The economic stimulus package will cost an estimated $787 billion over the course of less than 3 years.

(5) The federal deficit this year is estimated at $1.8 trillion.

(6) The Kennedy bill is estimated to cut the number of uninsured in this country by 15 million, solving less than a third of the overall problem.

So, let's analyze. Health care reform as proposed, will be cheaper on an annual basis than the Iraq war. It will be about one third the size of the economic stimulus package. If totally unfunded, it would add about 6% to the deficit. It would represent about a 10% increase in total government health care spending.

Frankly, folks, the cost and scope of this thing is overblown. We are not having a real debate on a Canadian or British-style single-payer system. We are debating about nibbling at the edges with a proposed government-backed insurance alternative.

If the Democrats in Congress can't get this meager piece of reform done, they deserve to be voted out in 2010. Right now, they do not appear to have the votes. We'll see how the debate unfolds. Even former President George W. Bush got prescription drug benefits done.

Incidentally, here is some food for thought. In the history of publicly funded health care (approximately the past 100 years), no country that has gone to a government-run system has ever gone back. That means that EVERY country that has passed universal health care has found, over time, that it is superior to a free-market system. Just some food for thought.

Stimulus Update
The latest figures:
Authorized: $147.2 billion (29.5% complete) -- up $6.2 billion from last week
Spent: $48.9 billion (9.8% complete) -- up $2.5 billion from last week

Money continues to flow, although the trend continues to be that it is getting authorized a lot faster than it is getting spent. Traditional infrastructure spending, such as roads, bridge, etc., the so-called "shovel-ready" projects have lagged, with only $217 million spent by the Department of Transportation so far, despite $17.5 billion being authorized.

The pace will have to pick up to have quell rising unemployment. It is interesting to note, however, that for the first time since the recession began, last week the number of people receiving unemployment benefits actually declined modestly. This could foretell a drop in the unemployment rate, or it could just mean that a lot of people are having their benefits expire. We'll see when the June figures are published.

Historical Perspective
Since I publish frequent updates on President Obama's popularity, it's time again to put that approval rating in some perspective. We are well out of the much-lauded "first 100 days", so let's see how President Obama stacks up against some recent occupants of the White House in terms of approval. As we don't have the benefit of the same sample-weighted average poll of polls for previous President's that we have for President Obama, we will rely on Gallup data for comparison, as Gallup has had a tracking poll for every Post-World War 2 President. At comparable points in their Presidencies, the other Post-World War 2 Presidents stacked up this way:

Harry Truman: 65% Approval
Dwight Eisenhower: 70% Approval
John Kennedy: 72% Approval
Lyndon Johnson: 74% Approval
Richard Nixon: 60% Approval
Gearld Ford: 51% Approval
Jimmy Carter: 62% Approval
Ronald Reagan: 58% Approval
George H.W. Bush: 60% Approval
Bill Clinton: 44% Approval
George W. Bush: 55% Approval
Barack Obama: 58% Approval

You can see, in the Post-Nixon era, average approvals have declined a lot more quickly. The average for Truman through Nixon is 68% at this point in their terms, Ford through Obama, the average is 55%. This likely reflects the increased public scrutiny of public officials in the post-Watergate era and, more recently, the rise of 24/7 media.

So, President Obama is tracking behind all the Presidents through Nixon at this point in his term. Versus the post-Nixon Presidents, he is ahead of Ford, Clinton and W. Bush, even with Reagan and behind H.W. Bush and Carter. Of course, Clinton and W. Bush were re-elected and H.W. Bush and Carter were not. In fact, the average for those re-elected Post-Nixon is 52%, whereas those who were not re-elected is 58%.

So do these numbers actually tell us anything at this point?

All things being equal, obviously if I were President I'd rather be popular than unpopular, but it just shows that a heck of a lot can happen in three and a half years. Here are the things to watch out for in the trending. Let's look at what happened to the President's who won and lost re-election after this point:

The Winners
Ronald Reagan -- continued to decline, all the way to a 39% trough in early 1983 as the recession deepened and the GOP suffered huge losses in congress in 1982. Then, slowly ascended to 60% by the 1984 election.
Bill Clinton -- was on an uptick and broke back above 50% in early 1994, then declined again to 40% in late 1994 and suffering massive congerssional losses that year. He then began a slow rise to 57% by election-time in 2006.
George W. Bush -- stayed in a narrow channel in the mid-50s until September 11th, when his popularity spiked to over 90%, which helped to lead to unusal GOP gains in the 2002 mid-terms. It then began slow, steady decline, but was still at 53% in the 2004 elections.

The Losers
Jimmy Carter -- saw a slow, steady decline all they way to 30% in late 1979. He then saw a brief bump to above 50%, but was back to the low 30s come election day in 1980.
George H.W. Bush -- approval spiked up to near 90% by early 1991 as Operation Desert Storm kicked into full gear. Then saw a steady decline to the high 30s by election date as the recession took hold. Ironically, rose to above 50% approval after the election as economic conditions started to improve.

So what can we glean from this? Approvals at this point in a presidency probably say a lot more about how the mid-term congressional elections will go than how the next presidential race will shape up. Second, major events, particularly in foreign policy, can cause dramatic changes in Presidential approval. Finally, President Obama is slightly, but not dramatically above the mid-point for post-Nixon Presidents. He has certainly been among the most active in his early administration, partly due to circumstances, partly due to Democratic congressional control and partly due to his own tendencies towards a shift from Bush administration policies.

Next time, I'll take a look at macro-political trends to answer the question, in context, as to how much trouble the GOP is in. A good place to start is to compare this GOP to the post-Watergate GOP and draw comparisons.

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Partisan-Looking Appropriations, Angry Gay Rights Activisits, Kent Impeached, Iran Continued, Obama Approval Update

The Appropriation Process Beings with Partisan Sniping
The House has begun its appropriations process for the fiscal year that begins in October, and the first of the departmental appropriations bill -- the bill funding the seemingly not-so-controversial Departments of Justice and Commerce provides a striking example of just how large the partisan divide still can be. Democratic leadership made the decision to severely limit amendments, angering House Republicans, who, in turn, voted against the bill 149-24. Of course, the Democrats are demonstrating that they don't need Republican help to get things through the House (the bill passed 259-157 on the strength of Democratic votes.) And it isn't like this is the most partisan bill ever passed (after all, 24 Republicans voted for it and 8 Democrats against it.) But limiting amendments that might actually pass the Democratic-dominated body seems downright undemocratic, and the kind of practice that Pelosi and company used to decry when they were in the minority. Amazing how both partisans can do full 180s on the power of the ruling party when the balance of power shifts.

The appropriations process is long and this is just the first step. After passing the House, each appropriations bill will move to the Senate, which will have a lengthier debate about each because of the rules of debate (60 Senators have to vote to invoke cloture and limit debate.) Then, a conference committee will have to reconcile the two versions and a final version of the bill will have to pass both houses.

Often, the process is not finished by the start of the fiscal year in October and the congress has to pass temporary continuing resolutions to keep agencies funded in the mean time.

Gays to Obama: We Are Mad as Hell
Despite President Obama's efforts to reach out to the gay community by providing some federal benefits to gay partners, the gay community is mad.

They are mad that there has been no movement on gays in the military (see my previous blog: The Worst Law in the Land), they are made that he has not moved to repeal the Defense of Marriage Act (which, among other things, allows states to not recognize gay marriages from other states) and they are still mad that Rick Warren spoke at the inauguration.

They certainly have a point, President Obama has been less than a stalwart promoter of gay rights. But, he never really claimed to be a gay rights advocate and I think what we are learning is that these issues frankly aren't that important to him.

I think the President is on the wrong side of history here and is missing a cultural revolution that is happening at the state level to promote gay rights. That is shame. But not that unexpected.

Judge Kent Impeached
In some high drama, the House has unanimously voted to impeach Judge Samuel Kent of the U.S. District Court in Texas after he pled guilty to sexually assaulting two women, but refused to resign his post, stating that he wanted to contineu to draw his salary for another year.

Are you kidding me? You just got convicted of a felony but think you are entitled to another year of free money from the tax payers?

In order to remove Kent from office, the Senate will have to conduct a trial and vote to remove by at least a 2/3rds margin. I hope they move quickly.

This is the first impeachment passed by the House since Bill Clinton was impeached on charges of lying under oath about his affair with Monica Lewinsky.

Iran -- President Obama on the Sidelines
As protest continue in Iran and the Iranian government threatens bloodshed if they continue, President Obama has remained largely silent on the topic. He has started to come under fire from some for not taking a more active role.

My question is: what possible good would a more active role play? President Obama claiming the election was rigged (without real evidence, although most experts agree it was) would only inflame the Arab world against continued U.S. intervention. Right now, this is a grassroots uprising -- if President Obama speaks out it is a western-led conspiracy.

Obama Approval Update
No big shifts in President Obama's numbers in the past week and a half. He is holding at an approve minus disapprove of 26.9%. He has been in the 25% to 30% range since mid-May.


Broken down monthly, he continues to show a lower average in June than in May (every month of his presidency have seen his numbers decline, albeit slowly.)


Looking by poll sample type, we see:
Adult Americans: +29% Approval
Registed Voters: +31% Approval
Likely Voters: +9% Approval

This is the first time that we have seen the Adult Americans and Registered Voters numbers inverted with Registered Voters being more approving. This could be a statistical anamoly (Likely Voters still show much lower numbers) or it could suggest some poll methodology divergence. Either way, we'll keep an eye on it.

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The Stage for the Great Health Care Debate, Quagmire in Iran

The Stage is Set...
Of all the policy ambitions laid forward by President Obama for his first year in office, perhaps the most aggressive was the notion of signing universal health care legislation into law.

Let's review first the history:
This is at least a 50 year old debate. Universal coverage was first proposed (as near as I can tell) by President Harry Truman. It was advocated by not only Truman, but John Kennedy, Lyndon Johnson, Richard Nixon, Jimmy Carter and perhaps most aggressively, by Bill Clinton. All of them failed. Sure, Johnson took a step towards universal coverage with "The Great Society" which created the Medicare and Medicaid systems that provide coverage for the elderly, disabled and poor. President George W. Bush expanded Medicare coverage to include prescription drugs. Fully 5% of our GDP is now spent on government-funded health care. But 5% is less than a third of the estimated 16% of our GDP spent on health care in total, a far-cry from single-payer systems in Canada and Great Britain. And 42 million Americans remain without health coverage, mostly those in the lower-middle class, too rich to qualify for Medicaid, too young and able to qualify for Medicare but too poor and too underemployed to receive employer-provided health care.

Bill Clinton went for the gusto in year one. He had a Democratically controlled congress and was coming off a resounding victory in the 1992 elections. It wasn't even a close fight -- no universal health care bill ever made it to the floor of either house of congress for a vote.

The Current State:
42 million uninsured Americans. Estimated costs of $1.5 trillion dollars over the next decade to provide health care coverage to that population. Health care inflation exceeding the general rate of inflation by 2 to 3% per year in a rise that threatens to consume the economy. Four times the spending on health care of the rest of the first world with shorter life expectancies. Massive deficits without a cent spent on health care. A promise of no new taxes on those making under $250,000 per year. Millions already being spent by health care industry groups lobbying against increased government intervention.

So, how, against this history and these circumstances can the betting public (as measured by current Intrade rates), put the odds of congress passing universal health care coverage this year be even money?

President Obama has been very savvy so far. No secret meetings, a la Hillary Clinton in 1993. Bringing health care groups to the table. Leveraging the reconciliation process and the adjoining procedural rules in the Senate to dodge a fillibuster. Laying out broad principles without committing to specific policy options early on. All very smart.

But the heat is rising. Republicans and industry groups sense that there is a real chance that a bill will be passed this year and are pressing hard with ads and media appearences. "Do you want the government that ran the post-Katrina operation to run health care?" they ask in a piece of bitter irony. They point out rationing in single-payer systems. They decry a public option as crowding out existing private insurance.

But this issue is far more complex than any sound bite. Here are a few key issues to watch for:
(1) Cost Is THE Issue
We spend a ton on health care. There are a number of reasons for this. Republicans claim that it is because economic incentives for individuals don't favor good choices about care. My insurance covers going to a Doctor, so how hard am I going to think about the economic implications of going for a minor cold?

There may be some truth to this argument, but it doesn't explain why we spend many multiples more than countries that have single-payer. Ah, but they RATION care, say conservatives. You want a heart transplant in England, you better get in line.

The cold, hard fact is that EVERY health care system rations care. The criteria are just different. In single-payer systems, the rationing is explicit, as the government dictates which procedures will be covered and when. In our system, it is more subtle. It comes in the form of insurance caps for yearly coverage. It comes in the locking out of uninsured people from access to care. And it doesn't work very well -- we still spend a ton.

In a sense, Republicans are right, economic incentives do drive up the cost of care. The incentives are for Doctors, reimbursed per procedure, to rack up as many procedures as possible. The incentives for employers, who can reimburse health care tax free but are taxed on cash compensation, to provide stronger health care benefits and weaker wages. And the incentives for individuals are to take advantage of coverage as much as possible. It's broken on every level.

The other thing that drives our health care costs is perscription drugs. Essentially, we finance pharma R&D for the rest of the world. We pay five times the cost that single-payer states pay for perscription drugs and hundreds of times the cost that third-world countries are charged. Why? R&D is very costly for new drugs, but once the R&D is completed, the marginal cost of actually making the drugs is very low. Single-payer systems negotiate low-cost drugs beause they have ultimate leverage -- you don't like our price, don't sell it in our country. Drug companies go along because they have already spent the R&D and they marginally make money on the price that they sell drugs to Canada, England and France. In the third world, they largely sell at cost, which is a nice humanitarian gesture to African nations ravaged by HIV. In the US, however, they own a monopoly for as long as the patent is good. There is no single entity that can negotiate higher prices, therefore the manufacturers pretty much set the price.

Republicans rightly point out that if this profit incentive goes away, companies will shy away from costly R&D. But should the US really have to bear the world's burden for pharma research?

(2) What Is Universal Coverage?
Does it mean single-payer? Probably not, from what I've heard so far.

Does it mean everybody has access to health care? What exactly does that mean? Will everyone have insurance? Will we be forced to buy it?

(3) The Public Option
Will there be a government-run plan that everyone can buy in to? Will private plans be subjected to rules about what level of coverage they have to provide? Will employers still be the primary payers for health care?

(4) Financing
How exactly are we going to pay for any sort of expanded program?

Some Common Sense Ideas
Regardless of where you are on the ideological spectrum, it would be hard to disagree that the current system is broken. Our government spends more per capita on health care than nations that HAVE single-payer coverage, yet we have 42 million uninsured.

Here's a few common sense ideas:
(1) A Most-Favored Nation Clause for Pharma
A law that state, simply, that if you are going to sell drugs in the US, you cannot charge more than you charge in any other first-world country. This law would force single-payer states to quit riding our coattails and would force the pharma companies to develop an economic model that does not involve gouging the U.S. consumer.

The length of patents also needs to be examined, particularly for life-saving medications.

(2) An End to Multi-Tiered Care Pricing
Currently, if I go to an emergency room without insurance with a broken leg, it may cost me upwards of $20,000. If I get care through insurance, they will pay only a third of that. If I'm insured through Medicare/Medicaid, the government pays a quarter of that. If the hospital can't collect, I pay nothing.

These tiers of pricing do nothing but force people out of the system. A regulation requiring that hospitals charge the same fees for procedures for all patients would go a long way towards stemming that inequity. It wouldn't have to dictate what the price was -- obviously hospitals couldn't take Medicare/Medicaid patients if the prices were higher than Medicare/Medicaid pricing -- but it would ensure fairness to everyone who walks through those doors.

(3) Universal Preventative Care
Check-ups and vaccinations are cheap. And they save tons of money down the road. There is no reason not to nationalize MMR immunizations and blood pressure testing. Everybody should have access to these basics.

(4) Change the Tax Incentives
John McCain was right - the employer tax exemption distorts the market. End the credit and give all Americans a refundable tax credit in the same amount to be used for health care. Allow all individual health care spending to be tax exempt. Require that all coverage be portable (not contingent on employment), so people don't have to tie job decisions to health care decisions and people don't have to worry if they will have a job tomorrow to support health care they need today.

Are these the complete answer? No. We still have to decide the thorny issues of whether to offer a public health care option (I favor it) and how to regulate coverage (pre-existing condition clauses, risk rating processes, etc.) But it's a start.

The Political Reality
The heat is only going to turn up. Blue Dog Democrats are fundamentally not sold and at least some of their votes will be needed to pass a bill. If a bill isn't passed before the August recess, it is probably dead for the year. And the Sonia Sotomayor confirmation hearings are scheduled smack dab in the middle of when this debate will be taking place, in what I think is an awful political miscalculation by Senate Democrats.

And the biggest political reality of all -- if President Obama can't get this done this year, with big majorities in both houses of congress and public approval at his back, he probably never will get it done, the same as Bill Clinton.

50/50 odds? Sounds a little optimistic in light of the facts. President Obama may be a different kind of President (for better or for worse, depending on your political leanings), but he lives in the same old Washington. Of course, Intrade also has better than 2:1 odds that President Obama wins re-election. So, according to the betting public, President Obama doesn't need to get universal health care done in order to win in 2012. Certainly, Bill Clinton didn't, winning the popular vote by 9% in 1996, the widest margin for a Democrat since FDR. President Obama? I'm not so sure. Health care was the centerpiece of his campaign. He needs to get a bill passed. And he needs to figure out how to pay for it.

A Mess in Iran
Opposition protests and charges of vote tampering abound in Iran. I don't doubt that Ahmadinejad and the corrupt religious mullahs who control Iran are capable of fraud and may have stolen the election. But we need to watch our words. Alleging fraud without evidence, and it is pretty scant at this point, is dangerous. We have no scientific polls that show Ahmadinejad trailing and no direct evidence of vote-tampering. All we have is a "sense" based on pre-election rallies that the opposition was rising. We need more if we are going to contend the election was corrupt. And it is probably irrelevant anyway, as even if we had evidence of fraud, the Iranian government isn't about to take a mulligan.

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Our Bulging Budget Deficit, Assessing the FDA Tobacco Law, Stimulus Update, Looking at the Obama Cabinet, 2010 Projection Update

Deficit Continues to Bulge
Lower tax revenues, stimulus and bailout spending and generally higher expenses for recession-prone safety net programs such as unemployment benefits and food stamps bulged the federal deficit in the month of May to over $181 billion, according to the Congressional Budget Office, with spending of $302 billion and tax collection of only $121 billion. The year-to-date fiscal year deficit has reached $984 billion and is assured to cross $1 trillion for the first time this month. The May numbers are not as bad as they sound, as May is typically a high-deficit month (the deficit was over $160 billion last year), but the year-to-date numbers are ever bit as bad as they sound.

So how scared should we be? No less a liberal thinker than Paul Krugman is very scared. Conservatives are obviously also upset (although they are more for spending cuts, whereas Krugman is for large tax increases.) There was a Wall Street Journal article this week that showed that insuring Federal bond debt against default is now significantly more expensive than insuring debt from stable companies such as Intel and Campbell Soup, meaning that investors in general consider the government at a higher risk of default. Treasury Secretary Tim Geithner was dispatched to China to try to reassure the Chinese that their debt ownership is safe and was widely mocked up local press.

In the short-term, I don't think there is anything that we can do about the deficits. Raising taxes or cutting spending as we are trying to eek our way out of a recession could have disastrous consequences. In the long-term, we must do something different than the proposed Obama 10-year budget outline.

Deficits soak up investment dollars that would otherwise go to private industry, create a burden for future generations and threaten to hike up interest rates, making investment and innovation harder. Simply put, a dollar spent financing government debt is a dollar not going somewhere else, where it could be growing the economy.

So, what to do? For lessons, I look back to the Clinon-era budget and try to ask the question, what has changed?

(1) Defense Spending
Clinton took full advantage of the "peace dividend" from the end of the cold war and slashed defense spending to its lowest level as a % of GDP in generations. Today, we are still spending heavily for the conflicts in Iraq and Afghanistan, although the President's 10-year outline calls for us returning to Clinton era levels over a 10-year period. Defense Secretary Robert Gates has proposed cancelling a number of over-invested weapons systems which were of dubious value militarily, but which had been well-positioned politically. We'll see if congress goes along.

(2) Capital Gains Tax Collection
When the stock market is going up, the feds are collecting taxes from capital gains. When it goes down, they are dealing with tax credits for capital losses (albeit not the same magnitude.) The stock market went on an historic rally during the Clinton years, pushing up capital gains tax collection.

(3) Marginal Tax Rates
No way around it -- the $250K tax bracket helped solve the deficit. It likely returns in 2011 when the Bush tax cuts expire.

(4) Domestic Discretionary Spending
President Clinton was working with Republicans to reduce welfare spending and they put an absolute lock down on any new social spending. President Obama is expanding SCHIP, proposing universal healthcare, etc. Clearly we need more money to finance these things.

Bottom line -- the massive projected deficit of $1.8 trillion this year is not the real concern. We need to be focused in the short-term on growing the economy, which will grow the revenue base (it was primarily the recession that caused this massive deficit in the first place.) The structural deficits in 2011 and beyond are a big worry. I've said it a dozen times, if we are going to do universal healthcare, we MUST pass new taxes. No way around it. Pay your way and have an honest debate. After this year, debt as a % of GDP may surpass 50%. We weathered debts of 120% of GDP in World War 2. It is troubling, but not damning. But continue to rack up the debt will be damning in the long-term.

Senate Version of FDA Tobacco Bill Passes House
The House this week overwhelmingly passed the Senate version of a bill to ban candy flavored cigarettes, further restrict tobacco ads, increase the prominence of warning labels and allow the FDA to regulate nicotine content in cigarettes.

President Obama has said he will sign the bill, which would make it the 13th bill that the President will sign into law.

Based on the congressional vote, this law earns a 0.48 on our partisan index, with a designation of "bipartisan". Really the Republican party was fairly evenly divided between those representing tobacco states and the rest of the country. Democrats were near unified in support of the legislation. This brings the Obama administration totals to:

Highly Partisan Laws (2)
Fairly Partisan Laws (2)
Fairly Bipartisan Laws (2.5)*
Bipartisan Laws (2)
Highly Bipartisan Laws (2.5)*
Completely Bipartisan Laws (2)

* The CARD Act is counted as half "highly bipartisan" for the vote on the core bill and half "fairly bipartisan" for the separate vote on the provision to allow firearms in national parks.

Stimulus Update
Latest numbers from the feds:
Money Authorized: $141.0 billion (28.3%), up $5.6 billion from last week
Money Spent: $46.4 billion (9.3%), up $2.7 billion from last week

Despite President Obama's promise last week to pick up the pace, last week was actually a rather slow week for both money authorization and spending on the bill. This just shows the challenge of executing huge projects quickly and effectively. The bulk of the money spent so far has been for easy-to-execute social programs ($19.7 billion for HHS, $13.0 billion for the Social Security Administration.) The actual infrastructure provisions have moved more slowly (the Department of Transportation has authorized $15.7 billion but spent just $200 million so far.) The administration will need to pick up the pace to blunt the criticism that has been rising in recent weeks as the unemployment rate has climbed to 9.4% and people have started to doubt the effectiveness of the bill.

Assessing the Obama Cabinet
We are in day 145 of the Obama Administration, almost 10% of the way through his term, so I thought it would be a good time to look at how his cabinet picks are doing.

Superstars
Robert Gates -- a credible face on national defense, Secretary Gates has proposed a dramatic reorganization of military spending, replaced Generals in key roles in the Middle East and flawlessly begun to execute the President's strategy in Iraq and Afghanistan. It was widely rumored when he agreed to stay on that it was a one-year deal only and he would be gone by January 2010. Let's hope not. He's one of the best advisors that the President has.

Hillary Clinton -- a shining star as a diplomat and a valuable asset to the President. She has been unflinchingly loyal and kept her husband behind the scenes.

Stars
Janet Napolitano -- Napolitano has been a steady-hand at Homeland Security, proposing smart ways to make the department cheaper and more effective and dealing well and even-handedly with the swine flu and Mexican drug cartel crises.
Arne Duncan -- quietly and mostly out of the public eye, Secretary Duncan has proposed smart educational reforms with a moderate streak and has guided stimulus funds to high-priority projects.
Steven Chu -- a man of few spoken words, Mr. Chu is the achritect behind the President's coming proposal on cap and trade as well as other energy reforms.
Kathleen Sebelius -- we haven't seen too much of her yet, but expect her exposure to step up as the Health Care debate heats up.

Quiet Forces
Ray Lahood, Eric Shinseki, Hilda Solis, Tom Vilsack and Ken Salazar have all been quietly runing their agencies without much drama. Lahood had a minor flap when he floated the idea of a mileage tax early in the administration, but other than that, we've scarecely heard from these 5. Hilda Solis' profile may increase as the debate on card check steps up.

Duds
Eric Holder -- immediately after getting through a bruising confirmation fight over his recommendations on the Mark Rich pardon, Holder steps in it by calling the country "a nation of cowards" on race in the first camera appearence most Americans saw him in. He struck exactly the wrong tone at the wrong time. He has done some positive things, like stopping the prosecution of former Sen. Ted Stevens (R-AK), but overall, he's been a bust.
Tim Geithner -- from his tax-dodge controversy at confirmation to his disastrous first press conference to his now-scrapped toxic asset plan, Geithner has been an all-around bust. He was supposed to be a bi-partisan-respected savant at economics. He has looked like an ameaturish hack who is outside the circle of power in the White House.

Overall, President Obama has actually had a cabinet of fairly low prominence, in part because he has been personally out in front of the press so much. Previous President's, who didn't like to face the press, such as George W. Bush and Ronald Reagan, often had their cabinet speak for them. President Obama, at least so far, has not shown that tendency.

2010 Projection Updates
The Republican Party has technically been in the "wilderness" (controlling neither House of congress nor the Presidency) for only 145 days, but it feels longer. Prospects for a 2010 takeover of either house of congress still look bleak.

No new polling information of note on the Senate races, so my projection stays unchanged for now with 2 projected Democratic pick-ups (Ohio and Kentucky) and 1 projected Republican pick-up (Colorado).

In the House, Democrats hold a 6.3% lead in generic polling, slightly behind where they finished polling in 2008. My current projection is a GOP pick-up of 4 to 15 seats (central projection of 9 seats), far short of what would be needed to retake the House.

Ahmadinejad Apparently Wins by Wide Margin
Dashing U.S. hopes of regime change in Iran, Mahmoud Ahmadinejad has won the Iranian elections by a large margin with almost 63% of the vote. Hopes had been rising in recent days that reformer Hossein Mousavi's campaign was building momentum. Mousavi is disputing the results of the election, but with such a wide margin for Ahmadinejad, he will no doubt be in office for another term.

Progress happens slowly in the Middle East.

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