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CBO Ignores Cost Savings In Health Care Bill, More Still To Come

CBO chief dumps on current incarnations of health care bills in Senate testimony. W. Post: "Congress's chief budget analyst delivered a devastating assessment yesterday of the health-care proposals drafted by congressional Democrats, fueling an insurrection among fiscal conservatives in the House and pushing negotiators in the Senate to redouble efforts to draw up a new plan that more effectively restrains federal spending ... Douglas Elmendorf ... said bills crafted by House leaders and the Senate health committee do not propose 'the sort of fundamental changes' necessary to rein in the skyrocketing cost of government health programs, particularly Medicare.

Beat The Press' Dean Baker challenges W. Post's characterization, CBO's record: "...the Post told readers that it was 'devastating.' This characterization appeared in the first sentence of a front page news story, not in a column or editorial. It is worth noting that the Congressional Budget Office's assessments have often proven to be highly inaccurate. It completely failed to anticipate the collapse of the housing bubble and the resulting economic crisis. Back in 2001, their budget projections over-estimated capital gains revenue for the next decade by $450 billion because they assumed the stock bubble would persist indefinitely. More recently, CBO hugely over-projected the number of homeowners who would take advantage of the Hope for Homeowners mortgage modification program passed by Congress last summer. CBO projected that 400,000 homeowners would take advantage of the program through 2011. As of April of this year, there had been less than 1,000 applications and just 51 closings."

Wonk Room's Igor Volsky criticizes CBO's narrow focus: "...Elmendorf, is isolating the ledger of the federal government from the context of the entire system. In other words, since many of the savings from reform won’t be reflected in the federal budget, Elmendorf does not consider them. But modernizing the health care system (implementing electronic medical records, health information technology) and reforming the way Medicare and Medicaid reimburse providers will save money for the system as a whole."

Health Care for America Now's Jason Rosebaum slaps CBO's push to tax benefits: "Elmendorf's solution is very odd indeed, as the tax exclusion on health care has nothing to do with health care costs. And, Elmendorf walked back his testimony later in the day. So take Elmendorf's words with a grain of salt."

The Treatment's Jonathan Cohn notes the White House is a step ahead of CBO:

[The House] bill is still very much a work in progress ... And the White House, among others, has some ideas about how to shape it. Despite a vow not to draw lines in the sand about reform legislation, President Obama has been adamant that any bill make substantial progress on cost reduction--a pledge his Budget Director, Peter Orszag, reiterated in the course of a brief (and previously scheduled) interview he gave TNR Thursday afternoon. "The legislation that emerges from this process has to contain key provisions that will bend the curve over the long term," Orszag said. "The president has said that and we're in the middle of a legislative process, so it's not surprising that, as you go through that process, there are modifications that are necessary."... the administration is effectively calling to reconstitute, and strengthen, MedPAC--a commission that now advises Medicare on how it pays for medical services and wares. The recommendations of this new commission, which the administration would call IMAC (the Independent Medicare Advisory Commission), would go into effect automatically, unless either the President or Congress decided to block them. It's similar to an idea that Senator Jay Rockefeller and Representative Jim Cooper have been promoting in their respective chambers. Orszag called it "the most important game-changer" now on the table.

Ezra Klein offers five rules for quoting the CBO report:

Politicians who are going to use this CBO report against the existing health-care reform proposals must do some combination of the following:

a) Support, as the CBO says you should, the eradication of the tax exclusion that protects employer-based health-care insurance;

b) Support, as Lewin and Commonwealth say you should, a public insurance option that can bargain at Medicare's rates;

c) Support, as the Office of Management and Budget and every health-care wonk in town says you should, one of the various policies floating around to give MedPAC authority to continually reform and modernize Medicare;

d) Support some form of aggressive cost-sharing that would make people extremely angry because it will save money by reducing their access to health-care services;

e) Support comparative effectiveness review that can judge not only the effectiveness but also the cost-effectiveness of various treatments, and give the federal government authority to use that data when deciding reimbursement rates.

I would also like to propose a related rule: any reporters who receive a quote from a politician referencing this CBO score should be required to ask the politician which of these policies -- or which alternative cost-saving policies -- they support.

EARLIER on "The job of the Congressional Budget Office is to make an estimate of the cost to the federal government. But any estimate involves subjective assumptions. And CBO makes cautious assumptions, because it is institutionally skeptical of new ideas ... Obstructionist insiders looking to derail the public plan option know full well of CBO's reputation, so they have hyped up the CBO as the ultimate scorekeeper..."

Insurance lobby to launch ad campaign against public plan option. Politico Pulse: "HEALTH INSURERS SET TO LAUNCH TV AD CAMPAIGN NEXT WEEK: In the health insurance industry’s first health care reform ads since Harry and Louise helped torpedo reform in 1994, the industry is set to launch a seven-figure, national cable ad blitz next week that could also target specific markets, an industry lobbying source told Pulsemaster Chris Frates. The source stressed that the ads are not negative but are intended to'“set the record straight about the industry's support for reform and make sure the American people understand that there is a path to reform that does not include a government-run plan.'"

House Ways & Means Cmte passes public plan option, another step forward in legislative process. NYT: "The House Ways and Means Committee approved legislation early Friday to overhaul the health care system and expand insurance coverage after a marathon session in which Democrats easily turned back Republican efforts to amend the bill."

Duncan Cross on the surprise endorsement of the House bill from the AMA: "Looks like the American Medical Association finally came around on health reform; they’ve endorsed the House bill, by far the strongest of the three proposals currently in play ... If you think that means doctors are now in favor of health reform - well, not so fast. A number of state medical societies have announced their opposition to the AMA’s letter ... These are actual medical doctors, rising up in defense the insurance industry’s right to kill you by neglect .... If I found out one of my doctors was part of this effort, I’d have a really hard time trusting my health to him or her."

Senate Finance cmte still gridlocked. Politico: "Baucus (D-Mont.) said the talks were suspended until next week — defying President Barack Obama’s request to produce an agreement by the weekend and throwing into doubt any hopes of meeting the president’s August deadline to pass a Senate bill.

Will deficit hawk Dems complain that surtax on wealthiest could also reduce deficit? Politico: "House Speaker Nancy Pelosi said Thursday she is open to reducing the rate of the proposed surtax on wealthy Americans by "squeezing" more savings out of the current health care system. But Pelosi quickly added that the federal government could also use that surtax money to pay down the deficit — a comment sure to rankle moderate Democrats already fretting about being forced to take a vote on a major tax increase."

No Recession At Goldman Sachs

Time looks at the political fallout from Goldman Sachs' boon:

The good news for traders has created two distinct concerns for President Obama's advisers. The first problem is political. For much of the year, populist revulsion at Wall Street greed has been palpable. Obama, who prides himself on his cool countenance, has repeatedly channeled this fury, flashing anger and frustration at the logic of financial titans, who continued to justify huge paydays even as their banks begged financial lifelines from the U.S. taxpayer. "That is the height of irresponsibility," the President said in January, after a report emerged of large 2008 bonuses on Wall Street. "It is shameful."

But the President has thus far resisted calls for a heavy government hand in limiting financial paydays, aside from certain limits on senior executives at firms that have not paid back some taxpayer funds and a number of proposals for regulators to develop new ways of better tying compensation to long-term risks. That leaves the White House vulnerable in the coming months. If Wall Street decides to cash in on its recent winnings despite the public rhetoric of the Administration, the contrast with the nation's still growing unemployment rate couldn't be starker. "It's just got to feel wrong to a lot of people," says Douglas Elliott, a fellow at the Brookings Institution, speaking of the Goldman compensation announcement. "It seems to me a political mistake."

Strong regulation could rein Goldman in. NYT: "...if regulation being considered in Washington is passed, banks would face new limits on the amount of their own capital they may trade. That could limit the profits that banks like Goldman and JPMorgan make from their trading businesses, and level the playing field, experts say. Other former Wall Street stars like Morgan Stanley, which was hurt more by the crisis and has avoided taking big risks in the new era, may also rebound and begin to take on old rivals. But for now, Goldman Sachs and JPMorgan are surging."

Consumer groups rally behind financial protection agency. W. Post: "The Obama administration's push to create a Consumer Financial Protection Agency, the subject of sharp criticism from many in the financial and business world, found a chorus of support on Capitol Hill yesterday as consumer advocates praised the proposal in testimony before the House Financial Services Committee. "

States Defend Stimulus

Stateline reports state officials contend stimulus is creating jobs on the ground:

...state and federal officials were put on the defensive by an analysis of 5,274 transportation projects in The New York Times showing that urban areas are getting less than two-thirds of federal transportation stimulus money even though most Americans live in those areas.

The American Association of State Highway and Transportation Officials put together a news conference July 14 in Seattle to refute the GOP criticism. Washington state Transportation Secretary Paula Hammond said 2,000 construction projects worth $6 billion are in progress nationwide — with more on the way. The stimulus program will channel $27 billion to states for highway and bridge projects, she said.

“We’d have a higher percentage of unemployment if we didn’t have these stimulus dollars,” Hammond said at the news conference.
Officials did not dispute the Times' analysis but said they are confident the money is reaching urban and rural areas. In an interview with, Hammond said 51 percent of the stimulus funds are being spent in economically distressed areas, which includes cities.

“Clearly the money didn’t go far enough to satisfy everyone,” Hammond said, adding that states were guided by the administration’s requirement to give priority to “shovel-ready” projects that were ready to go, regardless of where they were located in a state. “We think the money is being used where it’s needed.”

The Obama administration also weighed in. Transportation Secretary Ray LaHood said in a speech that in Pennsylvania, nearly 40 percent of the state’s unemployed live in about 40 economically depressed counties, where nearly half of the stimulus-funded road projects are located. “So these funds are indeed going to workers and their families who are most vulnerable during the recession,” LaHood said. “And that’s true around the country.

Nuclear Not Key To Senate Climate Deal

ClimateWire reports additional support for nuclear not enough to win over pro-nuke Senators: "'Adding a nuclear title to the climate change bill would be just one of many improvements needed to secure Senator Landrieu's vote,' said Aaron Saunders, a spokesman for Sen. Mary Landrieu (D-La.) ... When asked if additional nuclear incentives in a climate bill would help win support from the senator from North Dakota -- a heavy coal-production state -- Dorgan simply said, 'We'll see.' ... Nuclear energy incentives do not appear to be the clincher for Republican swing voters either ... The underlying question for sponsors: If nuclear incentives are not enough to get undecided senators on board with cap and trade, what is the point of including them at all?"

US-China baby steps. NYT: "... the United States energy secretary, Steven Chu, said the two nations had agreed to plan joint studies on ways to improve the energy efficiency of buildings, a major issue in addressing China’s contribution to climate change ... He said that China’s broad effort in areas like renewable energy make it more likely that an agreement can be reached in December at the United Nations climate change conference in Copenhagen."

Study Suggests Wind Power Potential Is Much Higher Than Current Estimates, reports Green Inc.

Gates Forceful on Ending F-22s

NYT reports Defense Sec angrily defends F-22 cuts: "Saying he 'didn’t molt from a hawk into a dove on Jan. 20, 2009,' Defense Secretary Robert M. Gates sharply criticized Congress on Thursday for trying to push more F-22 fighter jets into the Pentagon budget than he and President Obama say the country needs. 'If we can’t get this right, what on earth can we get right?' Mr. Gates said in an acerbic, sometimes withering speech to the Economic Club of Chicago. 'It is time to draw the line on doing defense business as usual.' From his point of view, that means overbuying weapons for wars the nation is unlikely to fight."

EFCA Compromise Near

NYT on big EFCA compromise scrapping petition option but creating faster elections and keeping binding arbitration: "A half-dozen senators friendly to labor have decided to drop a central provision of a bill that would have made it easier to organize workers ... Though some details remain to be worked out, under the expected revisions, union elections would have to be held within five or 10 days after 30 percent of workers signed cards favoring having a union. Currently, the campaigns often run two months. To further address labor’s concerns that the election process is tilted in favor of employers, key senators are considering several measures. One would require employers to give union organizers access to company property. Another would bar employers from requiring workers to attend anti-union sessions that labor supporters deride as 'captive audience meetings.' ... Corporate lobbyists have indicated they would oppose fast elections ... Business also opposes the bill’s provisions to have binding arbitration if an employer fails to reach a contract with a new union."

Jonathan Tasini offers harsh assessment: "One, when it comes right down to it, the kind of people labor supports in the Democratic Party are not reliable when it comes down to a fight-or-die moment for workers. Second, the strategy to pass the bill was an insiders game that never engaged the public, partly because we left the campaign in the hands of some people who are entirely clueless about talking to anyone but themselves."

Terrance Heath contributed to the making of this Breakfast.

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