An awakening of sorts has taken place this week in the netroots, as progressives realize that a "compromise" health reform bill might be worse than a missed opportunity.  It might be bad -- really, really bad.  It might force millions of Americans to buy lousy insurance they can't afford.   It might make Democrats as popular in the voting booth as Michael Vick at a PETA meeting.

The turd in the jello bowl is the mandate that everyone buy health insurance.  Such a mandate would be fine if Congress also makes sure that folks can buy decent insurance at a decent price.  But this part of the reform equation costs money.  Most of the trillion dollars in the House bill goes to subsidies generous enough (barely) to make the individual mandate work.

So pseudo-centrists are calling on Obama to "scale back" reform.  Baucus asked his Gang of Six to consider a plan of $600 billion, which would cut off subsidies for a family of three at about $54,000 and permit insurance companies to sell high-deductible plans for $9,000 or more. A sprained ankle and a couple sore throats would leave that family of three paying 20% of its pre-tax income on health expenses. 

And voting Republican until Bristol Palin's second term.

The Washington Post's Stephen Pearlstein - who had some good columns on health reform lately - on Thursday urged Democrats to accept a compromise that embraces Baucus' approach to financing.  That approach leads inexorably to Baucus' skinflint approach to subsidies.

Jonathan Cohn of the New Republic analyzed this folly in a great post titled Dumb Policy, Dumber Politics.  Over at Daily Kos, the usually calm David Waldman righteously drew the implications:

I don't get how you can possibly hand me a health care bill with an individual mandate and no public option. If I'm uninsured or poorly insured, and the answer coming out of Congress is that I now have to buy crappy insurance from some private company that has no plan to actually help me pay for my health care without raking me over the coals, then I've gone into this fight an ardent supporter of strong reform, and come out a teabagger.

I share Waldman's conclusion:  "Fuck the hell out of that."  But we should understand that overcoming corporate-funded resistance to the public plan will only get us part way to a solution.  The problem runs deeper, involving the federal deficit and the Senate's almost reflexive resistance to any kind of tax increase. As much as we have to fight for the public option, we also have to demand a big bill and the big taxes on millionaires necessary to fund it.

Follow me here a bit into the policy weeds.  The bill approved by three committees in the House provides a barely adequate array of subsidies costing about $140 billion a year.  But House Democrats accepted a White House dictate - reportedly driven by Rahm Emanuel - to cap the cost of the bill at $1 trillion over 10 years.  That leaves about $40 billion per year too little to make coverage affordable to everyone, even with the public option.  So the House plan holds off on requiring insurance or paying subsidies until 2013. 

So even under the best proposal now on the table, Americans won't see the benefits of expanded coverage until after the next presidential election.  Worse, by opening negotiations with a barely acceptable bid, Rahm invited what we are seeing now:  a disastrously low-ball proposal touted as a sensible compromise.

Happily, the cost of the bill is the biggest thing working in favor of the public option.  You wouldn't know it from watching the news, but the public option saves $150 billion over ten years.  So, try as they might, establishment types like Pearlstein just can't fashion a sell-out strategy that makes any political sense.  To avoid completely screwing Joe Sixpack, you need either to give him a public option or to raise taxes on Joe Millionaire even more than the House Democrats propose to do.

Just because something makes no sense, of course, is no guarantee the likes of Reid, Baucus, and Conrad won't do it.  So let's add no "no cheapskate bill" to our shortlist of demands for health reform.

 

Why are progressives growing frustrated with the man they helped elect? 

Perhaps it's because Obama's campaign for health care reform reminds us too much of the campaign he beat to win the Democratic nomination.  In trying to avoid the mistakes Hillary Clinton made on health care in 1994, Obama has behaved like the Hillary who so repulsed progressives in 2007.

Hillary's campaign tried the classic frontrunner strategy.  Create the impression that victory is inevitable. Co-opt or intimidate powerful folks who might be inclined to side with your opponents.  Win early contests overwhelmingly and ride your momentum to success.  It's an insider strategy, undemocratic by design, and it often works. 

Obama used the same playbook to advance health care reform.  As the debate began, the DC cognizanti believed that a major reform bill would pass.  Throughout the spring and early summer, Obama and his team gave cursory attention to his grassroots network.  Meanwhile, they worked as hard as possible to get endorsements from health industry groups, including insurance and pharmaceutical companies.  He hoped to win the fight before the public really started paying attention.

It pains me to say it, but the Town Hall lunatics - while differing from the outsiders who flooded the Iowa caucuses in ideology, demography, decency, and hygiene  - are playing the same dramatic role as the Obama grassroots.  Once again, real people are derailing an insider juggernaut.

Does Obama's embrace of an insider strategy mean that he duped progressives during the campaign?  That Obama has shown his true colors now as a stooge for the wealthy and their corporate interests?

Of course not.  What matters is whether we get meaningful health reform. Populist, insurgent tactics are not an end in themselves.  If they were, Glen Beck would be a hero, or George Wallace for that matter.  The chances for real reform are still very good, if progressives keep the pressure on.

It's not even clear whether Obama's insider strategy was a mistake.  What alternative did he have?  Should Democrats have held hearings and organized events to demonstrate a popular mandate for reform?  One might have thought the election itself proved the mandate.  Should Obama have demonized the insurance and drug companies rather than negotiate with them?  Perhaps.  But imagine how hard things would be if the industries were throwing their full weight behind the opposition.

Do we need to go back even earlier?  Should Obama have campaigned for single-payer reform instead of his more complex, harder to explain hybrid approach? Would he have gotten any further towards the nomination than Denis Kucinich?  

It's been a hard summer, and carping and hair pulling are understandable. But let's remember that Hillary didn't lose because her insider strategy failed.  She lost because her campaign adapted slowly and poorly to the insurgent threat, and because she had no contingency plan when she failed to sweep the primaries on Super Tuesday. 

Obama has a contingency plan -- the budget reconciliation process, through which health reform can pass with only 50 votes in the Senate.  This option is available only because Obama fought to include it in the budget bill that passed in March.  While not the flawless leaders of our dreams, Obama has proven himself to be both steady under pressure and flexible enough to change tactics. He may be in Martha's Vineyard, but you can bet he's thinking hard about the next stage of the debate.

Disillusioned progressives should remember what's at stake, stop complaining, and check their email box for unopened action alerts - whether from Organizing for America or from any of the more explicitly progressive advocacy groups. Let's not declare defeat while the battle rages.

Krugman, who shined so much light in the dark days of the Bush administration, and who is still doing more than anyone outside of This American Life to help non-economists understand the banking crisis, is fundamentally wrong in his assessment of Obama's plan to rescue the financial system.

The Obama administration is now completely wedded to the idea that there's nothing fundamentally wrong with the financial system -- that what we're facing is the equivalent of a run on an essentially sound bank. As Tim Duy put it, there are no bad assets, only misunderstood assets. And if we get investors to understand that toxic waste is really, truly worth much more than anyone is willing to pay for it, all our problems will be solved.

This is a straw man and suggests why Rahm Emanuel correctly dismissed Krugman as blind to the complexities of governing.  Obama has not said that the financial system is fundamentally ok, nor has he said that the banks are "essentially sound."  On Thursday, for instance, Obama diagnosed the ultimate cause of the AIG debacle as "a bubble-and-bust economy that valued reckless speculation over responsibility and hard work."  Not exactly an endorsement of the status quo on Wall Street, and not a new position either.

There are only two real difference between Obama and Krugman.  The first is Krugman's rejection of the argument, made first by Paulson and now Geithner and Obama, that the so-called troubled assets are worth more than anyone is currently willing to pay for them.  To Krugman (at least in this debate), the real value of anything is what the market willing to pay right now.  This is the principle of mark-to-market accounting, which in other circumstances allowed Enron to steal vast sums by claiming inflated boom-time asset values.  Now, Krugman asserts that because a busted bubble has crushed asset values, banks like Citi should be regarded as fundamentally and hopelessly insolvent.  He makes this case in the abstract, without having analyzed at all the cash flows that underlie the mortgage-backed securities.

As Krugman suggests, it is possible that Geithner's plan will benefit the bankers at huge expense to the taxpayers.  It is also possible that Geithner's plan will work:  that by financing and subsidizing investment in the bad assets, the government will buy time for those assets to rise in value.  The outcome depends on the economy.  If the economy gets much worse, the taxpayers will lose.  If it stabilizes, the odds seem good that the cost to the taxpayer will be modest.

Fundamentally, it's a gamble.  The thing is, any option is a gamble, and Geithner's gamble is far less risky than Krugman's favored option:  a temporary federal takeover of the world's largest banks.

This is the second, and more important, difference between Krugman and Obama: their assessment of risk.  Krugman and his allies on the financial blogs make a very strong case that a federal takeover is the fairest, most socially just way to avoid the outright collapse of the mega-banks.  They also make mince meat of the conservative arguments typically put forward against "nationalization."  What they do not do, however, is make a compelling case that a temporary federal takeover will actually work.  

Nor do they even address an even scarier question:  would the announcement of a temporary federal takeover trigger a disastrous panic?   Is it possible even to imagine a political or public relations strategy that could achieve such a takeover in a way that does not risk a much greater disaster than the one in which we currently find ourselves?

I have great confidence in government.  I think Medicaid is more effective than Kaiser Permanente.  I think the Marines are more reliable than Blackwater.  The Food Stamp program helps more people than the United Way.  

But could the Treasury Department run Citibank and Bank of America for the two to three years it would take to reprivatize them?   With maybe a few weeks to prepare? The very thought of it makes me want to trade what's left of my 401K for a few gold coins and a shotgun.

That's my reaction, and I'm as liberal as anyone you're likely to find in my Blue State zip code.  Now, imagine the reaction of the Republicans and their media abettors.  And the  foreign governments and financial markets.  Shit flinging and raw fear, that seems to me the most likely outcome.  Perhaps the takeover option would work in the end.  But I'd rather bet on the Geithner plan.

A closing observation:  much of the skepticism towards Geithner among progressives follows from a sense that he doesn't "get it" about what went wrong.   His instincts and sensibilities align with the investment bankers, not the middle class.  So it's natural to suspect that Geithner's plan will benefit those who should be punished, and that, left to his own devices, he would be happy to go back to the status quo that let the finance industry run completely amok for a generation.

Maybe so.  But Obama is the President.  His budget proposals are taking on the oil industry, the health insurance industry, and the arrayed interests of people in the highest tax bracket.   There's no reason to doubt that he will take on the finance industry when the time is right.  In the meantime, by choosing the least risky path to avoiding cataclysmic bank failures, Obama once again demonstrates the judicious leadership we need in times like these.

Obama arrived in DC yesterday and suddenly the longed-for change was here.  You wouldn't know it from the morning coverage. The breathless live feeds from Sidwell Friends as Mahlia began her first day at school. The braindead wire story on the outcome of the recount in Minnesota, which failed to mention that Norm Coleman's defiant legal challenge was completely without merit.  

Tabloid journalism and Rovian gamesmanship, nothing new about that.  

But as the day wore on accounts began to emerge from Obama's first Capitol Hill meetings as president-elect. Obama was seeking Republican support for the economic recovery package, shooting for at least 80 votes in the Senate. Mitch McConnell said Republicans would be pleased that the package included significant tax cuts.

Bush never once headlined his proposals with a measure pleasing to Democrats.  What's going on here?

In the story lines journalists are allowed to reference out loud, discussion of the recovery package admits only a handful of questions.  How large will the package be?  When will it pass?  And will any Republicans vote for it? Only this last is really significant. Outside the beltway, people are wondering if they can keep or get a job, pay for their health care, feel decent about their country and their future again.  Inside the beltway, these questions matter, too.  But they are explored with reference to a narrative question that stands in for all the others.  Can Obama change the tone?

From the perspective of the liberal blogosphere, a different and richer story line presents itself. Is Obama crazy to try to get Republican support?  He has made it known he wants 80 votes in the Senate.  Isn't this giving the conservatives far too much leverage?   It's a wonderful goal but risks two bad outcomes:  the Republicans can ruin the recovery package with bad policy demands (make it too small, include tax cuts that further the inequality of the Bush years) or, just by withholding their support, make what should be a victory (the passage of a recovery package with 60 or so votes in the Senate) appear to be a defeat?

We know from the campaign that Obama is anything but naïve.  He's betting that by devoting half of his recovery package to tax cuts, he will co-opt the Republicans into supporting a plan that is otherwise progressive. The question is whether - as the legislative process unfolds in all its complexity - he will, in attempting to co-opt, be forced to concede....

I'm reflecting on one of the most frequently heard reactions to John McCain's speech:  It had no over-arching theme.

The pundits say this as if the speech's lack of coherence were a simple act of omission, an ingredient left out of the recipe, as if a baker left the sprinkles off of a cup cake.

The truth is, the speech had contradictory, self-canceling themes that constitute a kind of political fraud. 

"Nothing brings greater happiness in life than to serve a cause greater than yourself," John McCain said at the climax of the speech.

Let's imagine the platform of a leader who actually believed in such a creed. It might include support for national service programs like the Peace Corps or Teach for America or like the "tuition-for-service" program articulated last week by Obama. It might include a challenge to voters to sacrifice to help the nation confront the energy crisis, the debt crisis or the entitlement crisis. It might include an activist foreign policy doctrine that called on America to build international institutions, or to intervene to stop genocide or human rights violations, or (if he wanted to sound like George Bush) to spread Democracy across the world.

But what political platform did McCain announce?  Lower taxes. Larger markets. Choice in education and health care. A government that "works to make sure you have more choices to make for yourself." A foreign policy concerned primarily if not exclusively with defeating "threats."

This is definitely a cause:  it's the cause of the same old movement conservatism that's been trying to wreck our country for 40 years. Which makes a mockery of McCain's claim to be someone who "marches to the beat of his own drum." Which in turn makes a mockery of his claim that "I fight for you."

If you really think about it, McCain seems to be saying: the "cause greater than yourself" that calls us all to service is "you."

Of course, McCain hopes that we don't think about it.  We might be reminded of Obama's warning that in the Republican "ownership society" we are all on our own.

Built on fraudulent premises, McCain's speech is not like a cup cake without sprinkles or a pie without ice cream.

It's like sugar coating on a poison pill.