Ezra Klein

1) Why government has such trouble cutting spending.

2) Ron Brownstein thinks Baucus got a lot right.

3) Jonathan Yardley reviews Kennedy's memoir, "True Compass." I've been reading a copy, and have been shocked at how good it is.

4) I'm also looking forward to Taylor Branch's new book on Bill Clinton.

L'shana tova!

The Massachusetts Senate seems likely to follow the House and approve legislation appointing a replacement for Ted Kennedy, but they're not comfortable with it. It makes them feel dirty. After all, in 2004, when John Kerry was running for president, they worried that Mitt Romney would appoint a Republican -- or himself -- to fill the seat, and passed legislation to ensure all open Senate seats are filled by special election. Now that Kennedy has died and the next five months seem crucial for health-care reform, they want to allow Gov. Deval Patrick to appoint an interim replacement until the special election is held. Reversing course seems like the rawest form of partisanship.

But this vote could be the difference between finally achieving the thing that Ted Kennedy said he went to Washington to do, and failing once again. In light of that, Kevin Drum retorts, "do you think the Texas legislature would hesitate even a few hours to do the same thing in reverse? Or any other Republican state legislature?"

The broader point is that we don't need to be here. There's no law that Republicans have to press their advantage in the wake of Kennedy's death and mount a filibuster of health-care reform. If one of Ted Kennedy's many Republican friends in the Senate announced that he could not support a filibuster if 59 Democrats voted to move forward, as that would just be ghoulishly taking advantage of Sen.Kennedy's passing and would also void the will of the voters, who elected 60 Democrats that would be that. Massachusetts could relax and wait for the special election, content in the knowledge that Kennedy's absence would not thwart health reform.

If I were a Massachusetts Senator, I'd remember that fact next time I felt a pang of conscience about replacing Kennedy.

Photo credit: AP Photo/Evan Vucci.

I haven't really written anything about the ACORN scandal, as it's just a transparent and cynical waste of everyone's time. But I do think Michael Tomasky gets the bigger picture right. So head over there if you want some commentary.

I like the idea of appointing Dr. Atul Gawande as an interim senator to Ted Kennedy's seat. No one knows health care better, and few have been as influential in this process. I'd worry that Atul himself would find it a bit of a disappointing experience, as knowing stuff is not likely to matter much at this stage in the process, and may just make the final weeks of the legislative sausage-grinder more stomach-turning. But it would be a bulletproof choice, and would certainly lead to a great New Yorker article.

Related: My interview with Atul Gawande.

The Guardian, in a transparent and sure-to-be-successful bid for links, rounds up the 50 best foods in the world, and tells you where to eat them. I've had two: California cuisine at Chez Panisse, and ravioli at Babbo. only one of those was a truly great meal (Chez Panisse). What's omitted from this list -- molecular gastronomy comes to mind -- are arguably more interesting than what's included.

The more people I talk to and the more reporting I read, the more convinced I am that health-care reform still faces the money problem. The unions hate the excise tax because it increases the cost of their benefits. Senators from high-cost states hate the excise tax because it increases the cost of their benefits relative to those in lower-cost states. The Republicans are attacking the excise tax because, well, it seems like the thing to do. Liberals like Jay Rockefeller are attacking the excise tax because it hurts some workers you don't want to hurt. And yet, everyone agrees we actually need more money in order to increase subsidies.

You can reform the tax. But then you get less money from it. You're probably going to need to go back to the drawing board, at least a bit. So let's talk about that drawing board.

There are three main ways people are raising money, and they have different advantages and different advantages.

1) Inside the Health-Care System: This includes excise taxes on insurance, or caps on the employer tax deduction, or any new taxes or fees levied on Medicare. The upside of raising your money inside the health-care system is that it grows as fast as health-care costs, so you're not caught with insufficient revenues 10 years down the road. The problem is that most of the ways are unfair to a lot of people, as the health-care costs vary for reasons that have nothing to do with income (geography, for instance, or the relative danger of your workplace, or the relative age of your workplace). This makes the options unpopular.

2) Outside the Health-Care System: Tax the rich. Tax soda. Tax cigarettes, or alcohol, or itemized deductions. The upshot of this is that the taxes can be relatively popular, and you can be pretty sure about who you're taxing. You can also raise money in ways that make people healthier, by taxing soda, or if we were really ambitious, in ways that make the planet better off, by taxing gasoline. The downside is that the revenue you get from these taxes grow much less slowly than health-care costs, so you're fairly quickly in a situation where the money you're raising isn't covering your expenses.

3) Inside the Health-Care Bill: The point of health-care reform, at least in part, is that it saves money. Some estimates (pdf) see the modernization measures alone saving $2 trillion. The health-care industry has promised that it can achieve that on its own. And then there are the so-called game-changers: MedPAC and evidence-driven medicine and the public plan and all the rest. CBO is reticent about scoring this stuff, but you can attach it to a "fail safe" measure -- cuts or revenues that trigger in the event the savings don't materialize -- and CBO will score that. The upshot is that you can try to get savings without doing all sorts of brutal revenue moves. The downside is, well, I'm not sure.

Right now, the Senate Finance bill uses the first strategy: the excise tax is unpopular, but CBo gives it a good score because it raises more money than the bill costs, particularly in the long-term. The House bill uses the second strategy: the surtax on the rich is politically defensible, but deficits explode after the first 10 years. And the plan the president released uses the third strategy: it didn't name any specific revenue measures, but it promised automatic spending cuts if the bill didn't balance. My sense is we're going to end up with a mix of the three strategies, but I'd like to see Democrats throw as much as possible behind the second strategy.

This is the best headline The Washington Post has run in some time:

Politicians' Tweets Self-Promotional, Study Finds

Yeah. I'll bet they are.

To put today's two interviews in a bit of context, both Sen. Jay Rockefeller and Sen. Ron Wyden are members of the Finance Committee. Both of them are unhappy. And both of them matter. They matter enough that on Wednesday, the day Baucus's bill was released, they were both invited for private, highly-publicized meetings with the president.

Rockefeller chairs the Finance Committee's Health Care Subcommittee. That gives him solid procedural power over the outcome. But his long history of work on this issue, and his long relationships with other Democrats on the committee, also gives him a certain amount of influence. His announcement that he couldn't vote for Baucus's bill in its initial form made changes a sure thing rather than a long shot, and opened the door for other angry Democrats to stand against the legislation.

Wyden's influence comes by virtue of the Healthy Americans Act, his universal health-care proposal that attracted, at various points, 11 Senate Republicans as co-sponsors, and received the best CBO score of any bill thus far. Wyden's bill is also a particular favorite among the chattering class. "When Ron Wyden balks at a Democratic health-care reform proposal," wrote Ruth Marcus on Wednesday, "people should definitely listen." Wyden thus has both bipartisan and elite credibility. His presence on the bill signals something positive about the quality and thoughtfulness of the proposal. His absence does much the same.

Rockefeller and Wyden, in other words, aren't being courted just for their votes. Rather, their votes are needed to ensure other votes for the bill. There's a certain subset of liberal Democrats who look to Rockefeller for cues, and a certain subset of Democrats who admired Wyden's Healthy Americans Act and take his opinion very seriously. As neither of them was included in the Gang of Six process, neither is inclined to give the bill a free pass. And Baucus and the administration are now working pretty hard to win their support, which means that there's a real chance their concerns will be fixed, and their priorities included.

Sen. Ron Wyden is another Finance Committee Democrat unhappy with the Baucus's initial proposal. Wyden's Healthy Americans Act, co-sponsored with Sen. Bob Bennett, is widely regarded as a good piece of legislation that's simply too radical for the current Congress. But it's given him enough credibility in the debate that on Wednesday, he was one of two Democrats Barrack Obama invited to the White House to discuss health care. Wyden has put his weight behind "The Free Choice" proposal (pdf), which would amend Baucus's bill to give all Americans access to the Health Insurance Exchanges. I spoke with him Thursday afternoon.

You and Sen. Bob Bennett met with the president on Wednesday. How did that go?

The President really likes Bob Bennett. And vice versa. At one point, the two were kicking around Utah politics, and I just offered to let them put together a deal of their own and introduce it into the Senate Finance Committee. The president turned to me and said, “I like you, too!” It was very funny.

I spent my time talking about the point Obama uses at every rally. I said, “Mr. President, I memorized it verboten. You say ‘everyone should get the same deal as members of Congress.’ ” But you take the text of these bills, and not only are you not getting the same deal as members of Congress, who get a dozen or more choices in the D.C. area, but people aren’t going to get any choice at all. It’ll be tethered to a policy that many people might think is pretty crummy. Some of those policies will be high-deductible, going up 10 or 12 percent a year. And people are going to think that’s pretty crummy.

What’s the mood among Finance Committee Democrats right now?

I think that in the Senate, the flashpoint has become affordability. And the flip side of affordability is choice. If you have a policy you’re having problems affording now, and some government official says you need to keep it, that’s not going to make you very happy. Plus, you don’t have a chance to make the system better, not just for yourself, but for everyone else, by making choices and creating competition among insurers.

As for the people who don’t have coverage and are making $65,000, those people look at Washington and see us saying you’ll have to pay 13 percent of your income, and then we’re going to clobber you with all these co-pays and deductibles, and some government official comes and says, ‘We’ll give you an exemption’? No middle-class people will be attending rallies holding signs saying “thank you for my exemption!”

You’re sort of dancing around your Free Choice Act here, so let’s talk about it. Do you have any co-sponsors?

There's a pretty good chance that I'll be eligible for the first-time homebuyer tax credit this year, which is nice for me. Budget wonk Pete Davis, however, thinks it's bad for everyone else. Which seems to be how most tax policy functions when it comes to housing.

The effort to appoint a successor to Ted Kennedy seems to be moving forward with fair speed:

After hours of testy debate, the Massachusetts House of Representatives on Thursday approved legislation allowing Gov. Deval Patrick to appoint an interim successor to Senator Edward M. Kennedy.

The House voted 95 to 58; the measure now goes to the State Senate, which could take up the proposal on Friday. Republicans have threatened to try to delay a vote, and, through procedural maneuvers, could do so for several days.

Mr. Patrick, a Democrat, has said that if both chambers approve the measure, he will appoint a temporary successor to Mr. Kennedy within days. The appointee would serve until a special election on Jan. 19, and could play a crucial role in the fate of health care legislation.

Sixty votes isn't a guarantee of anything, but it's a far better situation than 59 votes. And it gives Democrats negotiating room with Snowe, and Snowe negotiating room with Republicans. Her caucus has less leverage over her if her vote isn't decisive to passage.

Sen. Jay Rockefeller (D-W.Va.) chairs the Finance Committee's Health Care Subcommittee. His support will be crucial -- maybe even decisive – in getting health-care reform out of the Finance Committee. And he's been very public about his unhappiness with the bill. I spoke with the senator about his concerns this morning. An edited transcript follows.

Can you support the Finance Committee bill in its current form?

No.

Why?

There are a number of big things. The Children's Health Insurance Program is put into the exchange. That's like putting it into a farmer's market. It loses its defined benefits. And children need defined benefits.

Obviously the public option. I feel very strongly about that as a discipline on the private health insurance market. The public health insurance option doesn't have to make a dime. It doesn't have to make Wall Street happy or shareholders happy. It just has to sell a product at cost. That will put pressure on private insurance companies to bring down their premiums. What's the alternative? My staff has done extensive research on co-ops and everyone says they can't do health insurance. The best health care co-op exists in the state of Washington, and both of Washington's senators are adamantly for a public option. That ought to tell you something.

Another issue is that 46 percent of the American people have health insurance from fairly large companies that self-insure. And they're not included in the regulations. They have to have protection from preexisting conditions and lifetime caps and rescissions too. People hear that the regulations in the bill don't apply to these companies and they think it's not possible. But it's true. And it's almost half of the insurance market!

Another piece is the MedPAC proposal. if you really want to be honest about it, eight to 10 percent of the members of Congress understand health care. At maximum. I chaired the intelligence committee, and health care makes it look like riding on a tricycle it's so complicated. So what you have is lobbyists picking on congressmen who don't know health-care reform, and they say, you know what, you could get a lot more jobs in your state if you only put more money into oxygen or a certain medical device. If you're going to do Medicare right, understanding that the trust fund is going to go downhill in 2016, you can't have Congress making these decisions. You need professionals.

That's why I have well over 25 amendments ready for Tuesday.

Is this bill affordable?

Robert Pear interviews Olympia Snowe, who says exactly the right thing:

Senator Olympia J. Snowe, Republican of Maine, voiced the same concern. In an interview with The New York Times and CNBC, Ms. Snowe said that for her to support the bill, “there would have to be more subsidies” for low- and middle-income people and that she was trying to figure out how to pay for them.

Max Baucus, for his part, responds in exactly the right way:

The senator said the "most obvious" option would be to increase tax credits to households earning between 300 percent and 400 percent of the federal poverty level so their premium costs would be capped at a lower level. Some Democrats and Republicans have advocated scaling back the amount of coverage people would be required to buy, but Baucus noted, "I don't think that would be wise," because it would expose people to higher out-of-pocket costs.

And Chuck Grassley is actually contributing a perfectly good idea:

The approach Grassley is recommending would create a reinsurance system under which the federal government would cover some of the claims filed by high-cost individuals. That would permit insurance companies to offer lower rates.

Encouraging!

• Rethinking the worth of bipartisanship.

• Ron Wyden writes an op-ed.

• Who needs the mortgage-interest deduction?

• I'm influential, but not as influential as at least 48 other people.

• I also do a fair amount of TV.

Blogging may be a bit slow this afternoon as I'm heading to the Hill for some ol' fashioned reporting.

The Congressional Budget Office is normally a sleepy place where budget wonks prepare little-read estimates on the cost of legislation. Right now, however, it's the center of the legislative universe: Its judgment of how much health-care reform will cost, save and require is dominating the discussion of the bills. Last month, I sat down with Director Doug Elmendorf to talk about what the CBO does, how it works, and whether it's in fact too conservative in its estimates. Also, he told me why he's stopped reading books.

Normally people don't hear much about the Congressional Budget Office. It's a quiet place where people talk about numbers. But every few years, when major legislation moves forward, it seems like the weight of the world is on your shoulders. So what is it you do?

CBO provides objective analysis of budget and economic policy for the Congress. It was founded in 1975. Congress wanted a source of information independent of what it was hearing from the administration. For the last 34 years, we have provided estimates of the cost of different proposals and of the effects of different proposals on the budget, the economy, and the well-being of individuals.

How exactly does that work? To paraphrase Schoolhouse Rock, how do a bunch of academic papers become a model?

On health care, the root of the model is that people work for firms and live in families and we think they are making purposeful choices about how to get health-care insurance that are sensitive to the cost and quality of health insurance. There are estimates that economists and health experts have developed over years of the ways that individuals and companies respond to different options. We build those estimates of how sensitive people and employers are into the model. If we can show to the model a set of insurance choices that are different than the set of insurance choices people are given today, we can model how they make decisions.

So you take existing evidence of how people react to changes and then test more changes against it.

That's right.

So you put it all into the model and then you get something called a score. What is a score?

A score can be different things. CBO does official cost estimates for legislation at certain points in the legislative process. Those cost estimates usually include the cost over 10 years of the legislation. That 10 years is called the budget window. Those numbers, and an explanation of where they come from, are the official cost estimate, But we also do a variety of preliminary analyses. The estimates we've released for the Senate HELP Committee health bill and House bills are preliminary estimates. They're complicated bills and we're still working through all the aspects of the calculations we need to do. But we provide the preliminary estimates so there's an understanding of the broad contours of the legislation.

People often say that the way you do your work is biased towards costs, because you can say firmly "we're going to spend this much money," and away from savings, because they're more speculative.

If Max Baucus had brought out the exact same bill in late June, the reaction would have been very different. The subsidies would have been criticized, and so too would the co-op provisions. But it would basically have been the bill people expected from his office. The Democrats on his committee would have their disagreements, but they wouldn't be fuming after months of being locked out of the high-level negotiations. Baucus wouldn't be hated for letting this mess drag on through August, and his legislative skill and judgment wouldn't have been called into question for sacrificing so much in pursuit of bipartisan support and then failing to achieve it.

But Baucus now has a legitimacy problem. A dealmaker needs credibility and respect on both sides, and Baucus has lost it. The Democrats on his committee don't trust his instincts or his core commitments or his legislative skill. Nor do the Democrats outside his committee. They feel he gave away too much in return for not just too little, but nothing at all. That means the Republicans on his committee have further reason to distrust his ability to make a deal, because restive Democrats are going to want to change his bill. Meanwhile, House Democrats are enraged that he left them to suffer through August, and have little interest in passing a bipartisan compromise that doesn't come with any Republican votes.

Attacking Baucus, in fact, has become an applause line for liberals: Gerald McEntee, president of the powerful AFCSME union, responded to Baucus's proposal by leading delegates at the AFL-CIO's annual convention in a chant of "bulls**t." The blog response hasn't been much better.

Indeed, the only group that does seem happy with Baucus, or at least relatively forgiving of him, is the White House. They think he tried to get bipartisan support, and though failure was regrettable and delaying the August deadline was damaging, the effort had enough potential upside that it was worth trying. At the very least, it exposed Republicans as unwilling to cooperate, and demonstrated that Democrats had indeed been willing to reach out. They're also very happy he's given them a framework that CBO has scored as not only deficit-neutral, but deficit-improving.

But that leaves Baucus with little evident power at this juncture. Even within his committee, it's not obvious he can secure the votes of the liberals, and if he does, he almost certainly sacrifices Snowe. That means the White House and the Senate leadership are going to play the primary role in both offering concessions and guaranteeing their preservation in the process. The bill remains in Max Baucus's committee, but at this point, it's largely out of his hands.

Photo credit: By Haraz N. Ghanbari — Associated Press

Chuck Grassley would be a really terrible guy to date:

Sen. Max Baucus (D-Mont.) would have been able to craft a health bill with broad bipartisan support had he been given more time, a key Senate colleague claimed Thursday.

Sen. Chuck Grassley (R-Iowa), the ranking member of the Senate Finance Committee, argued that Baucus, the committee's chairman, might have unveiled a bill with a more positive reception had he not come under political pressure.

"The sad commentary is that we were working to practically completion of a bill," Grassley told CNBC during an interview this morning. "Another couple weeks would have given us an opportunity to have a bipartisan bill that I think would have gotten broad-based support."

I was totally getting ready to propose, baby, if you'd only waited a couple more weeks ...

I actually find Grassley's behavior throughout all this a bit shocking. Grassley's friendship with Baucus is long and deep. And he has made Baucus look like a weak, ineffectual fool. He has absolutely hung him out to dry.

Baucus assumed enormous personal risk to try and secure Grassley's support. He formed the "Gang of Six," infuriating the other members of his committee. He blew through the White House's August deadline, angering Senate Democrats and harming the White House. He compromised on a raft of liberal priorities, infuriating the Democratic base. And he got ... nothing.

Less than nothing, in fact. Grassley went on TV to trash the Democratic bills and proclaim that he was closed to an actual compromise. He let Baucus end the process with a compromised bill and not a single vote of confidence from his Republican colleagues. He made Baucus look like a knave. If there was any evidence that Grassley hated Baucus and wished him ill, it would count as one of the truly masterful political defenestrations in recent decades.

Photo credit: By Harry Hamburg – Associated Press

Washington, DC: Eazy-E,

I don't get the logic behind the free-rider provision. Is the thought that person A is getting subsidies, so if a company hires them and gives them health insurance, then they can use that subsidy on something else, and hence are getting a free ride? Is it an ACORN-style attempt to keep people on the subsidy books? Why would the government penalize any company for hiring anyone (outside of "undocumented" workers)? Please explain the provision from the point of view of someone who supports it.

Thanks

Ezra Klein: I ... can't. Nor can anyone else I've talked to. My reporting has basically uncovered this much: It seems to be coming from business trade groups, though I don't know exactly which ones. And they seem to have convinced Olympia Snowe. And she seems to have gotten it into the bill.

Also, I like the nickname. I got that one a bunch in high school.

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Chicago: Ezra, I love your blog and read it obsessively. But I have a non-health care related question for you: What do you think of this season of Top Chef, especially considering native DCites being some of top competitors?

Ezra Klein: I'm *loving* this season of Top Chef. The level of cooking is far, far above the last season, and maybe above any past season. The Voltaggio brothers are truly talented. Kevin is among the most intelligent cooks I've ever seen. The jerk from Zaytinya and the awesome blond girl are both great chefs.

More to the point, the type of cooking that's winning out this year is also cooking that's fun to watch. Stephan might have been technically talented, but there was nothing visually interesting about his dishes, or conceptually interesting about his choices. With these cooks, there really is. Following their intellectual process and watching their cooking process is pretty exciting, and helps overcome some of the natural deficiencies of watching people make food you can't taste.

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Washington, DC: Ezra -- I gather Dick Cheney is having elective surgery at GW Hospital today. Does he receive the benefit of his federal insurance policy for the rest of his life as a former VP? Or since he is 68 is he on Medicare? Either way, are the taxpayers paying for his health care?

Ezra Klein: Yep.

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Concord, N.H.: A comment and a question. Comment: You do a great job. Your blog is smart and incisive and is my #1 source for developments on health-care reform. Question: What can Dems and progressives say to seniors who are concerned that cuts to Medicare will impact their care?

Ezra Klein: This is going to be one of the key questions of health-care reform. What they're going to try to say to seniors is that they're fixing the donut hole. Interestingly, that fix goes into place in 2010, so seniors have it before the midterms. But whether seniors will listen ... that's a whole other ball of wax. Remember, this is the most conservative group in the country, and the group with the least to gain from health-care reform. Structurally, their opposition might simply be a given. But since they vote in midterm elections, that's scaring the hell out of Democrats.

Jim Henley has a question for some of his friends on the libertarian right:

So tell me: The argument is that if we further nationalize health-care financing it will mean reducing expenditures which will mean squeezing the profits of Pharma which will reduce innovation and more people will die and that’s bad. How is this not also an argument against any course of action that reduces health-care spending? For instance, favored right-wing programs are tort reform and increasing the share of health-care costs borne directly by the consumer. The argument is always that these changes reduce “unnecessary procedures” and – ta-da – control costs. But this would also, then, reduce the incentive for innovation in the health-care sector. Lower profits; less capital attracted.

I think y’all are proving too much.

For a long time, I took questions about stifling innovation very seriously. So did a lot of liberals. But then I realized that the people making those arguments wanted to do things like means-test Medicare, or increase cost-sharing across the system, and generally reduce costs in this or that way, which would cut innovation in exactly the same way that single-payer would hypothetically cut innovation: by reducing profits.

I also found that I couldn't get an answer to a very simple question: What level of spending on health care was optimal for innovation? Should we double spending? Triple it? Cut it by 10 percent? Simply give a larger portion of it to drug and device manufacturers? I'd be interested in a proposal meant to maximize medical innovation. I've not yet seen one.

It turned out that concerns about innovation weren't really about innovation at all. They were just about attacking universal health care ideas of a certain sort. Which is why I stopped taking them seriously. As it is, I'm less worried about squeezing out medical innovation than I am about rising medical costs squeezing out innovation in every other sector of society. Maybe some day the situation will change, and so too will those concerns. But we're not there yet.