Obama (re) declares war on lobbyists

It's on now. When the Baucus bill passed out of committee, it became clear that some form of health care reform will likely pass. That was the opening gong for lobbyists to start their final pushes to knock key cost control measures off of the end product -- the excise tax on expensive health care plans, the pending Sustainable Growth Rate cut to doctors' Medicare payments, the cuts in subsidies to Medicare Advantage plans, the tax on medical device makers, strong price control leverage for any public option, etc. etc.

The bogus and swiftly discredited (counter-swiftboated?) AHIP-commissioned study purporting to show that the Baucus bill will raise premiums was in turn a red cape to Democrats, who have gone out with gusto to paint the health insurance industry as public enemy #1. It is unlikely that AHIP is trying to prevent a reform bill from passing; they are rather trying to get what they can added in and taken out -- stiffer individual mandates, increased subsidies, no public option, no excise tax, weaker mimimum coverage standards. Give them all that, and reform is still worth doing -- insurance at least marginally worth having will still be made at least marginally affordable to most of those who now lack it. But the U.S. health care system will remain dysfunctional -- twice as expensive as that of other rich countries, riddled with coverage holes, wired for overtreatment. The battle now is about how eviscerated the final bill will be.

That is why Obama has returned to a major campaign theme: we can't reform our policies until we reform our politics. Here's how he put it on Jan. 30, 2008 in Denver:

we need to do more than turn the page on the failed Bush-Cheney policies; we have to turn the page on the politics that helped make those policies possible.

Lobbyists setting an agenda in Washington that feeds the inequality, insecurity, and instability in our economy.

Division and distraction that keeps us from coming together to deal with challenges like health care, and clean energy, and crumbling schools year after year after year.

Cronyism that gave us Katrina instead of competent government. And secrecy that made torture permissible and illegal wiretaps possible.

It's a politics that uses 9/11 to scare up votes; and fear and falsehoods to lead us into a war in Iraq that should've never been authorized and should've never been waged.

Compare his weekly address today:

This [rampant health care inflation] is the unsustainable path we’re on, and it’s the path the insurers want to keep us on. In fact, the insurance industry is rolling out the big guns and breaking open their massive war chest – to marshal their forces for one last fight to save the status quo. They’re filling the airwaves with deceptive and dishonest ads. They’re flooding Capitol Hill with lobbyists and campaign contributions. And they’re funding studies designed to mislead the American people.

Of course, like clockwork, we’ve seen folks on cable television who know better, waving these industry-funded studies in the air. We’ve seen industry insiders – and their apologists – citing these studies as proof of claims that just aren’t true. They’ll claim that premiums will go up under reform; but they know that the non-partisan Congressional Budget Office found that reforms will lower premiums in a new insurance exchange while offering consumer protections that will limit out-of-pocket costs and prevent discrimination based on pre-existing conditions. They’ll claim that you’ll have to pay more out of pocket; but they know that this is based on a study that willfully ignores whole sections of the bill, including tax credits and cost savings that will greatly benefit middle class families. Even the authors of one of these studies have now admitted publicly that the insurance companies actually asked them to do an incomplete job.

It’s smoke and mirrors. It’s bogus. And it’s all too familiar. Every time we get close to passing reform, the insurance companies produce these phony studies as a prescription and say, "Take one of these, and call us in a decade." Well, not this time.

Beyond slamming the most obvious target, Obama at the close broadened the scope and raised the stakes, framing the health reform bill as a test case for the functioning of American democracy:

Last November, the American people went to the polls in historic numbers and demanded change. They wanted a change in our policies; but they also sought a change in our politics: a politics that too often has fallen prey to the lobbyists and the special interests; that has fostered division and sustained the status quo. Passing health insurance reform is a great test of this proposition. Yes, it will make a profound and positive difference in the lives of the American people. But it also now represents something more: whether or not we as a nation are capable of tackling our toughest challenges, if we can serve the national interest despite the unrelenting efforts of the special interests; if we can still do big things in America.

I believe we can. I believe we will. And I urge every member of Congress to stand against the power plays and political ploys – and to stand up on behalf the American people who sent us to Washington to do their business.

Obama here is not only turning the spotlight on lobbyists just as they kick into high gear -- there's also a veiled threat to expose selected targets in Congress (Democrats, since there's no Republican votes except maybe Snowe's) who try to hold the final bill hostage to various giveaways.

It's been said by many that Obama needs to land a punch in a major domestic policy fight. Let's see specifically what he chooses to fight for as health care reform approaches the endgame.

Obama's doctrine of pre-emption

Want to see political power wielded the right way? Watch Obama's weekly address:

I realize that passing this budget won’t be easy. Because it represents real and dramatic change, it also represents a threat to the status quo in Washington. I know that the insurance industry won’t like the idea that they’ll have to bid competitively to continue offering Medicare coverage, but that’s how we’ll help preserve and protect Medicare and lower health care costs for American families. I know that banks and big student lenders won’t like the idea that we’re ending their huge taxpayer subsidies, but that’s how we’ll save taxpayers nearly $50 billion and make college more affordable. I know that oil and gas companies won’t like us ending nearly $30 billion in tax breaks, but that’s how we’ll help fund a renewable energy economy that will create new jobs and new industries. In other words, I know these steps won’t sit well with the special interests and lobbyists who are invested in the old way of doing business, and I know they’re gearing up for a fight as we speak. My message to them is this:

So am I.

The system we have now might work for the powerful and well-connected interests that have run Washington for far too long, but I don’t. I work for the American people. I didn’t come here to do the same thing we’ve been doing or to take small steps forward, I came to provide the sweeping change that this country demanded when it went to the polls in November. That is the change this budget starts to make, and that is the change I’ll be fighting for in the weeks ahead – change that will grow our economy, expand our middle-class, and keep the American Dream alive for all those men and women who have believed in this journey from the day it began.

That's a pre-emptive strike against business interests lining up against key elements in his budget. It's an extension of his campaign message against Rovian political attacks into the policy battles now looming: not this time. We won't get blind-sided, swiftboated, outlobbied, outspent and out-spun. And he's not alone in this. The Times has a story about how the whole liberal policy establishment is primed to pre-empt and counter Harry & Louise-style attacks on the health plan to come and other major policy initiatives to reverse the great risk shift and wealth shift of the past thirty years:

Mr. Podesta’s group [The Center for American Progress]is cooperating with two separate coalitions planning to fight for Mr. Obama’s health care plan with television advertisements, interview appearances on cable news talk shows and e-mail campaigns.

“This is no longer going to be Barack Obama standing by himself getting pilloried by the special interests with no one pushing back — if I can describe what it felt like in the White House in 1993,” Mr. Podesta said Friday.

The defeat of the Clinton health care plan was a hard learning experience for Democrats. They were caught flat-footed by an insurance industry-backed campaign to kill the proposal. It is best remembered for advertisements featuring a yuppie couple, Harry and Louise, worrying about limits on quality health care.

“The battle had been lost by the time the progressive community and its allies began rallying around the Clinton bill,” Mr. Neas said. “Now, people are prepared.”

Obama likes to exhort listeners to put their hands on the arc of history and bend it towards justice. Major progressive forces are gearing up to swing the pendulum back toward can-do government.

UPDATE: Al Giordano points out that the lobbies to whom Obama threw down the gauntlet have as much influence with Democrats as with Republicans -- and of course will be concentrating more on Democrats than on Republicans in this new era. Interesting in this context that Obama, who generally shuns speaking in the first person singular in favor of the nonroyal "we," personalized this challenge. "I know they're gearing up for a fight...So am I." As Giordano puts it: "They've [Congressional Democrats as well as Republicans] all just been put on notice: oppose the reforms he's pushing and be portrayed as siding with those corporate interests against the American people."

One relatively self-contained test of Obama vs. lobbyist influence on Democrats will be over the tax rates for hedge fund private equity managers, whose (formerly....) enormous incomes are taxed as capital gains, at 15%--a lower rate, as Warren Buffet points out, than his secretary pays. When this issue came up last year, Democrats caved quickly to industry pressure. Raising taxes on these management fees is in Obama's budget. We'll see if it happens this time.

Contrary Fact of the Day

Today's Wall Street Journal's story about how lobbyists smoothed the way for sovereign wealth funds' massive investments in bulge bracket investment banks has all the earmarks of a classic WSJ expose: front page billing, a load of detail about how the process works and who the players are, lots of case study detail. Instead of uncovering a scandal, though, the story opens the window to a heretical thought: occasionally at least, lobbyists win one on the merits. Consider, for example, this exchange between an Ogilvy lobbyist and James Webb:

Blackstone executives briefed several dozen lawmakers, with the firm's chief executive, Stephen Schwarzman, sitting in on some sessions. Stiff opposition came from Sen. James Webb, a first-term Virginia Democrat. Sen. Webb wrote a novel published in 1991, "Something to Die For," in which Japan uses its financial muscle to gain influence in Washington. The senator worries Beijing could do the same.

Mr. Webb wanted the China investment deal delayed so regulators could examine whether Blackstone's stake in a semiconductor company posed national-security problems. One of Mr. Berman's partners pointed out that the firm produced off-the-shelf chips. Sen. Webb withdrew his objections to the deal, though he remains skeptical of sovereign investors.

Exhibit B: Dubai Aerospace tries transparency as a lobbying strategy:

Wall Street and the U.A.E. thought they had turned the corner by spring 2007 when another Dubai-owned company, Dubai Aerospace Enterprise Ltd., bought two firms that owned small U.S. airports and maintenance facilities that serviced some navy transport-plane engines. The Dubai firm pledged to submit to government security reviews and submit its employees for security screening. It also thoroughly briefed lawmakers on the deal. It ran into no obstacles on Capital Hill.

"I call the strategy, 'wearing your underwear on the outside,'" says one of Dubai Aerospace's Washington lobbyists, Joel Johnson, a former Clinton White House communications adviser. "We have to show everybody everything -- no secrets, no surprises."

Of course, elected officials have to be very careful not to appear to compromise security, so it's likely that lobbying on this front won't succeed unless the logic at least seems bullet-proof enough to protect the responding politician. Still, it's worth keeping in mind that lobbyists can have reason on their side and sometimes even deploy it as an effective lobbying tool.