Is Max Baucus the New Phil Gramm?

Is Max Baucus about to do to America's health care system what Phil
Gramm already did to the nation's banking system? Let's hope someone
stops Baucus before it's too late.

Senator Phil Gramm, the Texas Republican, was a free market zealot
who was more responsible than any other politician for the mortgage
meltdown that led to the epidemic of foreclosures and the current
economic recession. Now Senator Max Baucus, the Montana Democrat, is
playing a similar role in the battle over health care reform. Although
certainly more moderate than the right-wing Gramm, Baucus is
nevertheless using his influence to undermine President Barack Obama's
efforts to enact meaningful regulations that would require the
insurance and drug companies to act more responsibly.

Just as Gramm argued that the banking industry could police itself
without government rules and safeguards, Baucus is tying the hands of
Congressional reformers who understand that we can't trust the
insurance and drug companies to protect consumers and control costs. If
Baucus is successful, health care costs will continue to skyrocket and
hurt the nation's economic well-being, compounding the damage caused by
Gramm's reckless role in stifling banking reform.

Gramm, who served in the Senate from 1985 to 2002, opposed any
government regulation of the financial services industry, arguing that
banks and other lenders could police themselves. As powerful chair of
the Senate Banking Committee, and as the banking industry's chief
spear-carrier in Congress, he was the key architect of the deregulation
of the financial services industry. During the 1990s, Mother Jones magazine
noted, "he routinely turned down Securities and Exchange Commission
chairman Arthur Levitt's requests for more money to police Wall

He was the major sponsor of the the Gramm-Leach-Bliley Act, passed
in 1999, and the Commodities Futures Modernization Act, passed in 2000,
which tore down the remaining legal barriers to combining commercial
banking, investment banking, and insurance under one corporate roof.

Gramm's free-market fundamentalism made him a willing puppet of the financial services industry. According to the New York Times,
"From 1989 to 2002, federal records show, he was the top recipient of
campaign contributions from commercial banks and in the top five for
donations from Wall Street. He and his staff often appeared at
industry-sponsored speaking events around the country."

Gramm used his power as chair of the Senate banking committee to do
the banking industry's bidding. Thanks primarily to Gramm, Congress
wiped out the once stable and sound system of requiring banks to help
homeowners buy homes rather than act like gamblers at a casino. The
nation's ugly mortgage meltdown mess -- the escalating wave of home
foreclosures, the growing number of bank failures, and the tightening
credit crunch - is a direct consequence of Gramm's reckless actions.
Washington walked away from its responsibility to protect consumers
with regulations and enforcement. Operating without government rules
and safeguards, banks and private mortgage companies indulged in risky
loans and speculative investments.

They invented new "loan products"- including subprime loans and
adjustable rate mortgages (ARMs) --that put borrowers, and their own
banks, at risk.
The Times reported that Gramm "pushed
through a provision that ensured virtually no regulation of the complex
financial instruments known as derivatives, including credit swaps,
contracts that would encourage risky investment practices at Wall
Street's most venerable institutions and spread the risks, like a
virus, around the world." These practices created the financial house
of cards that predictably toppled and brought down the entire economy.

After he left the Senate in 2003, Gramm became vice chairman and
chief lobbyist for UBS, the Swiss investment banking giant. In that
role, he used his political connections to lobby for further bank
deregulation. He was a key advisor to John McCain's presidential
campaign last year until he was forced to resign for his intemperate
remarks that the country had become a nation of whiners" in a "mental

Max Baucus chairs the Senate Finance Committee, which is a key
player in shaping health care legislation. His opposition to government
regulation has made him the darling of the health insurance and
pharmaceutical industries. Just as the banking industry filled Gramm's
campaign warchest, the insurance and drug companies love Baucus and
have rewarded him with huge political donations.

According to the Washington Post,
Baucus is a "leading recipient of Senate campaign contributions from
the hospitals, insurers and other medical interest groups hoping to
shape the [health care] legislation to their advantage. Health-related
companies and their employees gave Baucus's political committees nearly
$1.5 million in 2007 and 2008, when he began holding hearings and
making preparations for this year's reform debate."

In the last three years, for example, Baucus has received $63,350
from Blue Cross/Blue Shield; $45,250 from Aetna, and $46,750 from AIG.
Health industry lobby groups have hired more than 350 former government
staff members and retired members of Congress to lobby for them. Two of
them are Baucus' former chiefs of staff.

During the Bush administration, Baucus was one of the few Democrats
who sided with Republicans on tax issues and on a prescription-drug law
that has predictably turned into a boondoggle for the pharmaceutical
companies. In 2003 the drug companies and their trade associations
deployed nearly 700 lobbyists to stamp out a proposal to permit the
federal government to negotiate the cost of drugs for Medicare
recipients. Instead, the Bush administration and the GOP-controlled
Congress, along with Baucus, added a drug benefit to Medicare, but
prohibited Medicare officials from negotiating prices with drug
manufacturers. It also guaranteed that private insurance companies, not
Medicare, would administer the drug benefit program. This dramatically
increased Medicare costs for taxpayers. Seniors, meanwhile, wound up
paying much more in out-of-pocket expenses for prescription drugs.

Now Baucus is taking charge of much bigger health care legislation, but operating with the same anti-regulation ideology.

In June, Baucus announced -alongside Billy Tauzin, the former
Republican Congressman from Louisiana who now heads PhRMA (the drug
industry lobby) - that the drugmakers had committed to cut prices on
prescription drugs by $80 billion over ten years. But the deal is
entirely voluntary - and it would preclude the federal government from
negotiating for lower prices.

Baucus is particularly opposed to Obama's proposal for a "public
option" - a government-run insurance plan which would allow citizens to
select a Medicare-style alternative to private insurers. According to
polls, 72 percent of the public and 90 percent of Democrats favor the
public option. A public option would keep the insurance companies on
their toes, and force them to provide better policies at a more
reasonable price, or face an exodus of consumers. That's why they don't
want it.

Likewise, the drug companies don't want a public option, which would
expose how they inflate the cost of medicine that contributes to our
expensive and inefficient health system. Drug prices in the United
States are much higher than in Canada and other countries that regulate
costs. But Baucus has apparently agreed to a drug industry proposal to
bar consumers from buying US-approved prescription drugs from Canada
and elsewhere.

In a recent cover story, "The Health Insurers Have Already Won," Business Week reported
that, "The [insurance] industry has already accomplished its main goal
of at least curbing, and maybe blocking altogether, any new publicly
administered insurance program that could grab market share from the
corporations that dominate the business.... [The industry] has also
achieved a secondary aim of constraining the new benefits that will
become available to tens of millions of people who are currently
uninsured. That will make the new customers more lucrative to the

Although Baucus' name was conspicuously absent from the Business Week piece, his fingerprints were all over the story.

Last month, the U.S. Chamber of Commerce wrote a letter
to Congress voicing its opposition to any "new government-run insurance
plan" as well an "any mandate" on employers to provide insurance to
workers or pay a tax. It appears that the Chamber will like what Baucus
is cooking up.

Faced with the possibility of a public option that will hold them
accountable, the insurance companies and drug manufacturers are
pledging to voluntarily trim their costs. If Baucus succeeds in
removing a public option from the final health care bill, the insurance
and drug companies won't have to worry about any competition If we've
learned anything from the Gramm-inspired deregulation mania of the past
few decades -- particularly how it unleashed an epidemic of
irresponsible and predatory behavior by banks -- its that we can't
expect for-profit corporations to police themselves on behalf of
consumers, workers, or the environment.

Even former Federal Reserve chair Alan Greenspan had to acknowledge
that unregulated markets don't work. But apparently Max Baucus hasn't
figured that out.

Some observers argue that Baucus' anti-government stance isn't due
to the massive campaign donations from the health care industry, but
instead reflects
the individualistic leave-me-alone values of his Montana constituents.
But Brian Schweitzer, Montana's popular Democratic governor, is a big
fan of government oversight of the health insurance and drug companies.
Last Friday, Schweitzer introduced President Obama at a town hall
meeting in Belgrade, Montana. According to the Great Falls Tribune,
Schweitzer's "ringing endorsement of Canada's universal health care
system was well received by the audience" of 1,300 people waiting to
hear from the president. "Did you know that just 300 miles north of
here they offered universal health care 62 years ago?" Schweitzer asked
the crowd, drawing enthusiastic cheers.

Baucus has so much influence because Senator Ted Kennedy, the
Massachusetts Democrat who has championed health care reform for over
40 years and who chairs the key Health, Education, Labor and Pensions
(HELP) committee, has been too ill to quarterback the legislative
maneuvering in the Senate. Had Kennedy been healthy, he would have been
able to use his personal relationships and legislative brilliance to
neutralize Baucus and push for a progressive plan.

Instead, Baucus has rounded up five colleagues - Republicans Charles
Grassley of Iowa, Olympia Snowe of Maine, and Mike Enzi of Wyoming, and
Democrats Jeff Bingaman of New Mexico and Kent Conrad of North Dakota -
to help him hammer out a bipartisan health care plan that eliminates
Obama's public option alternative. (Critics point out that this group
represents six states that have less than 3 percent of the nation's
total population).

Baucus' opposition to regulating the health and insurance industry
has made it impossible for the Democrats to take full advantage of
their 60 vote majority in the Senate. He is not only leading the
handful of centrist Senate Democrats against Obama's plan, but also
empowering Republicans and right-wingers, including Rush Limbaugh, Bill
O'Reilly, and Glenn Beck, to exploit the Democratic divisions.

It is entirely possible that Baucus' intransigence will lead to a
stalemate, because his more liberal Senate colleagues, and the key
House Democrats working on health reform, like Cong. Henry Waxman of
California, won't buy what Baucus is selling. If that's the scenario,
then we'll wind up where we were in 1994 -- after Clinton failed to
health care reform -- with no bill that can win enough support to pass.

A second scenario is that Baucus will prevail, because he knows that
Obama is so eager to pass a health care bill this year that he'll
accept a compromise that is far from what he had hoped to win and try
to save face by calling it a victory.

A third scenario is that liberal and progressive Democrats, and
their allies among the labor movement, community groups, public health
advocates, faith-based groups and others, will ratchet up their
grassroots organizing and make Baucus - and his close ties to the
insurance industry and drug companies -- the target. That was clearly
why Obama traveled to Montana on Friday - to put pressure on Baucus in
his own backyard.

Publicly, Obama praises Baucus. But Obama and the majority of the
Senate Democrats are angry at Baucus for his obstructionism - more of a
drug industry pusher and an insurance industry salesman than an
advocate for real reform. Compare the insurance companies' big profits
and outrageous corporate compensation to the tens of millions of
Americans - including many Montanans - who can't afford health
insurance, who can't get insurance because of pre-existing conditions,
or who have policies that don't cover the things they need. Then
challenge Baucus: which side are you on?

The crises in housing and health care are intertwined. A recent Harvard study
found that high health care costs account for 62% of all bankruptcies,
including foreclosures. Three quarters of them had health insurance
that was simply too expensive.

After a Senate career shilling for the banking industry, Phil Gramm
will always be known as the father of foreclosures. If Baucus prevails
in carrying water for the insurance and drug lobby, he'll soon become
known as the Senator who derailed genuine health care reform for a
generation, a legacy that will wreak havoc for America's working
families and for the larger economy.

One of government's important roles is to establish clear ground
rules, and to regulate companies and industries, to save them from
their own short-sighted greed. Government is necessary to make business
act responsibly. Without it, capitalism becomes anarchy.

Gramm ignored that truism, and his actions led to an enormous amount
of pain, suffering, and hardship. Will Baucus follow in Gramm's

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