The report calls for making the tax code more progressive. Some measures include: Eliminating the Bush tax cuts for top earners, reinstating the estate tax for married couples over $4 million, a cap-and-trade energy policy, capping itemized deductions at 15 percent, modifying charitable giving and mortgage interest tax benefits, taxing dividends as income, raising the gas tax and instituting a tax on banks with assets over $50 billion. On the other hand, the report also calls for expanding the Earned Income Tax Credit, making the Child Tax Credit fully refundable and extending the Making Work Pay Tax Credit.

The plan adopts the Sustainable Defense Task Force recommendations, headed by Reps. Barney Frank (D-Mass.) and Ron Paul (R-Tex.). It also calls for investments in public education, health care, infrastructure and public transit.

The plan has some overlap with the Simpson-Bowles deficit reduction plan, including increasing the amount of income subject to social security taxes, modifying the mortgage interest credit and an increase in the gas tax.

Overall, the plan includes some of the progressive goals that did not pass the last Congress with huge Democratic majorities — and are much less than likely to pass during the next Congress: A health-care plan with a public option did not make it into the final reform bill; the cap-and-trade bill passed the House, but not the Senate; a tax on the largest banks was dropped out of the financial regulation bill after Sen. Scott Brown (R-Mass.) negotiated it out for his vote.

In a nod to deficit reduction, President Obama is set to announce a federal pay freeze today for 2011 and 2012.

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Rep. Lynn Woolsey (D-Calif.), leading the charge for a new public option. (ZUMApress.com)

Armed with a new line of attack aimed at soothing deficit fears, Democratic Reps. Lynn Woolsey (Calif.), Jan Schakowsky (Ill.) and Pete Stark (Calif.) last Thursday unveiled a bill that would offer consumers the choice of a “robust” government-run insurance plan alongside the private plans in the law’s exchanges. The Congressional Budget Office projects that the bill, which has gained 128 co-sponsors, will reduce the federal deficit by $68 billion between 2014 and 2020.

“As the deficit continues to grow, so does the need for a program that can save billions of dollars and improve health care while doing it,” said Woolsey, the co-chair of the progressive caucus. “We are introducing the public option now so it will be available as a ready-made offset or deficit reducer in this or the next Congress.”

Schakowsky argues that the lower overhead costs of government plans such as Medicare would allow the public option to create a better deal for consumers. “We could offer that kind of plan at a lower cost, and it would compete with private insurance companies, who would have to be more efficient and lower their costs,” she said. “It would follow the same rules as private insurers.”

The measure is unlikely to reach the floor this year, and could face even steeper odds next Congress. If nothing else, it appears part of a concerted effort by Democrats to galvanize disenchanted progressives and attack Republicans ahead of the tough November midterm elections.

“You’re the deficit hawks,” said Rep. Raul Grijalva (D-Ariz.), referring primarily to Republicans, “and we’re giving you a tool to be able to deal with the deficit.” Grijalva labeled deficit-minded lawmakers who refuse to consider the public option “hypocrites,” alleging that “the excuse that it was going to be too expensive is phony.”

For Democrats in election mode, catering to liberal wishes could help bridge the wide enthusiasm gap among voters — a key predictor of midterm victories, where the main objective is to turn out the party base. A Reuters/Ipsos poll last month found that 72 percent of Republicans were “certain” they would vote in November, compared to only 49 percent of Democrats.

“I do think this turnout issue is really going to be the crucial indicator, and the election hangs in the balance on how many of those less-committed Democrats actually turn out again,” said Ipsos pollster Julia Clark.

“That is a very real issue that we’re focused on,” Rep. Chris Van Hollen (Md.), the head of the Democratic Congressional Campaign Committee, admitted to Reuters. Apart from the public option bill, the White House on Monday strongly hinted it will choose liberal favorite Elizabeth Warren to lead the consumer protection agency. On Tuesday, Senate Democrats forced a cloture vote on the DISCLOSE Act, also a progressive priority, despite widespread expectations that it wouldn’t pass.

Republicans, who have depicted the public plan as a slippery slope to a national single payer system, derided the attempt to revive it and dismissed the CBO report. “House Democrats still don’t get it,” National Republican Campaign Committee spokesman Paul Lindsay said. “As if it wasn’t enough to vote for their party’s overreaching health care takeover that was soundly rejected by Americans, they now have the audacity to propose a government option which would put health care in the hands of bureaucrats and further bankrupt our nation.”

The CBO estimates that the public plan’s premiums would be, on average, 5 percent to 7 percent lower than the private plans in the exchanges. Providers would be paid Medicare rates plus 5 percent, a figure that would rise alongside physicians’ costs.

“Although skepticism about big government is growing, the CBO estimate gives [Democrats] an important selling point at a time of rising concern about deficits,” said Jack Pitney, a political scientist at Claremont McKenna College.

Popular among the populace but highly controversial in Congress, the public plan has the political disadvantage of facing fierce opposition from insurance companies, which fear competition from the government. And progressives shouldn’t hold their breath for a vote. “It’s unlikely it’ll be taken up this session,” a House Democratic aide conceded, saying only that it’s “quite possible” next Congress. But is it?

“For the progressives, it’s now or never,” Pitney argues. “They know that Republicans will make big gains in 2010, probably winning the House and maybe even the Senate. The numbers favor further GOP Senate gains in 2012.”

Despite the historic accomplishment, liberals cannot help but look back on the vexing health care debate with wistfulness, if not bitterness. Even though the bill covers 30 million Americans, liberals felt short-changed by its lack of a public insurance program. While the House passed a version of a public option in its November legislation, it was removed from the Senate version due to a lack of votes, and subsequently pronounced dead. (For a few liberal activists, this was the final straw that made the legislation no longer worth passing.) One day later, a CBS poll found that six in ten Americans favored the opportunity to choose between private insurance plans and a government plan. Surveys have consistently found that a large majority of the American public support the idea.

At the time, President Obama, soothing concerns of House progressives unsure whether to back a bill without it, reportedly assured them in private that it was merely a first step and he’d be willing to return to the public option later.

But major domestic initiatives are more likely to occur early in presidential terms, Pitney noted, arguing that the measure’s chances of success during this Congress are slim – but not nil. “It’s a Hail Mary pass, to be sure,” Pitney said. “But Hail Mary passes sometimes work. And Speaker Pelosi likes the Hail Mary. And if they fail to make the effort now, they will regret it in the future. Better a Hail Mary in 2010 than an Act of Contrition in 2011.”

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My decision came last Tuesday morning. There’s a place where I go in the Capitol, just to kind of reflect – before I have to make very important decisions. It’s in the rotunda – right next to Lincoln’s statue. It’s just a bench. And I went over there early Tuesday morning, about seven in the morning when the sun was just coming up, and no one else was around – there wasn’t a sound in the Capitol at that moment in the morning. And I just sat down there in a quiet place and thought about this decision. And that’s literally where I made up my mind that, notwithstanding how much there was in the bill that I didn’t like, that I had a higher responsibility to my constituents, to the nation, to my president and his presidency, to step forward and say, “We must pass this bill. And we must use this bill as an opening toward a renewed effort for a more comprehensive approach to health care reform.”

[...]

This was a particularly hard decision because the private insurance model is something that I don’t support. As I’ve said before, I don’t take back any of the criticisms I’ve made of the bill. This is reform within the context of a for-profit system. And the for-profit system has been quite predatory – it makes money for not providing health care. Now, the reforms in this bill may provide some relief from that impulse. But, nevertheless, I have my work cut out for me now in continuing the effort toward a much broader approach to health care reform, which would include attention to diet, nutrition, complementary alternative medicine, and empowering states to move forward with single-payer.

And so as we came closer, and it appeared that I would be in a pivotal position, I realized that the moment required me to look at this in the broadest terms possible. To look at this in terms of the long-term impact on my constituents, of the moment in history in which we now stand, of the impact on the country, of the impact on the Obama presidency, on the impact on the president personally. I had to think about all of this. I couldn’t just say, “Well here’s my position: I’m for single-payer, and this isn’t single-payer, so I’m going to defeat the bill.”

Last year, seventy-seven members of Congress agreed that if the bill didn’t have a public option, they were going to vote against it. And there were only two members who had kept that pledge when it was voted on the first time in the House. And I was one of them. And the other one’s no longer in Congress. So I basically was the last man standing here. So I’m aware of the debate that took place in favor of the bill. My concern was that this bill was hermetically sealed to admit no opening toward a not-for-profit system, no competition from the public sector with the private insurers. Which makes the claims of a government takeover such a joke. You know, those who claim that this is socialism probably don’t know anything about socialism – or capitalism.

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Will Bennet live up to his word. If yes, how so? Now or later? Bennet is sending mixed signals.

Tuesday, Bennet sent out a fundraiser email saying he remained committed to the public option:

The most disappointing part of this bill for me is something that isn’t in it — a public option. With this first hurdle now behind us, I will continue to push for new legislation, such as a public option, that improves our health care system.

That won’t cheer progressives pressuring Bennet. Jane Hamsher on CNN last night criticized Bennet precisely for raising money as a champion of the public option and now seeming to backpedal.

“He raised money, he built his [donations] list,” she said. If Bennet doesn’t offer an amendment, “he’ll look like a hack who was only in it when he thought there was nothing he could do.”

Bennet and Romanoff

Bennet spokespeople Adrianne Marsh and Craig Hughes said Bennet will not do anything to risk passage of the fixes. Adam Green, co-founder of the Progressive Campaign Change Committee, which had strongly supported the Bennet action to reintroduce the public option, told the Denver Post his organization is OK with waiting for a later vote.

Hamsher says Bennet can introduce a public option amendment without jeopardizing reform because the main bill with many reforms has already passed, she said.

Meantime, Bennet is being pressed by primary challenger and former Colorado House Speaker Andrew Romanoff, who is getting media attention by saying that if he were in the Senate, he would push now for the public option.

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Indeed, the House-passed reform bill strayed from the Senate proposal on a number of key issues, from children’s coverage to Medicaid payments to the creation of a public health insurance plan. Here’s how the reconciliation bill — which House leaders unveiled today to address what they considered weaknesses in the Senate legislation — would tweak (or not) some of the most contentious provisions in the upper chamber’s bill.

Paying the Freight

A central disagreement between House and Senate Democrats has been over how to pay the substantial costs associated with covering tens of millions of uninsured Americans. The House paid much of the tab with a 5.4 percent tax on the nation’s highest earners — individuals making more than $500,000 per year, and families pulling in more than $1 million. The Senate, meanwhile, passed a 0.5 percent hike on Medicare’s payroll tax for individuals earning more than $200,000 and families earning more than $250,000. But a larger chunk of funding under the Senate bill would come from an 40 percent excise tax on high-cost insurance plans — a provision that’s wildly unpopular among a key Democratic constituency: Organized labor.

The reconciliation bill alters both funding mechanisms. First, it scales back the insurance excise tax by increasing the dollar thresholds from $8,500 to $10,200 for single coverage, and from $23,000 to $27,500 for family coverage. It also delays the application of that tax until 2018. To make up the revenues lost by changes to the excise tax, the reconciliation bill also expands the Medicare tax to include net investment income (i.e. unearned income).

Kids’ Care

After years of promoting the virtues of the Children’s Health Insurance Program, House Democrats did a strange thing: They proposed to eliminate CHIP altogether, instead moving those kids into either Medicaid or private plans on newly created insurance marketplaces, dubbed exchanges. The Senate bill took a different tack, reauthorizing CHIP through 2019, while funding it through 2015. Despite a more recent White House proposal to provide an extra year of funding (through 2016), the reconciliation bill doesn’t touch the issue, leaving the original Senate provision intact (and kids welfare advocates happy).

Pharma Deal

A behind-the-scenes deal cut last year between Sen. Max Baucus (D-Mont.) and the pharmaceutical lobby drew a good deal of attention: The nation’s drug makers, under that agreement, would dedicate $80 billion toward health care reform over the next decade if Democrats would oppose further industry reforms — including a proposal allowing Americans to buy their prescriptions from abroad, and another empowering states to negotiate directly with companies on behalf of their lowest-income seniors.

While the White House endorsed the deal, House Democrats didn’t. Instead, Rep. Henry Waxman (D-Calif.), chairman of the House Energy and Commerce Committee, included the state negotiation provision as part of the House-passed bill. While the reconciliation bill does tap the drug makers for $28 billion over 10 years ($5 billion more than the original Senate bill), it doesn’t dabble with the other terms of the Pharma deal.

Abortion

Always the hot-button issue, abortion has emerged as the one topic that still really threatens House passage of health care reform. Late last year, Speaker Nancy Pelosi (D-Calif.) had negotiated a delicate compromise designed to satisfy a number of anti-abortion Democrats — notably Rep. Bart Stupak (Mich.) — who were concerned that the reform bill would allow taxpayer dollars to subsidize abortions. The so-called Stupak amendment would ban exchange plans from offering abortion coverage, forcing women to buy a separate policy covering abortion services. The Senate bill is a bit less strict, allowing abortion coverage on the exchange, but requiring women to write a separate check for those services to ensure that no federal funds go toward them. It’s the Senate provision that’s going to the floor of the House early next week, leaving Stupak and roughly a dozen other House Democrats vowing their opposition.

Anti-Trust Exemption

For 64 years, the health insurance industry has reaped the benefits of a rare exemption to federal anti-trust laws, which allows companies to share cost and coverage information without scrutiny from Washington. And for a number of years, Democrats have had their eyes on repealing it. The House bill would have done just that, but the provision didn’t make the cut in the Senate, due largely to the opposition of Sen. Ben Nelson (Neb.), the moderate Democrat whose close ties to the insurance industry include a stint as CEO of the Omaha-based Central National Insurance Group.

Like many other insurance reforms, this provision is one of those non-budget related items not eligible to move under the reconciliation process. The Democrats, though, are hoping to repeal the exemption later this year through separate legislation. Indeed, the House has already passed such a bill last month.

Medicaid Rates

The headlines today will likely focus on the plan to eliminate the sweetheart Medicaid deal that Senate leaders cut with Nebraska’s Nelson — a deal so unpopular that even Nelson himself claims now to oppose it. But much more significant for purposes of ensuring care is a provision of the reconciliation bill that hikes Medicaid rates to primary care physicians to at least the level of what Medicare pays for those same services. That provision was contained in the House bill, but not the Senate proposal.

The issue isn’t trivial. Medicaid rates are so low that many doctors refuse to see Medicaid patients. Only about 40 percent of physicians accept all new Medicaid patients, versus 58 percent for Medicare patients, according to a September study from the Center for Studying Health System Change, which randomly surveyed more than 4,700 physicians. And that number drops to about 31 percent among family doctors and general practitioners.

For dental care, the numbers are even worse. Only 27 percent of the nation’s dentists will treat Medicaid-insured patients, according to a 2007 survey by the American Dental Association survey. Those trends raise important questions about the value of an insurance program that nobody accepts — and led directly to the Democrats’ decision to hike Medicaid rates.

Closing the Doughnut Hole

Though seniors participating in Medicare’s prescription drug program are generally happy with their benefits, a painful thorn plagues the program: Seniors are forced to pay the full cost of drugs when annual expenses hit $2,700, and the subsidies don’t return until total costs hit $6,154 — a coverage gap known (not endearingly) as the doughnut hole. The Senate bills took steps to reduce the size of that gap, relying mostly on the pharmaceutical companies, who offered a 50 percent discount through the doughnut hole as part of their $80 billion deal with Democrats.

The reconciliation bill expands on that plan, offering seniors an additional $250 rebate in 2010, and closing the doughnut hole entirely by 2020.

Illegal Immigrants

While both the Senate and House bills would prohibit illegal immigrants from receiving federal subsidies on the exchanges, the Senate took the restriction a long step further by preventing those folks from buying insurance from the exchanges at all — even if they paid the full price of coverage using their own money. (The House bill would allow such unsubsidized purchases.) Although some members of the House Hispanic caucus have advocated for the House language in the reconciliation bill, it didn’t make its way in.

Public Option

The House bill included the creation of a government-backed insurance plan to compete with private companies on a national exchange, while the Senate bill contained no such thing. Despite a late push from liberal groups to include the House provision in the reconciliation bill, House Speaker Nancy Pelosi (D-Calif.) declined, citing a lack of support in the Senate.

House Majority Leader Steny Hoyer (D-Md.) said today that the lower chamber hopes to vote on the reconciliation bill Sunday afternoon.

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Gardner took a familiar tactic among Republicans opposed to the legislation by claiming that Markey was “not listening” to her constituents. A Research 2000 Colorado poll however suggests Markey is the one listening to the majority of the residents of the Fourth District and that Gardner is listening to a minority.

Markey, who has been the target this week of a major pro-health reform campaign, said in a release that she was swayed by key changes in the legislation:

After closely studying the compromise health care reform bill and the non-partisan Congressional Budget Office’s fiscal analysis of it, I have decided to support it. In November, I made clear that I wanted to see a bill that meets the goals of affordability and coverage, improved access, and that is also fiscally sustainable in the long-term. This bill does all those things and more. It contains a series of tough cost containment provisions beyond those in the bill passed by the House, designed to bring down the skyrocketing costs of health care and reduce the deficit. In fact, this is the biggest deficit reduction bill to come before Congress in over a decade.

This isn’t about politics. This is about bringing down health care costs and doing what’s right for the people of Colorado, and I’m proud to support this historic bill.

Gardner said in a dueling release that he knew what Markey’s constituents wanted and he pledged to work to repeal the legislation should it pass:

“The residents of the 4th Congressional District have sent a clear message to Congresswoman Markey: do not vote for the healthcare legislation,” said Gardner. “She has decided not to listen to her district. When I am elected in November I will listen to the wishes of the 4th District. I will work and vote to repeal the healthcare legislation.”

Added Gardner: “If this legislation passes, taxes will go up,” continued Gardner. “This bill will inevitably lead to fewer choices in healthcare, fewer jobs and sweeping cuts to Medicare to the direct detriment of our and senior citizens.”

The exchange mirrors a face off between U.S. Senator Michael Bennet and GOP challenger Jane Norton last month. Norton said that in supporting health reform and a public option, Bennet was “demonstrating a disconnect with Coloradans on the issue of healthcare” and “crossing the line into outright contempt for their wishes.”

The data suggests Norton and Gardner are wrong.. Markey and Bennet are perhaps disconnected on the issue from the crowds that gather at the Tea Party events where Norton and Gardner are campaigning, but the Research 2000 poll, which randomly tapped 600 statewide likely 2010 general election voters, reports that clear Colorado majorities support reform.

In the Fourth District, for example, at least 57 percent of respondents were not just supportive of health reform but also of the public option and of strong Democratic leadership on the issue.

The poll was commissioned by the Progressive Change Campaign Committee along with Democracy for America, and Credo Action on January 30 and 31.

Here’s one of the relevant questions asked by the Research 2000 pollsters:

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America wants and needs more competition in health coverage, and a public option offers that. But it’s just as important that we offer people not just another choice, but another kind of choice. A lot of people don’t want to be at the mercy of greedy insurance companies that will make money by denying them the care that they need to stay healthy, or to stay alive. We deserve to have a real alternative… The government spent billions of dollars creating a Medicare network of providers that is only open to one-eighth of the population. That’s like saying, ‘Only people 65 and over can use federal highways.’ It is a waste of a very valuable resource and it is not fair. This idea is simple, it makes sense, and it deserves an up-or-down vote.

Grayson has set up a website where voters can support the bill.

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The ad includes footage of key senators endorsing the public option. The coalition is looking to buy air time in Pelosi’s San Francisco district and in Washington. The ad closes with TV-drama-style music swelling and two sentences on the screen: “The Senate has the votes. The public option is in Pelosi’s hands.”

Politico reports that Pelosi’s office has repeated her position that reinserting a public option will scotch deals made with conservative Democratic blue dogs and tinkering now with the bill will lose votes in the Senate.

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(*UPDATE: Udall has announced his support of the public option but he has not joined the group of senators who have signed the letter sent around by Bennet. David Sirota has the likely explanation.)

The public option was stripped previously because it appeared it lacked support. Bennet, and an increasing number of Democratic Senators now believe, however, that including a public option meant to increase nonprofit competition in the insurance market, is the best way to win votes and pass reform among a majority of lawmakers, particularly in the House, who want to get behind strong progressive legislation.

Three more senators joined the push in the hours after it became clear Udall would join the effort. Udall sent out a release after the news broke.

Senator Udall shares President Obama’s over-arching priority of enacting meaningful and comprehensive health reform that will increase quality and access and put our system on a sustainable track by lowering costs for small businesses, taxpayers, and American families. As part of reform, he continues to feel that inclusion of a public option to go head-to-head with private insurers could play a significant role in bringing down costs and offering more affordable options to Coloradans. He thinks it’s important that such a plan — like the one approved in the House bill — negotiate reimbursement rates while competing on a level playing field with the private sector, and if such a plan comes up for a vote under the reconciliation process, he would vote for it.

In response to the upswelling of support for the Bennet plan, Republican congressional leader Newt Gingrich sent out a lengthy dispatch on the reconciliation process and Republican alternatives in the face of Bennet’s plan. The post ends on a note of temporary resignation that Bennet might take as inspiration.

If the Democrats are bound and determined to exert all their power and manipulate every rule they can to pass their big government health bill, Republicans may not be able to stop its passage.

[...]

No matter what President Obama, Speaker Pelosi and Majority Leader Reid decide, the bottom line for Republicans is that they must stand with the American people in opposing this bill.

This doesn’t just mean voting against it and using every parliamentary maneuver available to delay its passage.

It also means running on a platform of replacing whatever left-wing health bill the Democrats manage to pass with real health reform that empowers patients and doctors, not bureaucrats, to bring down health costs. And delivering on that promise in 2011 if Republicans gain control of Congress.

… [I]t means that the Republican candidate for President in 2012 must run on a platform that includes signing the replacement of the left’s big government health bill. After all, no matter what dirty tricks the politician may try to get his way, in America, the people have the final say.

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“By not joining Mike Bennet, [New Mexico Senator and Mark Udall's cousin] Tom Udall, and 18 other senators on the Bennet public option letter, Mark Udall is weirdly not standing up for one of the only popular health care proposals on the table. It’s time for him to take a stand — and embrace this opportunity to do the will of the people and be on the right side of history,” Adam Green, co-founder of the Progressive Change Campaign Committee, told the Colorado Independent Monday.

Progressive Change commissioned a nonpartisan Research 2000 poll along with Democracy for America, and Credo Action at the end of January that shows overwhelming support for the public option in Colorado. The poll tapped 600 statewide likely 2010 general election voters. The majority of respondents not only favored the public option as a way to control health care costs and provide coverage to more citizens, they also supported bold action on the part of Democratic lawmakers to push health reform through the legislative process and, as Green puts it, they favored “a good health bill over a bipartisan bill.”

The current Senate bill, which Udall supports, garners only 32 percent support from poll respondents. A bill with a public option garners 58 percent support.

Three relevant poll questions and answers:

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