This is what a lot of health-care advocates were afraid of. Social Security has, to the surprise of many, been untouchable in this year's various deficit talks and plans. Republicans reached out to touch the third rail of Medicare and got zapped. But Medicaid? Well, the program primarily serves the very young, the very poor and the very disabled. Those aren't constituencies known for meting out iron-fisted vengeance at the ballot box. And sure enough, Janet Hook and Janet Adamy are reporting that "officials familiar with the talks in both parties say they expect Medicaid to be the biggest source of cuts in federal entitlement programs in whatever compromise emerges."

That could mean Medicaid is coming in for very large cuts or it could mean Medicare and Social Security is are coming in for very small ones. Either way, the focus on Medicaid is perverse. Medicaid is a much more precisely targeted program than Social Security and Medicare. It's used by primarily by people without the means or the agency to pursue other forms of coverage. Social Security and Medicare, conversely, serve millions of beneficiaries who hardly notice the programs, and don't need them.

It's also much cheaper, per-beneficiary, than Medicare or private insurance. Indeed, it's probably too cheap. The New York Times today writes up a study in which researchers called doctor's offices looking for non-emergency appointments for children with Medicaid and with private insurance. Two-thirds of the kids with Medicaid were turned away. Only a tenth of the kids with private insurance were denied appointments. Cut further and children will either wait longer, or go without coverage altogether. Is that really the right way to start addressing entitlements?

Gene Sperling, the director of the White House's National Economic Council, has assured reporters that the administration wants to avoid "asking those who are most unfortunate or those with the least economic and political power to take the overwhelming bulk of this sacrifice." Moreover, the administration has to protect Medicaid because about half of the Affordable Care Act's coverage expansion is routed through the program. But it's hard to square that with these reports, or with the Democrats full-throated defense of Medicare and relative silence on Medicaid. “The safer Medicare is, the more endangered Medicaid is,” Sen. Jay Rockefeller told me last week. “Reading the tea leaves and being in a lot of meetings over the last couple of days, I worry that people are saying, ‘great, now we can really cut into Medicaid.’"

Five in the morning

1) The debt deal will likely include major Medicaid cuts, report Janet Hook and Janet Adamy: "The Medicaid program for the poor is facing significant cuts in an emerging bipartisan budget deal as Republicans seek to shrink entitlements and Democrats protect other priorities. Vice President Joe Biden and a group of negotiators from both parties met for the eighth time Wednesday at the Capitol, seeking an agreement that would pave the way for Congress to raise the debt ceiling. Officials familiar with the talks in both parties say they expect Medicaid to be the biggest source of cuts in federal entitlement programs in whatever compromise emerges. Social Security, the government's largest entitlement, is not expected to be cut at all and Democrats' top priority in the budget talks has been to limit cuts to Medicare, the program that provides health care for seniors."

2) The Fed is considering adopting an explicit inflation target, report Craig Torres, Steve Matthews, and Joshua Zumbrun: "Federal Reserve officials are discussing whether to adopt an explicit target for inflation, a strategy long advocated by Chairman Ben S. Bernanke and practiced by central banks from New Zealand to Canada, according to people familiar with the discussions. The talks coincide with Fed efforts to spur growth and reduce unemployment without fueling higher prices. An inflation target could help quiet critics of record monetary stimulus and anchor public expectations for consumer prices should the Fed in coming months try to spur the recovery by keeping interest rates close to zero for longer...People familiar with the discussions by Fed officials indicate they are active and serious, beyond the theoretical debates on the topic that the Federal Open Market Committee has had for more than a decade."

3) The Senate will vote again on ethanol subsidies today, reports Ben Geman: "The Senate will vote again Thursday on a plan to strip a major ethanol industry tax break and end the ethanol import tariff. Forty senators voted for the measure Tuesday, well shy of the 60 votes needed to advance the plan, when Sen. Tom Coburn (R-Okla.) offered it as an amendment to an economic development bill. But the politics of Tuesday’s battle were clouded by Democratic anger at Coburn’s surprise procedural move last week that set up the vote. Majority Leader Harry Reid (D-Nev.) said Wednesday evening that the Senate would vote on Sen. Dianne Feinstein’s (D-Calif.) identical version of the amendment tomorrow. Lawmakers will then vote on Sen. John McCain’s (R-Ariz.) amendment that would block use of federal funds for the construction of ethanol blender pumps or storage facilities. Both will need 60 votes to pass."

4) Obama and Congress are near a trade deal, reports Howard Schneider: "he Obama administration and congressional leaders are nearing consensus on three pending trade agreements and the renewal of support for workers who have been displaced by global trade, ending a standoff that some feared would put U.S. exports at risk, said business, administration and congressional officials close to the discussions. Free trade agreements with South Korea, Colombia and Panama have become a centerpiece of the Obama administration’s efforts to boost U.S. sales overseas...But the controversy over the U.S. deficit has stalled the deals, with Republicans opposing renewal of the billion-dollar-a-year Trade Adjustment Assistance program. The Obama administration has said it would not submit the trade pacts unless the assistance program is reauthorized to help workers hurt by outsourcing or increased imports."

5) FinReg regulators are falling behind, reports Louise Story: "The Securities and Exchange Commission said on Wednesday that market participants would not have to comply with many aspects of derivatives reform scheduled to take effect in mid-July. It declined to specify how long the delay would be in the equity derivatives it oversees. The announcement follows a similar statement on Tuesday from the Commodity Futures Trading Commission, although that agency imposed a year-end deadline for many of the changes in the derivatives it oversees. The idea of changing the deadline had been divisive at the commodities commission. The two Republicans on the five-commissioner board had wanted to create an extension without a deadline. The Democrats, however, wanted a specific date to keep some pressure on the group to complete the rule writing."

Questionable band name interlude: Dale Earnhardt Jr. Jr. plays "Vocal Chords".

Got tips, additions, or comments? E-mail me.

Still to come: The Fed is considering an explicit inflation target; poor kids have a hard time getting specialist treatment; a coalition of Republicans and Democrats are resisting deep cuts to food aid; this time, the ethanol subsidy cut vote might succeed; and The Office recut as a classic sitcom.

Economy

Ben Bernanke is opposed to tying the debt ceiling increase to cuts, reports Jennifer Epstein: "Federal Reserve Chairman Ben Bernanke on Tuesday again urged congressional Republicans to support an increase in the debt ceiling ahead of the early August deadline set by Treasury Sec. Tim Geithner, saying that they are using the 'wrong tool' to cut spending by linking it with the debt limit. Republicans’ threats to block a vote on raising the debt ceiling until they reach a deal with the White House and congressional Democrats on spending cuts could end up backfiring and doing serious economic damage. 'I fully understand the desire to use the debt limit to force a necessary and difficult fiscal policy adjustment, but the debt limit is the wrong tool for that important job,' Bernanke said at a meeting on the deficit hosted by the Committee for a Responsible Federal Budget and the New America Foundation."

Greece is getting close to default, report Anthony Faiola and Howard Schneider: "Escalating political turmoil in near-bankrupt Greece intensified concerns Wednesday that the Mediterranean nation may be spiraling toward a calamitous default with investors, potentially igniting a new phase in Europe’s debt crisis. Global markets shuddered as embattled Greek Prime Minister George Papandreou launched a risky gambit to push his Parliament to pass another round of austerity measures. Failure to pass the cuts could lead the European Union and International Monetary Fund to withhold bailout money, leaving Greece short of cash to pay its creditors as early as next month -- an event that some economists warn could destabilize the global financial system...Papandreou tried and failed to forge a coalition government to ensure the package’s approval...He then said he would reshuffle his cabinet and call for a vote of confidence this weekend."

Liberal Senators are already fighting Obama's debt deal, reports Scott Wong: "Two liberal senators facing reelection next year lashed out at President Barack Obama on Wednesday for negotiating a deal with Republicans that would tie three long-stalled free trade agreements with renewal of an aid program for workers hurt by foreign trade. Sens. Sherrod Brown (D-Ohio) and Bob Casey (D-Penn.) stepped up their calls for Congress to pass a stand-alone five-year extension of the aid program, known as the Trade Adjustment Assistance for Workers, before it takes up trade deals with Korea, Panama and Colombia. 'This is a continuation of [George W.] Bush policies - slightly changed,' Brown told reporters of the White House negotiations. 'I think the president is wrong on this.' Added Casey: 'This is a road that we shouldn’t take.'"

A House committee backed a balanced budget amendment, reports John Bresnahan: "The House Judiciary Committee on Wednesday approved a balanced-budget amendment, although it is unclear when - and if - there will be a floor vote on the measure. H.J.Res 1, introduced by Rep. Bob Goodlatte (R-Va.), would amend the Constitution to prohibit government outlays from exceeding revenue unless supported by three-fifth votes in both the House and Senate. Total government outlays would be limited to one-fifth the size of the U.S. economy. The Judiciary Committee approved the measure, which has more than 130 co-sponsors on a 20-12 vote. GOP leaders are considering bringing the measure to the floor, but they have slammed by conservatives for wanting to vote on the measure knowing it will fail."

The new IMF leader cannot be from Europe, writes Kenneth Rogoff: "If the fast-growing economies of Asia and Latin America feel disenfranchised from the I.M.F. -- there is still a strong undercurrent of hostility in Asia over the fund’s handling of the 1997-98 Asian financial crisis -- it will be difficult for the I.M.F. to raise money to deal with Europe and potentially Japan and to credibly do its work in emerging markets now and in the future. And because American and European leaders do not want to hear when their monetary, fiscal or regulatory policies are out of whack, the I.M.F. is really the only strong voice that can deliver the message; a non-European is best-equipped to deliver it. Until a few weeks ago, everyone seemed to agree that it was high time for a change...Suddenly, the I.M.F. became tabloid fodder and the plans for an open and meritocratic selection process were tossed out the window."

China faces three economic obstacles going forward, writes David Wessel: "China's leadership is determined to slow the pace of growth and thwart inflation while continuing to raise wages and deliver the goods to the masses. That would be a challenge for any government, and particularly for one so afraid of losing control that it's reluctant to let market forces do much of the work...The latest fad in Beijing government circles is 'internationalization of the yuan,' a currency whose use is nearly entirely domestic now...But China can't get there from here unless it stops holding interest rates so low that savers aren't even keeping up with inflation...A repressive government has an easier time keeping its people happy when the economy grows 10% a year. So far so good. But applying the economic brakes, never popular, threatens a government that doesn't trust its people."

Obama is rolling over on bank regulation, writes Matt Miller: "Take bank capital first - specifically, the amount of capital large banks are required to hold as a buffer against loss. Inadequate capital at 'systemically important' financial institutions was the main reason the housing meltdown led to epic taxpayer bailouts. Yet higher capital rules are being fought by big bankers, because such rules threaten their ability to pay themselves outrageous bonuses...The big banks have already won. The new international Basel accords ask banks to hold capital equal to 7 percent of their assets...Right now the Federal Reserve Board is talking about an extra 3 percent for the biggest banks, lifting total capital to 10 percent. But prudent Switzerland is requiring 19 percent. Why is 10 percent the outer limit of American debate? Wouldn’t 20 percent make us twice as safe next time casino capitalism runs amok?"

Adorable children making music interlude: A baby has a creative way of playing harmonica.

Health Care

Poor kids on Medicaid have a hard time getting care, reports Denise Grady: "Children with Medicaid are far more likely than those with private insurance to be turned away by medical specialists or be made to wait more than a month for an appointment, even for serious medical problems, a new study finds. The study, with findings that match anecdotal reports from other parts of the country, is one of only a few efforts to measure access to health care among people with Medicaid. Nationwide, those patients are caught between states’ threats to cut Medicaid payments and the Obama administration’s plans to use the program to cover more and more people as part of its health care law. 'There’s never been a study this comprehensive or this rigorous that actually measured access to specialty care, let alone children’s access,' said Dr. Karin V. Rhodes, an author of the study."

New presidential contender John Huntsman has a vague record on health care, reports Sarah Kliff: "As the governor of Utah, Jon Huntsman said he was 'comfortable' with the idea of an individual mandate for health insurance and signed a bill requiring his state to study the costs and benefits of one. As a soon-to-declare Republican presidential candidate, Huntsman rails against the individual mandate in the Democrats' health reform overhaul and says he never supported one in Utah. Huntsman's critics accuse him of flip-flopping, but health care experts who worked with him as governor say it's something different: Huntsman was so removed from the details of health care reform in Utah that he didn't seem to have an opinion one way or another. John T. Nielsen, who was Huntsman's most senior health policy adviser...says the former governor might have supported an individual mandate if his staff had called for one."

McKinsey's critical health care study is contradicted by its own experts, writes Sam Wainwright: "McKinsey & Company released a study last week that has caused a kerfuffle here in DC. The study claimed that 30% of employers 'will definitely or probably stop offering coverage after 2014' as a result of the implementation of the Affordable Care Act...Ironically, the author of an Urban Institute study used by the White House to refute the McKinsey report is none other than McKinsey’s own Bowen Garrett, the chief economist at their Center for U.S. Health System Reform. In his Urban Institute paper, Garrett dismantles 'claims that the ACA would cause major declines in [employer-sponsored health insurance],' calling them, 'greatly exaggerated.' Wait, you mean McKinsey published a study claiming 30% of employers will drop employee coverage, in direct contradiction to the expressed position of one of their head health honchos?"

Domestic Policy

A bipartisan group in the House is blocking further cuts to food programs, reports David Rogers: "Already on the defensive, scores of House Republicans joined with Democrats on Wednesday to beat back repeated conservative attempts to make still deeper cuts from nutrition programs and food aid overseas. The resulting margins approached 3-1, and the underlying $17.25 billion agriculture bill has clearly touched a deeper nerve than its Republican managers had expected. The combined cuts from Food for Peace and the WIC nutrition program for women, infants and children already total over $1.14 billion and triggered an emotional outburst from members of the House Black Caucus when the measure first hit the House floor Tuesday...[Rep.] Broun was trounced, 360-64, on his 10 percent WIC cut, which garnered only 63 GOP allies. And the deeper cut from Food for Peace lost by a 3-1 margin with Republicans split 139-98 against Broun’s position."

The GOP is doubling down on Amtrak privatization, reports Josh Mitchell: "House Republicans called Wednesday for the breakup of Amtrak's de facto monopoly on U.S. intercity passenger-rail service, proposing to open up the government-controlled company's Northeast Corridor and other lines to bidding by private investors. Foreign rail-service operators have been angling to develop high-speed rail in the U.S., where Amtrak's fastest Acela trains average 85 miles per hour, far slower than the 220-mph pace found in Europe and Asia. But the proposal to take control of the nation's passenger-rail routes away from the heavily subsidized Amtrak is likely to face stiff opposition from the White House, the Democratic-controlled Senate and unions. Wednesday the Obama administration voiced concerns about the plan, and Amtrak rejected it as vague and unrealistic."

The House GOP is trying again to defund net neutrality, reports Eliza Krigman: "House Republicans are trying for a second time to kill the FCC’s net neutrality rules by denying enforcement funding. The House Appropriations Committee released a draft of its FY12 Financial Services Appropriations bill Wednesday with language that would prohibit money for the agency’s Open Internet Order. Republicans say the FCC rules amount to government overregulation of the Internet. But net neutrality supporters were quick to criticize the GOP’s move...The provision is likely to meet the same fate as an identical amendment the GOP put forward earlier this year. After rigorous floor debate, the House passed the continuing resolution budget bill with the net neutrality amendment attached. But the effort died after President Barack Obama vowed to veto it."

Time travel interlude: The Office recut as a classic sitcom.

Energy

The Senate's second ethanol vote may succeed, reports Steven Mufson: "The foes of ethanol subsidies are planning to try again in what could prove to be one of the toughest battles ever for the ethanol industry. Some oil industry lobbyists, never fans of the ethanol subsidy, say around 20 Democrats, who this week opposed Coburn for largely procedural reasons, could join with Republicans to eliminate the subsidies in a measure being drawn up by Sen. Dianne Feinstein (D-Calif.). If successful, it would end a long streak of success for ethanol proponents, an odd assortment of a few big companies, Midwest corn farmers and national security strategists eager to reduce American reliance on imported petroleum."

Lamar Alexander wants ethanol subsidies cut as part of a debt deal, report Felicia Sonmez and Lori Montgomery: "One day after a majority of Republicans voted to do away with ethanol subsidies, the Senate’s No. 3 Republican said Wednesday that he is working on legislation that could eliminate a variety of energy tax subsidies and dedicate the proceeds to debt reduction. The move by Sen. Lamar Alexander (R-Tenn.) is the latest sign of a break within the ranks of the GOP, which has for at least two decades strongly opposed raising taxes by any means other than economic growth. 'Permanent subsidies for mature technologies, to me, are inappropriate, so we’re looking over those carefully, and I expect that before long, I’ll have legislation that will look at all energy tax breaks,' Alexander told reporters at a pen-and-pad briefing Wednesday afternoon."

Al Gore gave Mitt Romney some inconvenient praise, reports Dan Berman: "Mitt Romney on Wednesday got a big thumbs up for his stance on global warming from a source that likely won’t help him at all in the GOP primary: Al Gore. The former vice president and Nobel Prize winner praised Romney for not heeding right-wing calls to reject the science behind climate change. 'Good for Mitt Romney -- though we've long passed the point where weak lip-service is enough on the Climate Crisis,' Gore wrote on his blog. 'While other Republicans are running from the truth, he is sticking to his guns in the face of the anti-science wing of the Republican Party.' Earlier this month, Romney told a New Hampshire town hall meeting that he believes climate change is happening and that man-made emissions are a cause."

Closing credits: Wonkbook is compiled and produced with help from Dylan Matthews and Michelle Williams.

June 16, 2011

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