Democrats’ Plan Would Offset Deficit by Ending Big Oil’s Tax Breaks

 

With high gas prices and rising federal deficits in the political spotlight, senior Democrats believe that tying the two together will put pressure on Senate Republicans to support the measure or face a difficult time explaining their opposition to voters whose family budgets are being strained by fuel prices.

President Obama and some top Congressional Democrats have said they want to take some of an estimated $21 billion in savings from ending the tax breaks and steer it to clean energy projects. But the Senate’s Democratic leadership is calculating that using it to cut the deficit instead makes it a tougher issue politically for Republicans who are trying to burnish their conservative fiscal credentials.

“Big Oil certainly doesn’t need the collective money of taxpayers in this country,” said Senator Robert Menendez, Democrat of New Jersey, one of the authors of the legislation that Democrats intend to showcase. “This is as good a time as any in terms of pain at the pump and in revenues needed for deficit reduction.”

As part of the effort to build support for the measure, the Senate Finance Committee has invited multinational oil company executives to discuss the tax subsidies and other government incentives at a hearing on Thursday.

Many Republicans are certain to oppose the proposal, making it hard for Democrats to assemble the 60 votes that will be needed to break a filibuster, given the resistance from energy-state senators in their own ranks. Republicans have characterized calls by Mr. Obama and Congressional Democrats to end the breaks as backdoor tax increases that will only increase gas prices.

“Instead of returning again and again to tax hikes that increase consumers’ costs, the administration and its Democrat allies in Congress should open their eyes to the vast energy resources we have right here at home and to the hundreds of thousands of jobs that opening them up could create,” Senator Mitch McConnell of Kentucky, the Republican leader, said in a statement.

Hoping to reinforce that point, House Republicans are set to approve legislation this week that would expand the coastal areas where energy companies can explore and produce oil and gas.

Democrats say they tailored their bill to make it harder for Republicans to reject after Senator Harry Reid, the majority leader, and Mr. Menendez wrote to colleagues last week that their goal was to “proceed with a bill that maximizes our chances of garnering bipartisan appeal.”

As currently written, the bill would apply only to what Democrats have identified as the five largest and most profitable oil companies: BP, Exxon Mobil, Shell, Chevron and Conoco Phillips. Those involved in writing the measure said they restricted it to those firms by using a definition that applied to major oil companies with certain levels of revenue. Democrats say they believe that approach thwarts Republican arguments that eliminating the tax breaks could affect more than just the major oil firms.

The proposal would end a series of tax advantages for the five companies and produce about $21 billion over 10 years, Democrats say.

More than $12 billion would come from eliminating a domestic manufacturing tax deduction for the big oil companies, and $6 billion would be generated by ending their deductions for taxes paid to foreign governments. Critics suggest that the companies have been able to disguise what should be foreign royalty payments as taxes to reduce their tax liability. The bill would also deny the companies the ability to deduct some intangible drilling and development costs, producing another $2 billion.

Some Congressional Democrats, including Senator Max Baucus, the Montana Democrat who heads the Finance Committee, have proposed using the revenue from the elimination of the tax breaks to promote alternative fuels and provide incentives to purchase fuel-efficient vehicles. Mr. Obama has made similar suggestions, and in his regular address over the weekend he again called for more emphasis on the development of clean energy.

But top Democrats said that reallocating the money that way would allow Republicans to accuse Democrats of picking winners and losers in the energy industry. At the same time, the strict focus on the deficit could cause unrest among Democrats who support alternative energy projects.

Last week’s sudden dip in oil prices, which could show up at the pump soon, might also sap momentum behind the tax measure.

Don Stewart, a spokesman for Mr. McConnell, noted that Democrats typically criticize oil companies when gas prices are high. He pointed to remarks made by Democrats at a 1974 Senate hearing that echoed the current talk of soaring profits and industry bonanzas.

“These guys need a new playbook,” Mr. Stewart said.

But Democrats said they see themselves as occupying the political and policy high ground in this case. They noted that top Republicans like Speaker John A. Boehner and Representative Paul D. Ryan, the Wisconsin Republican who is chairman of the House Budget Committee, have suggested that industry subsidies might have to be curbed.

Even talk of Republican delaying tactics does not seem to disturb Democrats who are eager to engage in a fight about oil.

“I am happy to have this debate on the floor for days,” Mr. Menendez said.

 

Israeli Strike on Iran Would Be ‘Stupid,’ Ex-Spy Chief Says

The intelligence official, Meir Dagan, who retired in early January after eight years as director of Mossad, the Israeli intelligence service, made the remarks at a conference here on Friday. His assessment contradicts the policy of the country’s political leaders, who have long argued in favor of a credible military option against Iran’s nuclear program.

The defense minister, Ehud Barak, criticized Mr. Dagan after his comments were widely publicized in the Israeli news media on Sunday.

Mr. Barak, saying that Mr. Dagan deserved credit for his contributions to state security, contended that he was “not wise to share his thoughts, legitimate as they may be,” with the general public.

“In the end of the day, these issues and decisions belong by their nature to the political echelon,” Mr. Barak said, adding that he was not sure that Mr. Dagan’s assessment was correct.

Iran has maintained that its nuclear program is for peaceful purposes, but Israeli, American and European officials believe that it is intended to produce nuclear weapons.

Independent analysts said that such a public stand by a respected figure like Mr. Dagan would complicate any plans the government might have to attack Iran.

Mr. Dagan, speaking for the first time in public since his retirement, was addressing a conference of senior public servants. His remarks were confirmed by a person who attended the conference, which was held at Belgium House, the faculty club of the Hebrew University of Jerusalem.

Mr. Dagan is known to have long opposed military action against Iran, but he had never said so publicly. Mr. Dagan, who also said Friday that Iran must not be allowed to produce nuclear weapons, has advocated covert means of setting back the Iranian program.

Israel considers the prospect of a nuclear-armed Iran as an existential threat.

Speaking last week at a ceremony marking Israel’s Holocaust Remembrance Day, Prime Minister Benjamin Netanyahu called on the world to “unequivocally condemn those who call for the obliteration of the Jewish state.”

“Iran is even arming itself with nuclear weapons to realize that goal, and until now the world has not stopped it,” he said. “The threat to our existence, to our future, is not theoretical. It cannot be swept under the carpet; it cannot be reduced. It faces us and all humanity, and it must be thwarted.”

It is not the first time that Mr. Dagan has courted controversy where Iran is concerned since he left office. In January, he told a group of Israeli reporters that he believed Iran would not be able to build a nuclear weapon before 2015, a year or more later than other Israeli estimates.

His revised assessment was based on obstacles that Iran has faced, including technical difficulties and covert actions against its nuclear program by intelligence agencies, according to Israeli news reports.

Some Israeli officials reacted furiously, worried that Mr. Dagan’s comments could reduce pressure on Iran.

But other Israelis, including two other former leaders of Mossad, said it was important for Mr. Dagan to be able to express his opinion. One official, who spoke at the time on the condition of anonymity because of the subject’s delicacy, said, “It has never been about when exactly they will get the device.”

The real challenge over the next 12 to 18 months, the official said, is to prevent Iran from reaching the threshold of nuclear weapons capability. An unexpected technological breakthrough in Iran is possible, he said.

Arguing that this was a time for more diplomatic pressure, not less, the official said that Mr. Dagan’s 2015 assessment might have been partly intended to quiet the drums of war, but that it was nevertheless “really unfortunate.”

 

In Florida, H.M.O.’s Would Treat Medicaid Patients

The cuts and changes being sought by the Republican-led Legislature and encouraged by the new Republican governor, Rick Scott, a wealthy former hospital company executive, are deeper than those in many other states.

In the past 11 years, the cost of Medicaid in Florida has grown to $21 billion from $9 billion and amounts to a third of the state budget. The federal government pays more than half the tab.

“There is a consensus that the Medicaid system is irretrievably broken,” said State Senator Joe Negron, a Republican who took the lead in writing the Senate bill, which is expected to come to a vote before the legislative session ends a week from Friday. The House approved its bill this month. The changes could go into effect as early as next year.

“I’ve never seen something where we are spending $21 billion and nobody is happy,” Mr. Negron said. “We were not going to kick the can down the road another year.”

Relying loosely on a five-year-old pilot program to shift care to H.M.O.’s, Florida lawmakers are poised to scrap the traditional model in which the state pays doctors for each service they perform. Instead, almost all of Florida’s Medicaid recipients would be funneled into state-authorized, for-profit H.M.O.’s or networks run by hospitals or doctors. H.M.O.’s or networks would also manage the long-term care of the elderly, shifting them away from nursing homes and leading to an expansion of in-home care. Lawmakers who support the bill say the state needs this flexibility in curtailing the exploding cost of Medicaid.

The Florida legislation is being closely watched by other states as they tackle the rapid growth of enrollment and the cost of care. Because Florida has three million Medicaid patients and a high number of uninsured people, a swift jump into managed care would be significant. And while many states use managed care for Medicaid users in one form or other, the Florida proposals stand out because they would set possible limits on services, giving the state and H.M.O.’s the right to deny some benefits that are now offered to patients. This would require federal permission.

“If Florida adopts this method of looking at managed care, other states will definitely look at that, and this is a tool we can use,” said Michael W. Garner, the president of the Florida Association of Health Plans, which lobbies for H.M.O.’s. “The toolbox is pretty empty right now.”

But there is concern across the state that the emerging proposals will not only reduce available health care for millions, but also leave the most vulnerable — the disabled, the elderly and those with serious chronic illnesses — at risk. An April study of the pilot program by Georgetown University raised doubts about patient services and cost efficiency, saying there was too little data. For some, the proposals hold a fearful prospect.

Vicki Ahern, 40, a single mother in Davie, Fla., who is her son’s full-time caregiver, spent several years trying to cobble together a network of medical specialists across several counties to help her son, Keith, 16, grapple with muscular dystrophy, spinal injuries and debilitating pain.

Then, suddenly, the network crumbled. With 10 days’ notice, Ms. Ahern said, Keith was shuttled into the pilot project, which transferred Medicaid patients in five counties to H.M.O.’s and hospital- or doctor-run networks. The counties are Baker, Clay, Duval and Nassau in the northeast and Broward in the south.

The participating H.M.O.’s in Broward County, where the Aherns live, listed none of Keith’s doctors or therapists; they offered few specialists and fewer services. The one rheumatologist who proved helpful dropped out of the program because of low reimbursement rates and frustrations with the bureaucracy.

“I started panicking and considered moving out of state, but we couldn’t,” Ms. Ahern said. “I was very angry because I knew he wasn’t going to get his services. If you have a chronic disability or are medically fragile, then forget it.”

After several months in the pilot program, Ms. Ahern discovered she could opt out, a long bureaucratic process, and she did.

The two bills now in play in Tallahassee are modeled in large part on the pilot program. It allowed the state to provide a set amount of money for managed-care companies to more efficiently serve each Medicaid patient, who include low-income children and pregnant women, the developmentally disabled and others.

The bills vary: the House version would send the developmentally disabled to managed care; the Senate’s would not. The Senate is pushing block grants, which would restrict financing further by creating a cap on the Medicaid budget each year; the House version does not.

The proposed changes worry health care advocates and Medicaid patients, who say that the for-profit nature of H.M.O.’s makes it difficult to care for the neediest.

The pilot program appears to have been far from successful, according to the Georgetown report: H.M.O.’s fled because of low reimbursement rates. Among those leaving was WellCare, which left 55 percent of Duval County’s Medicaid patients in limbo. The company was later accused of cherry-picking Medicaid patients to maximize profits, and five of its former executives were indicted on fraud charges.

Patients were shuffled from H.M.O. to H.M.O. and reported difficulty gaining access to services. In other cases, doctors listed in the network stopped accepting Medicaid patients. Supporters of the bills say that the rates would be adjusted to increase H.M.O. participation and that oversight would be bolstered.

Lawmakers are also planning steep budget cuts in the Medicaid program to tackle the state’s yawning deficits. This would make the shift even more burdensome, Democrats say.

“It can’t work,” said Representative Elaine J. Schwartz, a Democrat, who held community meetings on the program in Broward County. “It undermines the basic purpose of Medicaid, which is to provide services. If the private sector could have made money on Medicaid, they would have. With this plan, we are basically handing them $20 billion. Two groups of people will suffer: the patients because they are bamboozled and the taxpayer who is not getting their money’s worth.”

Joan Alker of the Center for Children and Families at Georgetown, who co-wrote the April report, said that so far there was no solid evidence of how much the pilot program had saved or whether the savings came from denying services. Florida pays among the lowest rates in the country for each Medicaid patient, ranking 43rd, making Medicaid less expensive than private insurance, Ms. Alker said.

Mr. Negron said he envisioned $1 billion in savings from his proposal in its first year and perhaps $4 billion in subsequent years.

“One of my guiding principles,” he said, “is that our friends and neighbors on Medicaid should not receive fewer benefits than their counterparts, but they shouldn’t have a more generous benefit either.”

 

Photos: What Would You Name This Baby Giraffe?

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