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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.

The Anti-Reformer: Is Baucus Destroying Health Care the Way Phil Gramm Wrecked Banking?

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 Street.”

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 recession.”

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 war chest, 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. (To see statistics about the large numbers of uninsured Montanans — the flip side of this coin — click here.)

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 industry.”

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 — it’s 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. (For more on Obama’s visit, click here.) 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. “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 is 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 Congressman 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 deliver 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, along with 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 — and for being more of a drug industry pusher and 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 percent 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 footsteps?

Peter Dreier is the E.P. Clapp Distinguished Professor of Politics, and director of the Urban & Environmental Policy program, at Occidental College. He is coauthor of Place Matters: Metropolitics for the 21st Century and The Next Los Angeles: The Struggle for a Livable City. He writes regularly for the Los Angeles Times, The Nation, and American Prospect.

This column first appeared in

To contact Sen. Max Baucus by email, click here. For his office locations and phone numbers, click here.

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  1. This Bush kissing Republican in Democratic clothing is determined to destroy health care reform-he doesn’t need it, it pays him very well, and in addition, he is already receiving monies for his next re-election campaign. It is time for Montanan’s to wake up and get rid of him, if for no other reason, than for destroying health care reform. An evil snake in the grass and another reason to push for term limits. When Obama, who deceived us all, calls Baucus a friend, I would love to see who he calls an enemy.

  2. Nice article. Completely agree. It’s really frightening when you think about the state of ehalth care ten years from now if there is no reform.

  3. We really , really need a few Montana Billionaire Dems to fund a legitimate candidate to oppose Baucus and we need it to start now. Can anyone step up to run or to fund a campaign?

  4. Thanks Peter for your insights and to NewWest for helping to carry it to us. RE: other comments … since Max has a seat in Congress til 2014, so replacing him would not seem to be our first priority. We are in the hot-seat here, right now in Montana as his constituents. Does Max realize that Dems have the leadership now, and a majority so that he does not need to get agreement of Senator Grassley (R) and others who are too busy agreeing with Sarah Palin’s lies to be part of any real consensus work? I hope you have you called Baucus and let him to move The Public Option forward Max for the people – even if the obstructionists drag their feet all the way to the finish line.

  5. Thanks Jim – I found Paul’s article much more inspiring… and to the point (note – when I copied and pasted the url, there were some extra spaces I had to take out for it to work).
    I only made it through a little over half of this article. I don’t understand how the writer is so black and white in this article. Why can’t there be “no public option” AND still have “more regulation”? The government “bailed out” the banks… and in some cases temporarily took them over…but key work is “temporarily.” From other sources I’ve heard, much of the mortgage crisis could be tracked back to fannie and freddie (practically government run), and a president’s influence to make it possible for every American to be able to own a home. Lack of regulation was yet another ingredient to the crisis. These major issues are not simple. I don’t have the answers, but I think Peter Dreier is too closed minded. I’m glad to see he is only a “guest writer”.

  6. The Anti-Reformer: Is Baucus Destroying Health Care the Way Phil Gramm Wrecked Banking?

    Short answer: Probably.

    Recommendations: 1. pay attention to Gov. Howard Dean. 2. Take Max to the woodshed.

    Single payer – modeled after the Canadian health system – cannot be allowed to be taken off the table. Whatever happened to those 70 percent of all Americans who favored Single Payer in the polls just a few weeks ago ? Did they get lost in the blizzard of propaganda and lies being put out by the lobbyists and conservative activists beholden to Big For Profit Medicine ?

    Short answer: Hell yes!

  7. Jim – The Begala article omits some very important historic issues that make his comparisons between social security and the current health care reform debate more than a little questionable.

    First, no one was making billions of dollars a year off social security because it didn’t exist. Today, billions of dollars flow to the insurance and pharmaceutical industries, fueling their opposition to anything that either cuts into those dollars or tries to get a better deal for the American people. Plus, our dollars, pried from us by a corrupt industry, flows directly into the hundreds of lobbyists and the millions in ads opposing serious reform efforts. Say what you will, but to believe Max is unmoved by the millions he has personally received from those industries is a joke — his actions speak far louder than his words.

    Second, here we are, some 74 years down the line and guess what? Americans on Social Security still can’t exist on the pittance it pays and are being advised to make sure they have significant private retirement funds or they’re toast. Very Third World, don’t you think — where the rich live well and the poor (or middle class) can look forward to a lesser standard of everything — education, health care, old age benefits. All you have to do is check the stats on how many people in America own how much (yes, that tiny sliver at the top owns a lot more than they used to) to see that progressivism has gone backward, not forward, in recent decades.

    Begala has also highlighted what he considers the great strides it only took three-quarters of a century to achieve but omits any mention of fiscal uncertainty for the future (think Boomers here, folks), the unrealistically small payments the program provides, the increased (radically) cost of living and the even more radical increase in medical and insurance costs. Wrap those in and suddenly Social Security looks a lot less secure and the great “wins” this DC “strategist” lauds look a lot less great.

    Additionally, his comparison of Republican actions when they’re in power and the Democrat fumbling we see today are laughable. The reality is simply this: When Republicans get the majorities, they move their agenda regardless of what the Democrats think about it. You didn’t see Republicans seeking bipartisan support for the Patriot Act, the Iraq and Afghanistan wars, warrantless wiretapping, or any of the Bush-Cheney nightmares. They rolled over the hapless Democrats like rabbits in the road without a look backwards.

    Democrats, on the other hand, continue to try and appease their CORPORATE contributors at the same time they half-heartedly address the very real needs of the American citizenry. Nothing illustrates this better than the current Baucus debacle. Health CARE has been dropped from the discussion in favor of Health INSURANCE, thus cementing the middle man that is costing the nation hundreds of billions a year in waste and obscene profits.

    Given 60 Democrats in the Senate, why oh why would Max Baucus take a stance that any bill coming out of his committee must be bipartisan? Why would he give equal standing to the three Republicans in his Gang of Six? None of this makes sense, and for Begala to tell us that bipartisan “solutions” hold up longer is pure baloney.

    Finally, let us all remember that Begala is a DC “Demo strategist.” So let’s see, what’s the strategy? Looks to me like the White House and the Democratic controlled Congress can’t even get on the same page. One day it’s “public option” (for insurance) and the next day it’s “only a sliver of reform.” You call that strategy? It’s like having your army divided into three parts with them fighting each other because no one is in charge.

    We were promised “change” — and Begala in no way embodies change. He is a product of his environment – an entrenched DC insider who wants to cover butt for his DC buddies while the rest of the nation goes up in flames. “Incrementalism” and “pragmatism” are the popular terms in DC these days, but what they are really simply sly excuses for the lack of significant progress by Democrats who can’t seem to keep their campaign promises or deliver the goods for the citizens who elected them.

  8. great article. And no,the problem is not too much government intervention. We need government to regulate many things,from the safety of air travel,to safety of our food,air,water, Wall Street banksters,and yes,out of control insurance companies who have been holding so many consumers hostage for the past decade especially.The best way to do that is through a public option, which would be like Medicare ,and would be optional,giving Americans a choice.

  9. Interesting article. It certainly seems that Senator Baucus is on the side of the insurance industry.

    Personally I want to see a free market for health care (doctors, hospitals, etc.) but a non-profit approach to insurance. Whether the insurance approach is private or public matters little to me, as long as it is not-for-profit. The market will drive innovation in health care and cost control for the medical industry. However, innovation for the insurance industry is only about maximizing profits. In the current system the insurance industry is making health care decisions based on maximizing profit. They tell doctors what they can charge, what procedures they can provide, what drugs they can prescribe. And doctors and hospitals have to have an agreement with each insurance company. If we can establish caps for for health care lawsuits and give health care decisions back to the health care industry, we can have lower health care costs and more options for providing universal insurance coverage. The latter requires a non-profit insurance industry.

    And hopefully this country can get over the knee jerk ideology junk that is holding us back. There are economic tools available, and the question is which tool or sets of tools to use? If we let rigid ideology drive all decisions, we would be stuck back in a non-technological world thinking everything in the universe revolved around the Earth. Let’s move forward.

  10. Gramm obviously didn’t do all this damage on his own; the many years of Republican-run congress (and, of course, Bush and buddies) helped an awful lot.

    It’s so disappointing, but not surprising, that so many citizens are buying all the crap that’s put out by the right-wing nuts regarding health care reform. I guess all those years of forcing kids in school to memorize “facts,” instead of teaching them to think, has finally had the results the Republicans were hoping for.

    I’m a senior living in AZ, and I think McCain and Kyl should be put in front of Palin’s “death panel.” And I volunteer to be one of the panelists!

    Thanks, all, for an important article and intelligent comments.

  11. Baucus has been looking a bit older lately too. You might also want to review his case while you’re looking at McCain and Kyl; you know, more efficient to address them all at one time.

  12. Oops, just re-read my comment above, and I should revise it: “. . . Pay the congresspeople a decent wage to attract more middle class candidates . . .” Should read: . . . to allow candidates of any income . . . Sorry.

  13. Wow, I don’t suppose ol Barney and Dodd insisting that all of those poor folks be given loans they couldn’t possibly repay had anything at all to do with the banking crash. In fact the feds are still advertising to renew the loans they can’t repay at present. Not that it mattered whether they could or can repay, the vote Democrat and that is all that matters. What is going to happen when the Pres shuts down all of the energy production and no one is working and sending money to Washington to redistribute?

  14. No loans for them coolies, peasants, peons and serfs, todd.
    Just let ’em starve!

  15. Horst, exactly what does giving folks who have no jobs loans for $200,000 to 300,000 homes, have to do with them starving?
    I went to work at 16, put myself thru school after my family was raised. I bought my little 60,000 fixer upper 8 years ago, but now the government won’t let me keep enough of my earnings to fix up my home because all of those people you are worried about (you too?) need the government to tax me to pay for their big homes. Nope I sure as he** don’t like it.

  16. Todd, you are to be commended that you did this on your own — and the right way. But a lot of people, not educated in the ways of shady realtors and greedy mortgage brokers, were excited about being able to buy a home. Of course, there were people who knew this wouldn’t work, but many folks actually believed those realtors who convinced them they could get a bigger/better house than what they were looking for. These people aren’t the only problem, tho. For years, investors, including “flippers,” have been allowed to buy rental property with no downpayment, interest-only payments, etc., and when the economy and the market changed (thanks to a certain previous administration) they were in big trouble. It’s a big mess, with lots of people and businesses to blame. And then there are the politicians who said that all those financial institutions were too big to fail, when that’s exactly why they should have been allowed to fail. Perhaps it would be better to go back to the smaller neighborhood banks, that know the people and the value of the homes in the area. I think there are very few people, no matter their political persuasion, who like the financial bailout, or at least the way it was handled (no accountability, etc.). Many of us contacted our congresspeople and told them NOT to do this, but they didn’t care. Even tho it seems as if we are powerless against the big business interests, we have to keep pushing. Everyone expected the Obama administration to snap their fingers and fix overnight all these issues that took decades to mess up, but it’s not going to happen. Especially not as long as those same big businesses control congress.

    Todd, I assume from what you write that your income isn’t over $250,000. So, hopefully, the promise that we won’t see an increase in our taxes will be kept. However, I see nothing wrong with increasing taxes on ultra-wealthy people so they can pay their fair share – and maybe some of the silly tax write-offs for the rich can be changed, too. We could at least turn back the taxes to what they were when Reagan lowered them dramatically for his wealthy buddies. (and Todd, they vote REPUBLICAN).

    P.S. It seems there still could be a SENSIBLE program to help people buy their first homes. There are so many reasons homeownership is beneficial – to families and to neighborhoods.

  17. So nice to hear things spoken so clearly. Perhaps with the latest news on the projections for the federal deficit, the first stage of health care reform will have to come through existing extensions of the safety net through waivers, and not through Congressional legislation.

    In any case, I’ll be out there this weekend and next week pressing for the public option, and trying, this time, to protect the physicians and nurses asking for single payer from being handcuffed and arrested.