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As Senate Democrats reconvened Wednesday at the Capitol in the wake of their devastating loss in Massachusetts, they vowed to press ahead toward enacting a health-care bill, possibly with a scaled-back package of provisions that could gain Republican support.

But Democrats cautioned that discussion of such plans is just getting underway. “We’re not going to rush into anything,” said Senate Majority Leader Harry M. Reid (Nev.). “Remember, the bill we passed in the Senate is good for a year. There are many different things that we can do to move forward on health care, but we’re not making any of those decisions now.”

Scott Brown’s victory in a special election Tuesday “changes the math in the Senate,” Reid conceded. But just as Democrats face new pressures to reach across the aisle, he added, GOP senators must be willing to meet halfway.

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With Democrats reeling from the Republican victory in the Massachusetts special Senate election, President Obama on Wednesday signaled that he might be willing to set aside his goal of achieving near-universal health coverage for all Americans in favor of a stripped-down measure with bipartisan support.

“It is very important to look at the substance of this package and for the American people to understand that a lot of the fear-mongering around this bill isn’t true,” Mr. Obama said in an interview on ABC News. “I would advise that we try to move quickly to coalesce around those elements of the package that people agree on.”

He continued: “We know that we need insurance reform, that the health insurance companies are taking advantage of people. We know that we have to have some form of cost containment because if we don’t, then our budgets are going to blow up and we know that small businesses are going to need help so that they can provide health insurance to their families. Those are the core, some of the core elements of, to this bill.”

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DJ reports Senate Democrats are to seek an increase to the federal government’s borrowing limit by $1.9 trillion lifting the total amount the U.S. government can owe to $14.294 trillion, several congressional aides said. The increase is forecast to support the federal government’s borrowing needs the end of 2010, one Senate Democratic aide said. The borrowing hike comes soon after a $290 billion increase to the debt ceiling agreed to by lawmakers at the end of 2009.

Sen. Russ Feingold (D-Wis.) told a local reporter, “It’s probably back to the drawing board on health care, which is unfortunate.” Rep. Bill Delahunt (D-Mass.) told MSNBC this morning he will advise Democratic leaders to scrap the big bill and move small, more popular pieces that can attract Republicans. And Anthony Weiner (D-N.Y.) said his leadership is “whistling past the graveyard” if they think Brown’s win won’t force a rethinking of the health care plan.

Sen. Evan Bayh (D-Ind.), who now might draw a challenge from Rep. Mike Pence (R-Ind.), said the party needs to rethink its entire approach to governing.

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….the Massachusetts vote is a loud and clear signal that the American people hate this legislation. Barack Obama came into office assuming that economic distress would move most Americans to favor big-government legislation. It turns out that’s not so. Not when Democratic bills would take away the health insurance most of them are content with. Not when it’s the product of backroom deals and blatant political bribery.

But Scott Brown’s victory was not just a rejection of Democrats’ health care plans. Brown also stoutly opposed the Democrats’ cap-and-trade legislation to reduce carbon emissions. He spoke out strongly for trying terrorists like the Christmas bomber in military tribunals, not in the civil court system where lawyers would advise them to quit talking. He talked about cutting taxes rather than raising them as Democrats are preparing to do.

Brown’s victory represents a rejection of Obama administration policies that were a departure from those of the Bush administration. In contrast, on Afghanistan, where Obama is stepping up the fight, Brown backed Obama while his hapless left-wing opponent Martha Coakley was forced (her word) to oppose it to win dovish votes in the Democratic primary.

Democrats will be tempted to dismiss Brown’s victory as a triumph of an appealing candidate and the rejection of an opponent who proved to be a dud. But Brown would never have been competitive if Americans generally favored the policies of the Obama administration and congressional Democratic leaders. In that case, even a dud would have trounced the man who drives a truck.

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From here:

In many ways the campaign in Massachusetts became a referendum not only on health care reform but also on the openness and integrity of our government process. It is vital that we restore the respect of the American people in our system of government and in our leaders. To that end, I believe it would only be fair and prudent that we suspend further votes on health care legislation until Senator-elect Brown is seated.

Even if Democrats lose the Jan. 19 special election to pick a new Massachusetts senator, Congress may still pass a health-care overhaul by using a process called reconciliation, a top House Democrat said.

That procedure requires 51 votes rather than the 60 needed to prevent Republicans from blocking votes on President Barack Obama’s top legislative priorities. That supermajority is at risk as the Massachusetts race has tightened.

“Even before Massachusetts and that race was on the radar screen, we prepared for the process of using reconciliation,” said Chris Van Hollen of Maryland, chairman of the Democratic Congressional Campaign Committee.

“Getting health-care reform passed is important,” Van Hollen said in an interview on Bloomberg Television’s “Political Capital with Al Hunt,” airing this weekend. “Reconciliation is an option.”

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The White House has reached a tentative agreement with labor leaders to tax high-cost health insurance policies, sources said Thursday. The agreement clears one of the last major obstacles on the path to final passage of comprehensive health care legislation.

White House press secretary Robert Gibbs said health care negotiators are “very, very close” to an overall deal and hope to have resolved most of their differences by day’s end. But White House officials privately cautioned that their optimism does not mean that a final health care deal will be formally announced Thursday.

Four labor negotiators briefed lawmakers on the parameters of the deal at a luncheon at the Capitol. Lawmakers said the agreement would raise the cost of unusually generous health policies and ignore secondary coverage, such as vision and dental plans. Health plans negotiated as part of collective-bargaining agreements would be exempt for two years after the 2013 effective date, giving labor leaders time to negotiate new contracts.

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David Walker, chief executive officer at Peter G Peterson Foundation and former U.S. Comptroller, talks with Bloomberg’s Carol Massar and Matt Miller about the U.S. financial crisis.

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Alan Blinder, a former Federal Reserve vice chairman who is an economics professor at Princeton University, talks with Bloomberg’s Mark Crumpton and Julie Hyman about the outlook for an overhaul of financial regulation in the U.S. Blinder also discusses the Financial Crisis Inquiry Commission.

Watch it all (8 minutes in all).

Passage of the health-care bill will be, for the administration, a catastrophic victory. If it is voted through in time for the State of the Union Address, as President Obama hopes, half the chamber will rise to their feet and cheer. They will be cheering their own demise.

If health care does not pass, it will also be a disaster, but only for the administration, not the country. Critics will say, “You didn’t even waste our time successfully.”

What a blunder this thing has been, win or lose, what a miscalculation on the part of the president. The administration misjudged the mood and the moment. Mr. Obama ran, won, was sworn in and began his work under the spirit of 2008””expansive, part dreamy and part hubristic. But as soon as he was inaugurated ,the president ran into the spirit of 2009””more dug in, more anxious, more bottom-line””and didn’t notice. At the exact moment the public was announcing it worried about jobs first and debt and deficits second, the administration decided to devote its first year to health care, which no one was talking about. The great recession changed everything, but not right away.

In a way Mr. Obama made the same mistake President Bush did on immigration, producing a big, mammoth, comprehensive bill when the public mood was for small, discrete steps in what might reasonably seem the right direction.

Read it all from today’s Wall Street Journal.

This is the culmination of an unprecedented policy disaster, inflicted on the American taxpayer by congressional supporters of Fannie and Freddie who refused over many years to approve new and tougher regulations for the two GSEs. Now that many of these folks are in charge of the House and Senate committees that deal with financial reform, they have suddenly found new respect for regulation and are trying to apply it to the entire financial system. Perhaps the American taxpayers, acting as voters in 2010, will decide that one disaster per career is all they should be allowed.

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In the nation’s capital, where $12.1 trillion of national debt looms and Democratic President Barack Obama’s projected 2010 budget shortfall is expected to hit $1.26 trillion, a bill is pending to establish up to $3,500 in annual tax deductions for the family pet.

The legislation is known as the HAPPY Act – Humanity and Pets Partnered Through the Years – and it has some support.

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American presidents, it is often said, have about a year to make their mark ”“ enact a major piece of legislation that then shapes and defines the rest of their term in office. Failure to choose the right weapons, or the right turf, can be fatal.

Barack Obama has at times struggled to find a cause he can truly make his own. He seemed to take on too many issues at once, from Middle Eastern peace to climate change, without demonstrating that he had a clear strategy to carry them through. With the Senate’s passage of his bitterly contested healthcare bill, the clouds have lifted a little. Just in time for the Christmas break, the President can afford to wipe the sweat from his brow and contemplate his holiday with some satisfaction.

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New census data shows that South Carolina’s population grew by more than half a million people during the past nine years, a nearly 14 percent increase with important political implications in the next decade.

The numbers are the last to be released before the 2010 census, which among other things will determine how many U.S. House seats each state gets.

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Thursday’s vote — which comes on the first Senate session on Dec. 24 in more than five decades — will bring Democrats closer than ever to realizing their 70-year-old goal of universal health coverage.

For the first time, most Americans would be required to obtain health insurance, either through their employer or via new, government-regulated exchanges. Those who can’t afford insurance plans would receive federal subsidies. And Medicaid would be vastly expanded to reach millions of low-income children and adults.

Difficult issues must be still resolved in final negotiations with the House, which has passed more liberal health-care reform legislation, and those talks could stretch through January and perhaps into February, Democratic leaders said. But Democrats are increasingly confident that President Obama would sign a bill into law in early 2010.

“Health care reform is not a matter of ‘if,’ ” White House spokesman Robert Gibbs told reporters Wednesday. “Health care reform now is a matter of ‘when.’ ”

Senate Majority Leader Harry Reid declared after Wednesday’s vote that: “We stand on the doorstep of history.” But he declined to speculate about negotiations with the House.

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[Robert] SIEGEL: Mr. President, some people have faulted this whole process for not focusing enough on how medicine is practiced in the U.S. and our appetite for lots of tests and the like. I want to ask about a recent, coincidental event, which would be the new guidelines on mammography. They suggested that we’ve been testing too much and it would be better to get tested less. There was an outcry. Your own secretary of HHS backed away from the new recommendations. What does that say to you about how best practices can actually be instituted in the country?

{President] OBAMA: Well, I think what it says, No. 1, is that we still have a tendency to think that more medicine is often ”” is automatically better medicine. And that’s just not the case. Inside this reform bill that I’m pushing is a provision that has a panel of experts ”” doctors, medical experts ”” who are going to look at all these practices to start changing how we think about medicine.

SIEGEL: Will politicians defer to their judgments ”” to their scientific judgments?

OBAMA: Well, one of my goals is to make sure that doctors and scientists are giving the best information possible to other doctors who are seeing patients. Look, if you talk to most health care economists right now, they will tell you that every good idea out there, when it comes to improving quality of care and reducing costs of care, are embedded in this bill. It’s not going to happen overnight because we’re going to have to change both how doctors think about health care and how patients think about health care.

And there are going to be millions of small decisions all across the country and interactions between doctors and patients that, over time, change the trajectory of our health care system. The important point is that we’re getting started in this process. And I’m actually very confident that the average person is going to say to themselves, if, right now, I’m taking and paying for five tests and my doctor tells me that I only need one, that person’s going to want to take one ”” save some money and save some time. But they need some validation. They need somebody who’s giving them the better information. And we have set up a system where, year after year, best practices are going to get disseminated across the country.

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The Senate’s healthcare bill is fatally flawed, a senior Democrat atop a powerful committee said on Wednesday.

Rep. Louise Slaughter (D-N.Y.), the chairwoman of the House Rules Committee and co-chairwoman of the Congressional Pro-Choice Caucus, said that the Senate’s bill is so flawed that it’s unlikely to be resolved in conference with the bill to have passed the House.

“The Senate health care bill is not worthy of the historic vote that the House took a month ago,” Slaughter wrote in an opinion piece for CNN’s website.

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Rep. Bart Stupak (D-Mich.) said the White House and the Democratic leadership in the House of Representatives have been pressuring him not to speak out on the “compromise” abortion language in the Senate version of the health care bill.

“They think I shouldn’t be expressing my views on this bill until they get a chance to try to sell me the language,” Stupak told CNSNews.com in an interview on Tuesday. “Well, I don’t need anyone to sell me the language. I can read it. I’ve seen it. I’ve worked with it. I know what it says. I don’t need to have a conference with the White House. I have the legislation in front of me here.”

The Michigan Democrat succeeded last month in getting 64 House Democrats to join him in attaching his pro-life amendment to the House version of the health-care bill. The “Stupak amendment,” as the provision is known, would prohibit the federal government from allocating taxpayer money to pay for any part of any health insurance plan that covers abortion except in cases of rape, incest, or when the life of the mother is in danger.

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Americans will feel the pain before the gain from the health care overhaul Democrats are close to pushing through Congress.

Proposed taxes and fees on upper-income earners, insurers, even tanning parlors, take effect quickly. So would Medicare cuts.

Benefits, such as subsidies for lower middle-income households, consumer protections for all and eliminating the prescription coverage gap for seniors, come gradually.

“There’s going to be an expectations gap, no question about that,” said Drew Altman, president of the nonpartisan Kaiser Family Foundation. “People are going to see their premiums and out-of-pocket costs go up before the tangible benefits kick in.”

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[U.S. House Majority Whip Jim] Clyburn said the high-profile deal that Nebraska Sen. Ben Nelson reached to have the federal government pay 100 percent for Medicaid expansion in his state will help land South Carolina a better deal during the conference negotiations.

Nelson was given the perk in return for agreeing to vote for the bill. Nelson’s vote all but assures the bill’s final passage later this week.

Other states would receive reimbursements worth 91 percent. Clyburn said he will be a party to the conference negotiations and he will push for states to receive a 95 percent return for the life of the bill, but he cannot guarantee he will get it.

“Rather than carping on this, I think it opens the door for other states to demonstrate need for similar treatment when you get to the conference,” Clyburn said.

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The healthcare reform bill that will go to the vote on the US Senate floor this week falls well short of Barack Obama’s original vision.

As the president took office at the beginning of this year, he laid out a plan for reform including a robust “public option” for a nationwide government-backed scheme that would inject a bolt of competition into the inefficient medical insurance market.

Instead, he is set next month to sign into law a bill that, while dramatically expanding healthcare insurance coverage, will largely leave insurance in the hands of private companies.

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The health-care debate in the Senate has, thankfully, returned to the paramount issue of cost. Unfortunately, the most obvious, time-tested and feasible approach to providing high-quality care at reasonable cost remains excluded from consideration.

The irony is that President Obama and a number of legislators have lauded the work of approximately 30 health-care organizations, caring for about 6 percent of the population, that for decades have provided care reliably better than average at lower cost. These are the “group employed models,” or GEMs, such as Geisinger Health System, the Marshfield Clinic, Kaiser Permanente, the Mayo Clinic and the Cleveland Clinic. Two of these GEMs — the Cleveland Clinic and the Mayo Clinic — have been ranked among U.S. News and World Report’s top five hospitals in the country. And shouldn’t all Americans have access to such better and cheaper care?

Most health-care organizations are run on a “fee-for-service” model. GEM organizations are different in that their physicians are employed, they are physician-led, and they work closely together and share information.

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Obama’s overhaul would also change how private firms insure workers. Perhaps 18 million workers could lose coverage and 16 million gain it, as companies adapt to new regulations and subsidies, estimates The Lewin Group, a consulting firm. Private insurers argue that premiums in the individual and small group markets, where many workers would end up, might rise an extra 25% to 50% over a decade.

The administration and the CBO disagree. The dispute underlines the bills’ immense uncertainties. As for cost control, even generous estimates have health spending growing faster than the economy. Changing that is the first imperative of sensible policy.

So Obama’s plan amounts to this: partial coverage of the uninsured; modest improvements (possibly) in their health; sizable budgetary costs worsening a bleak outlook; significant, unpredictable changes in insurance markets; weak spending control. This is a bad bargain. Benefits are overstated, costs understated.

This legislation is a monstrosity; the country would be worse for its passage. What it’s become is an exercise in political symbolism: Obama’s self-indulgent crusade to seize the liberal holy grail of “universal coverage.” What it’s not is leadership.

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David Axelrod, an adviser to President Barack Obama, predicted health-care legislation would pass “soon,” after Senate Democrats on Saturday secured the 60 votes needed to clear a path for quick Senate passage of the measure.

“We’re right on the one-yard line” with Senate Democrats reaching a deal, Mr. Axelrod said on CNN’s “State of the Union” which aired Sunday. “I believe this is going to happen soon”¦. People understand we’re on the doorstep of doing something really historic that will help the American people and strengthen our country for the long run.”

Senate Majority leader Harry Reid secured the pivotal 60th vote after a late-night deal on abortion coverage locked in the support of Nebraska Sen. Ben Nelson. The agreement capped weeks of negotiations aimed at building consensus on the White House-backed initiative.

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When Senate Democratic leaders agreed this week to remove a public insurance plan from their massive healthcare bill, they did more than quash a liberal dream of expanding the government safety net. They effectively pinned their hopes of guaranteeing coverage to all Americans on a far more conventional prescription: government regulation.

The change sprang from a compromise made to placate conservative Democrats wary of a new government program. But shorn of a “public option,” the Senate healthcare bill has reverted to a long-established practice of leveraging government power to police the private sector, rather than compete with it.

Despite the resistance among Republicans and conservatives to more government regulation, even the insurance industry has agreed to broad new oversight of their business in exchange for the prospect of gaining millions of new customers.

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Major procedural reforms will be needed as well. One essential step is the implementation of “pay-as-you-go” rules, which require that all increases in spending or tax cuts be financed by savings elsewhere in the budget. The statutory creation of a “fiscal future commission”””modeled on the Defense Base Closure and Realignment Commission, a federal body whose recommendations are subject to an up-or-down vote in Congress””could represent a major breakthrough. It might even be time to reconsider passing a balanced-budget amendment to the US Constitution, a provision that exists in nearly all US states and is now being pursued in a somewhat analogous form by the European Union. Whatever the specific policy approach, the underlying objective should be to create a system that will achieve a balanced budget over the course of the economic cycle.

A responsible fiscal policy would permit the Federal Reserve to run a relatively easy monetary policy, which would hold down interest rates and prevent overvaluation of the dollar. If the Obama administration is looking for a historical model, it should aim to replicate the Clinton-Greenspan policy of the late 1990s (a mix of budget surpluses and low interest rates) rather than the Reagan-Volcker policy of the early 1980s (a mix of large deficits and high interest rates).

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The latest calculation of the National Debt as posted by the Treasury Department has – at least numerically – exceeded the statutory Debt Limit approved by Congress last February as part of the Recovery Act stimulus bill.

The ceiling was set at $12.104 trillion dollars. The latest posting by Treasury shows the National Debt at nearly $12.135 trillion.

A senior Treasury official told CBS News that the department has some “extraordinary accounting tools” it can use to give the government breathing room in the range of $150-billion when the Debt exceeds the Debt Ceiling.

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Thirty-six members of Congress came out against a proposed tax on stock and derivatives trading, warning that it would drive up unemployment and undercut a shaky economic recovery in the U.S.

Charging investors for trading stocks, futures, options and other instruments would also drive up the cost of credit and private investment for both businesses and governments, according to a Dec. 15 letter sent by the 36 members, a copy of which was seen by Dow Jones Newswires.

The letter marks the latest opposition to an early December proposal by Rep. Peter DeFazio, (D., Ore.), who introduced the transaction-tax idea as one way to raise money for job creation and paying down the federal budget deficit.

“In reality, it would be a tax on all investment and savings vehicles because mutual funds and money market fund transactions are, by definition, purchases and sales of securities and bonds,” wrote the members of Congress in the letter.

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