From chatting with people on the Hill these past few days, it's clear that there's a lot of pessimism about the Senate passing a big climate bill this year. (And if nothing passes in 2010, next year won't be any easier, given that Democrats will likely lose a bunch of seats in the midterms.) The dour predictions aren't surprising, given that even health care reform is in peril right now.

Granted, too-big-to-fail is an issue that has populist resonance on both right and left. Still, given McCain's trajectory over the last few years, this isn't necessarily a fight I'd have expected him to pick. Good to see him involved. Politico's Victoria McGrane has the story:

Copenhagen's nabbing all the headlines, but there's been some big climate news in the Senate this week. Yesterday, John Kerry, Lindsey Graham, and Joe Lieberman unveiled an outline of their "tri-partisan" climate legislation. You can see the rough framework here. As expected, it's similar to the House climate bill, only with more subsidies for coal, nuclear, and offshore drilling.

Of all the different industry groups scrambling to shape climate policy in Washington--from electric utilities to Detroit automakers--one stands out as a bit unexpected: Wall Street. Financial giants like Goldman Sachs and JP Morgan have enlisted, all told, more than 100 lobbyists to roam the Capitol and influence the debate over how to curb greenhouse gases. There’s a reason for that: Any cap-and-trade bill that puts a limit on emissions and allows polluters to buy and sell permits will create a vast carbon market.

So far the members of Congress who think the Treasury Secretary should go don't quite constitute a full-blown caucus, much less anything resembling a majority. But they're expressing their opinions with increasing passion. Early this month Democratic Senator Maria Cantwell confessed that she was "not sure" why Geithner still had his job given his too-soft treatment of Wall Street. (A spokesperson later walked back the implication of that statement.) Then, last week, Geithner took some lumps from both Democrats and Republicans in the House. Oregon liberal Pete DeFazio proclaimed that Geithner should resign over his refusal to answer questions about the AIG bailout. At a hearing of the Joint Economic Committee the following day, Texas GOPer Kevin Brady told Geithner that "[T]he public has lost all confidence in your ability to do the job" and pleaded, "For the sake of our jobs, will you step down from your post?" 

And the risks for Geithner only appear to be growing on Capitol Hill. Someone who recently attended a large gathering of House Democrats told me last week that "there were moments when it turned into a pep rally against Geithner and the Obama economic team." 

The criticism of Geithner is threefold: First is the continued taint of AIG, whose bailout he orchestrated as president of the New York Fed. The recent report by Neil Barofsky, the special inspector general for the bank bailout (aka TARP), has reignited suspicions that Geithner and the Fed pumped taxpayer money into the cratering insurance company in order to funnel billions of dollars to its major counterparties--banks like Goldman and Merrill Lynch. The second criticism is related to the first--that Geithner is too close to Wall Street generally. This comes partly from his role in the bailouts of Citigroup and Bank of America, partly from his decision to help investors buy the banks' toxic assets rather than nationalize them, and partly from revelations about conversations he had with the CEOs of Goldman and Citi at the height of the crisis. Third, both of these problems have been magnified by the rising unemployment rate and the perception that Geithner is more concerned with the deficit than with job growth.

On the merits, I think these criticisms are all slightly off the mark.

As the U.S. Senate prepares for floor action on health care reform, there's a sudden profusion of schemes that seek a compromise on the key "public option" question by giving states a lot of leeway.  Tom Carper is floating a state "opt-in" approach.  Others are talking about a state "opt-out" system.  The Finance Committee has already adopted Maria Cantwell's proposal to let states use federal subsidy funds to cover a majority of the uninsured as they see fit.   And the original Baucus markup vehicle included Ron Wyden's proposal to let states do all sorts of "experimentation" with federal funds. 

The political value of these approaches is pretty obvious: by giving states flexibility on the key questions surrounding the public option debate, health reform proponents hope to give shaky Democrats and maybe a Republican or two an avenue to get out of the way of health reform while accomodating home-state pressure from health insurers and/or providers. 

This makes abundant sense in Washington.  But the question must be asked: are the states ready to get into the driver's seat on the basic design of health care systems, public and private, within their borders?