“The great thing about hitting yourself in the head with a hammer is that it feels so good when you stop.”  Recently, almost two-thirds (64 percent) of Americans desired the preservation of the Affordable Care Act (ACA) as it currently exists or with reforms of “problem areas.”[1]   Are there “problem areas”?  Yes.  Here are a couple of examples.  First, there are many people who are caught in a tight spot by earning too much to qualify for subsidies, but too little to be able to afford health insurance.  Second, only a few insurance companies had any experience at providing/pricing health insurance to poor people.  The Obama administration lured many other health insurers into participating in the healthcare market places by promising that all sorts of healthy rubes would pay premiums without needing much care.  Then, the Obama administration failed to enforce the “mandate.”  Many people did not even bother to get health insurance.[2]  The lack of young, healthy fools ready to be gouged for the benefit of older, wealthier people lies at the root of the instability in healthcare market places.  Third, the survival of the system depends upon continuing subsidies from appropriations passed by Congress.  The Republicans have declined to pass such appropriations and a federal court has held that spending without an appropriation is unconstitutional.  This case has not yet been heard by the Supreme Court.  When the Court does hear the case, it seems likely to support the initial decision.

Then, there are all the bad-press issues.  President Barack Obama said that “If you like your insurance, you can keep it” (or words to that effect).  Then the government cancelled a lot of insurance policies as “garbage policies” when the policy-holders really liked those policies.  The “roll-out” of the healthcare.gov web-site was a humiliating mess.  The Supreme Court held that the extension of Medicaid could not be forced on states that didn’t wish to participate by the threat to withhold other Medicaid funding.[3]  Naturally, these colossal screw-ups colored the perception of the ACA for a time.  Now, however, with the ACA an established—if imperfect—reality,[4] Republicans might do well to concentrate on remediation.

Such remediation might consist of getting rid of the ACA mandate on what must be covered; getting rid of the “mandate” that everyone must be covered; allowing/encouraging a few experienced companies to provide insurance for previously uninsured Americans[5]; expanding the range of those people eligible for subsidies; appropriating the moneys needed to make the system work; and not trying to coerce states that don’t want to expand Medicaid.

This will not be easy for Republican law-makers to do.  It abandons ideas of personal responsibility, to which many Republican voters are committed.  It expands spending, when we are already neck-deep in red-ink.  On the other hand, it will not be easy for Democrat law-makers to do.  It abandons the idea of “equal access” to health care and it abandons another federal suppression of state autonomy.

Then we can argue about how to close the budget deficit.  Anthoer difficult task.

[1] “Poll Watch,” The Week, 11 August 2017, p. 17.

[2] About 15 million people did get health insurance solely out of fear of the Internal Revenue Service (IRS).  These 15 million resent having to buy something they don’t need and constitute the core of those people who would “lose” this insurance under various Republican plans.

[3] This class-based program of medical insurance covers many Trump voters as well as the voters whom the Trump voters despise for other reasons.

[4] Like Social Security, Medicare, and the Espionage Act of 1918.

[5] Yes, I understand that this will create a two-tier medical care system.  “What are you, fresh offa da boat?  Expect that the streets are paved with gold?  ‘Merica is hard place to live.  Still, is better than the Old Country. “  NB: Imagined monologue, not a quote from the text.

There is a good argument that the “welfare state” has been created out of changing social needs.  In 1965, as part of his “Great Society” effort to “complete” Franklin D. Roosevelt’s New Deal, President Lyndon B. Johnson signed the law creating Medicaid.  The law extended medical insurance to the “deserving poor”: children, pregnant women, the disabled, and geezers unable to afford long-term care.[1]  By 2013, 57 million people were covered by Medicaid.[2]

In 2014, the Affordable Care Act (ACA) allowed states to extend Medicaid coverage to all those who earned 138 percent of the federal poverty level or less.  Some 31 states expanded Medicaid.  This added 17 million people to the Medicaid rolls.  Even though 19 states did not expand Medicaid, the total cost of the program rose to $574 billion in 2016.

Did the expansion of Medicaid improve health outcomes?  One might suppose that it would take a while to tell.  All the same, Harvard rushed out a study that that found a 6 percent drop in mortality among poor populations in states that expanded Medicaid after 2014.[3]  A Kaiser Family Foundation study found that there isn’t much difference between private insurance and Medicaid—except that Medicaid recipients are just as likely to get care that they wouldn’t have received otherwise.

The aging of the American population poses a huge challenge to Medicaid.  The chief problem is “long-term care”: home health aides and nursing home care.  Medicaid provides for such “long-term care.”[4]  Anyone who exhausts their savings paying for home health-care or a nursing home qualifies for Medicaid.  Better than 60 percent of people—mostly women because women tend to outlive men—in nursing homes are covered by Medicaid.  This amounts to 21 percent of total Medicaid spending and the share is only likely to grow.  About 18 percent of “Baby Boomers” will need nursing home care.  Most of them don’t have the resources to pay for it, so they will become public charges as they/we have been public charges throughout life.

Republicans wanted (and still want) to scale back spending on Medicaid.[5]  In particular, they want to roll-back the Obama administration’s extension of Medicaid to the “working poor” while leaving in place health coverage for the “deserving poor.”  In contrast, the vast majority (70 percent) of Americans favor maintaining Medicaid spending at its current level.

In the near term, there isn’t any real prospect of cutting entitlement spending.  It is a different question to ask if America can afford such spending.  The ACA loaded $875 billion in new taxes on upper income earners.  This seems to be the real source of funding for the ACA, rather than the revenues derived from “mandatory” insurance participation.[6]  The Republican “repeal and replace” plan would roll-back these taxes.  The House version would have cut spending by $834 billion.  Grimy though it may be, this turns into a debate over spending on an “undeserving” past versus spending on an uncertain future.  Boomers should have saved more.

[1] On the distinction between the “deserving” and Undeserving” poor, see http://www.herinst.org/BusinessManagedDemocracy/culture/work/deserving.html  It doesn’t matter if this is a nonsensical distinction.  In contemporary Democratic party ideology, ALL poor people are the “deserving poor,” as re many members of the middle class.  However, Republicans hold the White House, both houses of Congress, and the Supreme Court.  For that matter, it is clear that many conservative Democrats hold to the same beliefs.

[2] “The battle over Medicaid,” The Week, 23 June 2017, p. 11.

[3] Not to be callous, but over two years, the death rate declined by 6 percent and this is the result of extending Medicaid?  Is this reduced or merely postponed mortality or just a short-term deviation?

[4] Fat black ladies from the Caribbean, mon, sticking tubes in you and wiping your ass.

[5] People on Medicaid usually don’t vote Republican.  If the “reform” passes, they never will.

[6] My sons received forms for the last two years in which they were supposed to certify that they had health insurance.  However, they were not required to submit those forms with their tax returns.  That is the “mandate.”

The stock market surged after the election of Donald Trump.  This seems to have reflected a belief that he would begin the laborious process of rolling-back Barack Obama’s massive extension of federal rules and regulations, and that President Trump would support the Republican default strategy of tax cuts.  The Trump administration projected rapid growth as a result of his election: a big, long-overdue infrastructure program; an additional 10 million jobs by the end of the first term; and significant tax cuts whose revenue effects would be off-set by the accelerating growth rate.  “Bliss it was in that dawn to be alive,….”

In reality, the American economy appears to be slowing in its growth under the Trump administration.  The average monthly pace of job creation in 2016 ran at 187K.[1]  According to the Labor Department, the American economy can be expected to add 162K jobs per month in 2017.  It added only 138K jobs in May 2017.  The labor participation rate has fallen from 83 percent a decade ago to 81.5 percent in May 2017.  The unemployment rate fell to 4.3 percent. That is the lowest level in 16 years.  In short, wages should be starting up.

But they aren’t.  Wages increases for the last year have averaged between 2.5 and 3.0 percent, scarcely ahead of the inflation rate.  Why?  Well, productivity growth—a perennial problem since the 1980s—continues to drag.  Price inflation is very low.  To the extent that nominal wages are frozen—as are mine—real wages have been falling in recent years.  This real deflation then drags on consumption.

Similarly, mergers and acquisitions (M&A)–often taken as a stand-in for corporate confidence in the economy—are at their lowest level since 2013.[2]  Because 80 months of increasing hiring has occurred, people have a reasonable concern that we are headed toward a new slump.  I think the smart thing to do would be to “buy in” to the slump.

On a totally different front, consumer demand for the Ford Focus is weak: American drivers prefer SUVs and pick-up trucks; gas prices are low, so those vehicles don’t cost as much to drive; and Focus sales have fallen by 20 percent.  In late June 2017, Ford announced that it would shift production of this dog of a car to China (rather than to Mexico).  The Chinese-made cars would then be re-exported to the United States.  The one-time Focus plants in the United States will be converted to produce even more SUVs and trucks.[3]

This announcement raises several questions.  First, why to China?  Ford already has Focus plants in China (where the car is seen as much better than a bicycle) and because labor costs are lower in China than in Mexico.  Second, why off-shore them at all, rather than just cutting back production to reflect the market?  Because, under Obama administration regulations, Ford gets to average the mileage of the Focus with the mileage of the F-150 and the Explorer when calculating how to meet the average miles-per-gallon (mpg) requirements set by the Environmental Protection Agency (EPA).  Ford has to make a lot of cars no one wants in order to be able to sell the vehicles that people do want.  What if no one buys the Focus?  I think that Ford still gets to average in the Focus mpg so long as it has made the cars and they are sitting in some vast parking lot near a sea-port.  So, Ford is trying to cut to the bone the production costs of a car that will not be bought.  That is, the Obama administration planned to force losses on an entire industry so that it could pretend that it was meeting its climate change goals.

[1] “Issue of the week: The jobs report’s red flags,” The Week, 16 June 2017, p. 34; Greg Ip, “Paychecks aren’t growing,” The Week, 30 June 2017, p. 14.  .

[2] “The bottom line,” The Week, 23 June 2017, p. 31.

[3] “Autos: Ford shifts its Focus to China,” The Week, 30 June 2017, p. 32.