Memoirs of the Addams Administration 29.

Unable to leave well enough alone, the Republican Senate leaders made yet another attempt to “repeal and replace” the Affordable Care Act.[1]  Without having any commonly-agreed plan, they managed to get a formal debate started.  First, the Senate voted down a broad plan to repeal and replace.  Then it voted down a plan to repeal and give Congress two year to replace it with something else.  Then it voted down a “skinny repeal” that just got rid of the mandate.[2]  Despite its flaws, the Affordable Care Act (ACA) helps—as well as vexes—many lower income Americans of both parties.  Opinion polls since the election have tended to show broad support for preservation of universal health insurance.  With a narrow 52-48 majority in the Senate, the Republican leadership cannot force through any legislation that would alienate more than two Republican senators.  Lisa Murkowski (Alaska) and Susan Collins (Maine) come from states that may have a substantial number of people who want to vote Republican, but who also live in marginal economic circumstances.  Their opposition alone isn’t enough to block “repeal and replace”: Vice President Pence can cast the tie breaker.  However, one more Republican dissident—like John McCain—and the measure loses.  In either case, Murkowski and Collins get covered for the next election for having done the right thing.  So, the question becomes: how to fix the problems with the ACA, rather than trying to roll it back?

Donald Trump campaigned against the North American Free Trade Agreement (NAFTA), calling it “the worst trade deal maybe ever signed anywhere.”  Once elected, he insisted on a renegotiation of the agreement.  This immediately became engulfed in the hysteria following Trump’s surprise election.  It also drew heat from Trump’s highly public spat with the president of Mexico.  Nevertheless, Mexico and Canada agreed to engage in a re-negotiation of NAFTA.  The negotiations are scheduled to begin on 16 August 2017.  Now the government has released a statement of its objectives for the negotiations.  Contrary to the worst fears of the immediate post-election Trump hysterics, the American objectives are solidly “mainstream ideas for furthering trade liberalization.”[3]  Generally speaking, NAFTA trade benefits the American economy even though it is often seen as the source of job-loss.  Reality proved more compelling than rhetoric.  Perhaps Trump and the Senate leadership should let Commerce Secretary Wilbur Ross (who oversees the NAFTA negotiations) run health-care reform?

Six months into his first term, President Trump began a major churning of his staff.  Sean Spicer had the reputation for being a decent guy.  Then he took the job as White House Press Secretary.  Six months of humiliating Hell followed.  Then, President Trump concluded that his image problems sprang from poor representation.  He hired Anthony Scaramucci as communications director.[4]  Spicer promptly resigned.[5]  Chief of Staff Reince Priebus, Trump’s direct connection to mainstream Republicans, then got the heave.

Donald Trump governing as a non-party mediator still has—theoretical—potential.

[1] “Senate Republicans grapple with Obamacare repeal,” The Week, 4 August 2017, p. 7.

[2] The Congressional Budget Office (CBO) estimated that ending the mandate would leave 15 million more people without insurance.  This can be taken as an official measure of the number of people who buy insurance under duress.  It can be added to whatever number just don’t buy it regardless of the mandate to get a total number of people who are opposed to the mandate.  On the other hand, it can be subtracted from the numbers of those estimated by the CBO to be left without insurance issued on other versions of “repeal and replace.”

[3] “Issue of the week: A softer U.S. line on NAFTA,” The Week, 4 August 2017, p. 42.

[4] Scaramucci deleted Twitter posts in favor of gun control, action on climate change,, legal abortions, and ending use of the death penalty.  “Noted,” The Week, 4 August 2017, p. 18.

[5] “White House: Spicer’s out, “The Mooch” is in,” The Week, 4 August 2017, p. 18.

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Medicaid.

In 1965, fresh off a Democratic thrashing of the Republicans in the 1964 elections, President Lyndon B. Johnson had the means to push through his effort to “complete” the New Deal.[1]  This included legislation to provide government-funded medical care to four groups of the “deserving poor”: children, pregnant mothers, the disabled, and geezers who needed long-term care.  So it went from 1965 to 2014, as the one-time “war on poverty” failed to end poverty in a growing population.  By 2014, 57 million Americans were covered.  Still, at that point, one in seven Americans (14.3 percent) had no health insurance.  Then the Affordable Care Act (ACA) of 2010 kicked in, “allowing” states to use Medicaid to pay for the expenses of all able-bodied adults who earned less than 138 percent of the government’s poverty level.  This added 17 million people (about 30 percent of the 2014 total) to the Medicaid rolls. By 2016 the share of Americans without medical insurance had fallen to one in twelve (8.6 percent).  However, the cost of those covered by Medicaid ran to $574 billion a year.[2]

As part of the “repeal and replace” ACA effort, House Republican proposed to reverse the ACA’s expansion of Medicaid by 2020.  That is, they sought to return Medicaid to its original mission.  This would involve dropping 14 million people—those able-bodied people added by the expanded Medicaid of the ACA.  There also is talk of imposing a work requirement on able-bodied recipients of Medicaid.

Another part of the plan is tax cuts.  The ACA imposed $875 billion in new taxes, mostly on high income earners.  The Republicans want to roll back those tax increases.

Another part of the Republican plan would reduce the future growth in Medicaid spending by $834 billion over ten years.  The federal government would provide states with fixed amounts of money, rather than just paying whatever bills come in.  This proposal tries to address an important demographic and financial problem.  Medicaid pays for home health aides and for nursing home care for those who have exhausted their own savings.  A recent report by the World Economic Forum pointed out that the United States has the biggest gap between actual retirement savings and projected needed savings.[3]  U.S. government projections suggest that 70 percent of people will need long-term care.  The vast majority of these will need a home health-care aide, while 18 percent will need nursing home care.  Given the retirement savings gap, a huge financial cost will fall on the Medicaid system.  The Republican plan tries to address that issue.  It may not do that well, but one is surprised to see it done at all.

It is possible to see two distinct moral perspectives in the struggle over Medicaid.  Medicaid is but one front in a fight that involves Medicare, Social Security, defense, education, and taxes.  Broadly, they all touch on different conceptions of social reform and the best society.

Democrats would argue that the national government has a moral duty to its citizens.  It must break down the barriers to individual success.  Where those barriers can’t or can’t yet be destroyed, then the winners from current systems need to compensate the losers.

Republican would argue that such government action corrodes individual responsibility and creates dependency.  It harms the very people it seeks to help.  Government has a moral duty to create the conditions for individual success by fostering a dynamic economy.

It’s wishy-washy to say so, but both could be true.

[1] Julian Zelizer, The Fierce Urgency of Now: Lyndon Johnson, Congress, and the Battle for the Great Society (2015).  Really good book.

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

[3] See: https://waroftheworldblog.com/2017/06/20/memoirs-of-the-addams-administration-24/

Memoirs of the Addams Administration 19.

In late March 2017, House Republicans had to pull the American Health Care Act (AHCA) because they couldn’t cobble together a majority from the disparate Freedom Caucus and moderate factions of the party.  In early May they took another stab at it.  This time the bill passed the House of Representatives by a razor-thin (as the cliché goes) margin.  The new and improved AHCA ended the mandate[1], but allowed insurance companies to charge extra for people who let coverage lapse and then applied in a hurry once they got sick; granted the states the right apply for waivers if they wanted to allow insurance companies to offer plans with fewer “essential services” than mandated by the Affordable Care Act (ACA)[2]; “rolled-back” the expansion of Medicaid (which observers predicted would cut 25 percent/$880 billion in health-care spending over a decade); replaced the income-based subsidies of the ACA with age-based tax credits[3]; allowed  insurance companies to charge old people much more than young people[4]; and encouraged states—through a promised $138 billion in federal subsidies–to create high-risk pools for those with pre-existing conditions that insurance companies wouldn’t touch with a ten-foot pole.[5]  The right-to-life-but-not-to-medical-care-once-born crowd insisted on defunding Planned Parenthood.[6]

Republican Senators, who live in a radically different political environment than do Republican Congressmen, didn’t like the handiwork.  Senate majority leader Mitch McConnell set up a baker’s-dozen of Republican Senators to save the party from an electoral disaster in 2018.  They are expected to sketch a fig-leaf with regard to things like Medicaid spending, and coverage of the Emma Lazarus people: “Give me your tired, your poor, Your huddled masses yearning to breathe free, Your people with pre-existing conditions.”

Is there any way to make a Republican plan work?  Yes, if you aren’t a 100 percent Democrat.  The ACA expanded entitlement programs to provide health care to the poorest Americans.  It had little effect for most Americans.  It did not create health-care insurance for most Americans, nor did it seek to rein-in the rising costs of health-care.  Most people receive their health care through their employers or through Medicare.  The Republican plan poses no serious threat to these people.  Republicans are betting that health care lite for the poor will be politically acceptable to most voters.  Are they correct?

One contested issue lies in the effect on taxes.  Democrats jeer that the AHCA will lead to a $1 trillion cut for the richest Americans over a decade.  However, the ACA imposed a $1 trillion additional tax on those same richest Americans.  This casts into doubt the claim that the mandate is necessary so that poorer young people will subsidize richer older people.[7]

[1] This is an acknowledgement that many young people don’t want or need insurance, or—if they do—resent being ordered around by the government as if they’re the hired help.  There probably are about 14 million of these timid fugitives currently on the rolls of Obamacare.  Millions more have not signed up because the Internal Revenue Service does not require that taxpayers actually submit proof of coverage.

[2] This is a concession to the people who were promised by President Obama that “if you like your insurance, you can keep it” and then had the rug pulled out from under them.  Sad to say, attention to detail proved not to be Obama’s strongest quality.  See: “Healthcare.gov roll-out.”  Lots of times “big picture” people aren’t good at this.

[3] So people in their 20s would get up to a $2,000 credits, while people in their 60s would get up to a $4,000 credit.

[4] Up to five times as much, compared to the ACA’s limit of three times as much.  However, old people consume far more health care than do young people, so the ACA appears to be a taxing of low income people to support higher income people.

[5] “Health-care reform heads to the Senate,” The Week, 19 May 2017, p. 5.

[6] Still, last time I checked, condoms were a dollar each at CVS.

[7] “American Health Care Act: The winners and the losers,” The Week, 19 May 2017, p. 6.

Memoirs of the Addams Administration 13.

Once upon a time, old people depended upon their savings and their families to cover the living costs of their few last years.  Then, people started to live longer and the individual safety net eroded.  We got Social Security.  Once upon a time, the business cycle visited prosperity and hardship on people in varied measure.  Then came the Great Depression.  We got Keynesian counter-cyclical spending.  Once upon a time, doctors couldn’t do much to cure illness.  Then, the combination of science and medicine opened an Aladdin’s Cave of health solutions.  These cost a lot of money, so we got Medicare and Medicaid.  Once upon a time, America was a meritocratic society and poor people had to take their lumps.  Then came the Sixties and Seventies, which altered assumptions.  The Forgotten suffered in misery, so we got the Affordable Care Act (ACA).

Lots of people didn’t like the ACA.  Moreover, the ACA has problems all its own.  Those problems appear not to be fatal or crippling.  The Congressional Budget Office (CBO) projects that, left to its own devices, the ACA will “naturally stabilize” in most of the country in a few years.[1]  President Trump, or the Republicans in Congress acting without President Trump, can shove the ACA downhill if they want it to fail.  They can do this most easily by just not enforcing the individual mandate.  That would allow about 14 million younger-and-healthier people to drop out of the system.  The loss of their premiums might fatally destabilize the ACA.

The first major step in the Trump Administration came in the effort to co-operate with the real Republicans in the legislature.  Republicans campaigned against the ACA for seven years, then got the chance to repeal-and-replace.[2]  In contrast to the Democrats’ year-long construction of the ACA and disciplined passage of the bill, the Republicans adopted a “Hey, we can put on a show, we can use my dad’s garage!” approach.  The Affordable Health Care Act (AHCA) repealed the unpopular and nonsensical individual mandate, substituted limited age-related subsidies for open-ended income-based subsidies, and cut down the Medicaid expansion.  Public opinion—especially among Trump’s core supporters—disliked the AHCA.

Well, that didn’t work.  In the House the “Freedom Caucus” didn’t like it; in the Senate moderate Republicans didn’t like it.  The two Republican factions could not agree, so the AHCA got pulled before a vote.  (See: Face, egg on.)  The ACA survived.  Bitter recriminations ensued.

The stock market’s Trump Rally turned into a slump once the AHCA went up in flames like the Hindenburg.  The botched handling of the bill’s passage revealed that the deep fissures inside the Republican Party during the Obama years have not been healed.  It also raised suspicions that neither Trump nor House Majority Leader Paul Ryan have much understanding about how to manage their business.  Those revelations, in turn, cast a pall over the prospects for the other elements of Trump’s agenda that have real relevance for business conditions.  Tax cuts, renegotiated trade deals, infrastructure spending, and sweeping deregulation now seem in peril.[3]

Is the new “realism”/”pessimism” justified?  It is if you ask Democrats, but less so if you ask Republicans.  Having messed-up one thing right off the bat, Republicans have a strong motive to do better with the next project: tax reform.[4]  They had the same motive to pass AHCA.

Democrats chortled that people like the ACA.  The like Medicare/Medicaid and Social Security too.  With defense, such entitlements are driving the growth of the deficit.

[1] “Obamacare: Will it collapse on its own?” The Week, 7 April 2017, p. 16.

[2] “The GOP’s failed Obamacare repeal,” The Week, 7 April 2017, p. 4.

[3] “Markets: Health-care failure rattles Wall Street,” The Week, 7 April 2017, p. 36.

[4] “The GOP: can ‘the party of no’ learn to govern, The Week, 7 April 2017, p. 6.

Memoirs of the Addams Administration 10.

Jonathan Chait has argued that Donald Trump and a coterie of advisers “cooperated with the undermining of American democracy by a hostile foreign power [Russia].”  James Clapper, former Director of National Intelligence and no fan of President Trump, has said that “there is no evidence” of “collusion between members of the Trump administration and the Russians.”[1]  So which is it?  Chait is a partisan Democratic journalist at a time of considerable distress for the party.  Clapper is an experienced professional who had access to all they key intelligence before he left office.  All things considered, Clapper’s seems the more credible voice.

Even so, that leaves the problem of all the false denials of contacts between some Trump followers and various Russians.  Michael Flynn has been the most egregious case of this so far, but Jeff Sessions may still end up in serious trouble over his terminological inexactitude.

The Russians undoubtedly “intervened” in the election by hacking into the computers of various Democratic figures and institutions, then releasing the fruits through Wikileaks.   The results came in the revelation of information that the Clinton campaign would have preferred to keep secret because it likely would alienate many voters in a tight race.  First, how did that “undermine democracy”?  Second, would the revelation of this information by American investigative journalists not have undermined democracy?  As for the lying, part of the explanation may be the firestorm of criticism heaped on Republicans by Democrats after the election.  Another part of the explanation may be sheer stupidity.   As Jonathan Tobin has pointed out, the Benghazi witch-hunt didn’t help Republicans.

There seems to be a lot of that going around.  Recently, Breitbart News claimed that a story in the New York Times had reported that federal officials had “intercepted communications and financial transactions” between Russians and members of the Trump posse.[2]  Almost immediately, President Trump walked—stormed, really—into a door by claiming that “Obama had my ‘wires tapped’ in Trump Tower just before the victory.”  This charge elicited a hostile reaction from all across the spectrum.

Under these circumstances, many observers may be having a sigh of relief that actual legislation on important issues has begun to move forward.  Republicans launched their campaign to “repeal and replace” the Affordable Care Act (ACA) with the American Health Care Act (AHCA).[3]  In some ways, the AHCA really is “Obamacare lite.”[4]

What gets lost in the criticism of the bill is that Americans pay a lot more for not-as-good health care than do people in Western Europe and Japan.   The ACA did little to address this problem.  Arguably, it is a more important problem than the issue of people without insurance.  (They always had “catastrophic care” through emergency rooms.  I know it’s cold to say that.)  Both Medicaid and a lot of employer-provided health insurance are in effect open-ended when it comes to spending.   The fundamental dispute between Republican and Democrats is the likely effect of limiting spending.  Will insurers hold down their premiums in a less-regulated market in order to gain customers, then find ways to cram-down costs?  This is the Republican wager.  Or will insurers shred insurance for the poor in order to keep targeting the easy money?  This is the Democratic wager.  Whoever “wins,” the stakes are high.

[1] Both are quoted in “Trump and Russia: What do we really know?” The Week, 17 March 2017, p. 6.  On Chait, see https://en.wikipedia.org/wiki/Jonathan_Chait

[2] “Trump accuses Obama of illegal wiretap,” The Week, 17 March 2017, p. 4.  The story in the NYT ran on 19 January 2017.  See: https://www.nytimes.com/2017/01/19/us/politics/trump-russia-associates-investigation.html?_r=0

[3] “Republicans face a revolt over health bill,” The Week, 17 March 2017, p. 5.

[4] See: https://waroftheworldblog.com/2017/03/05/memoirs-of-the-addams-administration-9/

Memoirs of the Addams Administration 9.

A calmer, more coherent, and less confrontational Donald Trump offered his first address to Congress.[1]  “Everything that is broken in our country can be fixed.  Every problem can be solved.”  He didn’t have Theodore Sorenson as his speech-writer, but that’s still a pretty up-beat statement.  Everyone noted the new tone.  Over half (57 percent) of Americans felt a “very positive reaction” to the new-and-improved Trump, while 21 percent felt “somewhat favorably.”  That’s better than three-quarters (78 percent) of Americans.  On the other hand, 22 percent took a dim view (or no view) of the speech.  That suggests that the majority of Americans are at least open to Trump’s ideas, provided he doesn’t act like a moron in presenting them.  It also suggests that the die-hard opposition to Trump is restricted to a MoveOn ghetto.  Could this Donald Trump have been elected president?  What if he had given this speech on inauguration day?

What are Donald Trump’s policies exactly?  That is hard to tell and the speech did little to clear up this question.  He wants a big infrastructure plan, and a border wall, a lot more money for defense and a lot less money for the snail darter, tax cuts for someone, and a replacement for the Affordable Care Act (ACA).  Republicans have been desperately trying to fill in the gaps with regard to the ACA.[2]  In the current version, “subsidies” to low income people to help them buy health insurance will be replaced with “tax credits” (worth more than those people pay in taxes) to purchase health insurance; it would replace the ACA’s federal subsidies to states that expand Medicaid with federal subsidies to states that create “risk-pools” to insure those with pre-existing conditions.[3]  Some of the problems of Republicans arise from the self-repeal of those covered by the ACA.  Many young people have not purchased insurance, regardless of the make-believe mandate.  This has distorted the financial model of the exchanges.  Many thinly-populated areas—red states—pay higher premiums and have less choice of provider than do densely-populated—blue state—areas.  The ACA sought to entice states to expand Medicaid by offering a temporary increase of federal cost-sharing from 60 percent to 100 percent, but down-played the subsequent reduction that would leave these states freighted with additional costs.  The ACA sought to eliminate product differentiation by requiring all the insurance plans to offer the same set of liberal mandated benefits.[4]  In short, is the current ACA an inadequately-financed effort to by-pass the market economy?  And all that implies.

At least for the moment, Trump’s astonishing victory has lifted the dead hand of Ronald Reagan off the Republican Party. For decades, Republicans have tried to our-Reagan Reagan.  Now they have to think anew an act anew.  Then, if Democrats don’t believe in the Trump administration, investors do believe.[5]  At least for now.  The much-delayed recovery of the economy from the financial crisis slump of 2008-2009 provides an underlying force.  President Trump’s endorsement of tax cuts, infrastructure projects, and deregulation have all poured fuel on the underlying fire.  However, trade war and tariff protection are implicit in “America First.”  With 44 percent of the goods and services sold by Standard and Poor 500 companies going abroad, people are skittish.  It’s still early days, so they aren’t alone.

[1] “A sunnier Trump lays out his policy goals,” The Week, 10 March 2017, p. 4.

[2] While the mainstream media (MSM) have been lambasting Republicans for trying to repeal and replace the ACA, the exchanges have been failing and premiums soaring.

[3] Just as the Obama administration found itself compelled by reality to follow some main lines of the Bush II foreign policy, the Trump administration finds itself compelled by reality to follow some main lines of the Obama domestic policy.  Anyway, that’s what I think at the moment.  Probably I’m wrong on both counts.

[4] “GOP divided over Obamacare repeal plan,” The Week, 10 March 2017, p. 5.

[5] “Conservatism: The Party of Reagan embraces Trump” and “Stocks: will the Trump rally last?” The Week, 10 March 2017, pp. 6, 33.

The ACA in September 2016.

There seem to be several major challenges facing the Affordable Care Act (ACA).[1]

First of all, the ACA sought to provide health insurance to low-income people.  On the one hand, the problem the Obama administration did not want to address directly is that American doctors make about 50 percent more than European or Japanese doctors with comparable skills.  The same goes for hospitals.  Cutting the incomes of doctors and of hospitals to reduce health care costs to manageable levels would set off a storm of opposition from the American Medical Association and whoever fronts for the hospitals.  On the other hand, there are a bunch of insurance companies—notably Blue Cross plans–that are used to dealing with low-income populations.  However, these insurers keep prices down by offering a narrow range of service providers who agree to accept low payments in return for a steady stream of customers.  Most doctors would refuse to participate in such arrangements.  Assuming that poor consumers were like richer consumers, the authors of the ACA sought to provide a greater range of choice.  The government mandate on the health services provided cuts across the desires of some consumers.  Then, the government lured a bunch of major insurers into the market in the belief that that competition would hold down costs for a broader range of services.  However, the major insurers lost a lot of money and they have begun to bail.  Basically, markets are often more rational than any government “ukase.”  Perhaps 17 percent of people who use the insurance “marketplace” will find that there is only one seller.

Second, the ACA rests on the belief that healthy, young, poor people can be compelled to buy insurance to subsidize sick, old, richer people.  In fact, less than half the 24 million people who were expected to buy insurance through the marketplace have signed up.  A lot of younger people just don’t want to join.  A lot of sick people do want to join only for  long enough to get their illnesses treated,  As a result, the insurance premiums are already so much higher than the government subsides that many people are opting out.  One solution would be to follow the path of the low cost insurers by narrowing networks and forcing down remuneration to doctors and hospitals.  Democrats favor either raising taxes on Republicans to pay for more generous subsidies to health care providers or coercing the un-insured to get insurance.

Third, apparently believing that much of the high cost of American health care came from profiteering by the insurance companies, the ACA included limits on profits and inadequate guarantees against losses.  Faced with large and mounting losses, the major insurance companies have begun to abandon the market place.

So, what are the policy options?  First, President Obama and President-in-Waiting Clinton have floated the idea of going back to the “public option” that Obama once cavalierly abandoned.  The public option would—undoubtedly with the aid of subsidies from the tax payers—“compete” with the private companies in order to drive down prices.  (See: TVA.)  Second, Blue Cross plans—low cost insurers with a lot of experience—argue for further reforms like blocking customers from signing up for short-term coverage in order to deal with accumulated health problems, the drooping coverage; higher premiums for older patients who cost more; and enhancing government subsidies for th care of very sick patients.  “Experts” and “advocates” are in some disagreement about what course to pursue.  Apparently, the Obama Administration is reluctant to consult or listen to business people.

[1] Reed Abelson and Margot Sanger-Katz, “ObamaCare Obstacles, and Some Possible Solutions,” NYT, 30 August 2016.