Taxes Anyone?

The President and the Republican controlled Congress are ready to move onto what they are really interested in and have been too worried about incidental blow back to confront. Their focus is on how to deliver significant tax reduction for their many supporters who have shelled out the billions to get the GOP crowd elected. One might sayits “pay back” time.

So, why the reluctance?

Republicans realize that if they do not handle the messaging parts extremely well the public will wake up and see what a one sided deal Republicans are offering. With this new awareness, voters might put the screws to a few GOP Senators and Representatives. And, if enough GOP Senators cave, Americans will see a repeat of repeal and replace. Hmmm.

Is this a legitimate concern?

The President has announced the tax reform will be a huge break for the hard working middle class and the wealthy, like him, will get little, maybe nothing. Doesn’t that make you want to sign up right away? Hmmm, but does the President have a track record of telling the truth on important matters? Or for anything?

Like healthcare, the Republican plan lacks any input from public hearings, assessments from reputable think tanks, or the public existence of any plan details. But this lack of information has not inhibited Republican spokespersons from explaining why the tax reform is necessary and in America’s best interest.

The tax reform, the President says, is about stimulating the economy and creating jobs. Why? Entitlements are projected to increase the size of our yearly Federal deficit and unless the economy grows faster than the current 1.5-2%, the increase in tax revenues will not keep up, the deficit will grow, and the $20 trillion debt will get bigger.

This is a reasonable and logical argument which deserves a fair review. Admittedly, one has a perceived debt problem and the answer is to lower taxes.  Hmmm.

The first problem is there is no evidence this works based upon previous attempts at supply side economics. Most corporations and wealthy individuals take the tax cuts and say thank you and do not reinvest.  With interest rates currently so low, any sensible business person would borrow and invest if there was a reasonable prospect that there were customers.

 

Second, with 4% unemployment now, where are the workers going to come from and where are they going to suddenly find the skills need to expand the economy. Are all the new to be employed going to work at Starbucks or Walmart?

 

Third, global macro forces can unexpectedly influence US economic performance. Add to this the current US hostile trade negotiations, what are the chances that other countries will want to trade with the US?   A global slowdown, if not a recession, is a distinct possibility.

Are Congress leaders telling us everything?

Not withstanding the sincerity of some supply side economists, Congress is regrettably tied to huge campaign election costs. At one end of this rope is the Senator or Representative and at the other end is a special interest or wealthy donor. What one must acknowledge is that the rope is both real and susceptible to being cut. If cut, the Congress member can say goodbye to his seat. Under these circumstance there should be no surprise that items like eliminating the AMT, lowering corporate taxes from 35% to 20% while still allowing pass through earnings, and reducing the top bracket from 39.5% will be in the final bill. These provisions represent payback for the billions already advanced in general elections.

The ‘free lunch” theorists will offer assurances that the tax code can be cut, Americans will flock back to work as new jobs are created, and the economy will blossom while the Federal Debt shrinks. If this could happen, it truly would be a great tax reform, but what if it doesn’t happen this way?

The first signal will be the deficit increases faster than currently projected. Americans will be advised to be patient and next quarter these stimulations will take affect.

 

The second signal will be income inequality continues to grow, possibly even faster.

 

The third signal will be a desire from many conservatives and deficit hawks to cut government programs like Medicare, Medicaid, and Social Security (but not Defense) because America can’t afford to spend with its deficit and debt so high.

 

Sadly, the fourth signal, if history repeats, will be the initiation of a war requiring Americans to turn their attention from domestic issues to supporting our flag and troops overseas.

Belatedly, Americans will realize that the “free lunch” was served only to the very wealthy while the rest of America had to pick up the bill.

The size and shape of tax reform should be know soon and at that time, the predictions of this post can be judged. The best outcome, IMO, will be that in pursuit of greed, GOP Congress Members will choke on this ambitious reform, and consequently, this reform fails to pass into law. With Republicans in control of both house failure is a long shot but hope still shines eternal.

Obamacare’s 9 Lives

With Senator Susan Collins’ thumb down, it appears the Affordable Care Act (Obamacare) will live to die another day. This is a victory for decency to be sure, but fiscally US healthcare remains a uncertainty. What does this say about those who govern?

Senator Rand Paul said the GOP bill (Graham-Cassidy) was too much like the Affordable Care Act (too much entitlement), and he said he would not vote for it. Senator John McCain told Senate Republicans to use a bi-partisan approach when Congress deals with 1/6th of the economy. Republicans did not, and McCain said no thanks.  And, Susan Collins announced her “no” following the release of the CBO score indicating millions of Americans would lose coverage with Graham-Cassidy. Others such as Senators Cruz and Murkowski were rumored as “no” but have not spoken out.

The general theme of Republican opposition has been exploding cost. Republicans seem concerned that the Federal Government will pump billions into healthcare and that amount will not be enough as healthcare cost will increase each year. A subset of these fiscal worriers sees Medicaid expansion as the culprit and have selected block grants to States as a way to cap the Federal Government’s financial obligation.  Both of these concerns are reasonable but is it reasonable to take healthcare away from some in order to keep the Federal cost down? Hmmm.

Senator Bernie Sanders has seized this opportunity to hype “Medicare for all”, a single payer system, as the best way to fix Obamacare. OMG, here comes socialism Republicans are crying out.

What an opportunity for someone to articulate in a calm voice that the rest of the modern world provides basic healthcare to all their residents at 1/2 or less what it costs America and these other countries have excellent (better than the US) health outcomes.

If Republicans were really serious about the fiscal aspects of Obamacare, one would think that adopting a healthcare system similar to France, Germany, or Switzerland’s would make sense. Unfortunately, these universal, single payer systems cut out insurance company profits and in turn campaign donations to politicians.
Hmmm.

There might be a tendency to take a deep breath that Obamacare has survived again.  Obamacare’s nine lives are not a forever thing.

Republican’s disregard about pre-existing conditions and even whether everyone, regardless of means, should have access to basis healthcare pose a menace to most Americans.

One might think that faced with a ground swell for Universal, single payer, Republicans might see Obamacare as a preferred alternative.

U Bum, (Mr President)

A Bully is always one step away from a surprise put down. President Trump ask for it and got his this past Friday. Here’s how.

At a campaign style rally in Alabama, the President tossed some red meat to his faithful choosing to pick upon pro-football players who have chosen to “take a knee” when the national anthem was played at the beginning of professional games. Although many Americans dislike this practice, most see the symbolism as a legitimate concerns over police misuse of lethal force and protected as free speech. Hmmm

The President saw no Constitutional issue and chose to call out players who had demonstrated and said they should be fired. Given most Americans’ respect for the national anthem, he might have thought he was on safe grounds and could bully others. Wrong.

Not satisfied with this, the President later withdrew a White House invitation to the champion Sacramento Warriors after star Steph Curry had said if it was up to him, he would turn down the invitation.

While the President delighted his Alabama audience, at the same time his words united the professional world against him.

President Trump, who ventures often into the gutter with unpresidential speech, has run the risk that sooner or later some target of the President’s remarks will reply in kind, Cleveland Cavalier star LeBraun James fired back, “U Bum” echoing what many others were thinking. Hmmm.

It is very worrisome when the public does not respect the office of President. And, respect is quite different from being dissatisfied with policies. Unfortunately President Trump has done all he could to conflate himself and the office.

U Bum was clearly intended as message for Donald Trump and regrettably Trump happens to be President.

McCain’s Repeal and Replace

Senator John McCain informed Senate Republican leadership that he could not support the latest “repeal and replace” bill (Graham-Cassidy). This placed the proposed legislation one vote away from defeat and would then end a Republican only healthcare action. Was this McCain’s finest hour?

Senator McCain rejected partisanship saying healthcare was too important a matter to not have bi-partisan support. Life could have been much simpler for McCain if he had just chosen to wait and in the end go along. But for the 80 year old Senator afflicted with brain cancer, the future might not seem so endless. For whatever his reasons, Senator McCain made a principled decision without regard to special interest pressure and money.

Hip, hip, hurrah for John McCain.

Repeal And Replace II

Republican Senators are marching, somewhat like lemmings, towards a cliff over which they are likely to plunge. The Graham-Cassidy proposal is craftily constructed healthcare (not) bill. As previous GOP attempts, this repeal and replace version eliminates the individual mandate, frees employers from the requirement to provide their workers healthcare insurance, and frees businesses and the wealthy from certain Obamacare related taxes.

Graham-Cassidy also shamelessly bribes the 50 States with a promise of a block grant which can be spent as the States see fit thanks to large cuts to Medicaid.

For some States, Medicaid cuts are unwelcome since when they do the math, these States realize they will receive less money than with Obamacare. For other States, especially those who did not expand Medicaid under Obamacare, Graham-Cassidy looks like new found money.

The vote scheduled for next week represents a wholesale capitulation by Republican Senators to big money interests. The vote is expected to be held without the daylight of any public hearings and without knowledge of the CBO review, both steps Senate Republicans had vowed to provide just months ago.

There is, however, no reason to expect the CBO score to indicate less Americans will lose coverage than in previous GOP attempts.  One must wonder why the GOP insist upon retracing its already discredited path.

At risk once again are the most vulnerable, the poor, those with pre-existing conditions, and the suddenly unemployed. Most Americans gain healthcare coverage through employer provided insurance and will not feel the impact of any “repeal and replace’ legislation (until such time as it becomes fashionable for employers to decline to offer coverage at all). The wealthy, if required, could pay for healthcare personally, and while no one likes paying for anything, healthcare insurance cost for the wealthy represents a tiny percent of their disposable income.

One is tempted to blame President Trump and assign this shameful legislation to him. Wrong.

From all reports the President has tissue paper thick knowledge of healthcare and has applied his learnings to Graham-Cassidy.

There is no doubt the President will praise the bill if the Senate finds the 50 votes necessary for passage (President knows about winning). There is also no doubt that were Graham-Cassidy to become law and the public become disenchanted with GOP governance, President Trump will then disown the legislation and blame the Senate.

Rocket Man Versus Gutter Man

President Trump addressed the UN yesterday and disappointed no one. In Trumpian style, President Trump displayed the crudest take on the “ugly American” displaying an unprecedented lack of historical knowledge for a US leader.  The President neither showed he knew how America became a wealthy country nor even a clue of the important symbiotic relationships that have maintained our Country’s living standard since World War II.

For his supporters, President Trump once again “said it like it is”. For his detractors, the President again was the embarrassment many have thought he was.

The red meat crowd (Trump populist supporters) stood up and cheered when the President called the North Korean leader “Rocket Man” and threatened North Korea with total destruction. What are they (the red meaters and the President) thinking? Does the President now endorse other Countries settling for total destruction as the preferred means of settling their differences with their adversaries?

The President also put on display his simpleminded world view. Every country for themselves, or as the President put it, world leaders should act according to their countries best interest. The “Selfish Gene” and the general theory of evolution have long established this as man’s basic motivation. Everyone acts in a way they believe in their personal best interest. But, is that the route to peace?

Does the President think, on a broader view, that the US can continue to prosper if the rest of the world decides not to trade (without heavy tariffs and duties) with the US and for good measure, ignores intellectual property rights of US companies?

A reality of today’s world is that globalization is a fact. If the US or any other country tried go it alone, that country would experience loss of customers and higher costs (due to higher raw material costs and higher labor costs). Whether the country is the US, China, or Russia, without foreign trade, the domestic economy simply can’t keep supporting its current standard of living.

The Trumpian sector may say, “so what, the US can do better than anyone else and eventually the other countries give in to our terms”. Even if this were true, history has painfully shown that those who feel they have been dealt a poor deal will brood until they find a way to get even.

The United Nations is a direct result of a world community tired of turning to war to settle grievances which had marked the world’s history. For the chief executive of arguable the greatest beneficiary of globalization to threaten another country so crudely and to trash a cooperative world community can only reflect a profound misunderstanding of history or a bully more at home in the gutter.

What say Gutter Man?

$700 Billion For Defense?

The Senate has overwhelmingly approved a Defense authorization bill which carries a $700 billion price tag. Championed by Senator John McCain, the Defense bill has been positioned as absolutely necessary to keep America’s world leadership role secure. With North Korea, China, Russia, Iran, Afghanistan, and ISIS posing threats to American interests, McCain feels it is imperative that defense spending increase.

There is a problem, however, “where will the money for this spending come from”?

Republicans have suggested their new Graham-Cassidy “Obamacare repeal and replace” will save tax payers money. Republicans do not, however, say one must accept less coverage, revisit open season on pre-existing conditions, and allow less Medicaid funding if Graham-Cassidy becomes law. Hmmm.

Tax reform has been held out also. The GOP promises to stimulate the economy, put people to work, and in the his process generate the same or greater tax revenue with lower tax rates. (Sound like a free lunch?).

But there is a far bigger problem than finding funding sources. What would the Trump Administration spend the increased defense budget on?

What is the Trump foreign policy? What is its goals and what strategic relationships would the Administration employ?  What would be the State Departments’ role?

President Obama proposed “pivoting” US military assets from the Middle East where arguably, it was no longer necessary to secure the region’s oil reserves to the far East where China was posing new worries about freedom of the seas for all nations.

Underpinning Obama’s vision was protecting free trade and independence of the region’s trading partners. Countries which prosper are simply less likely to find hostilities attractive.

What does President Trump see? “Making America Great” does not meet commonsense tests. Why would any country, especially a Southeast Asian country cooperate with the US if the outcome was a zero sum, America wins-the other country loses?

And the Trans Pacific Partnership, aimed directly at building win-win trade relationships, along with discrediting the Paris Climate Agreement which called for cooperation among the worlds nations appear not part of Trump’s vision.

How can anyone conclude other than President Trump sees “going it alone” (with a big stick) as his preferred strategy, either because it is simple and he can understand it or because he now finds his campaign rhetoric has boxed the US into a tight spot.

Spending $700 billion on defense may be in the US best interest but until a clear and coherent US foreign policy emerges, these expenditures will be wasteful in themselves, and will require deep cuts in domestic expenditures since there appears to be no appetite amongst Americans to pay more in taxes.

The potential cost of Trump presidency is becoming clearer.