Monday, November 21, 2016

Obamacare Repeal and Infrastructure Plan Questions

Good morning, happy campers!  Let's start today off with a look at whether or not millions will lose their health insurance.

It appears that by dint of the mere threat to repeal Obamacare, insurers may be headed for the exits at an even more rapid pace than they already were.  Emphases added mine:

But repealing the law without a replacement is likely to spook health insurers, who might bolt from the markets prematurely to avoid losses as some people stop paying their premiums, while others rush to have expensive medical procedures before losing coverage. Insurers would have little incentive to stick around without knowing know what to expect at the end of the transition. And that could spell chaos for consumers. 

How many folks will have to find new health insurance options if Obamacare is repealed?  Why, 20 million folks.

GOP lawmakers say they plan to repeal the Affordable Care Act as soon as President-elect Donald Trump takes office, including a transition period of a year or two before it takes effect. That way, they satisfy their base while giving notice to 20 million Obamacare customers that they must find other coverage options.  

What's the GOP alternative to Obamacare?  Nobody seems to know for sure.  Most likely block grants to states are involved.  The upside would be allowing people to buy insurance across state lines, which is great.  In all likelihood, the health insurance marketplace would resemble the pre-Obamacare health insurance marketplace, with medical inflation outstripping regular inflation and millions more Americans (maybe 20 million, we'll see) uninsured:

Overall health spending rose by 5.3 percent in 2014, according to a report issued Wednesday by the Office of the Actuary at the federal Centers for Medicare and Medicaid Services. 

That contrasts with a 3.7-percent average inflation rate for health spending in the previous five years — and just a 2.9-percent growth rate in 2012. 

That said, the higher health spending growth rate seen last year was still lower than in most years seen before the Affordable Care Act began being implemented in 2010, CMS noted. From 2000 to 2009, health-care spending grew by an average of 6.9 percent each year.

The one, very good, reason to believe that a repeal of Obamacare might not be in the cards is because to throw millions of people off their health insurance could be a political disaster that the GOP will not want to deal with in the midterms, or at any point:
This would be an unmitigated political disaster. The stories — of people with cancer, diabetes and more who were suddenly stripped of their insurance and left out in the cold — would very likely dominate our discussion for months. That leaves more than enough time to lead to significant repercussions in the 2018 midterm elections. With no Democratic leaders in any branch of government to blame, I think this would be akin to what happened in the 2010 elections, but in reverse.
The best time for such a disaster would be after Trump's hypothetical re-election in 2020, but that didn't work for George W. Bush and social security privatization.
Let's leave healthcare behind for the moment and talk infrastructure.  Details about Trump's infrastructure plan remain unclear but even in its hazy state, the plan is being dissected.  Paul Krugman raises some valid questions about Trump's infrastructure plan.  To wit: is it actually a plan to build new infrastructure, or is it a privatization scam?

Let me attempt to summarize Krugman's concerns.  First, if the government farms out infrastructure work to private contractors, to avoid taking on public debt, which is what Trump  has proposed, then all future revenue from tolls on public roads, bridges and tunnels will accrue to private contractors, not the government.  In brief, the government will not recoup the costs of the investment, unlike, say, the TARP bailout following the Great Recession, which ended up netting the government $15.3 billion.  This is not a concern, obviously, if your goal is to "starve the beast" of government, but is a concern if you want government to have skin in the game when it comes to infrastructure maintenance.

Secondly, and crucially, even with all the tax cuts in the world, why would private developers want to invest in infrastructure projects that won't return them a healthy profit?  Toll roads and hydroelectric works are one thing, but what about overhauling water and sewage systems?  This infrastructure work is needed, but isn't especially profitable.  It's an open question whether the miracle of the free market will work when it comes to building/renovating/maintaining such critical infrastructure.

Thirdly, and just as crucially, how much infrastructure to be built under the Trump plan will be "new," i.e., not previously planned?  This is where the potential for government giveaways come in.  If a tunnel beneath a river was in the works anyways, but now it is shifted from government construction to a private contractor who's been given a 82% tax cut, the government is in effect giving money away to a private contractor while no additional new infrastructure is being built.  It's welfare for construction companies, and it is unlikely to alter the number of new jobs that would be generated in anything other than marginal  way.

So will the Trump infrastructure plan deliver, or will it just shift taxpayer dollars over to private contractors without generating any new, substantive spending?  We'll find out.

Setting these concerns aside, there's also the question of whether the GOP will go for a $1 trillion infrastructure plan.  My gut tells me the answer is yes.  The GOP has never shied away from spending an ungodly amount when their man occupied the Oval Office.  Still, the GOP will at least give lip service to making the plan "pay for itself," and some very principled conservatives may end up opposing the whole thing:

“To just add it to the national debt, I don’t think President-elect Trump or members of the Republican Conference would support that,” said Rep. Mark Meadows (R-N.C.), a member of the House Transportation Committee and the conservative Freedom Caucus.

It's also possible that the GOP will not only authorize the infrastructure plan, they will use it as an excuse to pass a series of tax breaks under the guise of an "overhaul":

A trillion dollars is “a big number,” said Senate Commerce Chairman John Thune (R-S.D.), adding that a tax overhaul could be one promising way to pay for it. “I think it's going to come down to figuring out just actually what's achievable.”

There are also questions, among Democrats at least, about the realism of farming infrastructure work out to private contractors, as mentioned above:

Rep. Peter DeFazio of Oregon, the top Democrat on the Transportation Committee, said those partnerships won't do much for the 143,000 bridges that need work nationwide "unless you're going to toll 143,000 bridges." He said the same goes for the interstate highways "unless you're going to start massive tolling of already constructed infrastructure to reconstruct it."

It appears possible that gas taxes will be increased, a proposition that may have bipartisan support:

DeFazio said he would propose indexing the gasoline tax to inflation, so that the rate would rise over time, or implementing a wholesale barrel tax on oil. “If they want to put people to work quickly and they want a big bang in infrastructure, they need real money," he said.

At least one House Republican agrees: Former Transportation Chairman Don Young of Alaska said he would also hike the gas tax to pay for transportation projects, and he faulted both his own party and Obama for blocking it in past years.

“There’s no pie in the sky, no magic wand,” Young said. “We have to pay for it.”

We really won't know until the infrastructure plan is announced and put into effect how many people it will employ, how much legit new infrastructure (and what sort of infrastructure) will be built, and how much it might amount to a taxpayer giveaway to private contractors as opposed to an investment in our nation's future.
There's going to be more infrastructure talk in coming months.  For now, let's just say heil victory, and see you all tomorrow!

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