How the Republicans Are Paving the Way For Single Payer Health Insurance

The proposed tax legislation sponsored by the Republicans in Congress and the Trump Administration would repeal the individual mandate in Obamacare.  This mandate, which requires all uninsured Americans to either buy health insurance or pay a penalty through their tax returns, is much detested by the political right.  But it is based on a sound principle of insurance.  Insurance works best when a large group of people work together to pool their risks.  Mandatory insurance on all registered vehicles is a good example of how an intelligent insurance systems works.  If the Republicans repeal the Obamacare individual mandate, then the private health insurance market for individual coverage will be severely distorted.  The healthy won't buy coverage until they get sick or are injured.  Since Obamacare forbids insurers from excluding prior medical conditions, people can game the system by not paying for insurance until they need a lot of health care.  Then they buy coverage and pay premiums that total only a smidgen of the actual cost of their care, while shifting most of their costs onto others.  Insurers would have to push up rates sharply and a lot more people would drop coverage--until they need a lot of healthcare, at which time they would game the system by buying health insurance.  The market for private individual health insurance would die.  Then, really large numbers of people would be uninsured.

Senator Susan Collins from Maine has tried to negotiate promises from Republican leaders in Congress and the Trump Administration for alternative funding for health insurance that would supposedly stabilize that market.  But with all the secret, back-room, opaque maneuvering and sneaky, swampy pork barreling that has gone on into putting together the proposed tax bill, one wonders how Senator Collins can be so sure these promises will be kept.  She has no meaningful recourse if they aren't.  Given how the proposed legislation is primarily a monumental looting of the U.S. Treasure by the rich and by large corporations falsely depicted as tax "reform" for the middle class, how can Senator Collins believe there is any good faith at all on the part of the Republican leadership?

The Republican destruction of the market for private individual insurance will pave the way for the expansion of Medicare to cover uninsured individuals.  Politically speaking, it is no longer acceptable to throw these people into the gutter.  Even President Trump recognized this when he promised that there would be insurance for everybody notwithstanding his efforts to repeal Obamacare.  But the underhanded tax law repeal of a health insurance measure--the individual mandate--vividly illustrates the difficulties of trying to use the private insurance market to provide universal health insurance coverage.  The Republicans leave no alternative except an extension of Medicare to uninsured individuals of all ages.

Virtually all industrialized nations today provide some form of universal, single payer health insurance.  Some allow supplemental private insurance for people willing and able to pay for premium level care.  Americans today view health insurance as something all should have, and a government program like Medicare is the only realistic way universal coverage can be provided.  Medicare isn't perfect.  But it works well, and ensures near universal coverage for people age 65 and older.  Its imperfections can be improved. It can and does work side-by-side with private insurance (such as Medicare D and supplemental policies).  Americans today won't tolerate their fellow citizens being tossed in the gutter because of health problems, in order to fund a monumental tax cut for the rich and powerful.  The Republicans will find this out in 2018 and 2020.

Will Donald Trump Be a Traitor to His Class?

The most important legislative priorities of the Trump administration--tax and health insurance reform--will be enacted within a matter of months.  Both of these measures will greatly impact the working class whites who propelled Trump to the White House--either for better or for worse.

Preliminary assessments of the proposed tax reform indicate that taxes for the middle class will drop about a couple hundred dollars.  One percenters can look forward to many thousands in tax savings.  This isn't exactly what folks in small town America were hoping for.  To make up for the loss of income tax revenues from these cuts, the President may endorse a border adjustment tax (basically, a tariff on imports that would likely increase the prices of the inexpensive food and goods that low and moderate income Americans rely on).  To many, this might feel like another kick in the teeth.

Health insurance reform is turning out to be a very tough nut to crack.  President Trump has said he wants to preserve the protections that many low and moderate income Americans count on--guaranteed acceptance, coverage against pre-existing medical conditions, and subsidies for those unable to pay full freight.  But these conditions are very expensive.  How will the President cover the costs?  There seems to be little consideration of progressive taxation of the wealthy or increasing the federal debt.  Yet there's no free lunch.  One possible "solution," so to speak, would be to offer low cost policies with skimpy coverage--prior medical conditions would be covered but total coverage might go only up to $25,000 or $50,000 a year.  This would be expedient, but would effectively deprive people of coverage when they needed it the most.

On top of this, the President's desire to turn Medicaid into a program of block grants for the states has significant potential to reduce coverage for the low income.  Many of these people voted for him.  Where will they go for care without health insurance? Medicaid covers around 74 million Americans--almost 1 in 4.  Cuts to this program could mean many millions of people mad at the President.

President Trump's problems are exacerbated by his proposal to increase military spending by $54 billion.  Where will this money come from?  The Republicans in Congress won't agree to more deficit spending.  So the President can either raise taxes, or piss off many millions of voters by cutting other federal programs.

Donald Trump is President at a time when stark choices are necessary.  He was elected as an insurgent.  But he's stacked his cabinet with establishment Republican types, people who have no demonstrated concern or sympathy for his core constituents.  The Republicans who control Congress gave him scant and faint-hearted support during his campaign.  But today they stack the legislative agenda with bills that would make the rich richer and offer the working class hardly more than a crumb or two--and stale ones at that.  

If the President really wants to help his constituents, he'll have to be a traitor to his class.  He'll have to offer substantial improvements in life to the working class, and sorry to say, but wealthier people will have to pay for them.  America got itself into its current mess by believing that somehow everyone can get more of everything all the time at no cost to anyone else.  The last two large nations to subscribe to this notion--the Soviet Union and Communist China--had to abandon their illusions and now struggle with the consequences of the their wishful thinking.

Franklin Delano Roosevelt, the greatest President of the Twentieth Century, was labelled a traitor to his class.  And he was.  He endorsed legislation like Social Security and a strengthening of protections for workers and labor unions that uplifted many millions of ordinary Americans out of poverty and into the middle class.  The cost was born to a large degree by a sharp increase in federal income taxes paid by the well-to-do.  The rich grumbled and plotted against him.  But he ushered in the prosperity of the 1950's and 1960's, now viewed as a golden age in America.  America's perceived decline from those days also correspond with ever increasing inequality of wealth and income.  If Donald Trump really wants to make America great again, he'll have to make it great for the working class.  That isn't the direction he's been going in since his inauguration.  The next few months, when his most consequential legislative initiatives will be enacted, will likely make him both a traitor--either to his core constituents or to his class--and a hero--to the wealthy, many of whom didn't support him but are glad to free-ride on his policies and program, or to the working class that vaulted him into office.  The choice is his.

Political Risks of Social Insecurity

The financial press has reported that the United States ranks 19th worldwide in the retirement security, lagging behind Slovenia, the Czech Republic and Slovakia, among other nations.  http://www.cnbc.com/id/100534205.  We're one step ahead of Britain, but well behind France and Germany.  The Scandinavian countries rank at the top, along with Switzerland, Austria, the Netherlands and tiny Luxembourg.  Even Japan, after more than two decades of economic malaise, ranks 15th, four steps higher than America.

This probably doesn't surprise many Americans, particularly those who are approaching or in retirement.  They have probably already viscerally sensed their comparative insecurity.  Herein lies great risk for politicians who would reduce America's social safety net.  Our net is modest compared to the protections offered by most of the industrialized world.  If it's cut, the pain--particularly for moderate and lower income Americans--could be pronounced.  It's one thing if your retirement benefits may not cover as many restaurant meals as you would like.  It's another if your cost of living increase is so paltry that you can't afford needed prescription medications.

That we have a fiscal imbalance is because our taxes are even lower on a comparative basis.  (See http://usatoday30.usatoday.com/money/perfi/taxes/2009-11-25-oecd25_ST_N.htm.)  America could without enormous pain pay for its current social safety net without having to borrow.  We just don't want the taxes it would take to get there. 

Many politicians in Washington sound off about cutting Social Security and Medicare benefits.  This isn't just Republicans.  President Obama has been quick to offer reductions in Social Security.  One is to change the Social Security inflation adjustment from the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) to the Personal Consumption Price Expenditures Index (PCE).  The effect of this change would to gradually erode the relative value of Social Security benefits, with the most elderly being the hardest hit over time.  Is is really a good thing to whack the most vulnerable, who may have exhausted their savings and be unable to work? 

Consciously or subconsciously, Americans know that their retirement benefits aren't great.  And many of them won't be happy with politicians who make their retirements bleaker.  If the President and the Republicans somehow reach a Grand Bargain to stabilize or even balance the budget, the political impact may surprise them.  As Republicans clumsily attempt to embrace diversity, their core of older, white Americans may abandon them if they lead the charge to cut retirement benefits.  President Obama, instead of being viewed as a latter day FDR, may end up appearing to fall into the mold of Herbert Hoover.  And the liberal left, annoyingly shrill as they can sometimes be, may end up inheriting the White House in 2016. 

Political Risks of the Fiscal Cliff

Who faces the greatest political risks from the fiscal cliff?  It ain't the Democrats.  They could do nothing, and watch the pre-Bush tax rates go back into effect in 2013.  While this would have a near term negative impact on consumer spending, it would lower the federal deficit.  That would promote long term economic growth.  The President would take some heat for the economic slowdown, but the Democrats would have four years to recover before facing the 2016 Presidential election.  By then, the economy might well be improving.

If there is a deal on the fiscal cliff, it would probably include some cuts to Medicare and Medicaid, and perhaps to Social Security (although the latter is less likely, since Social Security is actually much less of a fiscal problem and more visible to the voting public).  The Democrats would blame these cuts on Republican insistence (of which there is plenty).  Meanwhile, the Democrats would take credit for whatever tax increases or enhancements or whatever else would be part of the deal, which probably would fall more heavily on the rich than the 99%.

The Republican insistence on no tax rate increases allows President Obama to replay his winning electoral strategy of advocating tax increases for the rich.  Republicans believe too much in their own P.R., that all taxes increases are invariably bad and that spending cuts would somehow be made to prevent taxes from increasing.  A majority of the electorate thinks otherwise, and the Republicans conceded these voters (let's call them the 51%) to President Obama. 

 The baseline problem with the Bush tax cuts is that they reduce federal revenues to the point where Social Security and Medicare--the two most sacred bovines of American politics--are imperiled.  It's one thing to attack federal funding of bridges leading to nowhere.  It's another to take away bread and butter from the elderly.  Republicans have managed to put themselves in a corner where they seek to protect low taxes for the wealthy while trying to squeeze pensioners having modest incomes.  They ultimately can't protect the wealthy from a tax increase--the Democrats can do nothing and those increases will take effect at midnight, Jan. 1, 2013.  But the Republicans can manage to look like Scrooge during the Christmas season as they advocate cuts for moderate income retirees.  Politically, it won't be the Democrats who tumble over the fiscal cliff.