Trump Healthcare and Taxes

Trump won an important political victory last week by getting the House to pass a bill repealing and replacing ObamaCare.  The victory showed that Trump and his staffers are able to put together the political power and intelligence to get the fractious Republican congressmen to agree on something that can get the necessary number of votes.  The bill is a mess, but it is a political victory. 

The reasonable, responsible thing for America to do is pass single-payer, government-funded healthcare, Medicare for all, as Trump recognized by his comment during his dinner with Australian Prime Minister Turnbull.  Trump probably personally favors this solution, but he can’t possibly pursue it with the Republican Party he leads. 

ObamaCare is bad.  It expands coverage, but it is a mishmash drafted by healthcare and insurance industry lobbyists.  It has turned out not to be so profitable for health insurance companies, but they have the option to drop out if it’s not profitable, which they are doing in droves.  ObamaCare is somewhat responsible about trying to provide funding for the new services, but it fails in the long run.  The Congressional Budget Office estimated that in 2016 federal subsidies for all types of health insurance coverage for people under age 65 (i.e., excluding Medicare) amounted to $660 billion, or 3.6% of GDP.  The amount would rise to $1.1 trillion by 2026.  For the ten year period from 2017 to 2026, the total federal subsidy for medical care for people under 65 would be about $8.9 trillion.  Of that subsidy, $3.8 trillion is for Medicaid, and $3.6 trillion is for the tax deductions for healthcare insurance provided by businesses. 

The main point of these figures is that ObamaCare is not self-funding; it results in a huge deficit funded either by higher taxes or borrowing from the Chinese.  Since higher taxes seem unlikely, China is picking up the tab for much of the medical treatment provided in the US.  The Chinese are buying lots of expensive homes and cars for American doctors. 

It’s hard to tell from this FactCheck.org report, but it sounds like about 6 million people with pre-existing conditions were covered by ObamaCare, who might otherwise have been denied insurance.  On the other hand, Kaiser and HHS say about 75 million people are enrolled in Medicaid; so, Medicaid is a much bigger, more expensive program.  I found it strange that the Democratic arguments against the Trump repeal and replace of ObamaCare were focused much more on pre-existing conditions than on Medicaid.  In addition, it sounds as if the Trump bill uses its Medicaid cuts to give a huge tax cut to millionaires.  It seems to me that this is a much more important issue. 

These articles in Forbes and MarketWatch so far seem some of the clearest on the tax implications of the Medicaid changes.  It looks like the TrumpCare bill eliminates a Medicare tax, not a Medicaid tax.  The Medicare tax imposed by ObamaCare is a 3.8% tax on net investment income for people earning over $200,000 (single) or $250,000 (married).  Plus, ObamaCare created a 0.9% Medicare tax on salary or income above those same amounts.  Apparently TrumpCare would eliminate these taxes, reducing taxes (and revenues) by about $900 million over a decade, i.e., about $100 million per year.  One advantage of putting these tax provisions in the healthcare bill may be that it will help a tax bill pass under the reconciliation process in the Senate, thus blocking a filibuster.  It may also make tax cuts look smaller by dividing them up between the healthcare and tax bills. 

In any case, the Medicaid provisions, which are the basis for including the tax cuts, seem much more important for the economy and for the population at large than the pre-existing condition provisions.  Nearly half of all births in the US are paid for by Medicaid, according to Kaiser.  Maybe the Democrats thought the pre-existing condition issue would be more attractive to the general public, but relatively few people will be affected by it.  More than 6 million people may have pre-existing conditions, but they probably have other options than ObamaCare, and can get insurance through another program. The 75 million people on Medicaid have fewer options. 

Op-Eds on the Importance of the EU

Kissinger had an interesting op-ed in the Wall Street Journal:

https://www.wsj.com/articles/the-man-who-saved-europe-the-last-time-1493417446

I thought it was interesting history, but at first I wondered why he wrote it.  I guess it’s in the WSJ because of the French election and what Kissinger says about the importance of a united Europe.  It also sounds like he has a personal fondness for Adenauer that he wanted to get on the record.  Kissinger is unique.  He has written a relatively long piece about Germany just after WW II and does not mention the Holocaust once, despite being an ethnic Jew.  He has high praise for Adenauer and by implication the Germans who worked with him after the war.  My experience is, especially after my Poland tour, that as soon as you mention WW II to a Jew they start talking about how horrible the Holocaust was, and often think the US let the Germans off too lightly despite the Nuremberg trials. 

The one time I met Kissinger was on a Sunday afternoon while I was working in the current intelligence office of the State Department operations center in the 1970s.  We got a highly classified report that Anwar Sadat, who was at that moment in the US on an official visit, was going to be assassinated.  (They just got the time and place wrong, but it’s like the stopped watch that is going to be right sometime.)  Anyway we decided we should probably tell somebody about this report; so, I took it the 50 yards down the hall to the Secretary’s office in a locked pouch.  There was nobody there but his private secretary, who said he was in a conference room in the back. So I walked another 25 yards down a warren of corridors to a little conference room where he was sitting with Assistant Secretary Philip Habib.  I was going to hand him the report, but he said just tell me what it says.  So I told him; he said thanks, and that was it.  I think Sadat was around for several years after that.  Ford must have been President at that time, and Kissinger was his Secretary of State.    

There’s another interesting historical piece in today’s NYT on Central Europe:

https://www.nytimes.com/2017/05/05/opinion/robert-kaplan-european-union-balkans.html?_r=0

It’s probably interesting to me because of the Polish connection -- King Sobieski’s defense of Vienna against the Turks.  It’s another pro-EU article before the French election.  He calls the EU “the necessary empire.” The EU can theoretically help knit together the ethnic rivalries of old Europe – Roman Catholic Slavs, Russian Orthodox Slavs, Muslims, etc., but I’m not sure it is up to the task at the moment if it can hardly keep the French on board.  Nevertheless, the history of the Balkans is interesting.  A more assertive Russia and Turkey versus a weakening EU could presage a resurfacing of these old rivalries. 

North Korea and the KEDO Attempt To Stop Its Bomb Program

This was in last week's installment of the Diplomacy Oral History project newsletter. 

Here is a link to an oral history of the first attempt to work out a nuclear deal with North Korea:

http://adst.org/2017/04/first-attempt-limit-north-koreas-nuclear-program/

  

Near the middle, around the graph of KEDO (Korean Energy Development Organization) funding and the picture of the North Korean nuclear plant, is a description of the KEDO funding difficulties.  This article doesn’t mention it, but while I was in Rome, KEDO was having trouble getting funding for the fuel oil it had promised the North Koreans as a reward for them if they would not work on their bomb project while KEDO worked on building a nuclear power reactor in North Korea that would not produce bomb-usable plutonium.  As the article says, the US Congress would not approve the money for the fuel oil.  The main sticking point was the Republican congressman from Mobile, Alabama, (I forget his name) who was on the Appropriations Committee.  Since he would not approve the money, somebody from KEDO came to Rome (maybe Bosworth, I don’t remember) to ask the EU (through the Italians since they held the rotating presidency of the EU) if it would contribute $2 million to help KEDO meet its obligations.  I think the EU eventually said, “No thanks,” although they promised to think about it, and expressed European concern about a North Korean bomb.   

It really ticked me off that the North Korean deal looked like it might fail because the US refused to meet its obligations, thus giving the North Koreans an excuse to go back to building bombs.  Interestingly, Bosworth says here that the North Koreans were not too upset about the funding problems, but in Rome I didn’t know that.  In any case, the KEDO deal fell apart later.  Joel Wit, who worked for Bosworth and was more my level (we had worked together on the Missile Technology Control Regime),has said somewhere that KEDO never missed a payment.  But I think maybe he and Bosworth tend to gloss over the payment difficulties so as not to make themselves look too responsible for KEDO’s failure. 

Trump’s Attack on Syria

Trump's attack on Syria dealt with several issues that should help his popularity:

I creates a contrast with Obama’s publicly drawing a red line on the use of chemical weapons in Syria and then doing nothing about it.  Trump looks strong and decisive in comparison, and it pleases the liberal establishment.  

It helps to overcome Trump’s perceived softness on Putin.  He attacked Putin’s ally, Assad, and even put Russian troops in peril. For the moment at least, he and Putin are on opposite sides in Syria.  

It demonstrates to North Korea that Trump is not afraid to use force, and thus constitutes an implicit threat to North Korea.  

Liberals in general like the attack on Syria because it inhibits the use of nuclear weapons and attacks on civilians and children.  Thus, the attack tends to roll back their perception of him as a far right ideologue.  

Liberal talking heads have expressed concern that Trump has no strategy to bring about regime change or end the war in Syria, but Trump can let this attack stand alone if he wants.  He can describe it as a response to an inhumane violation of international law, not the beginning of regime change.