Trump: The Movie

Posted by & filed under CGR Staff, Rochester Business Journal.

Kent GardnerTrumpMario Cuomo noted that “we campaign in poetry but govern in prose.” Trump’s campaign was hardly poetry—it was more like a sensationalist novel, with racy sex, clichéd dialogue and improbable plot twists. Now Trump & Co. are writing the screenplay for a movie and doing casting. And we wonder—some with hope and some with fear—whether the movie will be true to the book.

With Congress firmly in Republican hands, the policies reflected by Trump’s cabinet choices are steeped in Republican orthodoxy. While Trump may love a brawl, he can’t make America great again without winning votes in Congress.

PriceRepresentative Tom Price, tapped by Trump for Health & Human Services, will finally find the milk truck of Obamacare repeal within reach. Like the proverbial pursuing dog, do the Republicans really want to catch the truck? Let’s consider their options.

Guaranteed issue can’t be repealed—that’s the part of the ACA that prohibits denying health insurance coverage to people with pre-existing conditions. Price and his fellow Republicans may hate the Affordable Care Act, but they love their jobs more. Americans support guaranteed issue out of a deeply-felt sense of fairness. Although there are cases where the connection between behavior and disease is unambiguous, e.g. smoking and lung cancer, most agree that illness is a random event. Few of us have escaped this sober reality, either in our own lives or in those close to us. Congress tampers with this at its peril.

Many of the ACA’s coverage mandates are also popular. Young adults and their parents support the idea that they should be allowed to stay on the parental insurance policy until age 26. Free preventative care is popular, although I wonder if most people understand its connection to the ACA. The Medicaid expansion may be unpopular with conservative wonks but I’d wager that 14 million people gaining coverage in the expansion states rather like it. And some are represented by Republicans in Congress. (Some new enrollees were eligible before ACA passed and didn’t know it, but most of the growth comes from expanded eligibility.)

The unpopular bits of the ACA can be killed off without paying a political price. Most of us hate government telling us what to do, so this coverage mandate—both for employers and particularly for individuals—“just has to go,” we say. Health care providers and insurers have a long list of targets including these complex “payment reform” models that are designed to cut cost. And there’s community rating—the idea that rates may not vary by health condition. This is part of the “guaranteed issue” package but is not as well understood by the public and may be easier to repeal. (The ACA permits some pricing variation, but just by age, geography and whether the individual smokes.)

The political beauty here is that Congress and Trump’s White House can repeal the unpopular coverage mandates and leave the rest intact. Guaranteed issue without the mandate will put Obamacare on hospice care. Its slow and painful death will eventually be blamed on its eponymous architect and the Democratic Congress that passed it.

This is a movie we’ve seen before. In 1992, NYS passed guaranteed issue and community rating. But no one was forced to buy insurance—you could sign up on your way to the hospital. By 2001, New York’s “direct pay” market (i.e. buying outside group plans like those offered by employers) enrolled only 128,000. By 2010, enrollment had dwindled to 31,000 (in a state of 19.4 million people!) and premiums had tripled. Average premiums in NYS were more than twice those in California and Florida (not cheap places for coverage). See here. “You have to be incredibly sick to make it worthwhile,” said a consumer attorney practicing in the state. So “insurance” was something you bought only when you needed it (which rather misses the point).

Obamacare is already in trouble, as House Speaker Paul Ryan has soberly (with gleeful undertones) observed. The penalties for not having coverage have yet to entice enough mostly-healthy young people into the market, so the “pool” is sicker than the general public and much more costly to treat. Insurers—including national firms UnitedHealthcare, Humana and Aetna—are heading for the exits. Premiums are soaring in some markets. Removing the coverage mandate will magnify the problem and strangle Obamacare in its crib by triggering a nasty cycle of rising prices and falling enrollment.

The Congressional leadership is now talking about limited and phased repeal with a replacement to come in the sweet by and by. This is a cynical move guaranteed to accelerate the death spiral. Eventually the Obamacare “experiment” will be given a solemn burial and we’ll return to the status quo ante or worse.

PruittWhat kind of economy can we expect to see in Trump: The Movie? Trump’s pick to lead the Environmental Protection Agency, Scott Pruitt, will surely roll back the Obama energy plan, which imposes pain today for reduced carbon emissions in the future. And we can expect a lifting of restrictions on energy exploration, thus continued low fossil fuel prices. With the wind of Republican reductio ad absurdum tax cut ideology at his back, Trump will probably drive through some kind of tax rate reduction. And he might get the infrastructure spending that Clinton would have found impossible, given Republican opposition to spending of any kind. Remember, too, that the economy is running on all cylinders at the moment, with no credit due to Team Trump.

Some will argue that these policy changes are misguided in the long run, and I agree in part. But they are surely stimulative in the short run. Combined with the momentum we currently enjoy, the Trump Administration could claim economic victory by the midterms, solidifying Republican control of Congress. By 2020, however, who knows? Trump’s pronouncements on trade—if he follows through—could have profound implications long term. With the rest of the world economy currently lagging, however, nothing short of an all-out trade war should slow near term growth.

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