Boy, Republicans passed one really nasty tax bill!

The Thinker by Rodin

I mentioned recently about the audaciousness of the new tax bill expected to become law soon. Some years back I also mentioned that Republicans are basically sadists. This newest version of the bill that passed Congress this week proves Republicans have doubled down on both their bill’s audacity and its egregious sadism. I really hope they don’t believe their own rhetoric that this will actually grow the economy and make the middle class prosperous, since all previous attempts have proven trickle down simply doesn’t work. So I prefer to believe they are simply mendacious.

Apparently the House-Senate conferees decided to go through the bill and look for ways to make their tax bill even more in their favor and to screw the working classes even more. Now there are new tax break for real estate investors. It’s hard to believe Trump and his cronies didn’t phone this one in, not that Trump was not going to profit handsomely even before the addition of these provisions.

This bill has all the hallmarks of legalized bribery. Basically it’s a scheme to foist $1.5T in new debt on the American taxpayer and redirect the vast majority of this debt directly into their pockets. It’s like going to the Federal Reserve, taking $1.5T out of their vaults and doling out $1.4T of it to rich people and corporations over the next ten years.

Ah, but not for us little people. They have dangled some candy in front of us, but those who taste it are going to discover its initial sweet state will soon turn bitter. Consider:

  • You may pay a few hundred dollars less in taxes per year over the next ten years. But by getting rid of the individual mandate, the rising cost of health insurance premiums are going to quickly negate any of this extra money. After all, it’s not how much you are taxed; it’s how much you keep. Those who figure they can’t afford health insurance will opt out now that the penalty for not having insurance has gone away. These are illusory savings. Medical debt is likely to wipe out any savings they accrue by dropping health insurance. As for the rest of us with health insurance our costs will go up and up until we too decide we can’t afford it either, leading to ever-higher levels of working class impoverishment. This makes a lot of sense though if you are sadistic, and Republicans are sadists.
  • As a Disney heiress points out because of “pass through” provisions in the bill her income (none of it earned) will be taxed at a rate lower than most you saps who must work for a living. This is not entirely new. Those living off of capital gains and dividends have been tax-advantaged over those most of us who earn wages for a long time while doing nothing to earn it other than occasionally discussing their portfolios with their financial adviser. This just widens the hole. Remember how Trump was going to drain the swamp? He’s making it deeper. However, this makes a lot of sense though if you are sadistic, and Republicans are sadists.
  • Remember that Alternative Minimum Tax that made sure that many of these loopholes for the rich were mitigated by requiring them to pay at least some reasonable tax? It’s gone. Oh, and fewer wealthy people will have to bother their executors with the duty of paying estate taxes. The estate tax limit has been doubled meaning more money will go to their kids who earned none of it. Leona Helmsley once famously said only the little people pay taxes. Republicans are proving her right. This makes a lot of sense though if you are sadistic, and Republicans are sadists.
  • Why do Republicans hate charities? The charitable deduction is effectively gone for most of us, because they have doubled the standard deduction. This dries up any incentive other than pure kindness and a philanthropic nature for anyone but the richest to give any money to charity. If I had to guess we’ll see a lot more money going to Koch-funded charities and a lot less to the American Red Cross. It’s a likely red alert for charities across the country, who can almost certainly count on fewer donations in 2018 and basically forever. But this makes a lot of sense if you are sadistic, and Republicans are sadists.
  • Republicans don’t like blue states. How dare they vote for people they don’t like! Now to add insult to injury by capping deductions for property taxes they are effectively screwing the bluest of the blue states. States where property values are high (predominantly blue states) charge the most in property taxes. Since most states base state income taxes on the adjusted gross income on your federal return, this effectively cuts revenue for these states, which means fewer state services like money to public schools, police and food stamps. Blue states already send more federal revenue to red states than they receive. This actually makes it worse, and makes it permanent. This makes a lot of sense thought if you are sadistic, and Republicans are sadists.
  • Who doesn’t like teachers? Republicans don’t, perhaps because they suspect them of teaching subversive liberal ideology. Anyhow, our teachers who are already vastly overworked and vastly underpaid while serving an incredibly vital role in our nation’s future prosperity and going to be screwed some more. The expenses they paid out of their own pocked for school supplies for their own students that their own school districts were too chintzy to pay are no longer deductible. Apparently, Republicans loathe teachers and look forward to future generations of even stupider Americans. This makes a lot of sense thought if you are sadistic, and Republicans are sadists.
  • Apparently Republicans also hate people with business expenses. It used to be that you could deduct these expenses in excess of 2% of your AGI. That deduction is gone with the wind too. So if your employer does not reimburse your business expenses, essentially Republicans in Congress have reduced your salary. This makes a lot of sense thought if you are sadistic, and Republicans are sadists.

There are also indirect ways the bill will further screw over the rest of us. Republicans are already making noises about how the $1.5T deficit that’s part of their tax reform means we need more austerity because … omigosh, the deficit’s so high! They obviously won’t repeal their tax cuts or defense spending so they are talking about “entitlement reform” instead. First out the gate will be automatic cuts to Medicare that will start in 2019. These would start on January 1, 2018 but Trump will wait until January 1 to sign the bill so these cuts start in 2019, conveniently after the midterms. Update: reports are that Trump signed the bill today so presumably that means Medicare cuts would begin in 2018, not 2019.

Thankfully, Americans aren’t nearly as stupid as Republicans think that we are. This is borne out by polls that show the law is deeply unpopular, in spite of the fact that most people will initially pay fewer federal taxes. It’s the most unpopular bill polled in the last forty year.

They will get their comeuppance next November 6.

Slowly boiling the frog

The Thinker by Rodin

Yesterday House Speaker Paul Ryan finally released a bill to replace the Affordable Care Act, i.e. Obamacare. The bill came out of the Capitol basement, literally, where it was under lock and key. Wonks are still sorting through the bill, which hasn’t been scored by the Congressional Budget Office. The plan is not to repeal Obamacare, but to effectively put it out in the desert and wait for it to die a natural death. The expectation is that if done this way Republicans won’t get blamed for its demise. Perhaps slowly and over time as subsidies are lessened, health insurance companies drop out and both revenue and cost containment parts of Obamacare go away no one will notice that Republicans actually killed it.

Meanwhile, it’s important to ram it through as quickly as possible before legislators have a chance to consider its implications, the big ones being the impact on their reelections. Reading the early tealeaves suggests this bill is more likely to die than survive. A majority of the Tea Party members are against it as they see it as a continuation of Obamacare. Meanwhile, at last count four Republican senators suggest that they will vote against it, meaning that if it gets to the Senate as a reconciliation bill (where a simple majority rules) the votes won’t be there to enact it. Curiously these senators are from states that chose to accept the Medicaid expansion in Obamacare. They are keenly aware that many of those voting for them have found they like their Obamacare Medicaid, even if they didn’t like it enough to vote for Hillary Clinton for president.

So like past similar attempts to take away benefits citizens have come to expect, the strategy seems to be to use smoke and mirrors to obscure what it really going on. The idea is to boil the frog slowly. You don’t want the frog to jump out so make sure to turn up the heat shortly after Election Day. So keep the Medicaid part of the ACA and kill it by stealth. Cap enrollment after three years. Also make it hard for those on Medicaid who find decent employment to reapply if their luck takes a turn for the worse. Then cap the amount of money states will get. Since there is nothing in the legislation to restrain costs other than the hope that Health Savings Accounts will make consumers shop around more, effectively states will end up covering fewer people, which means the ranks of the uninsured will grow again. This is exactly as God has intended, in the eyes of Republicans.

You can tell what Republicans really care about by what goes away almost instantly. To start, all those taxes on higher earners that effectively subsidized health insurance for those of more modest means. This has the effect of depleting the Medicare Trust Fund much sooner. This should not surprise anyone because if there is one thing Republicans always agree on is that people should carry their own weight, even when it’s impossible.

Just today Rep. Jason Chaffetz (R-UT) opined that the poors should stop spending money on $700 iPhones and use it for health insurance instead, even though $700 won’t even begin to pay the annual deductibles for the discount basic health insurance plans. Clueless Republicans like Chaffetz prefer to live in La La Land, you know where you will shop around for medical discounts even though when you usually need health care, it requires urgency. It’s hard to shop around for a discount emergency room when you are bleeding to death, unless you prefer to bleed to death while trying. This appears to be what Republicans really want. If you can’t afford insurance then naturally you shouldn’t get any.

Don’t fret too much. Obamacare isn’t dead yet but it’s already bleeding profusely from inattention. It is lying on the sidewalk and is having trouble staggering to its feet. So it’s dying a slow death, mostly due to lack of consensus on how to fix it. That’s because only the Democrats want to fix it. The Affordable Care Act was launched with the expectation that its flaws would be fixed by a future Congress working (here’s the funny part) in the best interest of the American people. What it really did was give uninsured people a taste of what it feels like to be insured. What they discovered is what the rest of us discovered: it’s great, except for the paying for it part, which is hard even with subsidies.

Real insurance is basically risk mitigation. I pay homeowner’s insurance but it’s likely I’ll never get back in benefits what I pay in premiums. If my house burns down though I won’t regret paying those premiums. Health insurance works similarly but not identically. It works better when everyone participates and it works best with intelligent government oversight. Effectively the young subsidize the old because they require fewer services. Take away the mandate to have insurance as the bill allows and the pool gets older and sicker. Unsurprisingly, rates go up.

Health insurance though also requires redistribution of wealth. So the young don’t entirely subsidize the old and the sick, most require subsidies of their own to afford the insurance. The rich have the money so it’s logical that they should provide the subsidies. When the rich don’t subsidize the insurance pool anymore, it raises costs for all left in the insurance pool. Given the rules of supply and demand costs will go up and as they do fewer will be able to afford insurance at all.

There is no way to stick this Republican square peg of a bill into the round hole of health insurance because it does not recognize the way health care actually works. In fact it actively works to undercut it. All of this is fine with Republicans. Like block grants to states without accountability that shrinks every year, the goal is to make the existing system more dysfunctional every year with little oversight and no accountability.

The irony is that most Republicans really aren’t hostile to the idea of health insurance for everyone. They just refuse to have it based in part on the transfer of some wealth from the rich to the poor. If before the system collapses altogether we add a trillion dollars in new deficits, those deficits don’t matter. The money that does matter is the amounts in their bank accounts.

As for the rest of us, we’ll be bleeding on the sidewalk too.

Bet on more debt

The Thinker by Rodin

Revolution is breaking out not only in Egypt but also on Capitol Hill. While protestors demanding freedom are taking over Tahrir Square in Cairo, Republican senators and legislators complaining that oppressive “socialism” is diminishing our freedom.

On Capitol Hill, we have the expected noise principally from Republicans about how dreadfully awful our $1.5 trillion dollar deficit this year will be (I agree) and how it must be stopped now! The chess pieces are moving. Earlier in the week, Senate Republicans forced a vote on the repeal of the Affordable Care Act, which predictably lost. Certain federal district courts apparently don’t like the ACA either. One Florida judge declared the whole act unconstitutional.

Glimmers of Republican sanity are emerging. House Republicans, or at least its leadership, seem to be backing away from an earlier threat not to extend the federal debt ceiling later this year, realizing that the resulting economic meltdown may not be good for their reelection prospects. Meanwhile, President Obama is playing a clever game of defense, setting boundaries on what is acceptable and not acceptable to cut and vowing to veto bills with earmarks. Overall, the momentum certainly seems to be on the side of those trying to cut deficits and reduce the size of the federal government. This time will the cut federal spending and deficits crowd actually succeed?

My vote: bet on more debt. It seems likely that non-defense discretionary spending will be frozen for a few years. Of course, there will be lots of threats and wailing about how bad things are and how the dynamics must change now. However, that’s all they are: threats and wailing. To effect real change, new external drivers are needed. Specifically, our creditors need to stop lending us money (or slow the amount of money they are lending us) or bond rating firms (some of whom were bailed out by federal tax money just a couple of years ago) need to downgrade the U.S. Treasury’s AAA bond rating.

There is little evidence now that either of these things will happen. Why? There are many reasons but principally there is an enormous surplus of capital in the world, including trillions held by U.S. companies. Many of those holding the capital are already heavily invested in U.S. treasuries and do not want to see their investment’s value diminished. A lot of their extra money can certainly be invested in other stocks and bonds, but even blue chip companies are not as safe a refuge for money as U.S. treasury bills. Seeking safety, it seems unlikely that capital will flee U.S. securities.

The improving economy will eventually increase tax revenues. It will be hard to see over the next few years, particularly since Congress and the president have already agreed to borrow money to fund a cut in social security withholdings. Nevertheless, eventually the economy will pick up a head of steam, bringing in more in the way of revenues and thus lessening the deficit. As the deficit shrinks, however marginally, the animus to cut federal spending eases as well. Getting out of wars in Iraq and Afghanistan will help eventually as well.

Another reason to bet on debt is to consider what really matters. For Republicans, the deficit is a talking point toward their real utopian goal of cutting the size of the federal government. To seriously do this they need sixty plus votes in the Senate, a majority of the House and a Republican president. Two out of three are possible in 2012, but three out of three are very unlikely. As for right now, we will all have to muddle through somehow. What this will amount to in the end is probably a freeze on non-defense discretionary spending. President Obama noted in his State of the Union speech that this is only fifteen percent of federal spending, so a freeze does not solve any underlying problems. Medicare costs in particular will keep rising.

Republicans talk about cutting Medicare and Medicaid, but it is mostly talk. What they really want to do is cut non-defense discretionary spending. They want symbolic victories, like getting rid of the Department of Education and the Corporation for Public Broadcasting because these agencies offend them. Even if they succeed, which is unlikely, they don’t address the real problem. Discretionary spending outside of Defense has not been the principle cause of deficits since the Great Depression.

The real problems driving up the debt, aside from the bad economy and tax cuts are: Medicare, Medicaid and defense spending. Of the three, only one is a realistic target for major cuts. Can you pick the right target? If you said Medicaid, come up and claim your prize. Why Medicaid? Because when push comes to shove, the disenfranchised are always the first to go. You can see it in being played out right now in state and local governments. Here in Virginia, for example, services for the mentally ill were one of the first cut. A few people speak for the mentally ill, but not many and they are not well organized. Nor do they contribute to politicians’ war chests. Even with Medicaid, it is not going to go away, but if forced to choose between the three, it will be the first to be sizably cut. That is because those who buy influence ultimately win. The poor, being poor, cannot buy influence, and survive only on largess. So Medicaid stands a decent chance of being a loser, while farm subsidies will doubtless continue. (After all, they go principally to red states, and principally to large agricultural companies.)

The Defense Department may get symbolic cuts, but that’s all they will be. Secretary of Defense Robert Gates is proposing “cuts”, but this does not mean he expects DoD’s budget to go down. No, he is proposing slowing its rate of growth. While there are some Tea Partiers who would favor real and painful cuts to the Department of Defense, there are too many teats feeding off the military industrial complex. Cuts will be mostly symbolic and weapons systems built in large numbers of congressional districts, as usual, will be mostly immune to cuts.

Social Security is largely untouchable. Social Security will neither be abolished nor will it be replaced with some sort of voucher system. Any honest Republican knows this. At worst, the retirement age will be increased but that will prove unpopular with voters, who can hardly keep a job now. Moreover, social security is not insolvent. It will always have a steady revenue stream through withholdings. The only concern is that over the next twenty years it will be slowly drawing from its trust of already accumulated savings, i.e. Treasury bills, unless the law changes.

Medicare spending is the most chronic and largest problem. Cutting it and raising taxes are the only two things that will seriously reduce the deficit. Unfortunately, it remains popular with the public and retirees depend on it. Republicans live in a fantasy world that it can be converted into a voucher system. To fix Medicare will require making painful choices among many vested interests including doctors, drug companies, retirees, hospitals, ancillary insurance providers and clinics. For it to become solvent will require that hardest of work: everyone must share in the misery. Of course, everyone will want someone else to endure the misery, not them.

The last reason to bet on debt is that tax increases have become anathema. When push comes to shove, Republicans will put deficit spending ahead of tax increases. This is as sure as the sun will rise. The only way to seriously raise tax rates is to have a Democratic congress, sixty plus Democratic votes in the Senate and a Democratic president. That too is very unlikely.

So for the short term, unless our creditors and rating firms force our hand, expect barbarians at the gate, but wielding only noise as weapons. More debt will win because it is the least painful choice. Future generations, after all, aren’t yet of voting age.

Appalled

The Thinker by Rodin

If you need more proof that our social fabric is unwinding, this story “Health Care Creates Dilemma for Tennessee’s Poor” today on NPR’s All Things Considered should scare you and make you very angry.

You can read the story on the NPR site, but please listen to it online if you can. As shocking as it is to read, it is even more appalling to listen to it. Linda Warner is a great grandmother who lives on a $600 a month disability check in a doublewide trailer in Cocke County, Tennessee. She is mostly confined to a wheelchair and helps take care of her three-year-old great grandchild. Because she is poor, Medicaid covers her. However, Tennessee got permission from the federal government to provide the poor with a cut rate version of Medicaid called Tenncare. As a result of a state budget crisis a few years ago, the state’s Tenncare program was cut back. Way back.

So this is what is left of our social safety net. Despite being disabled through no fault of her own, despite doing good for her family and her church, the state set a limit. No Tenncare patient, unless their circumstances are “unique and complicated” can receive more than five prescription drugs per month from the state. As you might expect if you are a great grandmother who is living on $600 a month, that does not leave much money for other prescriptions you might need to stay alive. Therefore, Linda Warner, like many of people in the program, has to make painful choices about which medicines she will or will not take.

She gave the pharmacist her prescriptions, but told him not to fill the bladder medicine. Normally, she takes it four times a day.

“It stops me from wearing a diaper, a disposable diaper,” Warner sighs. “I really hate to do without the bladder medicine because I can’t go anywhere without it.”

Along with the bladder medicine, she decided to skip her pain medication for the month. That way TennCare would cover the $28 worth of antibiotics she needed.

“You have to choose,” Warner says. “And I have to have the inhaler … because I have to breathe. It’s OK that I’m wet, but I got to breathe.”

One would hope that she were the exception, not the rule. This is not quite the case according to local physician Dr. Edward Capparelli:

In fact, says Capparelli, since the drug limits took effect, he’s spent almost as much time figuring out how to take people off medications as figuring out which medications to put them on.

“This is a real problem because the clock resets on the first of the month,” says Capparelli. “So if you happen to get your meds on the first, and then on the 15th you get sick, you really are not allowed to get any more prescriptions on that limit until the first of the following month.”

Capparelli says that for relatively healthy people, the five-prescription limit hasn’t been much of a hardship.

“But for people who have more than one chronic illness, it’s impossible to try to pick which is more important,” he says. “And unfortunately, physicians have often had to choose for what’s life-threatening today and give up on what might be life-threatening tomorrow.”

Here is what is left of our social compact. If you lead an honest life, earned an honest wage, yet can no longer work and have to live on a disability payment that keeps you in deep poverty you get to enter a medical Twilight Zone. You probably will not get the health care services you need. You may have to choose between breathing this month and accidentally urinating all over the house. Perhaps when the state’s coffers are a little flusher they will allow you to have an extra prescription per month. You may die or suffer some chronic illness needlessly but that is just too bad: the state only pays for five prescriptions per month. Here is your best advice: stay healthy. Never get sick. The state cares, but not enough to matter if you are old and chronically sick. Moreover, consider yourself lucky that you get any care at all. There are thousands of others in the state worse off than you with no health insurance.

There is no question that health care is expensive. On one level, it makes complete sense for Tennessee to cut back on these rising costs. Unlike the federal government, they do not have a printing press to manufacture money. Yes, there are other expenses for which the state has to pay besides ballooning medical costs for its poorest citizens. Those schools, roads and law enforcement officers do not come free.

Still, how can societies which call themselves civilized being just accept this? How can anyone see this as a situation where the glass is half-full? Why can we not summon the political will to raise our taxes so everyone at least has the medication they need to live their life with some modicum of decency?

Apparently, we are a first world country with third world values. We should be ashamed of ourselves.

Viagra for sex offenders?

The Thinker by Rodin

In 2003 forty five million Americans could not obtain, did not choose to purchase or simply could not afford health insurance. That’s 15.6 percent of the United States population. Some of these people may be here illegally but most likely they are decent, hard working Americans who were priced out of the health insurance market. Too young to retire they are not eligible for Medicare. And apparently they are not destitute enough or cannot meet some of the weird criteria in order to qualify for Medicaid provided by their state.

But if they had been convicted of a serious crime at least their health insurance would be paid for. Admittedly it might not be much fun being in prison, and just evading rape can be a full time occupation. In the state of Virginia where I live and in many other states, when prisoners have served their sentence and are released to the community they usually qualify for Medicaid coverage paid for by the State. So crime seems to pay, or at least ensures that for a while you will receive free or heavily subsidized medical care.

But did you know that until very recently that if you suffered from erectile dysfunction and were a registered sex offender you could receive Viagra on the taxpayer’s dime? Sadly, I am not making this up. According to a survey by the Associated Press, here in Virginia and in 13 other states Medicaid paid for 788 sex offenders to receive drugs for treating impotence.

Silly me. I assumed that Medicaid administrators in these states had some lick of common sense. Some of these Medicaid administrators claim a 1998 Clinton Administration Medicaid policy by inference allowed sex offenders to receive these drugs. A letter sent to certain states by the federal government required Medicaid to pay for all legal FDA approved drugs with a few limited exceptions. Apparently erectile dysfunction wasn’t on the exceptions list. But that letter also said that restrictions could be put in place to cover abuse. I would hope this issue was simply overlooked by these state Medicaid administrators. But at a minimum it suggests officials in these fourteen states were asleep at the wheel.

This is not hard to figure out. No we certainly don’t want to do anything that would make it easier for proven sex offenders to potentially have more victims. And we sure don’t want to do it on the taxpayer’s dime. So of course we don’t want to subsidize these costs for registered sex offenders. My governor Mark Warner was one of the governors figuratively caught with his pants down. He issued an emergency order to prohibit future prescriptions of these drugs to registered sex offenders by the Commonwealth.

In my opinion as a condition of probation registered sex offenders should be required to take drugs that actually cause impotence. There are a number of them out there, and certain antidepressants actually have impotence as side effect. In addition to frequent checkups from their parole officers, sex offenders out in the community should be getting therapy to reduce the likelihood that they will sexually assault anyone again. Indeed the mayor of Miami has proposed a new ordinance that prohibits registered child sex offenders from going to certain places like public parks where children are present.

Miami’s proposed ordinance is a sad but necessary policy that I would like to see in other communities. I would like to hope that even a sex offender could be rehabilitated. However when it comes to crimes that tend to profoundly affect the victim for the rest of their life, such as serious sexual, physical or emotional abuse, it is completely reasonable for society to insist that registered sex offenders have their privileges sharply limited, providing they are released back into society at all. This should be a two strikes and you are out crime. A second offense should require these offenders be locked up again for the rest of their lives.

I hope that state Medicaid administrators use this opportunity to review their implementation of the federal Medicaid statutes so egregious actions like this do not recur.