Browsing the blog archives for November, 2016.

Undoing Obamacare

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There’s a reason why Marxism in practice is often called creeping socialism. It’s built one entitlement—or entitlement enhancement—at a time. Once in place, entitlements are difficult to undo because reformers must survive a siege of charges that they are taking something away from someone. The “something” can be food on the table, unemployment benefits, social security, or just about anything the left has decided should be provided by government. In this instance, it’s healthcare.

The left’s narrative on repealing Obamacare is that Republicans must figure out how to improve the system while not affecting those who are currently covered, including millions who received heavily subsidized plans through the so-called Affordable Care Act. The average monthly subsidy for new enrollees was almost $300 for a plan with an average premium of less than $400. In effect, this means that newly covered Americans are paying about $100 per month for a $400 plan. The upper limit for subsidy eligibility is 4 times the poverty level, or about $100,000 a year for a family of 4. Obamacare proponents consider existing subsidies to be cemented, so any rollback would just be heartless.

The Republicans I’ve heard are playing along. Nobody will lose their plan because of reform, they say. To be frank, real reform isn’t possible if healthcare—including routine trips to the doctor—is considered an entitlement. Quality care costs money, and it’s time that Americans who can afford iPhones, Netflix, Body art, and lottery tickets accept responsibility for paying the piper.

I don’t want to be an early Grinch, but we must face facts. When government pays for something, we all pay for it indirectly. It’s direct payments that give us control over the grocery stores, gas stations, auto repair facilities, and restaurants we deal with every day. If they don’t meet our needs, we find another provider who can. But with healthcare, government and insurance companies pay most of the bills, so they call most of the shots. It’s no surprise that doctors and hospitals don’t post prices for their services and most people involved in their delivery have no clue what they actually cost. The only way to regain control is to limit subsidies to catastrophic care for the truly poor, while unleashing the market and demanding control of our own healthcare expenses.

A predominantly market-based healthcare system would be a paradigm shift for most. If you get the flu, you should decide if a trip to the doctor is worth $100. Instead, if you have coverage with a modest copay, you are more likely to go and pass the additional cost along to others in the pool, who are, of course, doing the same. Economists refer to this as perverse incentives and it drives up costs for everyone.

I’m saying what Trump, Ryan, and other Republicans are hesitant to say. Yes, some Americans should lose their subsidies. Some assistance for those in poverty makes sense, but the rest of use need to regain control of our choices. That means no mandated plans, the ability to purchase coverage across state lines, and no expectation that insurance companies will accept us as new customers after we get sick.

Here’s to a complete overhaul of the system. Unfortunately, I doubt the Republicans have the fortitude to go as far as we need to go.

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Trump & Mexico

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On Monday I addressed a group of business leaders in Mexico City. We covered a lot, including global trade. I wasn’t surprised that Trump, NAFTA, and the wall were hot topics in the Q&A. Essentially, I was asked to explain the Trump-trade phenomenon by Mexican managers who have benefitted over the years from the growth in US-Mexico trade.

For the record, I’ve been to Mexico dozens of times to lecture, conduct research, and speak to business groups. Their managers are talented and engaging, and they always express frustration with government corruption and infrastructure problems. My address on Monday was scheduled before the election when most Mexicans expected Hillary Clinton to win. The focal point changed when she was defeated. There is some uneasiness there about Trump, but they seem to understand the issues pretty well.

If you a regular on this blog, then you know my position on trade. Free trade is undeniably positive, but it’s really just an academic concept. In practice, there are lots of issues to negotiate, including currency manipulation, intellectual property protections, differences in tax policies and regulatory environments, state-owned enterprises (SOEs) and “catch up” provisions that allow one country to protect “infant” industries. In practice, negotiators from each country must hammer out their differences before trade can occur. President-elect Trump widely criticized NAFTA and other trade deals during the campaign, threatening tariffs as a means of addressing inequities. The US is a huge market for Mexico, and this is what makes Mexican business leaders nervous.

And then there is the wall. Nations have recognized the need to control borders for millennia. Hillary Clinton even voted for constructing a fence in 2006 while in the Senate. Regardless of one’s view on immigration, making sure individuals have permission to enter the country is a sound part of any policy. But the US does not have control of its southern border, a problem that has actually been a boon to our southern neighbors, as Mexicans working in the US send an estimated $25-50 billion home every year, accounting for 2-4% of Mexico’s GDP.  There is no doubt that simply enforcing laws currently on the books—along with a structure that eliminates most of the free passage between nations—would negatively hit the Mexican economy.

I understand the Mexican concerns given their strong ties to the US economy. Unfortunately, their press seems to follow the lead of the US mainstream media, stoking fears that the President-elect wants to completely abolish trade with Mexico. Overall, they were respectful of the election process and seemed to understand the concerns of workers who drove the results in the rust belt. None of them expressed the kind of disdain for Trump that numerous HRC supporters continue to do, although it would have been easy to do given I was the only American in the room. Their primary concern is trade, not the wall. In fact, several executives told me that they fully understand the need to secure the border, and they complimented Trumps economic plan to business prowess. They also noted the widespread frustration with President Peña Nieto, something that I did not hear reported when the media criticized Trump’s trip to the DF during the campaign.

Mexican business leaders see these issues from the Mexican perspective, but I was impressed with their ability to empathize with Trump’s concerns and work with him as our nation’s duly elected leader. I wish those American protesting and rioting could display the same class.

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No matter who wins…

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Today we will decide who will be our next president. The winner will have a lot to do with immigration, trade, and the Supreme Court. Don’t get me wrong, this is a huge election. But I’d like to point out some very important issues that will remain on the table no matter who wins.

This election will be close. I’m always amazed that we refer to 5-point wins as “decisive” or “landslides.” The winner will claim vindication and some sort of mandate, but our country will be as divided as ever on November 9. The best case (realistic) scenario for Clinton includes a Republican House and ongoing investigations. A President Trump would face opposition in his own party and constant Senate filibusters. We can expect our government to be as divided as the voters. If divided means that less gets done, this isn’t the worst outcome.

Clinton may have promised “debt-free college” and Trump better trade deals, but Congress will have a lot to say about these issues. The President can wield a lot of influence, but his or her views will be tempered by the will of legislature. If you’re worried that Clinton might by-pass Congress with “a pen and a phone,” my guess is that she might not hesitate to anger the Republicans while her investigations are ongoing, which could be a while.

Regardless of the victor, the national debt will continue to rise. While Clinton seeks to expand entitlements, Trump wants to hold steady and is counting on economic growth to save the day. Trump’s prospects would be better given his tax proposals and the leanings of a Republican House, but both candidates have kicked the entitlement issue can down the road.

Win or lose, the Republican Civil War will begin on Wednesday. If Trump loses, he and his followers will likely blame the establishment for a close defeat and many will call for a new party. The Trumpsters would have a point. While Trump has made some errors along the way, never before has a presidential nominee had to battle so many within his own party. A Trump victory would mean an entirely new look for the Republican party, but don’t expect Romney, Bush, Kasich, Ryan, McCain, and the rest of the usual suspects to go down easy. There’s a lot of political blood left to be shed either way, and it will probably be a good thing over the long haul. The Republican party has been feckless for years now and needs a major overhaul.

Win or lose, we will still have a massively biased “mainstream” media. WikiLeaks continues to expose CNN’s corrupt ties to the DNC. While past GOP nominees seemed easily intimidated, Trump (to his credit) has kept this issue front and center. Imperfect though it may be, Fox News will continue to lean right to counter the herd. Kudos to Fox for its investigative work with WikiLeaks and the FBI investigations while others conveniently swept these issues under the rug.

There’s a lot riding on this election, but it’s only part of the equation. If you read this on November 8 and haven’t voted yet, your vote can make a difference. But no matter who wins, the battle for our liberties won’t end on Wednesday morning.

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