A blog about business and economics.

March 21 2017 5:34 PM

Emirates Airlines Responded to Trump’s Laptop Ban by Updating an Ad Featuring Jennifer Aniston

On Tuesday the Trump administration announced a ban on laptops, tablets, Kindles, and other electronic devices larger than cellphones on flights from 10 Middle Eastern and North African airports on eight non-U.S. airlines. Misguided though the ban might be, most of the affected airlines have so far been fairly quiet about the ban.

So far the only exception is Emirates, the largest carrier in the Middle East. On Tuesday morning, the Dubai-based airline tweeted out an 18-second advertisement featuring Jennifer Aniston with the caption, “Let us entertain you” and a rather topical opening line: “Who needs tablets and laptops anyway?”

Aniston is then shown holding a console attached to the seat in front of her and sitting with two children. “This thing has so many games and so many movies, it’s crazy,” she says. Aniston may not be the willing face of this friendly jab at Trump administration policy, but her time-tested likability makes her an effective one. Who wouldn't want to be on Jen's side?

On Twitter, users were impressed with the speed with which Emirates put out the ad, but the video actually came from a minute-and-a-half-long October advertisement in which Aniston befriends a boy who ventures into her private suite on the flight. The opening text was evidently slapped onto the clip to capitalize on a newsworthy event—a policy that may have been motivated by the Trump administration’s protectionist instinct and that may have serious business consequences for Emirates and its peers, which thanks to state funding often offer cheaper fares than their American counterparts.

Emirates appears to be the only airline to have seized the moment. On Tuesday afternoon Royal Jordanian Airlines tweeted out basic information to let its customers know it will begin adhering to the ban on March 24. Saudi Arabian Airlines also stuck to the facts.

Otherwise, the other affected airlines—Egypt Air, Etihad Airways, Kuwait Airways, Qatar Airways, Royal Air Maroc, and Turkish Airlines—seemed to focus their social media attention elsewhere. Presumably they spent the day wishing they lived on one of the 99 out of 100 Earths in which Donald Trump is not president.

March 21 2017 1:23 PM

Trump’s Laptop Ban Isn’t Just Misguided and Xenophobic. It’s a Giant Middle Finger to Business Travelers.

The Trump administration announced on Tuesday its latest effort to make life more difficult for anyone—citizen or noncitizen—who wishes to travel to and from the United States. As of right now, passengers on directs flights leaving 10 airports in the Middle East and North Africa on eight non-U.S. airlines are prohibited from bringing electronics larger than a cellphone on board.

The justification given was security grounds, although that sounds dubious. If laptops are dangerous in the cabin, why aren’t they dangerous in the cargo hold? Meanwhile, the list excludes airports in places like Venezuela, a country about which the U.S. government has issued a travel warning. In the Washington Post, Henry Farrell and Abraham Newman smartly unpack some of the trade politics that may be behind the laptop ban. Several of the airlines in questions are either state carriers or enjoy significant government support that puts U.S. carriers at a disadvantage. In other words, this move could be an extension of Trump’s twice-foiled travel ban, but it could also be an outgrowth of his protectionist trade policy.

But on top of all that, the device ban is also the latest in the Trump administration’s efforts at a certain kind of class warfare—business class warfare. In addition to being a jab at foreign companies and another act of policy shaped by rank xenophobia, the announcement is a giant middle finger to one group of people you’d think our mogul in chief would like to keep happy: business travelers.

The use of laptops (and tablets) on long flights isn’t simply a convenience or a cure for boredom. It’s a requirement for any knowledge worker who works internationally. The planes plying the routes between Abu Dhabi and New York, between Riyadh and Washington, are filled with professionals of all types hunched over their MacBooks and ThinkPads.

The ability to work on long flights has evolved quickly over the years. Until recently, one of the virtues of having your laptop on the plane was that the cabin of an airplane winging across the Atlantic was the one place you could work without the constant interruptions of co-workers, social media, and emails. I looked forward to them as opportunities to write book proposals or finish chapters.

Now, however, another reality has taken hold. Access to in-flight internet via GoGo or other services is something close to standard. It kicks in at 10,000 feet. Virtually every plane is equipped with power plugs that can keep laptops juiced for the entire journey. On a recent flight back from Europe, eight grinding hours during a work day, I was able to be online—and hence in my office—pretty much the whole time. The internet access is slow, doesn’t let you stream video, and can fade in and out over the ocean. But it lets people do pretty much everything else: get into secure systems or dashboards, chat with colleagues, trade stocks, move money, sign and forward contracts, monitor sales on your e-commerce site, fine-tune the proposal you’re going to make upon landing.

As a result, the expectations and norms surrounding business travel have changed. There is a large class of highly compensated people for whom time is money—they bill by the hour or by the day. Investment bankers, management consultants, lawyers, accountants, project managers, engineers, architects. For them, long international flights used to be an economic black hole—you couldn’t really charge clients for the time, and you couldn’t get much work done. But now, for a lawyer who charges $1,000 an hour, paying $5,000 for a one-way business class seat from Dubai to the U.S. makes sense, even if she can comfortably do only seven hours of work. The same calculus holds for the accountant in coach. At the same time, we work in a business climate in which people expect you to be connected at all times. The idea that you’re on a plane for 10 hours is no longer an excuse for not responding to a colleague or client.

There is something particularly pernicious about the way this laptop ban works. It doesn’t apply to flights leaving the U.S. for the Middle East—which is to say west-east travel. But on those flights, a lack of connectivity or access to a laptop isn’t as much of an issue. These flights often go overnight, when it is permissible to be unplugged and passengers may spend most of the time sleeping. Those flights also tend to be shorter. But east-west travel is another story. The flights take longer and are often timed to coincide with work hours at home.

Take the laptop—and internet access—out of people’s hands, and it destroys their capacity to work. It turns several productive hours into unproductive ones. And there is huge amount of business to be done in the countries affected by the laptop ban. Saudi Arabia has a GDP of about $650 billion and Saudi Aramco is about to stage what could be the world’s largest initial public offering. Morocco is building some of the world’s largest solar plants. Istanbul’s airport is an important regional hub, and the gateway to a market of 75 million people. Major U.S. multinationals all have outposts, operations, and significant holdings in the countries serviced by these airports. In a way, the laptop ban doesn’t simply alienate individual business travelers; it alienates entire economies. Erecting policies that inhibit or discourage the free flow of people and commerce is just as protectionist as building a wall or slapping tariffs on imported goods.

Now, globe-trotting knowledge workers face a choice when returning from a business trip. They can stick to the nonstop flight and write off the east-west flight as wasted time, and read newspapers and books or watch in-flight movies. Or they could seek a less direct route home, which would allow them to be connected for some portion of the travel. One way to avoid the ban would be to fly from Saudi Arabia to Frankfurt, London, or Paris and then catch a flight on Delta or American back home. But doing so violates one of the cardinal rules of business travel. If you’re flying for work, you always fly direct if you can to eliminate downtime and reduce the risk of delays and cancellations. It’s good business. And our president is supposed to be all about good business, right?

March 20 2017 4:54 PM

Paul Ryan’s Favorite Talking Point About Medicaid Is Utter Bunk

Republicans have a handful of go-to criticisms of Medicaid. One is that they believe it costs too much—which is why the House GOP has targeted $880 billion in cuts at the government-run health insurance program for low-income and disabled Americans as part of its Obamacare replacement plan. Of course, simply slashing coverage for the vulnerable seems a bit cold-hearted, so conservatives also like to claim that Medicaid does a poor job serving its beneficiaries, because doctors won't accept it. That makes it easier to say with a straight face that they're interested in “reforming” the program, rather than just bleeding it dry.

You can find variations of this point dating back years. But it's been coming up a whole lot more lately, as Republicans have been trying to sell their austere version of health care reform to a deeply skeptical public. “More and more doctors just don’t take Medicaid,” Paul Ryan told reporters during a PowerPoint presentation a couple weeks back, repeating a claim he'd made in January. “I mean, what good is your coverage if you can’t get a doctor? And that is a huge, growing problem with Medicaid.” When confronted at a CNN town hall by a cancer survivor who'd obtained life-saving medical coverage thanks to Obamacare's Medicaid expansion, Secretary of Health and Human Services Tom Price resorted to a similar argument.

“We have one-third of the physicians in this nation, Brian, who are not seeing Medicaid patients,”  Price said (the cancer survivor’s was Brian). “And so if we want to be honest with ourselves as a society, it's important we step back and say, ‘Why is that?’ Why are those doctors not seeing Medicaid patients? Let me just suggest it's because the Medicaid program itself has real problems in it.” Price added that the Trump administration wants to move some patients from Medicaid to private insurance that “might be much more responsive to them.”

It is true that many doctors do not accept new Medicaid patients, in large part because the program pays physicians relatively little for their services. But new data suggests Ryan is dead wrong when he says this is a growing problem. If anything, it appears that more doctors have started to see Medicaid enrollees in the years since the program expanded under the Affordable Care Act. Meanwhile, a recent analysis shows that low-income Americans tend to have similar access to doctors whether they have Medicaid or a private plan, which belies Price's notion that many Medicaid patients would be significantly better off with coverage purchased on the individual market.

In other words, some of the GOP's favorite current talking points about Medicaid are bunk.

When the Washington Post tried to fact-check Ryan's Medicaid claims earlier this year, it had trouble finding any number at all to substantiate them. “I am not aware of any data source that would tell you one way or another whether the number of physicians who accept Medicaid or Medicare, or private insurance for that matter, is going up or down,” Julia Paradise, associate director of the Kaiser Family Foundation’s Program on Medicaid and the Uninsured, told the paper. But a recent survey highlighted by Bruce Jepsen at Forbes suggests the figure has been pretty stable in major metro areas over the past decade. According to the doctor job placement company Merritt Hawkins, 53 percent of physicians in 15 large cities said they were accepting Medicaid patients in 2017. That's up from 45.7 percent in 2014, when the Medicaid expansion began, and down slightly from 2009, when it was 55 percent.

These data may not cover the entire country, but they are instructive. First, they come from a substantial survey. Merritt Hawkins interviewed about 1,400 doctors' offices in large cities like New York, Los Angeles, and Atlanta covering five different specialties: cardiology, dermatology, family medicine, OBGYN, and orthopedic surgery. The company also found that doctors working in midsize metros were slightly more likely to accept Medicaid than their peers in bigger cities, so there's no particular reason to think that Medicaid is facing a more severe crisis outside the country's larger population centers (the report only offered survey results for midsize metros covering 2017). A separate Merritt Hawkins survey of more than 17,000 physicians around the country found that 63.7 percent said they saw all Medicaid patients in 2016, up from 61.9 percent in 2014.*

A pessimist like Price might look at these data and note that, while the problem isn't getting any worse, about half of doctors still aren't taking Medicaid patients or are limiting the number they'll see. That sure makes the program sound dysfunctional. But if you're relatively poor, it turns out that private coverage might not be much better. In November, an analysis by the Medicaid and CHIP Payment Commission showed that Americans who earned less than 138 percent of the poverty line—the population covered under Obamacare's Medicaid expansion—had about the same difficulty getting access to medical care during 2014 whether they had Medicaid or private insurance (that was the first year Obamacare's major pieces were fully implemented). In fact, those with private plans were twice as likely to say they lacked a regular source of medical care, and about 9 percentage points more likely to say they worried about medical bills. Medicaid patients did face slightly longer wait times. But they had far, far better access to medicine than the uninsured. So to demonize Medicaid, as Price does, is to ignore the fact that private insurance faces the same problems, and in some respects more severely.

If you stop and think about it, it makes sense that Medicaid might be about as good, if not better, than cheap private insurance, which tends to be cheap because it's accompanied by high co-pays and deductibles, and keeps costs down by offering patients a narrow network of doctors to choose from. Medicaid, in contrast, “is designed for people who have no money,” University of Chicago professor and health policy expert Harold Pollack told me. “So there are a lot of aspects of Medicaid that are more comprehensive than for people with private coverage.”

The irony about all this is that, whatever Medicaid's deficiencies are now, the Republican plan would almost surely make them worse by cutting the program's budget. Many doctors refuse to take Medicaid patients because the system doesn't pay them enough for their services. As funding shrinks, states will almost surely either have to knock those reimbursement rates lower, cut the enrollment rolls, or perhaps both. It will be become more of a niche, underfunded program, and that will discourage doctors from accepting its patients.

That might not be disastrous for access to care if today's Medicaid enrollees had the prospect of getting better insurance on the individual market, like Price suggested at that CNN town hall. But they don't. Under the Republican health care plan, low-income Americans (and especially low-income, older Americans who are below the qualifying age of Medicare) will receive smaller tax credits to purchase insurance than under Obamacare. Insofar as those families will be able to afford coverage at all, they'll have to opt for something cheaper and less comprehensive than they can get now. It seems plausible those plans will give them even less access to affordable medical care than the Medicaid coverage they enjoy today.

For the Americans who rely on it, Medicaid may not be any less desirable than the private coverage they could theoretically afford in its place. Under the plan Republicans are pushing, both options will simply get worse.

This post has been updated to reflect an additional Merritt Hawkins survey on Medicaid acceptance.

March 16 2017 6:25 PM

Trump’s Budget Director Has a Breathtakingly Cynical Excuse for Cutting Aid to the Poor

White House budget chief Mick Mulvaney faced a barrage of questions from reporters Thursday about the Trump administration's desire to slash spending on domestic programs, including a number that help the poor, in order to finance a military buildup, which it outlined in its preliminary “skinny” budget. In the course of the cross-examination, Mulvaney managed to offer up one of the most deeply cynical justifications for yanking benefits from the needy that I have ever seen.

Quick context: Early on in the Q&A, Mulvaney explained that the administration didn't want to fund programs such as the Corporation for Public Broadcasting or the National Endowment for the Arts because it wasn't fair to ask coal-mining families in West Virginia to pay for them with their tax dollars. (Yes, I know, coal miners' kids like PBS too. Just bracket the point.) That led to this exchange:

Reporter: You were talking about the steel worker in Ohio and the coal miner in Pennsylvania and so on. But those workers may have an elderly mother who depends on the Meals on Wheels program, who may have kids in Head Start. And yesterday or the day before you described this as a hard power budget but is it also a hard-headed budget?

Mulvaney: I don't think so. I think it's probably one of the most compassionate things we can do to—

Reporter: Cutting programs that help the elderly?

Mulvaney: You're only focusing on half of the equation, right? You're focusing on recipients of the money. We're focusing on recipients of the money and people who give us the money in the first place. I think it's fairly compassionate to go to them and say, look, we're not going to ask you for your hard-earned money anymore. Single mom of two in Detroit, OK, “Give us your money!” We're not going to do that anymore unless we can—please let me finish. Unless we can guarantee that money will be used in a proper function. That is about as compassionate as you can get.

Got that? Mulvaney says the White House is cutting Head Start to make sure it doesn't waste the taxes of single mothers in Detroit, because it's just that compassionate. Honestly, I would have more respect for the man if he'd stood up on stage with a stock pot and said the administration had decided that the poor should be boiled into bone broth. At least then he'd have the courage of his convictions.

Much to the frustration of conservatives like Mulvaney, we have progressive taxation in this country, which means that low-income single mothers in cities like Detroit tend not to pay much in income taxes. If anything, they owe federal payroll taxes, which fund things like Social Security and Medicare, programs that aren't even dealt with in the partial budget the White House just released. The Trump administration is not saving struggling parents a dime by cutting the Head Start or Community Development Block Grant funding that helps their kids get into pre-K or that feeds their parents. You can argue at length about whether some of these programs work as intended—I certainly don't have much faith that this White House will pay attention to the best social science out there—but nobody can say with a straight face that the administration is simply looking after the interests of needy mothers. Mulvaney's rhetorical crocodile tears are plain vile.

I mean, here's how much chutzpah we're talking about: This is all coming from the same administration that proposed a plan raising taxes on single parents during the presidential campaign while offering massive breaks to the 0.1 percent.

And what about the coal miners and factory workers, who presumably do pay some federal income tax? Let's consider a bit of back-of the-envelope math: The bottom 75 percent of Americans, who file 105 million returns, pay about 13 percent of all federal income taxes. The Trump administration, in its budget, is shuffling $54 billion from an assortment of spending programs to defense. Multiply by 0.13 and that works out to about $67 per taxpayer that the administration is “saving” by spending it on Navy ships, F-35 fighter jets, and a border wall with Mexico, while cutting programs that help the old pay for heat during the winter or send low-income kids to after-school programs. I'm sure those coal miners will be thrilled to see money pulled out of their communities to escalate a naval arms race nobody asked for.

Truly, the compassion is staggering.

March 16 2017 5:03 PM

Watch Trump’s Budget Director Say That Meals on Wheels “Sounds Great” but Doesn’t “Work”

White House budget director Mick Mulvaney held a press conference Thursday afternoon to defend the administration's new spending blueprint, which has been criticized for making draconian cuts to everything from environmental protection to aid for the elder poor, all in order to direct more funding to the Defense Department. There's been a particularly furious reaction to its request that Congress eliminate funding for the Community Development Block Grant program, which many states use to fund Meals on Wheels, among other popular initiatives.

After a reporter brought up the Meals on Wheels controversy, Mulvaney at first tried to subtly evade the question. But then, as is the wont of this administration, he fell head over glutes explaining that while Meals on Wheels “sounds great,” the administration couldn't keep wasting money on programs like it that “don't work.” As in, feeding the elderly apparently isn't showing strong enough empirical benefits to merit continued federal spending by this White House, which is now deeply wedded to evidence-based policymaking.

I'm not kidding. Here's the tape:

And here's the exchange, in two parts:

Reporter: Housing and Urban Development, the community development block grants aren't exclusively about housing, they support a variety of different programs, including in part Meals on Wheels. That affects a lot of Americans. In Austin, Texas, today, one organization there that delivers meals to thousands of elderly says those citizens will no longer be able to be provided those meals. What do you say to Americans losing out, not on housing but on other things that on other things that are taken out of this budget—
Mulvaney: As you know, or I think you know, Meals on Wheels is not a federal program. It's part of that community, the CDBGs, the block grants that we give to the states. And many states have made the decision to use that money on Meals on Wheels. Here's what I can tell you about CBDGs—because that's what we fund, right? Is that we've spent $150 billion on those programs since the 1970s. The CDBGs have been identified as programs since the first, actually the second Bush administration, as ones that just were not showing any results. We can't do that anymore. We can't spend money on programs just because they sound good.

OK, so at this point, it sounds like Mulvaney is just going to cannily dodge the issue of food for the elderly by discussing the efficacy of Community Development Block Grants more generally. But then:

Meals on wheels sounds great. That's a state decision to fund that particular portion, to take the federal money and give it to the states and say, look, we to want give you money for programs that don't work. I can't defend that anymore. We cannot defend that anymore. I can't defend that anymore. We cannot defend that anymore. We're $20 trillion in debt. We're going to spend money, we're going to spend a lot of money but we're not going to spend it on programs that show they deliver the promises we made to people.

As the Washington Post's Christopher Ingraham notes, research does in fact suggest that Meals on Wheels is pretty effective at its goal of, you know, feeding people.

When those hungry seniors would like to know where their meals went, I look forward to Mulvaney showing them a picture of Trump's big, beautiful border wall with Mexico.

March 16 2017 2:30 PM

How Companies Like McDonald’s Scramble When Their Twitter Accounts Go Rogue

No matter what, a rogue tweet like the one issued by McDonald’s Twitter account Thursday morning has a small, immediate economic impact. The likely scenarios are either that the missive was either a rogue or mistaken tweet by a staffer, in which case unemployment in the U.S. will almost certainly rise by one person. The other option is that McDonald’s was McHacked. On its Twitter feed, McDonald’s announced that its account had been “compromised.”

Either way, the cost to McDonald’s will be a lot higher than a single position or cybersecurity patch.

For small organizations, there’s a pretty simple playbook when a rogue tweet is posted on an official account. Take it down or delete it, swiftly discipline the person responsible, issue an apologetic statement, and move on.

For a Fortune 500 company like McDonald’s, it’s not that simple. Social media has become an integral part of marketing, brand communications, advertising, promotion, and corporate communications. There are large teams of people and layers of bureaucracy, policy, and protocols behind every social media posting. When 140 characters go astray, it’s easy to imagine 140 humans springing into damage-control mode.

When something like this happens at a very large corporation, a series of processes, fire drills, and protocols go into action. The IT department is alerted to investigate if there was a leak. If it turns out the tweet was the work of a rogue employee, human resources and legal must review the options for discipline or firing. There would have to be a series of discussions and perhaps some documents drawn up and signed by both parties. If the account was hacked, legal, IT, and compliance would assemble to interface with their counterparts at Twitter.

At the same time, many components of the brand apparatus jump off their treadmill desks and spring into action. The social media team, which might consist of dozens of people around the world, would convene via web conference to discuss the breach. The groups charged with safeguarding McDonald’s data would sheepishly figure out a response. A global all-hands meetings of social media, marketing, press, and public relations staffers would be called. A cross-silo crisis team—marketing, brand, public relations, legal—would start meeting daily at 7:30 a.m. to monitor the situation.

At the same time, the company would have to look after those downstream from the shitstorm—in this case, McDonald’s many franchisees. So the organization that deals with franchisees would fan out electronically and in person to assure store owners that the company has no anti-Trump bias, promise it won’t happen again, and lay out the plans to recover from the damage.

Instantly, questions would be raised as to how far to escalate this situation within the organization. It’s likely someone will conclude (probably correctly) that senior executives all the way up to the CEO will be asked about the breach at their next interview, conference call, or investor presentation. So the chiefs of staff of senior executives reach down into the organization and ask for reports and briefings they can in turn share with their superiors. A group of people big enough to run a small news site would spend a day crafting a release that the CEO can sign, which would of course have to be reviewed by legal.

Meanwhile, the large company’s many outside counselors and service providers view such breaches as an opportunity to prove their worth (and perhaps bill some hours). So outside lawyers, cybersecurity consultants, and especially public relations and advertising agencies, scramble to craft responses, draft memos, and set up meetings with their counterparts.

And that’s just the first day.

After the rapid response, any large organization worth its salt will conduct an inquest. Within weeks a smartly designed report will appear laying out in excruciating detail how the account was accessed inappropriately, and how the tweet was posted and then pinned for a period of time. For their next quarterly offsite in the summer, the social media teams, in conjunction with legal, will start drafting a series of lessons learned and set up new tweeting review protocols. The marketing and brand professionals might commission a few focus groups and surveys (perhaps even on Twitter!) to assess whether the brand has been unduly politicized. Human resources would then begin building a page on the company intranet to educate global team members on proper Twitter etiquette and how to safeguard social media accounts. Perhaps an outside provider would be advised to create a new video training module for new hires.

The module will consist of two words of advice: never tweet.

March 16 2017 11:17 AM

Trump’s Budget Guts the EPA and Help for Poor Seniors. It’s a Perfect Symbol of His Administration.

The budget plan that the Trump administration released Thursday is a sad, vicious, and mostly pointless document, the political and policy equivalent of shouting “America First!” to the wind while gunning your Dodge pickup into a lamppost. In order to fund a $54 billion increase in defense spending, it takes a machete to all manner of federal programs—aid for the poor and elderly, cancer research, public television, job training, and so forth. It gouges away 31 percent of the Environmental Protection Agency's budget and 29 percent of the State Department's funding. This would all be horrifying, if it weren't already being written off by Republicans who will have the power to entirely ignore it.

“The administration’s budget isn’t going to be the budget,” said Sen. Marco Rubio. “We do the budget here. The administration makes recommendations, but Congress does budgets.”

Rubio is just stating a fact—Congress votes on appropriations. Presidential budgets, on the other hand, are mostly exercises in political messaging meant to outline the White House's priorities, which in the case of the current administration mostly entails bug-eyed nationalist posturing. The budget is literally titled “America First.” Wimpy liberal priorities like environmental protection and the arts get the ax. (It not only eliminates funding for the Corporation for Public Broadcasting—Big Bird is in the crosshairs yet again—but also the endowments for the arts and humanities.) Money for international aid and diplomacy take a deadly cut in favor of more ships for the Navy and more soldiers in the Army and Marines.

“Make no mistake about it, this is a hard-power budget, not a soft-power budget,” Mick Mulvaney, director of the White House Office of Management and Budget, the man largely responsible for the document, said. “That is what the president wanted and that’s what we gave him.”

But the coldness of Rubio's response tells you how likely he and his fellow senators are to embrace Trump's blood and gore approach to spending cuts. When reporters asked South Carolina Sen. Lindsey Graham about reductions to State Department funding, he responded, “It's dead on arrival. It's not going to happen. It would be a disaster. If you take soft power off the table you're never going to win the war.”

Graham continued, “What's most disturbing about the cut in the State Department's budget, it shows a lack of understanding of what it takes to win the war.”

Contemplate that. The Trump administration somehow managed to write a budget that amps up military spending and simultaneously pissed off Lindsey Graham. This is the guy who loves war so much he wanted to put American boots on the ground in Syria. It's like handing Cheech Marin a bag of weed and having him throw it back at you in disgust.

Maybe Republicans will feel warmer to some of Trump's domestic cuts. But even that seems a bit unlikely. According to the New York Times, GOP staffers on Capitol Hill are pissed off the chronically disorganized White House dropped the budget while giving them zero “guidance on its details or how to sell the plan.” Meanwhile, half its contents are obvious attack-ad fodder.

Consider: Trump supposedly wants to reduce the budget for the National Institutes of Health, the major funder of biomedical science in the United States, and general symbol of bipartisan pride, by 18 percent. Does anybody in Congress really want to be the guy who decimated cancer research? And what senator wants to explain to the pharma lobby why they took a hatchet to the basic science that fuels their drug pipeline? Trump also supposedly wants to abolish the Community Development Block Grant, which funds meals on wheels for seniors among other cherished initiatives, and the Low-Income Home Energy Assistance program, which helps a whole lot of old people pay for heat in the winter. There you go—a budget literally designed to leave elderly Americans eating cat food in the cold. Enjoy that one come campaign season. Meanwhile, even the current head of the EPA, former Oklahoma Attorney General Scott Pruitt, who was selected for his job precisely because he hates the EPA and thinks climate change isn't really a matter of grave concern, reportedly asked for a smaller budget reduction than what he got here. The man Trump brought in to dismantle this agency thinks the president is overdoing it.

I say Trump supposedly wants these things, because I personally doubt he's actually read his own budget. I mean, I assume somebody explained the broad outlines to him, hopefully. But according to Politico, Mulvaney said the document “was assembled in part by examining excerpts from the president’s speeches and media interviews.” Maybe they were just being extra careful about cross-checking their work with POTUS's campaign promises, but that doesn't sound like the sort of thing you'd do if the man in the Oval Office was particularly engaged. Overall, this document has all the politically tone-deaf hallmarks of a Tea Party fantasy scribbled hastily on the page, which isn't shocking, since before he was budget director, Mulvaney was a Tea Party congressman who wanted to breach the debt ceiling rather than raise federal spending.

It should be said that this is not even a full budget. Rather, it's a “skinny” version that presidents issue early in their first year that doesn't include line-by-line spending details or deal with issues like entitlements. In that respect, it's even more of a glorified press release than your typical presidential appropriations request. And in this case all it tells us is that Trump wants to spend bigger on guns, boats, and bombs, and doesn't care much about whether the planet fries. And yet, while espousing those perfectly conventional conservative values, it's still managed to alienate other Republicans who will be essential to implementing the administration's vision. Insofar as they refuse to go along with his plan, it will be another example of Trump's inability to lead his own party. If this is an administration whose malevolence is only tempered by its incompetence, as Lawfare's Benjamin Witte so perfectly put it, this budget doc is its perfect symbol.

March 15 2017 2:44 PM

Some People Are Worried Trumpcare Would Crash the Insurance Market. The CBO Isn’t. How Come?

When House Republicans unveiled their plan for replacing the Affordable Care Act last week, a number of health policy experts, including conservatives, worried that it looked like a blueprint for insurance market chaos. The legislation had all the ingredients for a severe adverse selection problem—where sick people buy coverage, healthy people don't, and insurers can't make money, leading them to raise premiums or stop selling plans.

This week, the Congressional Budget Office disagreed. It suggested that after a brief period of turbulence, Trumpcare would result in a “relatively stable” market, in which “most areas of the country would have insurers participating” and customers would “not be subject to an unsustainable spiral of rising premiums.” In the context of a document forecasting that 24 million people stood to end up uninsured due under Trumpcare, this counted as good news.

Why are the budget wonks so optimistic? Their reasoning is sort of idiosyncratic but makes sense in the greater scheme of the CBO's report.

Let's start with a quick review of why some people, myself included, are concerned that Trumpcare could send the insurance markets into fits. In short, the legislation guarantees that sick Americans can buy coverage without balancing them out by forcing healthy people to purchase it as well. It keeps in place Obamacare's old rules prohibiting carriers from discriminating against customers with pre-existing conditions, while eliminating the individual mandate requiring people to obtain insurance or pay a tax penalty. In its place, Republicans would create a rule obligating insurance companies to charge people 30 percent extra for a year if they buy a plan after going uninsured for about two months. This is meant to encourage young and healthy people to stay covered (and pay premiums that subsidize the sick) lest they get hit with the penalty. But by making coverage more expensive, it could just as easily discourage the uninsured from enrolling in the first place.

The upshot: Sick people will still be able to buy insurance while healthy people will have incentives to hold off until they absolutely need coverage. One conservative health care expert, Avik Roy, wrote that it seemed “like a recipe for adverse selection death spirals.”

As Sarah Kliff noted at Vox, insurers themselves seemed much less worried about this than the wonks. In their view, the individual mandate hadn't been all that successful at getting people to buy coverage in the first place—adverse selection already seems to be a problem in some states, which is one reason why carriers have had trouble earning a profit under the Affordable Care Act—and Trumpcare's continuous coverage penalty probably wasn't going to work all that differently.

The CBO's analysis doesn't really mesh with either of these perspectives. Unlike the insurers, the office's staff believes that the individual mandate is extremely powerful—the agency estimates about 14 million fewer Americans will obtain health coverage in 2018, largely because the mandate will disappear. Like some of the wonks, it also thinks that Trumpcare's continuous coverage penalty is counterproductive—the office predicts that in most years after 2018, about 2 million fewer people will buy coverage because of the surcharge. And yet, after a couple years of rising premiums and fast-declining enrollment, it projects the market will settle down.

There are basically two reasons why: First, the Republican plan would nudge a lot of old, costly customers off insurers' rolls. Second, it would fork over a lot of government money to make sure carriers don't lose too much on the extremely sick.

Trumpcare is designed to lower the cost of insurance for young adults while increasing it for older Americans—it allows carriers to charge near-seniors five times as much as twentysomethings, instead of three times as much, like under Obamacare. As a result, the CBO essentially thinks a lot of 60-year-olds will get priced out and replaced by younger customers lured by cheap coverage. The result is a smaller, healthier, more profitable customer base. The Republican proposal would also give states billions of dollars each year for “stabilization funds”—which they could use to compensate insurers for the cost of covering particularly ill customers. (The Affordable Care Act had a temporary reinsurance program that did largely the same thing). That, the CBO thinks, should stabilize the industry's bottom line, even if its customers are a little more sickly than expected, and keep insurers in the market.

It's not an absurd theory of the case. But it is a depressing one. Congress' official forecaster thinks that Trumpcare would create a steady market where insurers are happy to sell coverage by making it unaffordable for the older Americans who need help most, while supplementing the system with government cash. The CBO's definition of “stable”—a market where “most areas of the country” have insurers to pick from—doesn't exactly inspire great confidence, either. After all, voters are already angry because a third of U.S. counties are down to one insurer on the ACA's exchanges. Having a functioning market in “most” of the country, rather than all of it, might not cut it politically.

And hey, the CBO also says that left to its own devices, Obamacare would end up just as stable—except 24 million more people would have insurance coverage. Just something to consider.

March 15 2017 1:43 AM

The Sliver of Trump’s Tax Return That MSNBC Obtained Tells Us Almost Nothing About His Finances. Demand More.

I woke up Tuesday morning planning to write yet another article on President Trump’s refusal to release his tax returns despite almost every other president and presidential candidate over the past 50 years having done so. Trump’s actions were troubling enough during the campaign, when his willingness to violate this norm set a dangerous precedent for future presidential contests. Now that he is president, that worry seems quaint. As Trump makes foreign and domestic policy decisions that impact us all, the public needs to understand where his loyalties lie, and how he might personally benefit from some of the decisions he makes. And absent his tax returns, we don’t.

On Tuesday evening, MSNBC began to tout what seemed to be a major scoop: It had a Trump tax return. The investigative journalist David Cay Johnston had received documents in the mail, and Rachel Maddow would tell all at the appointed hour. A previous leak during the campaign, to the New York Times, suggested that Trump had taken a $1 billion tax loss in the 1990s under circumstances that suggested aggressive tax planning at the best and flat-out cheating at the worst. However, we didn’t have the full returns to figure out what had actually happened.

Would this be the moment that we finally learned about Trump’s dealings with Russians, which might explain his solicitude to Vladimir Putin and Russian interests? Would we discover that, contrary to his claims, Trump has made very little in income or paid no income tax? After all, there must be some reason he refused to release his returns. Here, it was tempting to hope, was the moment it might all become clear.

Sadly, what Johnston received was not actually a complete copy of Trump’s tax returns, but rather his two-page Form 1040 from 2005. This is still big news in that we now know more than we did—assuming it is authentic, which the White House seemed to confirm in a statement Tuesday night—but it answers precious few of the questions many people have.

So, what did we learn? For one thing, we learned that Trump actually has earned substantial amounts over the years. Only about $100 million of the nearly $1 billion in losses from the early 1990s was still available in 2005, meaning Trump must have earned about $900 million (about $81 million per year) in the intervening years, assuming no additional losses. Based on this slice of the return, we can rule out the theory that, at least up until 2005, Trump wanted to obscure his income because it was far less than he would otherwise have us believe. Of course, he likely paid precious little in taxes on that income because of the aforementioned losses.

We also now know that he has actually paid some taxes, contrary to some speculation (speculation he has only fueled by refusing to release his returns). We learned he would have owed only about $5 million in taxes on about $150 million in income (about 3 percent) but for the alternative minimum tax (or AMT). As it was, he paid about $36 million in income taxes, representing a rate of about 25 percent, far lower than the regular statutory rate. This might help explain his proposal to eliminate the AMT.

And we know most of his income was business-related, as opposed to salary, but most people assumed that to be the case, anyway.

Oddly, the fact that he made a lot of money and actually did pay taxes helps him, making one wonder why he didn’t just release this on his own, assuming it’s real. Johnston actually raised the possibility that Trump may have leaked this himself, noting that he has been known to pull such stunts in the past.

What didn’t we learn? Without the schedules associated with this return and the returns of the various companies and partnerships whose income likely fed into this Form 1040, we can’t know who his business partners are, where he makes most of his money, or whom he pays and how much. In other words, this leak tells us very little about the core issues of Trump’s business entanglements that may—or may not—affect his policy decisions.

We also don’t know much about Trump’s itemized deductions, which came to about $17 million, according to the form. During the campaign, Trump claimed to be quite generous when it came to charity. Thanks to the dogged reporting of the Washington Post’s David Farenthold, we know a lot about his foundation and how he talked others into donating to it so that he could distribute those funds and take credit. Without a Schedule A form, we don’t know how much of his own money Trump actually gave in 2005.

Much has been made of the Emoluments Clause and the question of what Trump receives from foreign governments, whether it is through stays at Trump properties or trademarks for his various business interests in China. One great hope for the release of the tax returns has been that we would be able to see what favors Trump might be doing for others as he formulates U.S. policy and how he himself might benefit from his own decisions. Understanding the sources of Trump’s income, including the countries in which he makes most of his money and the people with whom he does business, might help explain why he threatens some countries with tariffs and not others. Or it could reveal that his foreign policy is completely disconnected from his financial interests. Trump’s behavior to date certainly suggests that he is self-regarding. He could go a long way toward addressing that reputation by revealing what his interests actually are.

Tuesday’s leak is certainly a step in the right direction for those interested in transparency and the important norm that presidents should make clear to the American people where their interests lie so that we can evaluate their motives. Nonetheless, it falls far short of what one might hope for. The leak simply reinforces Trump’s claim that he has made a lot of money without answering any of the questions about his financial dealings and potential conflicts of interest.

Tax Day is fast upon us. In a normal world, our president would release his tax returns for all to see. This ritual both reinforces the idea that we are all subject to the law and allows the American people to know that their president is not a crook. It also lets us know where the president’s financial interests lie so that we can be sure he has our interests at heart when he sets policy.

Perhaps Trump will surprise us all by releasing his taxes in the next few weeks. I’m not counting on it. While we cannot force him to behave as his predecessors have, we can at the very least refuse to let his nondisclosure pass unremarked upon. This still isn’t normal. And no one, whether Democrat or Republican, should let it become so.

March 14 2017 5:31 PM

One Conservative Wonk Tried Really Hard to Debunk the Blockbuster CBO Report. It Didn’t Go Well.

Republican officials have been at a complete loss for how to handle the Congressional Budget Office's blockbuster report estimating that their plan to replace Obamacare would leave an additional 24 million Americans uninsured by 2026. Many are staying silent. Others have tried, unconvincingly, to wave it off. House Speaker Paul Ryan has mysteriously decided to embrace the results, which seems about as wise as a hiker trying to fend off a grizzly by hugging it.

Into this rhetorical vacuum steps Avik Roy, a conservative health care wonk known for his strident criticisms of the Affordable Care Act. Roy is no fan of Trumpcare, either; he recently wrote a post titled “GOP's Obamacare Replacement Will Make Coverage Unaffordable for Millions—Otherwise, It's Great.” But he does think the CBO is greatly overestimating how damaging the legislation would be. In the end, Roy suggests that as few as 5 million Americans could end up uninsured because of the Republican plan. In other words, he believes the official estimate could be off by a whopping 19 million.

I don't think Roy's case is particularly strong. Unlike the attempts by Republican politicians to simply discredit the CBO in the run-up to its report, he is making a good-faith effort to question some of the assumptions underpinning its results, which is a fair and useful thing to attempt. But his own back-of-the-envelope math doesn't make a great deal of sense, in part because he conflates short-term issues the budget office identifies with long-term coverage declines.

Roy starts by noting a very technical but important point: The CBO's new report is unfortunately based on an outdated, overly optimistic assessment of how many Americans would buy insurance through Obamacare's exchanges if the law stayed in place. Specifically, the office starts from its March 2016 budget baseline, which forecast that within a couple of years 18 million people would enroll in health plans on the ACA's federal and state marketplaces. That's obviously not going to happen. If anything, the exchanges are shrinking right now (just 12 million people selected plans this year, down slightly from a year before) and in its most recent January update, the CBO lowered its expectations. It now thinks 11 million people will sign up for Obamacare coverage in 2018.

To be clear, there's no conspiracy here. The CBO did not decide to jump off from old, inaccurate numbers in order to undermine the GOP. The report says up top that it picked the March 2016 baseline in consultation with congressional committees, who were likely using it to craft their own legislation. But Roy thinks the decision massively distorts the office's forecast. The “baseline is off by 7 to 8 million in future exchange enrollment,” he writes, “hence, the impact of the [American Health Care Act] is also off by the same amount.”

That's probably wrong for at least a couple reasons, but the major one is this: Over the long term, the CBO doesn't actually think the individual market will shrink by much. Initially, many people would drop out after the individual mandate, which requires Americans to buy coverage or pay a tax penalty, was repealed. But over time, the availability of cheaper insurance would lure back more young people, so the individual market would shrink by just 2 million, on net. That's 2 million in a world where 24 million lose their coverage.

The CBO “ended up with a baseline that’s demonstrably inflated,” former CBO Director Douglas Holtz-Eakin, now president of the conservative American Action Forum, told me. “That’s a little misleading in the eyes of some.” But, he added: “I don’t think that’s driving the results, by any means, especially if you get to 2026, 10 years out.”

Douglas Elmendorf, dean of the Harvard's Kennedy School and another former CBO director named Doug, told me something similar in an email. “The bottom line is that CBO's baseline is uncertain, and the estimated effects of the AHCA would be different under the new baseline than the previous one. But there is no reason to think that the differences would be substantial.” In other words, on this issue Roy is really quibbling.

Now on to Roy's second big qualm: He believes the CBO is exaggerating what will happen if Republicans kill the Affordable Care Act's individual mandate. By 2018, the office thinks Trumpcare will cause 14 million fewer Americans to carry insurance, with “most of the reductions” stemming from the mandate's death. This strikes Roy as unbelievable. “The CBO has long believed that Obamacare’s individual mandate has near-magical powers to compel people to buy health insurance. There is little evidence to support this claim.” He thinks the CBO is overcounting its impact on insurance by maybe 9 million enrollees.

There is a very active debate about how effective the mandate has been at making people buy insurance (my general take: not effective enough). It's certainly fair to question whether ending it will have the dramatic near-term effects the CBO expects. But if we look at the long haul again, the mandate just isn't as important a factor in the CBO's analysis. Most people would lose coverage in its Trumpcare model because of outright cuts to Medicaid, which come in later years, and because fewer people would get insured through their employers, who would no longer be required to offer their workers health plans. The demise of the mandate might fuel some of those declines—the CBO thinks some workers might be less likely to pay for an employer plan if they weren't forced to, for instance—but not all of them.

Finally, Roy doesn't like how the CBO forecasts the future of Medicaid, because it assumes that were Obamacare to survive, about 5 million people would get coverage under the program's expansion, as more states decided to participate. This, he says, is also unrealistic.

“The states that haven’t expanded Medicaid have done so because they are concerned about exposing their taxpayers to significant and growing liabilities that the federal government may back away from over time. Those liabilities aren’t getting smaller as time goes forward, but larger,” he writes. “It’s equally, if not more likely, that Medicaid expansion in new states accounts for fewer than 2 million more enrollees by 2026.”

This is basically a political judgment. Maybe Roy has it right. But maybe he doesn't. Red and purple states like Louisiana and North Carolina that initially rejected Obamacare's Medicaid expansion have moved toward accepting it after electing Democratic governors (Republicans have tried to stop Roy Cooper's effort in the Tar Heel State). There's even a movement to make it happen in Kansas. If Florida alone were to take the expansion, it would make a huge difference. Roy's guess about how things would shake out is ultimately no better than the CBO's.

So Roy shaves 15 million uninsured from the CBO's estimate based on shorter-term issues that don't necessarily drive the office's 10-year outlook, and another 3 million based on his political instincts. This does not exactly strike me as a searing takedown.

Of course, the CBO's estimates aren't infallible. They involve a great deal of uncertainty, which the office admits up front, especially since some of the projections involve guessing how states will react to Trumpcare's various pieces. Will New York and California try to keep paying for the Medicaid expansion out of their own taxpayers' pockets once federal funding recedes? Will states use the money Congress would set aside to stabilize their individual markets for its intended purpose, or blow it patching up various budget holes? “There’s lots of room for reasonable disagreement on those things,” Holtz-Eakin told me. Indeed. I just haven't seen a compelling reason to disagree with the CBO's main point, which is that Trumpcare would leave a staggering number of people without insurance. And it's telling that so few conservatives are even trying to offer one.