Obama Cut the Fees Americans Pay for This Popular Mortgage Program. President Trump Just Raised Them.
Donald Trump seems to have started off his presidency with a small but telling reminder that, for all his populist rhetoric, he's fundamentally heading a conservative Republican administration.
Earlier this month, the Obama administration announced that it would cut the fee that the Federal Housing Administration charges to mortgage borrowers by a modest quarter of a percentage point. FHA loans tend to be popular with first-time homebuyers, as well as lower-income households, because they don't require a high credit rating, and you can qualify for one with as little as a 3.5 percent down payment. In return for those lenient terms, borrowers pay an annual insurance premium to the government, which covers losses incurred by lenders. The Obama administration's move would have saved your average borrower $500 per year—not huge, but enough to be cheered by the industry as a “parting gift to the housing market” at a moment when interest rates seem to be headed upward.
Republicans were not happy about this, in part, perhaps, because it's taken FHA's finances a while to recover from the housing collapse. Rep. Jeb Hensarling, who chairs the House Financial Services Committee, released a pretty apoplectic statement:
It seems the Obama administration's parting gift to hardworking taxpayers is to put them at greater risk of footing the bill for yet another bailout. Just three years ago the taxpayers had to spend $1.7 billion to bail out the FHA. Lowering premiums to below market rates now only puts the FHA in a more precarious financial condition. Playing politics with the FHA through cynical, surprise 11th hour rule changes is irresponsible and endangers the integrity and success of the FHA.
Nonetheless, Housing and Urban Development Secretary Julián Castro insisted he “had no reason to believe” Trump would reverse the change once in office. Really, he seemed to be setting up a little political test. FHA backs about 18 percent of all new mortgages on single-family homes; would the new Trump administration raise costs for all those buyers in order to appease conservative budget hawks?
Yes. Yes, it would. At his confirmation hearing, HUD secretary nominee Ben Carson said he hadn't been consulted on the change, and that he would “really examine” the cut. He also grumbled that he was “surprised to see something like this done on the way out.” Soon, it was being reported that the Trump administration would delay the reduction, which was scheduled to take effect on Jan. 27. And Friday, shortly after the inauguration ceremony, the Department of Housing and Urban Development announced it would be “suspended indefinitely.”
Liberal Trump critics, of course, are pouncing. Per Bloomberg:
"This action is completely out of alignment with President Trump’s words about having the government work for the people," said John Taylor, president of the National Community Reinvestment Coalition, through a spokesman. "Exactly how does raising the cost of buying a home help average people?”
Sarah Edelman, director of housing policy for the left-leaning Center for American Progress, in an e-mail wrote, “On Day 1, the president has turned his back on middle-class families— this decision effectively takes $500 out of the pocketbooks of families that were planning to buy a home in 2017. This is not the way to build a strong economy.”
To be entirely frank, I do not know enough about the health of FHA's finances to judge whether reducing premiums was a fiscally responsible move. But it seems obvious that the easy, popular—and even populist!—approach would be to leave the reductions in place. In that sense, this incident is a useful illustration of how traditionally conservative priorities will likely carry the day on important but low-profile administrative decisions during the Trump years, which we are now surreally living in (God help us).
I Can’t Even With Paul Ryan and Health Care Anymore
In a new interview with genial softball pitcher Charlie Rose, House Speaker Paul Ryan took some time to explain how Republicans would replace Obamacare. He recited some standard policy planks he's offered before without any important specifics. But then he said this:
We also think that a refundable tax credit is a smarter way to get people the ability to go buy insurance that they like that they can afford. That's better than [Obamacare's] subsidies. A refundable tax credit means you get assistance to regardless of your income tax liability to buy care.
Now here is the section of the IRS's website that describes Obamacare's premium support subsidies:
To review: Paul Ryan, renowned wonk, is claiming that the Republican health care plan will be an improvement over the status quo partly because it will offer refundable tax credits, instead of Obamacare's premium support subsidies—which are refundable tax credits. This is ridiculous. It's like if a bartender said to you, “You'll like this drink way better, because I make it with vodka instead of Smirnoff.”
Paul Ryan obviously knows this is absurd. Paul Ryan knows what a refundable tax credit is, and knows that's what the Affordable Care Act offers. But because the Republican Party has spent years demonizing every aspect of the president's health reform law, he is attempting to draw a nonexistent distinction for marketing purposes. Of course, he could have said: “Our plan will include refundable tax credits for everybody, whereas Obamacare only provided them for some families.” Or he could have said, “Our plan will include a better designed refundable tax credit.” But he did not. He spouted gibberish.
And, of course, Charlie Rose didn't call him on it, allowing his guest to continue ticking off talking points instead. This is Paul Ryan's magic. He has a confident command of policy speak that baffles generalist reporters and allows him to lay down one conceptual lie after another, whether it's saying without evidence that the Affordable Care Act is in a death spiral or that Republican refundable tax credits are totally not the same thing as Democratic refundable tax credits. This freedom to fib of course makes it easier for him to go out and sell his frighteningly austere vision for American government.
I can't even anymore. I just can't.
Tom Price’s Stock Trading Scandal Isn’t Going Away
Tom Price walked into a Senate hearing room Wednesday with an ethics scandal clouding his nomination to become President-elect Donald Trump's secretary of health and human services, and by the time he walked out, the Georgia congressman had done little to lift it.* If anything, he may have sharpened his critics' line of attack.
Democrats have been calling for an investigation into whether Price may have violated federal laws designed to stop members of Congress from engaging in insider trading thanks to his track record of buying and selling shares in health care companies while taking actions on Capitol Hill that could boost their profits. Over the past four years, Price, a former orthopedic surgeon who is deeply involved with health care policy, traded more than $300,000 of shares in medical companies, raising serious questions about conflicts of interest. In one case, reported by CNN, he invested in medical device manufacturer Zimmer Biomet less than a week before introducing a bill that would have benefited the company by delaying new regulation detrimental to its business.
This week the Trump transition team tried to diffuse the issue with a one-page fact sheet that claimed Price was not responsible for some of the trades in question. It explained that Price maintained a diversified, broker-run account at Morgan Stanley, overseen by a financial adviser who “designed his portfolio and directed all trades.” The Zimmer Biomet investment? That was the adviser innocently rebalancing his portfolio.
Price largely stuck to blaming the broker as Democrats grilled him Wednesday during his appearance before the Senate Health, Education, Labor, and Pensions Committee. Connecticut Sen. Chris Murphy, for instance, recounted how Price had invested in six pharmaceutical companies that would have been hurt by an Obama administration demonstration project designed to cut Medicare costs. After buying shares, Price led the congressional charge against the project, rounding up 242 fellow members to sign a letter opposing it. Afterward, four of the six companies saw their share values rise. “You did not have to buy those stocks knowing that you were going to take a leadership role in the effort to inflate their value," Murphy said. “Tell me how it can possibly be OK that you are championing positions on health care issues that have the effect of increasing your own personal wealth.”
“The fact of the matter is I didn't know any of those trades were being made,” Price said. “I have a broker-directed account. All of those trades were made without my knowledge.”
And 'round it went. Murphy pressed Price on why he didn't tell his broker to avoid companies that might be affected by his legislative work. Price said his broker's job was to “provide a diversified portfolio.” This was a sort of silly answer, since if he was really worried about investment diversification Price could get exposure to the medical sector without buying individual stocks by purchasing health care ETFs—but at most it evidenced a lack of interest in the appearance of propriety or understanding of contemporary portfolio-building strategies, not a nefarious personal enrichment scheme. Assuming he can prove that this broker-directed account is real, he should be in the clear.
Later in the hearing, however, Price admitted that he did have a direct hand in one of the deals that aroused the most concern. In 2015 and 2016, Price purchased discounted shares in a small Australian biotechnology firm, Innate Immunotherapeutics, as part of a private offering the company marketed to a handful of “sophisticated investors” in the U.S. One of those buyers included Rep. Chris Collins, who first invested in the company before he joined Congress, and currently sits on its board (he and his family own about 20 percent of the company's equity). Innate is still developing a single experimental drug, which would treat multiple sclerosis, but its shares rose rapidly over the course of last year. Late in the hearing, Sen. Patty Murray decided to cross-examine Price about the circumstances of his investment:
Murray: Well, Congressman Chris Collins who sits on President-elect Trump's transition team, is both an investor and a board member of the company. He was reportedly overheard just last week off the House floor bragging about how he made people millionaires from a stock tip. In our meeting, you informed me you made the purchases based on conversations with Rep. Collins. Is that correct?
Price: No. What I ...
Murray: That is what you said to me in my office.
Price: What I believe I said to you is I learned of the company from Congressman Collins.
Murray: What I recall our conversation was that you had a conversation with Collins and then decided to purchase the stock.
Price: That's not correct.
Murray: Well, that is what I remember hearing you say in my office. In that conversation, did Rep. Collins tell you anything that could be considered, quote, a stock tip? Yes or no?
Price: I don't believe so, no.
Murray: Well, if you're telling me he gave you information about a company, you're offered shares in the company at prices not available to the public, you bought those shares, is that not a stock tip?
Price: That's not what happened. What happened was he mentioned—he talked about the company and the work that they were doing in trying to solve the challenge of progressive secondary multiple sclerosis, a debilitating disease—
Murray: I'm well aware ...
Price: And felt it had some significant merit and promise and purchased the initial shares on the stock exchange …
The key admission here is that Price bought the stock on his own volition after talking to a sitting board member. Was the conversation harmless, like Price suggests? Possibly. Collins has reportedly been a “cheerleader” for the company for years, and a number of his associates have invested in it. Maybe he really was just kvelling about the wonderful science Innate Immunotherapeutics was undertaking. But there's enough ambiguity here to raise suspicions about impropriety and fuel calls for further investigation. As the Huffington Post notes, it also undermines the Trump team's attempts to pin all of Price's trading on his broker:
Trump transition spokesman Phillip Blando said in an email that Price asked his Morgan Stanley broker to open “an account separate from his primary broker-directed account at Morgan Stanley in order to make the purchase.”
Blando added in an email after the publication of this article that “the operative phrasing” in the fact sheet defending Price’s stock trades is that the broker “directed all trades in the account.” He added, “The Australian drug company was not part of that account.”
Price is scheduled for a formal confirmation hearing next week—Wednesday’s was just a “courtesy” warm-up appearance before one of the two Senate committees with jurisdiction over health care policy. We can expect Democrats to drill down harder on the Innate Immunotherapeutics deal, since Price has left plenty of questions unanswered.
*Correction, Jan. 19, 2017: This post originally misspelled Georgia.
Fox News Was the Dominant News Source in the 2016 Election, Survey Shows
It should come as no surprise that Trump and Clinton voters got their news from different sources throughout the 2016 presidential campaign. But a report from Pew Research shines new light on just how disparate their media diets really were.
Asked to name their “main source” for news about the campaign, 40 percent of Trump voters cited Fox News. That’s more than five times the number who cited any other source. CNN was second at 8 percent, followed by Facebook at 7 percent, and NBC at 6 percent.
And what was the Fox News of the left? Actually, there wasn’t one: Clinton voters did not overwhelmingly flock to any single news outlet. Eighteen percent cited CNN as their main source for campaign news, 9 percent named MSNBC, and 8 percent said Facebook. Just 3 percent of Clinton voters named Fox News as their primary source.
Unpopular as Fox News was among Clinton voters, some of Clinton voters’ top news sources were even less popular among Trump voters. MSNBC, NPR, and the New York Times were each cited by at least 5 percent of Clinton voters, but fewer than 3 percent of Trump voters.
The results come from Pew’s survey of 4,183 U.S. adults who are part of a nationally representative panel. The survey was conducted from Nov. 29 to Dec. 12.
The findings reinforce the conventional wisdom that the media and their audiences have polarized along with the electorate. But there are some surprising nuggets in the data, too.
Facebook has been widely regarded as a leading platform for political news in the 2016 campaign, but just 8 percent of Pew’s respondents cited it as their main source. This stands in contrast to the frequently cited statistic that 44 percent of U.S. adults get their news from Facebook—a statistic that I critiqued in depth here. Facebook is certainly influential as a distributor of political news, but Pew surveys have consistently shown that television, and cable news in particular, are much more so. That should help to contextualize the fake news problem, which was always more significant for the flaws it highlighted in Facebook’s algorithm than for its direct impact on the presidential election.
The data also help to illuminate why conservatives, including President-elect Trump, have so aggressively targeted CNN with criticism of liberal bias and untrustworthiness. CNN appears to be the last major media outlet that enjoys a sizeable number of loyalists among both Clinton and Trump supporters, putting it in a unique position to persuade the persuadable. The major news networks—NBC, CBS, and ABC—reach both camps as well but are cited as primary sources by no more than 6 percent of either one.
Local newspapers, it’s worth noting, barely register as a primary source of election news among either group. It has been a long, sad fall for a sector that was once a pillar of the American news industry.
Interestingly, though, online news sources fare no better when the question is framed this way. Not one digital-native media outlet was named by more than 3 percent of either Trump or Clinton voters as a primary source of campaign news. (That’s not counting Facebook, which is not an outlet in itself but a platform for the work of other outlets.)
Online media’s influence becomes visible, however, in the answers to another question, in which Pew asked respondents to identify outlets they turned to “regularly” for campaign news. Twenty-four percent of Clinton voters cited the Huffington Post here, compared with 9 percent of Trump voters. BuzzFeed also skewed liberal, while Breitbart and the Drudge Report were named almost exclusively by Trump voters.
A takeaway from the survey is that, while MSNBC is often viewed as Fox News’ liberal equivalent, it is not nearly as influential among liberals as Fox News is among conservatives. There are different ways to measure influence, of course, but by the metric Pew used here—asking people to name their “main source” of election news—Fox News was more than four times more influential among Trump voters than MSNBC was among Clinton voters. In general, Clinton voters were much more likely to cite nonpartisan mainstream media outlets as their main news sources than were Trump voters. That distinction does not appear to be mirrored online, however, where both Clinton and Trump voters turn mostly to sources that appeal to one camp far more than the other.
A second takeaway is just how dominant Fox News remains among conservatives, despite its internal turmoil and its occasional clashes with the Trump campaign. It was cited as the main campaign news source by 19 percent of all Pew respondents, significantly more than any other outlet, despite appealing almost exclusively to Trump voters. And while it is often lumped in with other “conservative media,” such as Breitbart, Drudge, and conservative talk radio, it stands along among them in the sheer scale of its loyal audience.
To be fair, smaller outlets matter more than a survey like this might suggest. Asking people to name just one main source of news obscures not only the many sources that supplement their news diet, but also the many sources that large news outlets rely on in their newsgathering. This is not a full picture of the American news media diet, but a snapshot taken through a prism. Still, it’s a revealing one. It reminds us that the “mainstream media” are liberal only if you don’t count Fox News among them—and that Fox News is, in some respects, the most mainstream of them all.
Bayer Is Adding Several Thousand U.S. Jobs After Meeting With Trump. Deal or Faux Deal?
Since Nov. 8, President-elect Donald Trump has claimed credit for—or been credited with—saving or creating U.S. jobs at firms as varied as Carrier, Ford, and Amazon. In Deal or Faux Deal? we analyze whether these deals are really Trump’s doing, if they’re good for America, and if they’re even deals at all.
The “Deal”: After meeting with President-elect Trump, executives at Bayer, the giant German pharmaceutical company, said Wednesday that it would add “several thousand” high-tech jobs in the U.S. and spend about $8 billion in research and development in the U.S. over the next six years. “Bayer Joins Job Parade,” blared the headline in the Wall Street Journal.
There’s a clear quid that Bayer wants for this quo. Bayer last September struck a deal to acquire U.S.-based Monsanto, the seed and pesticide giant, for about $66 billion. Because Bayer itself has a very large seed business, the deal is likely to encounter stiff scrutiny from the Federal Trade Commission and the Justice Department, whose leaders will soon report to President-elect Trump. If the deal gets killed on antitrust grounds, Bayer will have to pay Monsanto a $2 billion fee. Should it get approved, Bayer will establish itself as the world’s largest manufacturer of pesticides and seeds, and gain the opportunity to cut $1.5 billion in annual cost savings from overlapping operations.
Did Trump Make This Happen? Maybe a little. In general, companies—especially foreign companies—that make large U.S. transactions promise to make new investments and hires as they seek to gain approval. After all, everybody knows that some job cuts will be coming. One of the big purposes of a merger like this is that it will allow Bayer to take out large amounts of costs by eliminating or sharply cutting Monsanto’s overhead in the U.S. The merged entity won’t need Monsanto’s current investor-relations function, for example. and would likely take a scalpel to its central office’s ranks and geographic footprint. (After InBev acquired St. Louis–based Anheuser-Busch in 2008, it cut hundreds of jobs in St. Louis.) Until recently, however, such job cuts were held up as a positive good—for shareholders, and for the company at large. Given Trump’s propensity for calling out companies that cut jobs and general hostility to foreign firms, Bayer is clearly acting in a more sensitive manner than the typical foreign acquirer in 2010 or 2012 would have. In addition, the belief in Trump’s transactional nature—lots of people believe, with good reason, that he, or his appointees, might try to influence deal approvals based on their job impact—may have caused Bayer to emphasize job additions rather than job cuts. A betting person would have to believe that jobs announcement makes an approval more likely.
Is It Good for the Company? Yes. Bayer, facing perpetually low growth in its home markets in Europe, desperately needs growth. The purchase of Monsanto represents an opportunity to substantially increase revenues, fortify its market position in the seed business, and boost profits through cost reductions. What’s more, both Bayer—and Monsanto—already spend lots of money on research and development and hire lots of scientists and software engineers. As the Journal noted, Bayer’s “Tuesday commitment on R&D spending works out to a total of about $2.7 billion a year, which isn’t far from what the companies already spend.” It’s not like the company is committing to blow a lot of money on projects it wouldn’t have done in the normal course of events.
Is It Good for America? Unclear. Should the deal go through, it would certainly be bad news for St. Louis, which would see one of its leading corporate citizens effectively turned into a subsidiary of a German behemoth. The funds spent by the merged company on new hires and research projects (which don’t represent much of a boost from current levels) would be partially offset by the loss of jobs, decision-making authority, and status in Missouri. And other sectors of the vast and highly productive American agriculture sector might suffer. The Journal reported that many farmers are concerned that concentration in the seed industry would lead to higher prices for seeds and pesticides. Should the merger lead to higher costs for farmers, it would make food more expensive, and cut into profit margins for farmers and packaged goods companies.
Ruling: It sure looks like a real deal, though we won't know until the government renders its judgment. But it may be one America regrets.
Following Trump’s Prodding, GM Is Adding More Than 1,000 U.S. Jobs. Deal or Faux Deal?
Since Nov. 8, President-elect Donald Trump has claimed credit for—or been credited with—saving or creating U.S. jobs at firms as varied as Carrier, Ford, and Amazon. In Deal or Faux Deal? we analyze whether these deals are really Trump’s doing, if they’re good for America, and if they’re even deals at all.
The “Deal”: General Motors announced Tuesday it will invest an additional $1 billion in U.S. manufacturing operations, a move that will retain or create 1,500 American jobs. The company also said it would bring work on axle manufacturing for pickup trucks to Michigan, “including work previously done in Mexico.” That will add 450 jobs. And GM said that a supplier “has committed to make components for GM’s next-generation full size pick-up trucks in Michigan, moving 100 supplier jobs from Mexico to the U.S.”
Did Trump Make This Happen? No. It’s certainly true that automakers have a somewhat contradictory wish list for the incoming Trump administration. GM has placed a big bet on electric cars, and the sales of such vehicles are supported by a hefty federal tax credit as well as by government support for car-charging infrastructure. At the same time, GM and other automakers are seeking relief from the higher mileage requirements that the Environmental Protection Agency has enacted. Under new management, the EPA is likely to be in a position to help. Elsewhere, GM may be hoping that Trump adheres to the status quo. Sourcing components and vehicles in Mexico is a big part of GM’s strategy, which means it would oppose the kinds of tariffs and import taxes that Trump has proposed.
So Trump, who has previously shamed GM on Twitter and thanked the company there Tuesday, can get some credit for the phrasing of Tuesday’s announcement, with its focus on bringing back work from Mexico. “The U.S. is our home market and we are committed to growth that is good for our employees, dealers, and suppliers and supports our continued effort to drive shareholder value,” GM CEO Mary Barra said, trumpeting the announcement as a conscious investment in America.
But let’s be real. General Motors and American auto manufacturers in general are kicking ass thanks to seven straight years of economic growth, low gas prices (fueled by fracking), and low interest rates. These are the reasons why GM is even in a position to make new U.S. investments. And its record auto sales are being fueled by sales of big vehicles like pickups and SUVs, which companies like GM and Ford generally make in the U.S. anyways, not overseas.
In addition, GM has been in investing mode in the U.S. since it was bailed out by the Bush and Obama administrations. In its announcement, GM noted that it had invested “more than $21 billion in its U.S. operations since 2009.” That comes out to be about $3 billion annually. Over the past several years, the company has changed the shape of its operations and its workforce: fewer locations, more work being done closer to production, more robots, more software coders and engineers. And since the supply of engineers and IT workers is much higher in the U.S. than in Mexico or other developing markets, that has meant onshoring. In the announcement, GM said that in the past four years, it has “reduced more than 15,000 positions outside the U.S., bringing most of those jobs to America.” Tuesday’s announcement is great news, but it’s also more of the same.
Is It Good for the Company? Yes. General Motors doesn’t act impulsively. It’s responding to long-term shifts in its core markets. So long as gas remains cheap, investing to enhance capabilities in producing pickup trucks is a smart and logical move. And, as noted, the value of this investment is comparatively small in comparison to the investments GM has made in the previous years.
Is It Good for America? Yes. In fact, these moves, like GM’s prior investments, are really good for America. Manufacturing investment won’t restore life to many regions of the Rust Belt, or increase the demand for coal, and won’t magically raise wages. In fact, the move won’t create many jobs directly. But compared with services, manufacturing calls a much wider range of other disciplines and companies into action: parts suppliers, truck drivers, logistics companies, the power plant, security guards, landscapers, and so on. Everyone wins—including, of course, Donald Trump.
Ruling: Faux Deal.
Elaine Chao Will Have a Second Income Source When She’s Transportation Secretary: Millions From Wells Fargo
Elaine Chao is certain to be confirmed as President-elect Donald Trump’s secretary of transportation, but that won’t be her only source of income when the new administration takes over. As Lee Fang reports Tuesday at the Intercept, Chao will receive payments of between $1 million and $5 million over the next four years for her service to Wells Fargo, according to her financial disclosure forms.
Talk about a swamp draining! Chao joined the board of Wells in 2011. If that year sounds relevant to you, it might be because that’s when the Consumer Financial Protection Bureau says Wells Fargo began to look the other way while its employees, desperate to keep up with unrealistic sales targets, opened up 2 million unauthorized accounts on behalf of unsuspecting customers.
Chao, who worked in George H.W. Bush’s Department of Transportation and served as labor secretary under George W. Bush, is seen as one of the more competent and uncontroversial of Trump’s Cabinet picks, and her confirmation hearing last week was a breeze. The New York Times headline: “Elaine Chao Gets Cozy Reception at Confirmation Hearing.”
But there’s a good case for Chao having to account for her time at Wells. It’s highly unlikely, after all, that the contours of the Wells Fargo scandal were unfamiliar to her and other board members. The Los Angeles Times published an investigation of suspicious doings at the bank in 2013, quoting one employee who complained of being told workers who couldn’t keep up would “end up working for McDonald’s.” The Los Angeles city attorney’s office filed a lawsuit against the bank in 2015 based, in part, on the newspaper investigation.
With millions of customers wondering about damaged credit records as a result of the fraud and with Wells Fargo agreeing to pay a $185 million fine, it would seem Chao’s Wells service would raise major concerns, even if you didn’t know that Chao’s golden parachute supplements the $1.2 million CNN estimates she earned for her board service between 2011 and 2015. And as the Intercept points out, Chao was also granted Well Fargo stocks as a part of a deferred compensation package. Her Wells contract would likely forbid her from cashing them in if she joined a rival bank—deferred compensation is meant to encourage an employee to remain in place, not reward them for leaving to work for a rival. But government service? Not a problem! Wells, like most banks, explicitly says leaving the bank to take on work for the government is not an issue. The bank will simply issue what Chao described as a “cash payout for my deferred stock compensation.”
Fang goes on to elaborate one reason Wells might look kindly on Chao returning to public life. The secretary-designate said at her hearing last week that she would encourage public-private partnerships to find money for the increased infrastructure spending Trump covets. If you guessed Wells Fargo is one of the financial-services behemoths likely to finance some of these deals, make your way to the head of the class.
None of this is remarkable for a Cabinet pick, but you might think it’d be disqualifying in the administration of someone who promised to drain the ethical swamp. Candidate Trump may have ceaselessly badmouthed Hillary Clinton for collecting several hundred thousand dollars for speaking at Goldman Sachs, but he’s stacked his administration with enough Goldman veterans that they could host an employee reunion at the White House. Chao’s payout from Wells is simply the latest reminder that Trump isn’t draining the swamp, but turning a fire hose on it.
Repealing Obamacare Could Leave 32 Million Uninsured, Says Congressional Budget Office
Republicans still don't have an official plan to replace Obamacare. You know that already. What you may not realize, though, is that they don't have a plan to fully repeal Obamacare, either. Because the GOP only controls 52 seats in the Senate, party leaders are planning to partially scrap the law using the budget reconciliation process, which prevents filibusters on tax and spending legislation, but can't be used to change regulations. As a result, Republicans have a clear path to ending Obamacare's Medicaid expansion, insurance subsidies, and even the individual mandate (it's a tax, after all). But without a filibuster-proof 60 votes, they can't do much about the law's rules that bar insurers from discriminating against patients with pre-existing conditions and require health plans to cover certain essential benefits.
In other words, Republicans can only kind of half-repeal Obamacare.
What would happen if they did that and then failed to replace the law? The Congressional Budget Office and the Joint Committee on Taxation have released a new analysis exploring that question, based on the reconciliation bill that Republicans passed about a year ago as a dry run for Obamacare repeal (and that President Obama vetoed). While the report says its estimates are a bit “uncertain”—modeling massive changes to the health care market is hard to do—they also aren't pretty. The number of uninsured Americans would rise by about 18 million in the first year after passage. Once the Medicaid expansion and subsidies were gone, the number would hit 27 million, before eventually hitting 32 million in 2026.
One reason the uninsured rate would rise so quickly, according to the report, is that the repeal bill Republicans voted for would immediately end the individual mandate's tax penalties, which are designed to force Americans to buy coverage. As a result, many healthy Americans would choose to go uninsured. That would leave behind a smaller pool of customers full of sicker patients, forcing insurers to raise their prices—the CBO and JCT predict premiums would rise 20 to 25 percent. Meanwhile, many carriers would probably gaze upon this impending wreck and pull out of the individual market altogether. “As a consequence, roughly 10 percent of the population would be living in an area that had no insurer participating,” the CBO and JCT conclude.
According to the report, the uninsured rate really begins to swell two years after passage, when Obamacare's Medicaid expansion and insurance subsidies finally sunset. Here's the report's final tally of the carnage:
The estimated increase of 32 million people without coverage in 2026 is the net result of roughly 23 million fewer with coverage in the nongroup market and 19 million fewer with coverage under Medicaid, partially offset by an increase of about 11 million people covered by employment-based insurance. By CBO and JCT’s estimates, 59 million people under age 65 would be uninsured in 2026 (compared with 28 million under current law), representing 21 percent of people under age 65. By 2026, fewer than 2 million people would be enrolled in the nongroup market, CBO and JCT estimate.
It is unclear how closely the repeal bill Congress is now concocting will follow the timeline it settled on in last year's legislation. But one takeaway from all of this is that Republicans in Congress would be absolutely insane to repeal the individual mandate before dealing with other pieces of the law, since that could trigger the sort of immediate market collapse that the “repeal and delay” strategy is meant to prevent in the first place. More broadly, it shows the extent of the disaster that could ensue if the GOP passes partial repeal without a clear path to replacement. They'll be setting a time bomb without a kill switch. Who wants to bet that will end well?
Tom Price Is the Walking Definition of an Appearance of Corruption
Here are some things we have learned recently about Georgia Rep. Tom Price, Donald Trump's pick to be secretary of health and human services.
First, the congressman has a habit of trading stocks in medical companies while also writing legislation that could sway those firms’ fortunes. The Wall Street Journal recently found that Price had “bought and sold stock in about 40 health-care, pharmaceutical and biomedical companies since 2012, including a dozen in the current congressional session.” In total, he traded shares worth $300,000. Price, a former orthopedic surgeon who now chairs the extremely powerful House Budget Committee, regularly introduces bills on health care policy and sits on the House subcommittee that oversees Medicare.
Second, his investments have included at least one very nice bargain. In 2015 Price bought discounted stock in a small Australian biotech firm, Innate Immuno, that was attempting to win Food and Drug Administration approval for a new multiple sclerosis drug. Price purchased the stock in a private offering marketed only to “sophisticated U.S. investors” that Kaiser Health News referred to as a “sweetheart deal.” To be fair, all U.S. buyers received a 12 percent discount on their shares, which is reportedly standard in such a private placement. However, the stock price was also rising fast. Price has notched a 400 percent gain on the investment, Kaiser notes.
Finally, as CNN reported this weekend, Price introduced a bill that would assist a major medical device–maker less than a week after investing in it. Price bought between $1,001 and $15,000 in Zimmer Biomet, which manufacturers products like knee- and hip-replacement parts. Within days, he introduced the HIP Act, which would have delayed a new Obama administration regulation that may have crimped Zimmer Biomet's profits by changing the way Medicare paid for hip- and knee-replacement surgeries. After CNN's story was published, Price's aide told the news org that the congressman's stock broker had made the investment without his knowledge and that Price didn't become aware of the purchase until after introducing his bill. Nonetheless, “Price continued to hold about $2,000 worth of shares in the company, the source said, despite having introduced the bill that would have helped the firm just days earlier.”
Is Tom Price buying stocks based on the inside info he gleans as a congressman? I have no idea. Is Tom Price introducing legislation that he's aware might affect his own investments? I have no idea. Ideologically, the man is predisposed to oppose any sort of regulations that would cut into doctors' or medical device–makers' profits. I can't imagine he's writing bills and letters to regulators purely to goose his portfolio's returns. In any event, the Senate minority leader now wants the Office of Congressional Ethics to investigate whether Price violated the STOCK Act, which was passed in 2012 and was designed to stop insider trading by federal elected officials. We'll see if that yields anything.
But has Tom Price created the appearance of a massive conflict of interest by frequently trading stocks in companies whose bottom lines he might be able to influence as a member of Congress? Obviously. Could this have easily been avoided? Obviously. Assuming his official explanation about the Zimmer Biomet trade is true, he could have told his broker to avoid health care stocks. Or he could have just refrained from trading any individual stocks by investing his money in some diversified index funds (which is, frankly, what every member of Congress should be required to do). The fact that he did neither of those things means, at the very least, he wasn't worried about looking corrupt.
All of that should be enough to disqualify someone from a Cabinet post (doubly so if you're the sort of person who, say, thinks the Clinton Foundation was an unacceptable thicket of potential conflicts). But of course, it just means Price will fit in perfectly with the Trump administration.
Paul Ryan’s Big Lie About Obamacare
Paul Ryan has always been good at peddling groundless conservative talking points by dressing them up in the wonky language of a D.C. think tank symposium. With a phrase or two, he whips up an air of unearned mastery and seriousness, and certain easily duped members of the press go weak in the knees. Now that Congress has begun the process of repealing Obamacare without a clear plan for replacing it, the House speaker is milking those talents for all they’re worth.
To hear Ryan tell it, Congress needs to abolish the Affordable Care Act immediately because the law is in the midst of a “death spiral.” If you’ve been following the health reform wars of the past few years, this is a term you have almost certainly heard bandied about. It describes a worst-case scenario in which high premiums discourage healthy Americans from buying insurance, leaving behind a market full of sick, unprofitable customers whom carriers are still required to cover under Obamacare’s regulations. That drives premiums even higher, pushing away more healthy shoppers. The process repeats until insurers flee and the market unravels. According to Ryan, we’re witnessing that spin cycle of doom right now.
“Obamacare is failing and failing quickly,” he told reporters at a press conference last week. “Premiums are so high, more and more people aren’t even buying health insurance. And so only people who are desperate to get it are buying it and that is what we call a death spiral.”
Ryan repeated the refrain later when he was confronted at a CNN town hall by a Republican cancer survivor who credited the ACA with saving his life. “The problem with Obamacare—the actuaries call it a death spiral. It’s really kind of an ugly, gruesome term. But a death spiral is a mathematical term. They say when the insurance gets so expensive, healthy people won’t buy it. Because it’s just a trade-off. The penalty to not buy it is a lot cheaper than buying the insurance, so healthy people won’t buy it, therefore they won’t go participate in the insurance pool to cover the losses that sicker people who have to have insurance buy it.
"That’s what’s happening to Obamacare now,” Ryan concluded.
This was all completely baseless, at least if you judge by the latest enrollment data.
During the summer and early fall, there was some speculation that Obamacare might have entered the early stages of a death spiral. A handful of major carriers announced they were pulling out of the law’s insurance exchanges after losing too much money on them. Many markets were left with just a single insurer. The government announced that average premiums were rising by more than a fifth nationwide, and as much as 116 percent in Arizona. While most of the pundits pronouncing Obamacare’s imminent collapse were conservatives, even moderate and liberal health care analysts agreed that the situation was tenuous, and the next open-enrollment period could determine whether the system survived.
But we are now most of the way through open enrollment, and Obamacare sign-ups are rising, albeit modestly. This is in fact the opposite of what’s supposed to occur in a death spiral. As of late December, a record 11.5 million Americans had enrolled in coverage on the marketplaces, up 286,000 from the same time a year before. Sign-ups even jumped in Arizona, the state where the insurance market seemed most imperiled thanks to its giant premium hikes. Open enrollment won’t be over until the end of this month, so it’s technically possible the expanding insurance rolls are just a temporary illusion created by people picking their plans earlier. But right now, the market appears to be growing, and if it’s growing, it’s probably not twirling toward ruin, since that would entail a scenario where new customers on the exchanges were even sicker than the very early participants.
There are still plenty of open questions about whether Obamacare is really stabilizing permanently. There’s just no evidence I’m aware of that it’s midcollapse, either. Perhaps Ryan has some secret info the rest of us aren’t privy to. But assuming the speaker hasn’t been performing esoteric readings of Centers for Medicare and Medicaid Services data using sheep entrails and a dream shrine, I doubt that’s the case.
Of course, Republicans have come up with all sorts of absurd explanations for why we need to repeal Obamacare (see: goats). The problem is that Ryan’s fluency in wonk speak tends to win him plaudits from centrist pundits, who are more impressed by his ability to translate budgeteese than they are interested in whether anything he says makes sense. If you’re trying to dupe a bunch of reporters, or a nervous town hall audience, claiming Obamacare is in an actuarial death spiral is a better lie than merely telling people the law is a failure, because it sounds specific and analytical. And most political reporters simply don’t have the policy background to call it out. “You should watch this Paul Ryan town hall on CNN,” the Washington Post's Chris Cillizza told his Twitter followers last week. “The guy is extremely impressive.”