The Census Says New York, Houston, and Los Angeles Are Smaller Than It Thought. Why?
On Thursday, the U.S. Census Bureau reported that the population of New York City had jumped up by 21,000 people between July 2015 and July 2016 to 8,537,673.
It’s a new all-time high for America’s largest city—albeit not as high as the all-time high of 8,550,405 we thought we hit on July 2015.
New York’s not shrinking. But statisticians at the Census now think they overestimated the prior growth of New York and a handful of other big cities, including Los Angeles, Chicago, and Houston. In New York’s case, the 2015 estimate was too high by nearly 35,000 people. Based on the latest estimates, the growth rate of large U.S. cities has dropped below that of the suburbs.
Thirty-five thousand is not a big error for a city of more than 8 million; it’s not even a half of one percent of the total. Still, the annual population estimate is closely watched by newspapers, politicians and boosters, and serves as a civic blood pressure check.
This is especially true for a city like Chicago, where the Census estimate can mean the difference between growing and shrinking. In 2016, for example, the Census estimated that Chicago’s population had fallen, in 2015, for the first time in the decade. This year’s estimates project the turnaround was evident a year earlier, in 2014. Last year, Philadelphia could still claim to be America’s fifth-largest city. The newest release shows that it’s not anymore—and in fact, had already dropped to sixth place in 2015, when Philadelphians were still (mistakenly) celebrating their last days in the top five. Why? Because the Census now thinks they underestimated Phoenix’s 2015 population by 20,000, and overestimated Philly’s by 3,000.
Those are small changes. They’re new for this decade, but not unprecedented. But the story behind the annual estimates the bureau makes between its more reliable decennial population count tells us something interesting about how population is measured, and how crucially important the 2020 Census—which is currently facing the prospect of turmoil, as so many federal agencies are, thanks to the Trump administration—is to understanding the way America is growing right now.
Here, courtesy of the migration researcher Lyman Stone, is data on the latest course correction for the five biggest Americans cities whose population trends have been corrected downward:
What’s going on here? Part of it, Stone thinks, is that the Census has changed the way it thinks about foreigners leaving, resulting in population downgrades for dense, immigrant-heavy counties. In a note explaining the change in the 2016 methodology, Census researchers note that “foreign-born emigration will be higher and net international migration will be lower than the previous vintage.” It’s a one-time correction, but it appears to make a difference—especially in the dense metropolises where there’s no growth without immigration. With the latest methodology, New York City’s five-year population growth between 2010 and 2015 drops from 4.6 percent to 4.2 percent.
The counties whose estimates were off by the most, Stone shows, were those with more than 2,000 people per square mile. It’s another drop in the bucket of evidence that America is not, in fact, getting more urban. Not surprisingly, the county with the biggest revision in absolute population was America’s largest, Los Angeles County. Its five-year population growth from 2010 to 2015 is now thought to be 3 percent, down from 3.6 percent. Compounded over time, for a county of more than 10 million people, that’s a big difference.
But that doesn’t tell the whole story. To give its ballparks of county population, the Census looks at births, deaths, and migration data from the American Community Survey and the Internal Revenue Service. Sometimes, county and city boundaries are coterminous, which means those sophisticated methods can be used to estimate population growth in the cities of New York, Baltimore, and San Francisco.
But in most cases, big urban counties contain dozens if not hundreds of cities. So to figure out whether more people are living in Long Beach, Beverly Hills, or unincorporated areas of L.A. County, the Census tries to figure out where new housing units are being built, and multiplies the number of new units by the occupancy rate and average household size. From there it comes up with its growth figures for different jurisdictions.
But as everyone knows, housing growth isn’t evenly distributed across city lines. In 2012, for example, the sociologist Chris Briem criticized the Census for assuming that the population of cities and suburbs was growing in proportion to what it was in 2010. That Census release produced a big wave of headlines about urban growth that later appeared to be unfounded. In the years since, the Census has reverted to the more precise tactic of measuring housing stock growth.
Still, that can be difficult. In Omaha, for example, the Census once assumed that 100 percent of reported housing stock growth was happening within the city, when it was in fact happening mostly in an “extra-territorial jurisdiction” in the suburbs. As a result, the 2010 Census showed the city’s population was 40,000 people lower than estimates had predicted—a difference of nearly 10 percent.
So the declining projections for urban population growth aren’t all about emigrants. They’re also about measuring housing stock growth, which comes down to the geographic distribution of building permits. Harris County, Texas, saw its 2015 estimated population reduced down from 4.538 million to 4.533 million, a small adjustment. But Houston, which is within Harris County, saw its 2015 estimate fall by twice that number, from 2.296 million to 2.285 million. Houston’s estimated population growth is probably slowing because, in addition to revised estimated for Harris County, its new housing growth is slowing. Maricopa County, Arizona, saw its 2015 population estimate fall by 7,000 people—but the estimate for Phoenix, its principal city, rose by 20,000! County-level adjustments don’t tell the full story.
The big news from this year's estimates is that Seattle is the fastest-growing big city in America. For pro-growth urbanists, it feels like proof that the city’s massive construction boom is making it a more popular destination.
The same is likely true in Pittsburgh, which looks like it is holding steady even as the Allegheny regional population continued to decline. Why does Pittsburgh look like it’s in good shape? Probably because its new residential building permits leapt up in 2015.
The lesson here? Be wary of all trend articles about urban and suburban population growth. There’s no margin of error for Census estimates, but the average difference between population estimates and the 2010 Census was 3.1 percent. That’s pretty good after 10 years of population change, and tens of millions of new Americans. But it’s a reminder that every urban and suburban growth number you’re reading today is an estimate.
We think cities like Seattle are growing. But all we know for sure is that they’re building.
Trump Reportedly Wants to Stop Germans From Selling So Many Cars Here, Where They’re Made
Donald Trump had some tough words for the Germans at the NATO summit in Belgium on Thursday. “The Germans are bad, very bad,” he reportedly told Jean-Claude Juncker, the president of the European Union. “Look at the millions of cars that they’re selling in the USA. Horrible. We’re gonna stop that.”
It is certainly true that Germany runs a big trade surplus with the world and with the United States. (Last year, the U.S. trade deficit with Germany was nearly $65 billion.) But Trump can’t stop the German cars from coming in to the U.S. because, to a large degree, they’re already here. See, it turns out that many “foreign” cars are actually made in the U.S. while many “American” cars are made in Canada and Mexico. That’s how globalization works today.
Over the past few decades, in an often-overlooked dynamic, Japanese, German, and Korean automakers have sought to combat protectionist sentiment and insulate themselves from currency gyrations by opening large production facilities in the U.S.—particularly in the union-averse South. IAMA , the trade group for Asian automakers in the U.S., said its members last year produced 4.6 million cars between them, equal to 40 percent of all U.S. vehicle production, at some 300 facilities.
The German carmakers have been quite aggressive in building up their U.S. operations, too. In 1994, BMW opened a plant in Spartanburg, South Carolina. Having invested $7.8 billion in the plant, BMW now boasts that it is the company’s largest single facility in the world. And it has spurred investments by a range of suppliers throughout the state. The cars made in Spartanburg there include the EX3 and X5 Sports Activity Vehicle, and the X4 and X6 Sports Activity Coupe. Last year, Spartanburg produced a record 411,171 vehicles, about 34,000 per month. According to BMW, it sells about 26,000 cars per month in the U.S. Now, not all the cars BMW sells in the U.S. are made here. Some are shipped in from overseas. And many of the vehicles made in South Carolina—287,700 last year, or 70 percent—are exported to points around the world. The upshot: By exporting more finished vehicles from the United States than it imports to the United States, BMW may be helping to lower America’s trade deficit.
How about that other big German carmaker, Daimler? Well, it has a host of research and manufacturing locations in the U.S. The Mercedes-Benz plant in Tuscaloosa, Alabama, is an impressive operation. Last year, workers in Tuscaloosa produced more than 300,000 vehicles—or about 25,000 per month. As the main distribution site for GLE and GLS Class vehicles, Tuscaloosa exports to 135 countries. In April, Mercedes-Benz sold 27,000 cars in the U.S. Again, not all the Mercedes-Benz vehicles sold in the U.S. are made here, but the company produces roughly as many cars in the U.S. as it sells here.
Or take Volkswagen. Volkswagen has a big plant in Chattanooga, Tennessee, where it has been making the Passat and, lately, the seven-passenger Atlas SUV, whose rollout features this tear-jerking ad. It’s hard to get details about the production volumes at Chattanooga, since activity died down in the wake of the diesel emissions scandal. Volkswagen sells about 27,000 cars per month in the U.S.
I suppose Trump could try to stop the sales of German cars in the U.S. But that would involve shutting down a bunch of factories on American soil that employ American workers and use a lot of U.S.-produced parts. Yes, that would be bad—very bad.
Lyft’s New High-End Service Is a Luxurious Nose-Thumbing at Uber
Everybody seems to have a legitimate grievance with Uber these days: Google, female engineers fed up with its workplace misogyny, the U.S. Department of Justice. But the latest nose-thumbing comes from the company’s biggest domestic ride-hailing rival, Lyft, which announced a new high-end black-car service on its website Thursday.
Stylized as Lyft Lux, the service apes Uber Black, the luxury service Uber pioneered with its 2009 beta launch. Lyft Lux will begin picking up customers with a limited rollout in Chicago, Los Angeles, New York City, San Francisco, and San Jose through mid-June, according to TechCrunch, followed by 15 additional markets. A second service from the Bay Area company, Lyft Lux SUV, will offer parties of six or more in need of a higher-occupancy vehicle the same posh experience.
CBO Confirms That the Republican Health Care Bill Is Still a Garbage Dump of Bad Ideas
Meet the new American Health Care Act—it's pretty much just as god-awful as the old American Health Care Act.
The nonpartisan Congressional Budget Office reported Wednesday that the Obamacare repeal bill, which Republican House leaders successfully rushed through a vote earlier this month after several major revisions before the CBO could score their impact, would leave 23 million additional Americans without health insurance by 2026. This is a slight improvement over the previous edition of the legislation, which would have left 24 million more individuals uncovered. The updated legislation would also cut $834 billion from Medicaid and hand out tax cuts worth $661 billion, largely to upper-income households and corporations. If made law, the bill would still be absolute hell for aging, lower-middle-class workers. The report says a 64-year-old earning $26,500 would have to pay $13,600 for a health plan under the AHCA, up from $1,700 under Obamacare.
On the bright side, some people would get cheaper coverage with fewer benefits—which is great for young, healthy men in particular—and gutting Medicaid and reducing spending on insurance subsidies would cut the deficit by about $119 billion. So there's that.
In retrospect, passing this bill before the CBO could weigh in was a canny move by Speaker Paul Ryan. It's not just that the headline numbers are grisly—though they really, really are. It's that the CBO's analysis also shows how pointless and ill-conceived the conservative- and moderate-appeasing compromises that greased this legislation's path out of the House truly were. Republicans have mostly just rearranged the rusted cans and busted tires in their garbage dump of a law.
Republicans struck two major deals in order to pass the AHCA. First came the so-called MacArthur amendment—which represented the grand bargain between hard-line conservatives, who wanted to scrap all of Obamacare's insurance regulations in order to bring down premium prices, and relative moderates, who were nervous about doing away with popular consumer protections, like rules that bar carriers from discriminating against customers with pre-existing medical conditions. Rather than eliminate many of Obamacare's key pieces entirely, the deal gave states the ability to opt out of them by applying for waivers. In particular, it would let them do away with the law's essential health benefit requirements, which force insurers to cover certain services, and its community rating provisions, which prevent carriers from charging customers more because they're in bad health. Basically, blue states could keep their market regs if they liked.
Then came the Upton amendment, which added $8 billion to the bill to help insulate sick patients in waiver states from potential insurance premium hikes. While this was an obviously feeble amount of money, it was enough of a political fig leaf to win support from wavering moderates and get the bill passed.
What does the CBO have to say about all this? It makes short work of the Upton amendment, writing that though it pushes down costs as intended, the effect “would be small because the funding would not be sufficient to substantially reduce the large increases in premiums for high-cost enrollees.” In other words, it's barely worth talking about.
The number-crunchers spend much more time on the MacArthur amendment, since it could fundamentally reshape how insurance is sold in some states. The report estimates that half of the country would live in places where lawmakers would choose to keep all of Obamacare's rules. There, premiums would be a mere 4 percent lower by 2024, largely because the AHCA's basic structure would tend to price older Americans out of the insurance market and draw in younger customers, who pay less for their coverage. Another third live in states that would nix many of the essential health benefits Obamacare now guarantees, such as maternity and mental health care. Those places would see a 20 percent drop in premiums by 2026 compared with current law, “primarily because, on average, insurance policies would provide fewer benefits.” However, not everyone would benefit equally. “The reductions for younger people would be substantially larger and those for older people substantially smaller,” the CBO notes. People who needed more extensive medical care would also have to pay more out of pocket.
Finally, the CBO thinks that about 1 in 6 Americans live in states that would drop both the essential health benefit and community rating rules. This would create significantly cheaper insurance for people with few health care needs while leaving the sick to pay “extremely high premiums” that would “rapidly rise” over time. Technically, insurers would still be required to sell to people with pre-existing conditions, and could only raise prices for those who have gaps in their insurance market. But for reasons previously spelled out well by analysts at Brookings, the CBO still thinks the markets in those states would bifurcate—one with cheap insurance for the healthy, and another with wildly expensive coverage for the ill. The CBO thinks premiums would be somewhat lower in these states for customers who could afford coverage. But because costs would vary so much based on health status, the office doesn't bother estimating how much they'd fall on average.
The funny part of all this is that, in the end, the new and improved AHCA still doesn't do much more to lower insurance premiums—which appears to be the GOP's only significant health care goal—compared to the version that died without a vote on the House floor. That edition would have dropped the cost of coverage by 10 percent by 2026, according to the CBO, though largely by raising them for the old and lowering them for the young, instead of changing the benefits that were offered. Ultimately, we're not talking about a major difference in effect—and there's no reason someone who thought the original AHCA was too toxic to support should be particularly pleased with what actually passed. Both renditions make life harder for older, sicker Americans to help out younger adults who need less care, ultimately achieving a marginal drop in the cost of insurance—and leaving millions without coverage in the process. The current bill makes changes around the edges; the cruelty is pretty much the same.
Trump’s Infrastructure Plan: Let Wall Street Build and Operate America
As recently as Monday, few campaign promises looked deader than Donald Trump’s trillion-dollar infrastructure plan.
How dead? So dead that the market for municipal bonds, which had cratered in the two weeks after election day, had come crawling back as bond-buyers realized that no big plans were afoot. “Investors are less optimistic that the administration will implement its pro-growth agenda that includes hefty spending on infrastructure at the state and local level and tax reform,” the Financial Times wrote last week. They were worried that he’d actually go through with it, flooding the market with newer, higher-rate bonds, and maybe even eliminating the tax exemption that makes municipal bonds such an attractive investment. Then they stopped worrying.
And then on Tuesday, Trump went and quietly released an infrastructure plan, of sorts: a six-page document that Transportation Secretary Elaine Chao told reporters served as a guide to a legislative package that would come later this year.
It’s a short document, and like the rest of the budget, no more than a statement of intent for Congress to grapple with. (The White House decision to eliminate Amtrak long-distance routes and cut the popular TIGER infrastructure grant program, for example, part of a 13-percent slice out of the Department of Transportation budget, are unlikely to find favor in Congress.)
But it shows Trump’s two big goals: a smaller federal role in planning and funding (including expedited environmental reviews), and more private money in both new and existing infrastructure.
First, the plan calls for several well-known privatization projects. Airport traffic control would be corporatized. The lines, towers, and substations of the Power Marketing Administration, which helps the government sell hydroelectric power across the south and west, would be sold off. The administration also argues for tolls and private investment at rest stops on interstate highways, and congestion management strategies for urban areas.
But that’s just the beginning. The most significant signal of the Trump Administration’s goals may lie in the document’s other and more nebulous key principle: “Align Infrastructure Investment with Entities Best Suited to Provide Sustained and Efficient Investment.”
There, the administration says it will look for “opportunities to appropriately divest from certain functions, which will provide better services for citizens, and potentially generate budgetary savings. The Federal Government can also be more efficient about disposing underused capital assets, ensuring those assets are put to their highest and best use.” (Bolding mine.)
According to the Washington Post, the administration would like to begin a program of “asset recycling,” whereby cities, counties and states sell or lease their public assets to investment banks or private equity groups in exchange for upfront payments that can be invested in newer, less profit-friendly infrastructure. The administration may pay localities a bonus to privatize their assets, the Post reports:
"Instead of people in cities and states and municipalities coming to us and saying, ‘Please give us money to build a project,’ and not knowing if it will get maintained, and not knowing if it will get built, we say, ‘Hey, take a project you have right now, sell it off, privatize it, we know it will get maintained, and we’ll reward you for privatizing it,’ ” [Gary] Cohn told executives at the White House. “The bigger the thing you privatize, the more money we’ll give you."
The document also calls for targeted federal spending, using public money as leverage for private money, and encouraging local initiatives—broad ideas with which few pols would disagree, at least in theory.
The administration wants more money for TIFIA and WIFIA, federal programs that fund, respectively, transportation projects and water infrastructure. Each uses a relatively small amount of federal money to tap private dollars for assets like toll roads that generate user fees. The document also calls for more Private Activity Bonds, which help raise money for companies building certain types of infrastructure, such as airport and port upgrades. (More typical municipal bonds can only be issued for public projects, which limits the ways, for better and for worse, that private investors can get involved in water, sewer, school, and road projects.)
There’s plenty of debate about the wisdom of unleashing private money in public infrastructure. Sometimes the public gets ripped off, as when Chicago Mayor Richard M. Daley leased the city’s parking meters in 2008 to Morgan Stanley, shoring up the city’s operating budget but losing taxpayers nearly $1 billion over the deal’s 99-year term. Sometimes consultants inflate projects’ viability, which leaves public partners holding the bag when revenues don’t pencil out. (Of course, public infrastructure can be expensive and unnecessary too.)
More of a problem for the Trump administration: Only some big project types in the U.S. have been successful as public-private partnerships. Investors haven’t rushed to build new schools or hospitals. Building nuclear power plants in the Southeast U.S. proved too difficult for Westinghouse Electric, which filed for bankruptcy in March. Texas 130, a tolled highway between Austin and San Antonio built with $430 million in TIFIA-backed loans, went bankrupt in October—one of three TIFIA-backed toll roads to do so in recent years.
That’s where Trump’s “asset recycling” might come in, as cities and counties would be paid (by Washington, and by the buyer) to transfer their profitable public assets to private equity groups. The megafunds aiming at American infrastructure investment, like a Saudi-backed $40 billion fund run by Blackstone, whose CEO Steve Schwarzman heads Trump’s business council, could buy airports or bridges, while local governments use the new cash to pay for the new projects—like pipes for Flint—that the private market can’t or won’t provide. In the long term, governments would be left with money-losing assets while Wall Street runs more lucrative public assets such as bridges, airports, utilities, and prisons.
The Procedural Trick That Might Let Trump Pass Budget-Exploding Corporate Tax Cuts
It appears that the Trump administration is warming up to a tricky procedural move that might let the Senate pass permanent tax cuts without bothering to pay for them.
While the White House still doesn't have a formal tax plan yet, it's pretty safe to assume that whatever proposal the administration eventually produces will punch a sizable hole in the federal budget. One big reason why is that Donald Trump very badly wants to cut the top corporate tax rate by more than half—it's been one of the president's few consistent policy positions since his campaign—but has so far dismissed any of the revenue-raising ideas that might realistically balance out such a reduction.
This all raises a serious legislative problem—namely, Republicans might not be able to make Trump's tax cuts permanent. GOP leaders are planning to pass their tax package using the budget reconciliation process—the procedural tool that bars filibusters on tax and spending bills, allowing the Senate to approve them on a bare majority vote. Reconciliation is a useful means of trampling over Democratic resistance. But it comes with a catch: By law, Congress can't use it to enact policies that will raise the federal deficit outside of the budget window, which traditionally only lasts 10 years. The standard way around this restriction, known as the Byrd Rule, is to simply make tax cuts temporary if they increase the deficit, by setting them to expire before the budget frame shuts. That's why, for instance, the fiscally ill-advised Bush tax cuts sunset during the Obama years.
But the Byrd Rule might not just force Republicans to set a countdown clock on their tax cuts; it could make some ideas, like Trump's 15 percent corporate rate, essentially impossible to pass at all. As Paul Ryan's senior tax counsel, George Callas, has noted, even a corporate tax cut lasting just three years would raise the deficit more than a decade later if it wasn't paid for. That means a cut passed in 2017 would have to expire before Trump's second term got started—and even Republicans wouldn't bother with such a preposterous policy. “A plan of business tax cuts that has no offsets, to use some very esoteric language, is not a thing,” Callas said in April. “It’s not a real thing. And people can come up with whatever plans they want. Not only can that not pass Congress, it cannot even begin to move through Congress day one.”
Does that mean Trump's plans are dead? Not necessarily. Theoretically, Congress could choose to legislate based on a longer budget window—say, one that lasts two or three decades. The tax cuts would still have to expire in the long run, but as Pennsylvania Sen. Pat Toomey noted in a recent Bloomberg op-ed pushing this idea, they'd be good as permanent. Here's how he explained things:
The governing law, the Budget Act of 1974, forbids a relevant tax bill from increasing the deficit beyond the time frame contemplated in the enabling budget resolution. But it does not limit the duration of that time frame.
Congress has traditionally used a 10-year time frame, but nothing in the law prevents us from using a 20- or even 30-year time frame. A 20- or 30-year tax reform would be as close to permanent as we can get since Congress would be likely to overhaul the tax code within that period anyway.
Now it appears the administration is also embracing Toomey's open-the-window-wider strategy. On Wednesday, during a House committee appearance, White House budget chief Mick Mulvaney told members that the administration would be kosher with a longer-term budget. Per the Wall Street Journal:
Mr. Mulvaney told a House panel that Congress should be able to extend the window without changing the law. “We are exploring the possibility of also looking a little further out, especially when you start to talk about changes in mandatory spending,” he told lawmakers at a House Budget Committee meeting.
The benefits of changes to mandatory spending often don’t show up within the first decade, he said. “I think it’s a more reasonable way to look at the budget window,” he said.
Later in the hearing, Mulvaney claimed that the administration's tax plan would eliminate enough deductions and loopholes to be revenue-neutral. In theory, this would eliminate the need for a longer budget window—but I'm guessing the man wants to cover his bases just in case the administration can't follow through on its flimsy fiscal promise.
The big question about this strategy is whether enough Republicans would actually go for it. On the one hand, it would make deeply irresponsible tax cuts for the wealthy easier to execute. On the other, a longer budget window would also require a score from the Congressional Budget Office potentially showing decades of red ink. And given that some lawmakers seem to sincerely want budget-neutral tax reform, they may be hesitant to embrace the Toomey-Mulvaney strategy.
Still, there's a procedural trick that might make Trump's most feckless dreams a reality. And at least a few important people in Washington are taking it seriously.
Trump’s Budget Would Kill a Major Student Loan Forgiveness Program, but Only for New Borrowers
As was widely expected, President Trump's new budget calls for eliminating a major student loan forgiveness program designed to help government and nonprofit workers, such as lawyers, teachers, and social workers. Those who have already taken on debt for school may not need to worry for now, however, because it appears the administration only wants to end the program for new borrowers.
The White House is proposing an overhaul of the student lending system that would streamline many of the options the government currently offers borrowers for paying down their debts. As part of those reforms, it would end the Department of Education's Public Service Loan Forgiveness program, or PSLF, which wipes borrowers' balances after they spend 10 years working either for a government or nonprofit employer. A good number of readers panicked when I wrote about this possibility last week—yes, I saw all your emails and tweets—since it wasn't clear if people currently paying their loans would be grandfathered into the program. Many, many young adults have gone deep into debt for grad school in order to pursue relatively low-paying careers in the public or nonprofit sectors on the assumption that PSLF would be around to sweep away their loans after a decade (full disclosure: my wife is one of them), and no small number have been worried that Washington might pull the rug out from under them.
Trump’s proposed budget says changes to the student loan program, including PSLF, would only apply to those who start borrowing after July 2018. (I’ve contacted the Department of Education to confirm my reading of the budget and am waiting on an answer, but the text seems pretty straightforward.)
To be clear, I am leading with the good news here because I know there are droves of people who've been freaked out that the Trump administration might scrap the program they staked their financial futures on. However, this budget is still pretty brutal on students. Aside from nixing PSLF for future generations, it ends subsidized loans for low-income students and milks an additional $76 billion from the student loan program over a decade, in part by making students pay more of the earnings each year under a revised income-based repayment plan. The changes might work OK for those who only have undergraduate loans, since they will now qualify for forgiveness after 15 years under income-based repayment, rather than the current 20. But those with graduate debt will have to spend 30 years paying back their loans before getting them forgiven, instead of 25. Given that graduate degrees are only becoming more essential in the workplace, even in lower-paid careers like teaching, it seems like a pretty raw deal for the next generation of kids on campus.
How much of this could Trump actually accomplish? The White House would need Congress' help to end PSLF or subsidized loans. But it seems possible the administration might try to restructure income-based repayment on its own, given that President Obama took unilateral action to expand the program. Beyond that, there are plenty of conservatives on Capitol Hill who would be happy to increase costs on students in the name of budget savings, and given that higher education tends be a second-tier issue in Washington, a lot of these initiatives could be slipped quietly into larger bills. Without an outcry, I wouldn't be surprised to see some of these plans become a reality.
Donald Trump’s Budget Is Based on a Hilarious Accounting Fraud
Aside from a being a testament to the White House's willingness to decimate large swaths of the social safety net, it appears Donald Trump's new budget is based on a transparent and nonsensical accounting gimmick.
Here's the deal. The administration says its new proposal will erase the budget deficit after 10 years. However, to get there, it assumes that its policies—basically, tax cuts and deregulation—will send economic growth surging to 3 percent per year, allowing the government to collect $2 trillion or so in tax revenue. This is fanciful. You might as well write that eliminating the estate tax will cause an avenging nuclear lizard to rise from the sea and vanquish ISIS. But this kind of magical thinking about tax cuts is more or less standard these days.
It's the next step in the administration's arithmetic that seemingly qualifies as a straightforward fraud (or a hilarious error, depending on how you interpret intent here). The budget mentions the tax cuts, but doesn't include any of their costs. Instead, it just states that they'll be deficit-neutral, presumably thanks largely to their economic benefits (Treasury Secretary Steve Mnuchin has insisted that the administration's tax reductions would cover their own cost through growth). In other words, the White House is relying on its tax cuts to both pay for themselves and then add $2 trillion to the government's coffers. It's essentially double-counting their (already dubious) benefits.
“This is a mistake no serious business person would make,” economist and former Treasury Secretary Larry Summers wrote Monday. “It appears to be the most egregious accounting error in a presidential budget in the nearly 40 years I have been tracking them.”
To be fair, there are other potential interpretations of the administration's calculations. One is that it believes the tax cuts will, in fact, be so salubrious for the economy that they'll more than pay for themselves. This would be almost as intellectually bankrupt as simple double-counting, but would at least inoculate the White House from accusations of mathematical incompetence.
It could also simply be that the administration hasn't fleshed out its tax plan enough to spell out how it would influence the deficit. According to the Wall Street Journal, Office of Management and Budget Mick Mulvaney told reporters on Monday that the cuts mentioned in the budget are just a “placeholder” with details TBD.
“It was in all honesty the most efficient way to look at it, because if we said it’s going to add to the deficit, then we have to go into more detail than what’s in the summary right now,” Mulvaney said. “If we say it’s going to reduce the deficit, we have to go into more detail than what’s in it right now. And we simply are not in a position to do that.”
Or, maybe—just maybe—this proposal isn't really meant to be an economically coherent policy document, and is instead merely a flashing signal to Congressional Republicans that they should feel free to eviscerate the government's social spending programs once they get around to formulating their own budget. You don't have to be any good at math to tell Paul Ryan to sharpen his knives.
Donald Trump’s Budget Will Never Pass. It’s Still Frightening.
It’s often said that presidential budgets are mere “wish lists”—documents that let administrations showcase their principles and spell out policy ideas that have very little hope of making it into law. The White House can only make suggestions about spending, after all. The actual hard work of setting the government’s funding levels is done by Congress, where members have their own ideas and concerns.
But “wish list” feels like the wrong way to frame the repugnant grab bag of spending cuts Donald Trump's staffers are preparing to drop on Tuesday. For starters, there's a good chance our president doesn’t really understand the contents of the proposal going out under his name—recall that this is the man who couldn't even be bothered to learn what was in the House health care bill he lobbied for. Trump won't even be in the country when the budget is released. While that may just be a timing coincidence, it also feels aptly symbolic of the president’s personal investment in the proposal. It seems highly unlikely he truly cares much about whether most of the budget's contents pass.
You might instead think of Trump's first full budget—as is traditional for new administrations, the White House released a partial “skinny budget” in March—as a permission slip. It is essentially a stack of papers telling Republicans that they are free to go wild butchering essential pieces of the safety net in order to fund extraordinary tax cuts for the wealthy and increased defense spending. Food stamps? In Trump’s proposal, the Supplemental Nutrition Assistance Program gets $193 billion in cuts over 10 years, and would allow states to stiffen work requirements for the program. Temporary Assistance for Needy Families, aka welfare as we now know it? Its already anemic funding gets slashed by $21 billion. The administration is already trying to spin this kind of hatchet work as “welfare reform”—but it's mostly just a signal to conservatives that they can get their cleavers out, should they feel compelled. The same goes for the $800 billion in Medicaid cuts, which mirror the reductions in the House health care bill, and the reported reductions to Social Security Disability Insurance. (Update, May 23, 8:46 a.m. Actually, it appears the proposed Medicaid cuts go billions go beyond what's in the ACHA, enough to cut the program by 47 percent over a decade.)
None of this is especially surprising. Trump's budget director is Mick Mulvaney, a former Tea Party congressman from South Carolina who seems to largely have been given free rein to design this blueprint. With Mulvaney in charge, it was always going to be a bloodbath, full of the kinds of cuts to social spending Republicans have been advocating for years.
For that reason, the most important thing about the budget may be what's not in it. The plan reportedly will not call for any cuts to Medicare or Social Security benefits for seniors, which Trump promised not to touch during his presidential campaign (he also promised not to cut Medicaid and failed to mention that his promises to protect Social Security didn't include the disability portion of the program, which many of his supporters in West Virginia and Kentucky likely rely on, but who's counting?). Mulvaney personally supports raising the Social Security retirement age to 70 and means-testing Medicare benefits, but in April he said Trump had vetoed such changes to the programs. When it comes to those two entitlements, Trump is apparently checked in, resisting the traditional conservative agenda.
Otherwise, he's granting Paul Ryan permission to cut away. And that, ultimately, is what makes Trump's budget so frightening. Even if the whole package probably isn't going to become a reality, it's still a sign that he won't stop Republicans enacting whatever rash part of their agenda they manage to legislate. And while they may be more hesitant to pass dramatic cuts to some programs now that they're actually in power and liable to suffer the electoral consequences—many come from farm states that tend to like food stamp spending, for instance—the GOP now has an empty suit in the oval office who's apparently willing to bring their most extreme ideas to life. He might not even bother to read them first.
The White House Wants Everyone to Keep Guessing Whether It Will Nuke Obamacare
The White House was expected to deliver a final decision Monday about whether it would continue to defend a lawsuit that could determine the fate of Obamacare's coverage markets. But Politico reports that it will instead ask the court for an additional three months to make up its mind—a delay that will leave insurers grappling with further financial uncertainty as they determine rates for next year, almost certainly leading to higher premiums for their customers.
The suit, which was first filed by House Republicans against the Obama administration, challenges the government's ability to continue sending crucial subsidies to insurers to compensate them for limiting the out-of-pocket costs they charge low-income enrollees. A federal trial judge previously sided with the GOP members, ruling that Congress had never properly appropriated funding for the so-called cost-sharing reduction payments, and the case is currently on appeal. Trump himself has threatened to abandon the case and cut off the CSRs, which most experts believe would amount to dropping a bomb on Obamacare's insurance exchanges. Because insurers are still required by law to keep costs down for poorer enrollees, the industry would face severe financial losses without the subsidy payments, which are predicted be worth $7 billion this year. Many carriers would likely abandon the individual market, while those that remained would have to raise their premiums significantly.
By simply leaving the fate of the CSRs in limbo, Trump is pretty much ensuring Americans will pay more for their health coverage next year. Insurers have begun submitting their rate requests to state regulators for 2018, and uncertainty over the president's decision has already caused some companies to ask for major rate hikes this year just in case the subsidies are eventually cut off. Allowing this issue to linger for another three months will force pretty much every coverage provider to set its prices without knowing whether the subsidies will last, which will force them to charge more. This move probably won't cause an immediate crisis for the insurance markets, but it will continue to undermine them, as higher premiums will likely drive away more customers. Some carriers may also choose to bail rather than deal with the guessing game. Here's how the Kasier Family Foundation researcher Cynthia Cox summed up the situation for me:
If the stay continues, then insurers will continue to face a great deal of uncertainty for next year. This could cause some insurers to drop out of the market and others to raise premiums substantially since they won’t know whether they will get these payments by the time they have to file their premiums for next year. This uncertainty will likely mean less choice of insurers or possibly some parts of the country with no choice of insurers on the exchanges. We also suspect that insurers will have to raise their rates so much that premium tax credits will also increase substantially, meaning it will cost tax payers more than if the government had made these payments.
This might all suit the administration's political purposes better than dropping the appeal entirely. Simply cutting off the CSRs would be an overt move that would trigger a wave of media attention, with lots of cable news headlines about Trump choosing the nuclear option on health care. Delaying the issue will instead subtly sabotage the exchanges without capsizing them outright—which will make it easier for Trump to suggest that Obamacare is failing on its own and must be replaced. The president is doing plenty of damage by doing nothing.