Daily Archives: July 19, 2017

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In President Trump's America, anti-immigration animus is fast becoming the main organizing principle of the Grand Old Party. Not fiscal responsibility. Not the free market. Anti-immigrant fever.

For proof, look no further than the recent antics of two prominent Republicans: Rep. Mark Meadows (R-N.C.) and Sen. Tom Cotton (R-Ark.), both of whom have worked with the White House and floated plans to sacrifice traditional conservative economic principles to promote a harsh immigration agenda.

Meadows told Breitbart News, the organ of immigration hawks, last week that he was prepared to shut down the government again in September if Congress' spending bill failed to fund the Great Wall of Trump. "There is nothing more critical that has to be funded than the funding for the border wall," he declared.

It's stunning for Meadows to lobby for this money. He's an anti-spending warrior who helped found the House Freedom Caucus in 2015 for the express purpose of fighting rising government spending. He led the coup to depose House Speaker John Boehner two years ago after Boehner failed to cut half a billion dollars for Planned Parenthood from a bill to fund the government.

Yet here is Meadows now insisting that the border wall that will cost upwards of $20 billion needs to be funded fully. Why? He cites two reasons: President Trump made a promise to his base, and it is essential for national security. But a limited government conservative of all people should understand that if a lawmaker's campaign promises were a sufficient justification to fund government programs, America would have gone Greece's way many times over by now (not just when the bill for America's massive unfunded entitlement state comes due!). As for the security rationale, it's not just bogus but backwards.

The Bipartisan Policy Institute's Theresa Cardinal Brown points out that a physical barrier, no matter how tall or strong or beautiful, will not deter drug cartels given that America boasts a $100 billion drug market and that's just the annual number for the top four drugs. Cartels will find ways to go "over, under, around, or through any border infrastructure," she insists, by using drones, ultra-light planes, catapults, tunnels, submarines and, most importantly, human mules.

Mules are typically desperate foreign workers who, finding it difficult to get into the U.S., sign up with cartels to carry drugs in their body cavities in exchange for free passage to America. The more difficult America makes it for these workers to cross the border on their own, the more they will choose the cartel option. This will cause the drug and human trafficking business to become even more tightly entwined, breeding more criminality and lawlessness at the border. And all for the low, low price of $20 billion.

So why build the wall? The real purpose, clearly, is the symbolism it offers the GOP's restrictionist base. However, if the austerity hawks of the party of limited government become champions of expensive and empty exercises in government spending, what leg will their party have to stand on when liberals start building bullet trains to nowhere to earn brownie points with their supporters? Clearly, Meadows doesn't care.

But fiscal responsibility is not the only GOP principle that the anti-immigration fever is burning. Sen. Cotton, a rising star of the party, unveiled the Reforming American Immigration for Strong Employment (RAISE) Act last week. This legislation also disses the party's commitment to markets and competition everything that Republicans have long credited for making America great.

The Cotton bill would slash legal immigration in half by 2027 because he feels it's the government's duty to protect American workers from too much labor competition. So much for limiting the size and scope of government!

And the claim that a smaller workforce means more plentiful and higher-paying jobs for native workers is laughable on its face. Women's participation in the labor market doubled in the latter half of the 20th century, massively expanding the American workforce. By Cotton's logic, that should have produced rampant unemployment among American men and cratered male wages. But America's long bouts of full employment, including the one it is experiencing right now when we are in an alleged age of "mass immigration," offer ample proof against that thesis. That's because women didn't steal men's jobs, they created their own opportunities as America's dynamic market economy deployed their talents and skills to deliver new goods and services to consumers.

The same is true for foreign workers. Studies have repeatedly shown that even a sudden and large influx of poor foreign laborers has no big long-term negative impact on native wages. Even the short-term affect is often mild to negligible. Indeed, after the Mariel boatlift crisis in 1980, when Fidel Castro allowed 125,000 Cubans to flee to Florida, the wages of low-skilled Florida workers, with the possible exception of high-school dropouts, actually went up.

If expanding the workforce doesn't diminish American wages or job prospects, shrinking it, as the RAISE Act would, won't boost them either. Indeed, the Center for Global Development's Michael Clemens has found that the termination of the Barcero guest worker program with Mexico in 1964 shrank the seasonal agricultural labor force by up to 20 percent. However, the wages of American workers in affected states went up not one bit.

What is Sen. Cotton's response to all this evidence? "Only an intellectual could believe something so stupid."

He's not just throwing pointy-headed intellectuals under the bus. Or even immigrants. He, along with other anti-immigration zealots in his party, is throwing away the bedrock fiscal and economic principles that have guided his party for at least the last three decades.

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Does fiscal conservatism end at the border wall? - The Week - The Week Magazine

The House Budget Committee on Tuesday unveiled a spending proposal that would boost defense funding but dramatically reshape social welfare programs such as Medicare and food stamps.

The fiscal 2018 budget which the committee said would result in a $9 billion surplus after a decade reflected compromise between defense hawks and fiscal conservatives, but risked alienating moderate Republicans loathe to embark on the politically perilous process of reforming popular entitlement programs.

In fact, the budget ran into its first roadblock even before it was officially released Tuesday. The proposal assumes $204 billion in deficit reduction over a decade from the passage of the House bill to repeal and replace the Affordable Care Act. But the bill appeared to die in the Senate on Monday evening after Republican Sens. Mike Lee of Utah and Jerry Moran of Kansas came out against it.

The collapse of the health-care bill could place even more pressure on GOP lawmakers to pass a budget not just to keep the government running, but also because Republicans plan to use the process to push through what is arguably their top agenda item: tax reform.

"The budget resolution is no longer a theoretical outline with little chance of implementation," Budget Committee Chairwoman Diane Black said. "It is the major governing document of the 115th Congress, and it is the concrete fulfillment of our promise to the American people."

The proposal calls for $621 billion in defense spending in fiscal 2018, including money for President Donald Trump's signature border wall. That is more than the White House had requested, but it is still below the $668 billion that the conservative Republican Study Committee would like. The budget also outlines $203 billion in spending reductions to social safety net programs an amount that GOP Rep. Charlie Dent of Pennsylvania, head of the moderate Tuesday Group, has signaled is too steep.

The House proposal mirrors the White House budget in imposing new work requirements for programs like food stamps. But it goes beyond the administration's blueprint by also outlining changes to Medicare one of the programs that Trump vowed on the campaign trail not to touch. Among the reforms detailed in the budget are limiting Medicare benefits for wealthy seniors and allowing more private insurers to compete for coverage.

Although the House budget does not address Social Security retirement, it does call for changes to the disability insurance program, such as barring recipients from also collecting unemployment benefits.

"Mandatory spending must be addressed in this budget resolution and in budget resolutions to come," the document says.

The study committee plans to propose additional cuts to mandatory spending programs later this week. The group supports a bill introduced last year by Rep. Sam Johnson of Texas that would raise the age of eligibility for Social Security. Study Committee Chairman Rep. Mark Walker of North Carolina said his group plans to support the House budget but hoped that its proposals would become a blueprint for the future.

"Are we on a sustainable path?" he asked. "The truth is that overwhelmingly, both Republicans and Democrats would answer the same way. No we are not."

The House estimated that, if implemented, its budget would boost economic growth to an average of 2.6 percent annually over the next decade short of the Trump administration's often-criticized goal of 3 percent. Still, officials in both cases point to tax reform as the key to jump starting growth.

The budget proposal provides some broad guidance for how lawmakers should proceed, but substantial divisions remain within the GOP even over the framework.

The budget directs tax cuts to be deficit neutral, meaning that they could be offset by higher revenue elsewhere or spending reductions. House GOP leadership has previously said tax reform should be paid for only through higher revenues. Some conservative groups, such as the House Freedom Caucus, have argued that tax cuts should not have to be offset at all because they will spur economic growth.

"This budget cannot dictate to the [tax-writing] Ways and Means Committee how tax reform should be done," the document states.

The proposal also supports shifting the tax code to a "territorial" system, in which the individuals and businesses would only have to pay taxes on income earned in America. The United States is one of the only developed nations that taxes income earned in other countries as well.

One topic the budget does not appear to address is the federal borrowing limit. Lawmakers will have to vote to raise the debt ceiling by late summer or early fall or risk an unprecedented default. Some Republicans have called for the measure to be combined with vote over the budget. However, Treasury Secretary Steven Mnuchin has repeatedly called on Congress to pass a "clean" bill to lift the cap with no strings attached.

The House budget committee will mark up its proposal on Wednesday.

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House Budget Committee proposes boosting defense spending, reshaping welfare programs - CNBC

By David Morgan

WASHINGTON (Reuters) - Republicans in Congress unveiled a fiscal 2018 budget plan as a first step to major U.S. tax reform on Tuesday, only to face the same divisions between conservatives and moderates that helped killed their efforts to replace Obamacare.

The $4 trillion spending blueprint, released by the House of Representatives budget committee, could become a new flashpoint for Republican in-fighting because it links future tax cuts for businesses and individuals with $203 billion in mandatory spending cuts that would reduce benefits for the poor.

The Republican push to repeal and replace the Affordable Care Act, widely known as Obamacare, collapsed in the Senate late on Monday after a tug-of-war between party moderates who wanted to preserve healthcare benefits for lower-income Americans and conservatives who wanted to scale them back.

On Tuesday, House Republicans disagreed over the budget proposal in terms that could foreshadow a replay of the Senate healthcare debacle when lawmakers turn to tax reform.

Representative Mark Meadows, chairman of the conservative House Freedom Caucus, said the budget measure would not get enough conservative votes to pass the House without bigger cuts to programs that the government is required to fund by law.

"It's still short of what it needs," Meadows told reporters.

On the other side, Representative Charlie Dent, a leader of the moderate Tuesday Group, called for an agreement with Democrats to establish higher spending levels for discretionary programs.

"If we move too much in the mandatory area, then it will make tax reform that much more difficult to get. It's that basic," Dent told Reuters.

House and Senate approval for a fiscal 2018 budget agreement would unlock a vital legislative tool called reconciliation that allows Republicans to pass tax legislation in the Senate with a simple majority.

But the Senate's inability to pass healthcare legislation even with reconciliation raised questions about how useful the strategy really is.

One corporate lobbyist said some Senate Republicans privately question the reconciliation approach backed by House leaders, saying it appears to be "poisoning the well" in the Senate by alienating Democrats who might otherwise support tax legislation.

Republicans have only a 52-48 Senate majority and can afford to lose no more than two votes on Republican-only legislation, with Vice President Mike Pence providing the tie-breaking vote.

DEMOCRATS' DELIGHT

Democrats were delighted by the Republicans' failure on healthcare and called for bipartisan discussions.

"Using a partisan approach for the major issues of our time -- healthcare and tax reform is a prescription for trouble," Senator Ron Wyden, top Democrat on the Senate Finance Committee, said at a tax reform hearing on Tuesday.

Senator Orrin Hatch, the panel's Republican chairman, acknowledged that Republicans would also have difficulty passing tax reform legislation, even using reconciliation.

"It's going to be difficult to do. Hopefully, we can get that done," Hatch told reporters.

The Senate is under no obligation to accept the House budget language that would ultimately tie tax reform to mandatory spending cuts in the same piece of legislation.

Senator John Thune, chairman of the Senate Republican conference, said senators will decide whether to add the same language to their own budget resolution.

After six months in power, President Donald Trump has yet to score a major legislative victory, though financial markets have rallied since his election on expectations of pro-business measures, including tax reform and infrastructure spending.

Pence, speaking to a gathering of retailers in Washington on Tuesday, reiterated that Trump plans to slash the corporate income tax rate to 15 percent from 35 percent.

But the failure of the healthcare bill in the Senate created uncertainty in financial markets, with the dollar hitting its lowest level against the euro in more than a year on Tuesday.

"The healthcare bill not coming through raises some continued concerns about the ability of Washington to push through favorable fiscal policies," said Lisa Kopp, head of traditional investments at U.S. Bank Wealth Management.

The S&P 500 stock market index has gained about 15 percent since Trump's Nov. 8 election, while the benchmark Dow Jones industrial average has posted one record high after another on optimism of a Trump tax reform and other pro-business policies.

The budget committee will hold a hearing on the budget resolution on Wednesday. Representative Diane Black, the panel's chair, said the measure has the votes to reach the House floor.

(Additional repporting by Amanda Becker and Ginger Gibson in Washington and Tanya Agrawal in New York; Editing by Kevin Drawbaugh, Kieran Murray and Leslie Adler)

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After healthcare failure, Republicans face similar divisions on tax reform - Metro US

Cutting the costs of hospitals will be crucial to future state fiscal management.

The old business adage warns there is no such thing as a free lunch. The same applies when it comes to health policy: the notion we can make Australia's 'free' health system sustainable by funding public hospitals on an 'efficient' activity-basis is a myth.

Under the Gillard government's 2011 'National Partnership' funding formula, the states agreed to a national system of activity-based funding that pays public hospitals for each service delivered at the so-called 'national efficient price'. This is a pricebased on average costs across public hospitals nationally.

But a national efficient price is a contradiction in terms. Its impact on the unit-cost of care is biased by less efficient hospitals and distorted by therestrictive workforce practices that are legion in all public hospitals.

Nevertheless, the focus on efficiency is understandable. In all jurisdictions, health consumes around a third of state budgets, and public hospitals account for around two-thirds oftotal health spending. Since the start of Medicare in 1984, the unfulfillable promise of 'free', universal public hospital care has imposed increasingly onerous burdens on over-stretched state finances.

This activity-based funding first introduced in Victoria in 1993 was developed as a panacea for the inherent, unsolvable problem posed by a 'free' hospital system: an ever-growing disparity between public hospital capacity and the demand for 'free' services.

To the extent that activity-based funding encourages hospitals to increase productivity and attain at least average levels of efficiency, it can help reduce treatment waiting times and lower the overall cost of hospital services to governments.

However, it cannot eliminate the rationing of access to services by waiting lists, emergency queues, hospital bed cuts, and budget caps. These remain integral features of all state health systems and are essential to containing the potentially unlimited cost of 'free' hospital care.

Activity-based funding spurs hospitals to treat more patients. Higher service volumes could potentially further increase the total cost of hospital services even if funded at supposedly efficient prices and thereby increase the need to contain costs by further rationing access to services.

The Australian Institute of Health and Welfare has declined to publish figures for spending growth due to lack of year-to-year consistency in the data for recurrent real public hospital expenditure growth over the past five years. This means the cost impact of activity-based fundingis unknown and unprovable.

But even if reliable expenditure growth figures were available, any apparent success of the new activity-based funding system on the overall cost of hospital services is confounded by 'known unknowns': the impact on hospital expenditure of concurrent rationing necessitated by activity-based funding increasing throughput of patients.

Notwithstandingthat, thebottom line is that activity-based funding is no answer for the unaffordable cost of 'free' public hospital care in an ageing Australia.

The Abbott government recognised this when it scrapped the unaffordable Gillard funding deal in the 2014 budget, avoiding the$26 billion increase of federal hospital funding from 2013-14's $14 billion to $40 billion in 2024-25.

That has since been reversed by the Turnbull government, which temporarily restored the Abbott 'cuts' to hospital funding but only until 2020.

With this deadline looming, it is time to confront the undeniable: the fundamental unsustainability of a 'free' hospital system.

Instead of the usual cap-in-hand approach to the federal government seeking a non-existent money tree to fund health servicesstates need to fix their problems in health from first principles.

The reality is that states do not have sufficient sources of revenue from the current division of tax powers under the federation to ever hope to pay for their health and many other responsibilities.

A realistic path towards a state income tax therefore needs to be on the table in the forthcoming COAG negotiations over health, which need to be concluded by September 2018.

A state income tax would kill two birds with one stone.

Winningfiscal freedom wouldrelease states from some of their obligations under Medicare. That's because they would no longer be forced to provide public hospital services for 'free' as a condition for receiving federal health funding.

This would allow states to introduce policies that will ultimately control the demand for, and cost of, public hospital services. Policies such aspatient cost-sharing in the form of a compulsory co-payment for public hospital treatment.

This may seem radical or political poison after Labor's successful Mediscare campaign during the 2016 election, but bold reform in health to end 30 years of financially disastrous federal meddling in state health systems is the only way state governments can save themselves from Medicare.

David Gadiel is a Senior Fellow and Jeremy Sammut is Director of the Health Innovations Program at The Centre for Independent Studies. Their report is Medi-Mess: Rational Federalism and Patient-Cost Sharing for Public Hospital Sustainability in Australia.

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Fiscally fixing health and Medicare means state income taxes | afr.com - The Australian Financial Review