This is Viewpoints for Friday, June 30, 2017

Health care conundrum

Neither the GOP House bill, the American Health Care Act, nor the GOP Senate bill, Better Care Reconciliation Act, completely repeals or replaces Obamacare. Both acts reduce the amount of tax credits and subsidies the government gives low-income families. The legislation reduces the amount of money the government gives states for Medicaid. These reductions in spending are needed to pay for the GOP proposed corporate tax cuts. These bills eliminate the Obamacare taxes on capital gains for the wealthy.

The result will be that millions will lose their private insurance marketplace coverage, and many will lose their Medicaid coverage. These bills will make coverage more expensive for many older, sick and lower-in-come individuals. Neither of these bills provides private care for veterans. Therefore, veterans will have to seek care from the VA, which is not timely or complete.

The bills give states wider latitude to obtain waivers so they can opt-out of the bill’s regulations and restrictions. These waivers would allow insurance companies to charge individuals with preexisting conditions or the aged more for coverage, or denies them coverage altogether. It is unclear if government subsidies will be based on financial need or age. The bills may lower the percent of a premium’s cost that employers have to pay. The split could go from 70-30 to 50-50. This means employees will have to pay more of their employer provided insurance.

Neither of these bills will lower health-care costs. Individuals who do not have health insurance will use hospital emergency rooms when sick. This is the most costly form of health care. States, counties and cities have to subsidize hospitals to provide this care. Medicaid pays for the poor to live in nursing homes, and Medicaid cuts will reduce this care.

The Obamacare mandate to buy health insurance is eliminated. Therefore, there will be fewer young and healthy individuals buying insurance. The pool of individuals buying insurance will be older and sicker. This will drive up the cost of premiums.

The national debt

What is national debt? When our government spends more than it has in income, then it borrows money. Our government does the same thing we would have to do if our households spent more money than we make. Our government borrows from individuals, corporations, states and so forth from within our country. It also borrows from foreign countries.

The government raises money to cover its debts by issuing Treasury bonds, notes and other securities. Thus far, buying U.S. securities has been one of the safest investments in the world and buyers benefit from this safety and from the interest they are paid.

Our government’s inability to balance our federal budget is causing grave concern now that our debt has exceeded $20 trillion. More than $5 trillion is owed to a multitude of countries. Over a trillion dollars to Japan and China.

A modest national debt isn’t important if it is modest and in line with our national economy. Usually the debt is measured against our gross national product, the total value of goods and services provided in a year. But now our debt is greater than ur GDP. Foreign countries buying our securities may begin to believe the U.S. might not be able to pay them back and they might demand higher interest payments to cover the additional risk.

This impression is reinforced when candidate Donald Trump, in an interview in May 2016 with CNBC said that as president he could find ways to renegotiate our debt and pay less than 100 cents to the dollar if the economy went bad.

A month later Trump said on “CBS Good Morning” “I am the king of debt. I’ve made a fortune by using debt. If things don’t work out, I renegotiate the debt. I’m going to give ypu back half.”

Is it any wonder foreign nations as well as Americans may hesitate to buy Treasury bonds and other securities after hearing President Trump’s words? The current thinking in the White House and Congress is to reduce the increase in the debt by cutting social programs — food stamps, lunch programs for school children, programs for veterans, Social Security, Medicare, Medicaid and programs for seniors and so forth.

This thinking fails to consider the impact this would have on the economy. Consumer spending is what drives the economy. Cutting social programs takes money away from consumers and will increase hardships and economic problems. The powers rthat be should think this course of action through and not jump at what they seem to be identifying as easy and quick solutions.

A lesson from ‘The Prince’

Thank you to Jim Costello for the nice overview of the complicated situation in the Middle East. I am reminded of Machiavelli (1469-1529), writing in “The Prince,” chapter 21: essentially, do not interfere in a civil war because you will never win. Neither side will trust you, both will use you. After so many years dropping bombs in Irag, Syria and Afganistan, one would hope that we could figure that out for ourselves.

One small example of the current conundrum: We have strategic air bases in Turkey. We are arming the Kurds so they can fight the Islamic State. Turkey is threatened by the Kurds and is fighting them. So, now what? I was thinking of this paragraph from “The Prince”:

A prince is also respected when he is either a true friend or a downright enemy, that to say, when, without any reservation, he declares himself in favour of one party against the other; which course will always be more advantageous than standing neutral; because if two of your powerful neighbours come to blows, they are of such a character that, if one of them conquers, you have either to fear him or not. In either case it will always be more advantageous for you to declare yourself and to make war strenuously; because, in the first case, if you do not declare yourself, you will invariably fall a prey to the conqueror, to the pleasure and satisfaction of him who has been conquered, and you will have no reasons to offer, nor anything to protect or to shelter you. Because he who conquers does not want doubtful friends who will not aid him in the time of trial; and he who loses will not harbour you because you did not willingly, sword in hand, court his fate.

This story was originally published June 29, 2017 at 9:00 PM with the headline "This is Viewpoints for Friday, June 30, 2017."