Why failure to repeal Obamacare could cause cascading failures for Trump

A few hours before House Speaker Paul Ryan cancelled the vote for Ryancare, Treasury Secretary Steven Mnuchin said the Trump Administration was ready to do "comprehensive tax reform".
There was just one little problem: the math.

There are grave political risks for President Donald Trump now that the GOP health care bill is apparently dead. And its failure also creates a budget crunch that could make tax reform a whole lot harder to achieve.
Here's why: The Congressional Budget Office estimates that government revenue will total $41.3 trillion over the next decade under current law. The latest version of the Republican plan to repeal and replace the Affordable Care Act would have reduced that income by nearly $1 trillion, because it would have gotten rid of taxes connected to Obamacare.
Right now, there are no calls to offset that lost money by finding other revenue sources — a task that is always politically charged. Instead, the now-dead GOP plan offset the reduction in revenue by cutting spending elsewhere.

Basically, the money saved from denying health care for tens of millions of poor people was supposed to pay for massive tax cuts for corporations and the wealthy.
Now they'll have to find that money elsewhere, which probably won't happen. At least not in the sort of amounts Trump wanted.

The health-care legislation contains tax cuts of its own -- about $883 billion worth over 10 years -- that the bill would pay for by cutting roughly the same amount of federal Medicaid spending. Accomplishing those tax cuts would set a lower revenue baseline, Republicans say -- giving them a better chance of achieving revenue neutrality in subsequent tax legislation. A revenue-neutral tax bill could bypass rules requiring 60 votes in the Senate, where Republicans hold only 52 seats.

Now they'll need as many as 10 Democratic votes, which won't happen in a Trump sort of way, or settling for a more modest tax cut.
Either way, this is a good thing. This country badly needs both health care reform and tax reform, but not the sort of reform that Trump and Ryan want.

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Now before you start celebrating, this political defeat is not happening in isolation.
You see, the stock market has already priced in these Trump tax cuts.

The "animal spirits" unleashed in the stock market by President Trump's victory have lifted the Dow an incredible 2,700 points in less than four months.
The Dow has set 32 record highs since the election. This week, it crossed 21,000, tying a record for the shortest period between 1,000-point milestones...
A lot has to go right, in both Washington and the U.S. economy, to justify the meteoric market rise. That's because the gains on Wall Street have been built mostly on expectations and optimism, not fundamentals.
Stocks are more expensive by one measure than at any time in the past dozen years, and CNNMoney's Fear & Greed Index is flashing "extreme greed." Clearly, hopes for the Trump agenda of tax reform, deregulation and infrastructure spending are very high.

Stocks are expensive by a LOT more than just one measure.
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With the stock market priced to absolute perfection, a disappointment or two - such as failure to pass meaningful tax cuts to large corporations and the wealthy - can cause the stock market to start pricing in risk again. This is likely to happen even before any votes on tax reform.

The Trump Trade could start looking more like a Trump Tantrum if the new U.S. administration's healthcare bill stalls in Congress, prompting worries on Wall Street about tax cuts and other measures aimed at promoting economic growth.
"If the vote doesn’t pass, or is postponed, it will cast a lot of doubt on the Trump trades," said the influential bond investor Jeffrey Gundlach, chief executive at DoubleLine Capital...
Investors extrapolated that a stalling bill could mean uphill battles for other Trump proposals. Trump and Republican congressional leaders appeared to be losing the battle to get enough support to pass it.
Any hint of further trouble for Trump's agenda, especially his proposed tax cut, could precipitate a stock market correction, said Byron Wien, veteran investor and vice chairman of Blackstone Advisory Partners.
“The fact that they are having trouble with (healthcare repeal) casts a shadow over the tax cut and the tax cut was supposed to be the principal fiscal stimulus for the improvement in real GDP," Wien said. "Without that improvement in GDP, earnings aren’t going to be there and the market is vulnerable."

A failure to make "Yuuge" deals, combined with a falling stock market would burst Trump's ridiculous and undeserved reputation for being a business genius.
At that point the knives will come out.

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Comments

Pricknick's picture

As usual gjohn, nice reporting.
Obamacare/ ACA was doomed from the start. It's failing on it's own.
When will the public in general accept that we're well on our way to third class? I suspect at the same time we realize we're not too special or exceptional.
We never were.

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Regardless of the path in life I chose, I realize it's always forward, never straight.

@Pricknick
but maybe not fast enough to help Trump.

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CS in AZ's picture

for the knives to come out for Trump and carve his sorry ass to bits.

Stock traders are the most reactionary, short-sighted people on earth apparently. I read this and wonder, seriously, what the hell is wrong with these financial types that they didn't see this coming a mile off? Trump has never been any sort of business genius. He's failed over and over. He's a bullshitter and snake-oil salesman. Anyone can see that! I'm a nobody who punches a clock for a living, and I knew that. But Wall Street financial professionals didn't see it coming? They actually thought he was the real deal? They believed there was going to be a wonderful replacement for the ACA that actually got passed by congress? Good lord. That's unbelievable.

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Pricknick's picture

@CS in AZ

Anyone can see that!

You can't make the blind see or a horse drink water.

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Regardless of the path in life I chose, I realize it's always forward, never straight.

Dhyerwolf's picture

@CS in AZ fit pretty well for Wall Street traders. Hucksters with over inflated egos who help crashed the economy and add no value to anything! No wonder they can't see Trump for who he is.

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@CS in AZ If by stock traders you mean the people executing the trades, they get paid for executing trades. If you mean buyers and sellers making trades there is good evidence that the bulk of sales are to retail investors (People adding to 401Ks and such.) Insiders are the ones on the selling side in the transactions.

Large movements of money from retail investors into the stock market is often a harbinger of a significant market correction. It happened big time right before the dot com bubble popped. Then the insiders can buy more shares at lower prices.

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CS in AZ's picture

@FuturePassed

It's always looked like basically a big casino to me, and I know casinos are rigged so the house always wins in the long run. I avoid them.

One time years ago my husband and I considered investing some of our meager income in stocks as a way to save for the future. I read some books to learn a little about it first; I remember one that gave the advice: "don't invest anything you can't afford to lose." So, yeah... no.

One little thing that drives me nuts is the euphemism "correction" for the stock market phase where your money somehow magically disappears.

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riverlover's picture

Ryan had a presser after the fail, and said, out loud, that he would continue to work to destroy any US "healthcare" system. Power-drunk, that one.

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Hey! my dear friends or soon-to-be's, JtC could use the donations to keep this site functioning for those of us who can still see the life preserver or flotsam in the water.

MarilynW's picture

He predicted that those who put Trump in power will abandon him and cease to support his Presidency, once they see that he can't deliver. He can't deliver.

His Trumpcare wasn't cruel enough for many of his party and too cruel for others in his party.

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To thine own self be true.

Trump understood that the US was in trouble. He could see some of the symptoms, good manufacturing jobs disappearing, the Washington swamp filled with alligators, stagnant real GDP growth, a mess in foreign policy and a health care system on the road to failure. He got that right and could carry that message to middle America. Not only that, but his belief in his own ability to fix difficult problems was persuasive. The problem is that his understanding of the causes of these problems was flawed and therefore his solutions will not work. Now his policy limitations are being exposed by analysis as the rubber meets the road. On top of that he does not have a working majority in Congress to push through his extreme agenda.

I would not count him out yet. He needs to take the time to do serious analysis of the problems and solutions that are needed. He can push forward on those issues that he does have a working majority in Congress. Remember that the Democrats are seriously right wing today and he can make progress on issues like reducing corporate taxes, reducing regulations, and increasing the military budget, but within realistic budget constraints. What we are seeing is the education of an impulsive child-like president. Can he learn?

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Capitalism has always been the rule of the people by the oligarchs. You only have two choices, eliminate them or restrict their power.

CS in AZ's picture

@The Wizard
and it wouldn't help.

He needs to take the time to do serious analysis of the problems and solutions that are needed.

Trump doesn't have any interest in a serious analysis of the problems and solutions needed. He's incapable of it.

Yesterday I read an article that said during meetings about it, Trump wasn't interested in "the details" and didn't care what was in the healthcare bill, he just "wanted a win."

I was just looking for it again now so I could quote it specifically, but I couldn't find it ... however, I found an even better example of the problem in another article:

As the healthcare drama unfolded on Capitol Hill, Trump played it cool, taking a break from negotiations to hang out with some truckers, climbing into the cab of a long-haul transport truck parked on the back driveway of the White House, and blowing the horn a few times.

We have a shallow, spoiled child as president now. Anyone waiting for him to think seriously about the country's problems is in for a very long wait I'm afraid.

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TheOtherMaven's picture

@CS in AZ @CS in AZ
let him put up Medicare For All. Guaranteed Win-Win-Win for everybody but the Greedy Insurance Industry.

Edit: And even they could get a Win by offering gold-plated coverage for boutique medical care.

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There is no justice. There can be no peace.

CS in AZ's picture

@TheOtherMaven

Trump is not talking about a win for the people of this country! LOL- good one.

He meant of course a win for himself in getting a law passed and signed to "repeal Obamacare" like he boasted he was going to do. They should have just voted on a new law that changes nothing but the name. Then he could say they repealed and replaced Obamacare, and no one lost any coverage or benefits. His supporters are definitely dumb enough to fall for a scheme like that.

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TheOtherMaven's picture

@CS in AZ

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There is no justice. There can be no peace.

MarilynW's picture

@The Wizard
was not written by Trump. It was wholly written by Tony Swartz who reveals that Trump has 0 interest span. It appears quite obvious now, after his gigantic failure, he's not studying what went wrong and how to prevent it in the future, he's off to the golf course.

DONALD TRUMP’S GHOSTWRITER TELLS ALL
http://www.newyorker.com/magazine/2016/07/25/donald-trumps-ghostwriter-t...

You wrote:

The problem is that his understanding of the causes of these problems was flawed and therefore his solutions will not work.

So true, there's no understanding or analysis, his method is to remember headlines mostly from Fox and blurt them out at a given moment.

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To thine own self be true.

Thanks gjohnsit, you guys are scaring me pretty bad but I'm not dead yet.

"the math" LOL that is "just one little problem"? That's been the problem with my personal budget since years, no thanks to politicians and Great American "healthcare". Too bad I can't print dollars. Imagine me printing up stacks of bills, buying a bunch of weaponry, attacking and looting distant lands in order to solve it for my own fine self. You'd think the masses would put me in jail or somewhere. Or at least try to stop me, or even tell me to cut it out not prop me up like some savior.

Maybe there is more lead in waters we don't know about, I hope not but it sure seems like people can't think "their way out of a paper bag" lately. That hurts, all the way up to the highest levels of government. Ouchy.

Peace & Love

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ggersh's picture

is nothing but an algorithm.

But if donnie tinyhands really wanted to make a difference
he could say let's go single payer, after all he campaigned
on it.

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I never knew that the term "Never Again" only pertained to
those born Jewish

"Antisemite used to be someone who didn't like Jews
now it's someone who Jews don't like"

Heard from Margaret Kimberley

... is because he keeps proposing really shitty policies that nobody wants except unrestrained oligarchs. Trumpcare is a shitty policy that would kill lots of innocent people so that a few excessively rich people can extort even more money from the public. Why should it pass? Same goes with that upcoming tax cut policy.

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Beware the bullshit factories.

yet saved the day just by being intransigent and not settling for partial kills but wanting yuge kills!
Nowhere else but here in Amerikkka!

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glitterscale

@glitterscale
As Ryan steered right to please the tea baggers, blue state members bailed out, down went the ship.

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It's simply too painful to acknowledge, even to ourselves that we've been taken. Once you give a charlatan power over you, you almost never get it back. Carl Sagan

revs his engine, and accelerates straight ahead into into twenty miles of bad road. He has just hit the first big pothole.

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native

divineorder's picture

Even though I #Dem exited many moons ago I still am going through the motions of working for single payer and joining with others on an issue by issue basis. Grassroots action getting in Congress face at Town Halls and local offices and embarrasing them seems to be the only way to affect their actions. Single Payer advocates have often touted the economic benefits to the larger economy......

Today’s failure to pass the AHCA presents a unique opportunity for Congress to move beyond the ACA toward a permanent, sustainable single-payer health program.

“The ACA left 29 million Americans uninsured and channeled billions of taxpayer dollars to a patchwork of wasteful private insurers, each one skimming off its own share of administrative costs and profit that should have been spent on patient care,” added Dr. Paris. “Let’s clear the drawing board – it’s time to adopt a simple, commonsense approach to national health care.”

Dr. Paris called on members of both parties to adopt H.R. 676, introduced by Rep. John Conyers Jr., D-Mich. The Expanded and Improved Medicare for All Act is a streamlined, single-payer plan that would expand coverage to all Americans and save millions in health care costs, achieving President Trump’s campaign promises of more coverage, better benefits and lower costs.

PNHP and other groups are planning a National Day of Action on Saturday, April 8, the first day of the congressional recess. Health care providers in at least a dozen cities will conduct coordinated actions in support of universal guaranteed health care.

Physicians for a National Health Program (www.pnhp.org) is a nonprofit research and education organization of more than 20,000 doctors who support a single-payer national health program. It was founded in 1986.

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A truth of the nuclear age/climate change: we can no longer have endless war and survive on this planet. Oh sh*t.

edg's picture

Trump's big mistake was getting personally involved in the "replace" part of repeal-n-replace. The wise thing to do (and I'm not accusing Trump of being wise) would have been to tell Congress to have both houses pass a repeal bill and send it to him and he'd sign it. Then he could have washed his hands of the whole mess and the egg would be on Congress's face for not being able to get a repeal bill together.

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This is only my opinion but I feel the corporate repugs (i.e. the ones with the money)now see these folks were a usable 'tool' that has now run it's course. And now because of their efforts in this 'mess' expect to see a major effort to either eliminate or greatly downgrade their influence in the repug party. As the last minute Koch thing indicated. And also IMO they now have a great example of how to do this seeing how the corporate dems are doing to the progressives in that party now

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