28 Jul 2017 Skinny Courage

As suggested would happen in a Brief weeks ago, Senate Republicans have failed to repeal the Affordable Care Act, or Obamacare. While the opposition was fierce from Democrats, the media, health providers, special interest groups, and the insurance industry, the lethal blow was delivered by polls showing that some 70% of voters (including lots of Republicans), had taken a liking to it. In just three short years, healthcare for all has become an entitlement.

Problem is, entitlements are hugely expensive. Current US tax revenues fall irresponsibly short of paying for the country’s existing entitlements to the tune of 587 BILLION DOLLARS a year, adding rapidly to a growing US debt of over 20.4 TRILLION DOLLARS. Whatever the Affordable Care Act morphs into, its safe to say the majority of its costs will be borne by small businesses and people who pay for their own insurance, adding increased drag on an already plodding economy.

The difficulty in addressing broken parts of entitlements lies in the fact that they touch people directly, making them intensely emotional. Programs like Social Security, Medicare, and Medicaid form a direct, important, even intimate relationship between the government and recipients. Other government spending, like defense, education, NASA, research, national parks, make us feel looked after, but only in a very general sense.

As last night clearly demonstrates, entitlement repair under the best of circumstances, seems all but impossible to do for politicians. Republicans in control of all three houses of government failed to muster enough political courage, unity, and public support to address this and likely other growing crises that face us.

Tax cuts appeared to be in the bag at the beginning of the year. But given the current dis-unity among Republicans and the effectiveness of a mobilized aggressive opposition, difficulties in passing tax reform significant enough to get this economy growing faster than its stagnant 2% of the past decade appear just as likely. An article in today’s Wall Street Journal reveals that the border adjustment tax (BAT), that was to pay for a huge part of the tax cut package, has been dropped from consideration by lawmakers who bowed to pressure from retailers like Walmart and Target fearful of paying higher prices on imported goods.

It’s human nature to avoid or put off unpleasantness, particularly when the benefits come far down the road and are difficult to prove or quantify. It’s far easier to ignore a problem or kick it down the road than it is to deal with all its ugliness and complexity. We see similar behaviors in our planning almost every day. While the benefits of investing more for improved lifestyles down the road seems make sense, who wants to sacrifice today by spending less to make it happen?

But, in Washington, such sacrifices are not required. Spending without consequence is a way of life. Paying for that spending is almost always someone else’s responsibility. When a costly bill is passed, one of two things happens; somebody’s taxes go up, or the US debt increases.

While we like to hope our political leaders will rise above their natural tendencies toward comfort and security and make the tougher, less popular choices for a better future, we are most often disappointed. While many readers of this Brief might curse the names Tea Party and Freedom Caucus as obstructionists to compromise and progress, we must note that without their persistent opposition to establishment Washington, the US debt might be considerably higher than it is today.

The all-Republican government has thus far proven unable to communicate and legislate a clear legislative path forward amidst the turmoil of a deeply divided country, made worse by their missteps and the adept messaging of a well organized opposition. While the uncertainties of America’s healthcare system worsen, the future of other legislative actions like tax reform, infrastructure improvement and economy-enhancing measures also appear less certain.

In the past, government gridlock has been looked upon favorably by Wall Street. One has to wonder how today’s unexpected gridlock within the Republican governing party will be viewed in the coming months if the promise of significant economically-friendly legislation continues to wane.