Monday, February 6, 2017

Easier to Talk About Repeal than to Do It

There are aspects of Dodd-Frank (a federal consumer protection statute passed in 2010) that were specifically created to protect the public against the very specific failures that gave rise to a mega-trillion dollar global economic collapse in 2008. While the law may have created regulations that went beyond the horribles of the “too-big-to-fail” institutions that sucked down public bailout money like heroin addicts seeking a hit, there are a number of regulations that are downright necessary.

Like: 1. preventing lenders from giving mortgages to those obviously unable to pay the monthly load, 2. bundling bad mortgages and transferring 100% of the risk to stupid institutional buyers, or 3. simplifying the mortgage processes to make them understandable to consumers. But the biggie was creating a regulatory schema for the derivative marketplace (which has grown to be even larger than our stock market), which took a bad subprime mortgage disaster and multiplied the negative aspects many times over to make it into the greatest global financial catastrophe since the Great Depression.

Donald Trump has already written executive orders to dilute the impact of Dodd-Frank, and a GOP-controlled congress seems hell-bent on repealing the entirety of the law. If they do, any serious market collapse would fall squarely on a Republican doorstep, so you have to wonder if they have the guts to follow-through on their repeal threat. Assuming the United States doesn’t break apart before then, if Dodd-Frank is repealed or emasculated, a market collapse from unbridled greed-driven institutions pushing the envelope (gee, they wouldn’t do that, would they?) seems inevitable without reasonable restrictions and oversight.

The GOP’s intentions are very clear: “Trump will use a memorandum to ask the labor secretary to consider rescinding a rule set to go into effect in April that orders retirement advisers, overseeing about $3 trillion in assets, to act in the best interest of their clients, Cohn said in the White House interview. He said the rule limits consumer choice.

“Trump also will sign an executive order that directs the Treasury secretary and financial regulators to come up with a plan to revise rules the Dodd-Frank law put in place.”, February 3rd. Yeah, you really want a financial advisor who can put his/her interests above the interests of the poor clients paying for fair and unbiased advise.

And then there’s the GOP march to “repeal and replace” the Affordable Care Act. A minor problem seems to have arisen: the GOP has been unable to come up with what would replace the old act. “Congress’s rush to dismantle the Affordable Care Act, once seemingly unstoppable, is flagging badly as Republicans struggle to come up with a replacement and a key senator has declared that the effort is more a repair job than a demolition.

“‘It is more accurate to say ‘repair Obamacare,’ ’ Senator Lamar Alexander, Republican of Tennessee and chairman of the Senate health committee, said this week. ‘We can repair the individual market, and that is a good place to start.’… The struggles and false starts have injected more uncertainty into insurance markets that thrive on stability. An aspirational deadline of Jan. 27 for repeal legislation has come and gone. The powerful retirees’ lobby AARP is mobilizing to defend key elements of the Affordable Care Act. Republican leaders who once saw a health law repeal as a quick first strike in the Trump era now must at least consider a worst case: unable to move forward with comprehensive health legislation, even as the uncertainty that they helped foster rattles consumers and insurers.

“Insurers are threatening to exit the Affordable Care Act’s market unless the Trump administration and Congress can quickly clarify their intentions: Will they support the existing public marketplaces, encourage people to sign up and keep federal assistance flowing to insurers, or not?... ‘We need some certainty around the rules,’ said Dr. J. Mario Molina, chief executive of Molina Healthcare, which has been a stalwart in the Affordable Care Act market and is making money under the system…

Insurers say Republicans’ mixed messages and slowing pace could send premiums soaring next year while making the market much less stable. The deadline to file rates for 2018 is this spring, and insurers say they need time to decide what kinds of plans to offer and to set prices.” New York Times, February 2nd. Easier to complain and threaten than to do.

There are so many problems with the abstract statements of political candidates suggesting clear ACA alternatives. For example, even Donald Trump’s pledge to allow people to buy insurance from exchanges outside of their states is a non-starter. Sounds good and pro-competition, doesn’t it? But there’s one tiny catch. The only way an insurance carrier can afford to cover its policy-holders under reasonable rates is to use its size and bargaining power to negotiate lower rates from approved doctors, hospitals and other healthcare facilities. That effort is so massive that carriers only enter into those negotiations with local providers, not with every provider across the land.

Thus, a carrier from outside the state that has not so negotiated local rates would pay full freight without discounts. So an out-of-state carrier simply cannot afford to insure beyond the jurisdictions where it has those discounted deals. Oh! Unlike birthday and Christmas presents, it not the thought that counts. Doesn’t look like the GOP can remotely deliver on Trump’s promises without adopting large chunks of the ACA!

How about repealing all those environmental regulations? Good idea? Let’s look at coal production, the first environment target of the new administration. Between congressional action and Trump’s executive orders, coal effluents can now pour into streams without penalties. Coal miners are cheering. But think we are going to become a coal-fired nation again? The economics are all against that possibility. Global demand for coal is dropping like a stone. Natural gas is cleaner and cheaper. It will be interesting to live with lots more pollution, tainted drinking water, polluted streams and accelerated greenhouse emissions… and still not generate the massive new high-paying jobs that the Donald pledged would happen.

It was a whole lot easier when the GOP politicians were on the outside looking in. They could scream about the failures of the ACA – and clearly the ACA needed lots of repairs which even the Dems admit – and how they would fix it all, repeal all those plans, regulations and barriers that impaled businesses from creating lots of new jobs. They could claim that once the environmental regulations were gone, coal miners would get their old jobs back in droves… and those high wages they lost. They could eliminate financial regulations, and we would all be the better for it. Really?

Notice the beads of sweat on congressional faces. Problem is, if they do follow through on their promises, what would really happen? Are we ready for that? I suspect that more than a few elected Republicans wished that they did not have complete control of most of the state governorship, state houses, the presidency and congress. Maybe they are grateful for the distractions of the confirmation process on the Hill. Maybe the public won’t notice the “other stuff.”

I’m Peter Dekom, and our society is way too complicated for the rather simplistic solutions that spout from too many political mouths.

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