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Commentary :: Social Welfare
Republicans against the Poor and the Sick
14 Nov 2017
The US is experiencing a dramatic deterioration of its public health. President Trump is trying to make the ACA "implode" through decrees. The insured are reacting to the Trump decrees and to their higher premiums. A series of states have filed actions against the decrees.

On Trumponomics

By Detlef Umbach

[This article published on October 24, 2017 is translated from the German on the Internet,]

The US is experiencing a dramatic deterioration of its public health. Drug abuse and the number of drug deaths have increased enormously since the end of the 1990s. This opiate epidemic is part of a greater phenomenon. The abuse of medicines and the suicide rate have risen parallel.

In the “death from despair” (Agnus Deaton), the mortality of the white population from age 45 to 54 rises in the US. This is a unique phenomenon in the western world. The American health system is one of the most expensive in the world. Large parts of the population are excluded from adequate health care services. The Affordable Care Act (ACA), known in Germany as “Obamacare,” did not bring universal health insurance. Around 28 million (9% of the population) still do not have health insurance.

The president has every reason to expand the American health system and supply more money. Instead, we witness the attempted destruction of the advances under president Obama. Since 1965, Medicaid has been a tax-financed health care program for low-income citizens. It supports persons with low incomes – older persons and persons with disabilities. It is organized very differently by the individual states and is financed by the federal government. Through the 2010 ACA, coverage was extended to persons and families with an income less than 138% of the official poverty line. At the beginning of 2017, 70 million adults received benefits from Medicaid. This extension of Medicaid never occurred in 19 states governed by Republicans. In addition, the ACA degressively subsidizes health costs for incomes up to four times the official poverty threshold, an amount far above the median income.

The ACA functions essentially by state regulations forcing the insured and the insurers to affordable health care premiums with top-flight private health insurers. Through the “individual mandate,” the state with fines compels all ACA enrollees to sign up. A normal risk distribution among the insured is the goal. Insurance companies cannot deny those with pre-existing conditions, disadvantage them with higher premiums or offer a thinned array of services. Progressive taxes for medium-earners were introduced to subsidize the insurance of the poor.

According to the conviction of the large majority of the Republican Party, the state interfered inadmissibly in the market. Americans should be free from what they understand as state patronage or treatment as children. The republican majority leader in the House of Representatives, Paul Ryan, summarized the thinking of republicans: “Freedom is the ability to buy what you want to satisfy your needs. Obamacare means Washington tells you what you have to buy regardless of your needs.” [1] Ryan celebrates the freedom of the buyer without any understanding that large parts of the population cannot afford health services without s state regulated and subsidized insurance. The leader of the party seems bereft of any understanding of the social reality in the US.

Nearly all the ACA regulations are an unbearable and unreasonable demand for the majority of republicans in Congress. ACA subsidizes the sick with their premiums. This normal principle of every health insurance is an unreasonable demand for many republicans. That insurance companies cannot freely draft their policies, offer policies without dental coverage, maternity costs or cancer treatments is an unacceptable restriction of the freedom of the market. They stylize cancellation of the “individual mandate” as liberation. The danger that the healthy will not be insured or only inadequately insured without these regulations seems an expression of individual freedom to them.

For seven years, the Republican Party (Grand Old Party –GOP) demanded the abolition of the ACA without agreeing on any alternative. Since the 2016 election victory, it has had bare majorities in both chambers of Congress and the time for the abolition of the ACA has come. Drafting the “Trumpcare” alternative will be left to the majority leaders in the newly elected Congress since the president could not present any health policy.

A law to abolish the ACA failed in the House of Representatives. [2] The Republican majority in the Senate crafted its own law which was extremely unpopular in the population. It tried to push its draft through in a fast track or high-speed process without public committee meetings and even before the Congressional Budget Office could publish its estimate on the effects of the law. However, the bill did not even have a majority among the republican senators. The three deviationists that crashed the draft came from two directions. To one, it was too soft and to the other much too harsh.

The last version of “Trumpcare” was an attempt to shift the “dirty work” of cutting benefits to the individual states. The individual mandate should be cancelled. Every individual state will receive an amount for Medicaid. In the long-term, all price increases in medical services would be compensated by cuts in services. The possibility of thinning the catalogue of benefits opens up for individual states.

Individual states that did not introduce the ACA will receive more funds while the states that did introduce the ACA would be immediately forced to cuts. In the long-term, these regulations would have cancelled health care for around 32 million citizens or 10% of the population. That would be more than the 20 million given health insurance by the ACA. [3]

The questions how many millions could lose their health insurance through “Trumpcare” and how many could not afford the necessary medical services were never important to the majority of the Republican congresspersons and senators. The Republican Party is a party of “social coldness” that seems largely unmoved that their own voters will be upended by their social brutality.

In the past, the US was regarded as the land of realistic politicians. Members of the two large parties in the American two-party system had similar convictions. A far-reaching change has occurred in American politics since the presidencies of Bush II and Obama. Democrats and Republicans have drifted further and further apart in an increasing polarization.

The differences are most serious in social themes like state support of the needy, the significance of racial discrimination and the evaluation of immigrants. Unchanged for decades, around three-fourths of the members of the Republican Party are convinced hard work leads to social ascent. Among republicans, the American dream “from dishwasher to millionaire” continues to be dreamt despite all the growing inequalities in income, wealth and life chances. The shady side of this belief in the American dream is rejection of state help for the needy. [4]

The social coldness of the Republican Party corresponds to the merciless Puritanical ideology of the majority of their members and voters. “The GOP is ruled by an ideological madness based on a strict hierarchical picture of the US where only those who deserve assistance receive help. Only a small select group, chosen by the market or defined by wealth and privilege, deserve help. This party declares cruelty as its main virtue.” [5] Friedrich August von Hayek radically formulated this ideology. “The social today only serves to rob the rules of the free society to which we owe our prosperity of their substance and is not a definable ideal… Even if you are shocked, I must admit that I cannot think socially.” [6]

President Trump is now trying to make the ACA “implode” through decrees after different attempts at a legal appeal of the ACA failed. Through exemptions, the rules for the insured should largely be dropped and the payments of the federal government for the insured stopped. The premiums of the socially disadvantaged were long subsidized with these funds. Previously, he abolished subsidies for contraceptives contained in the ACA.

The executive orders aim at shooting holes in the broad insurance protection of the ACA and encouraging cheaper and more meager policies. The desired result would be removing the young and healthy from the insurance protection of the QACA. Seniors, the sick and persons with pre-existing conditions would be left behind. Through the much worse risk pool, the insurances would be more expensive so the insured would be forced to abandon their insurances and the ACA would implode. As expected, the insured are reacting to the Trump decrees and to their drastically higher premiums. A series of states have filed actions against the decrees.

Two senators from the two parties are currently trying to craft a transition al rule giving individual states more possibilities and restoring state payments to subsidize insurance premiums of low-income citizens. The president appears fickle and the echo from the GOP is mixed. Therefore, this nonpartisan compromise does not seem to have a great chance.

Trump and the republicans now want to turn to tax policy. The goals are the same as with Reagan and Bush II, lower tax rates should fuel stronger economic growth. None of the actors want to know that economic growth did not soar with Reagan and Bush II by reducing taxation. Trump and his Treasury secretary Mnuchin – born super-rich and became even richer on Wall Street – are not tired emphasizing that the rich will not be strongly favored. However, that will obviously happen.

The first calculations showed the rich and the super-rich will skim off even more than in the past. “Trump’s plan is even friendlier to the rich than the infamous degressive tax cuts of George E. Bush… Trump’s tax cuts are worse for people with low incomes, worse for the middle class and better for the top 1% than the tax cuts of the last republican presidents.” [7]

In his inaugural address as president, Donald Trump declared: “Every decision will benefit American workers and American families.” Nothing remains of that claim. More expensive, worse health care and tax cuts for the rich will not help American workers or their families. The republicans’ historically unique possibility with a republican president and two majorities in Congress threatens to melt away and come to nothing.

Detlef Umbach lives as a pensioner und SPD member in Hamburg.
[1] Zitiert nach Scott Lemieux, Will the Trump Era Finally Kill Paul Ryan’s Wonkish Cred?,, 24.2.17, Übers. D.U.; Paul Ryan ist erklärter Verehrer von Friedrich August von Hayek, er verteilt dessen Schriften an seine Mitarbeiter.
[2] Wie wenig Trump zum Thema zu sagen hat, zeigt Folgendes: Trumps machte nach ersten dem Scheitern der Gesetzesvorlage im Repräsentantenhaus den »Freedom Caucus« – die Repräsentanten der Tea Party innerhalb der republikanischen Abgeordneten – dafür verantwortlich. Er drohte öffentlich, der »Freedom Caucus« müsse »sich einreihen«, sonst würde er ihn offen bekämpfen. Das einige Wochen später beschlossene Gesetz kam dann den Forderungen des Freedom Caucus entgegen. Nicht die Repräsentanten der Tea Party hatten sich angepasst, sondern Trump, der das Gesetz begeistert als »seinen Erfolg« feierte.
[3] Senator Graham – einer der Autoren dieser Version von »Trumpcare« – hat die Aufhebung des ACA als notwendig bezeichnet, um »to stop a march toward socialism«. Vgl. Sarah Jaffe, Socialized Medicine Has Won the Health Care Debate,, 29.9.17.
[4] Vgl. PEW Research Center, Oct.2017, The Partisan Divide on Political Values Grows Even Wider.
[5] James Bouie, Cruel Old Party, The GOP’s Passage Of Trumpcare…,, 4.5.17.
[6] F. A. von Hayek, Wissenschaft und Sozialismus, Walter Eucken Institut, Tübingen 1979, S. 16.
[7] Derek Thompson, This Is What a Real Middle-Class Tax Cut Would Look Like, The Atlantic, 3.10.17, Übers.D.U.

By Constanz Weinberg

[This article published in Ossietzky 3/2017 is translated from the German on the Internet,]

The judgment about Donald Trump’s role as Deus ex machine depends on the viewpoint of the observer. For some, he ends a dreadful situation and leads to a good end. Or others, he only makes everything worse. How Trump behaved in the first days of his term of office as president, his seemingly spontaneous decisions one after the other and his threats in all directions – all this gives the impression a new day is dawning. In reality, everything stays the same. Nothing will change in property relations… To take the edge off, Trump plays the advocate of the victims of neoliberal madness and promises them jobs and safe housing.

Trump’s hunger for power and lack of restraint reminded the recently deceased sociologist Zygmunt Bauman during the election campaign of Stalin and Hitler. No one in Germany likes to publically make this comparison. Herta Daubler–Gmelin compared the US president George W. Bush with “Adolf Nazi”. The social democrat lost her office as Federal Minister of Justice. Not a single leader of European right-wing populism spoke as subversively as Donald Trump in his inaugural address. For too long, a little group in Washington harvested the fruits of government work while the people had to bear the costs. That sounded as though his predecessor came to power in a coup and stole the wealth of the nation in a blood-sucking way. But now the Redeemer has come, a redeemer not offended by torture who holds human equality as an invention of America’s enemies.

That this person was elected president of the United States of America and rose to be the leader of the western community that accordingly lost its moral claim is frightening. How great must be the misery of many Americans that they trust a clown or charlatan like Donald Trump? Apparently, the entertainment industry and the constant exposure for decades through advertising made their perception so dull that they only react to the most crude stimuli and take the cheapest promises at face value. The ruling class of the super-rich that includes Donald Trump caused the decline of whole industries and the ominous situation of the middle class. Immigrants from the Caribbean or Mexico did not cause that decline.

An enemy – the establishment in one’s country and illegal immigrants – is needed to divert from that truth. Trump wants to lower the taxes and give new contracts to the arms industry – even though the state indebtedness of the US at around $3 trillion reached its highest level of all time. He pours oil into the conflict of the Middle East by shifting the American embassy from Tel Aviv to Jerusalem, the hoped-for future capital of a Palestinian state.

To the shock of experts of American-Chinese relations, he threw down the gauntlet to the Peking leaders. The US owes the People’s Republic $1.5 trillion… Regarding Russia, the supposed affinity between Trump and Putin may soon be reinterpreted into its opposite. The survival of NATO and the Transatlantic Partnership ultimately need a justification.

How could all this happen? The pressure under which governments stand comes from the right-wing, not from the left as could be expected in view of the gulf between the poor and the rich. This pressure has grown very gradually because of an increasing displeasure in the unwieldy mechanisms set in place by parliamentary democracies and the estrangement betwee4n voters and the elected. For too long, politicians of every shade and color looked away when unease spread in the population, that many people feel narrowed by immigrants from foreign societies and threatened in their way of life that they fear for their freedom and their own identity.

Something similar happens in relations between member states and the European Union and its central headquarters in Brussels. Even here, the worry over the loss of identity plays an important role. No one wants to be treated like a child, neither a whole country nor an individual person. On the other hand, an instinct planted in humanity from the cradle – the desire to be free – resists. The elected representatives of the people should listen to what people say and no longer has talk above the heads of the people so that instinct is not misused as happened through the right-wing populists in Europe and the US. It will take a while before we can sing “We can only liberate ourselves from our misery.”
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Our institutions will not save us
15 Nov 2017

"The Plot Against America's 99%" by Nouriel Roubini, Nov 6, 2017, Project Syndicate

The problem is that eliminating the state and local tax deduction would provide just $1.3 trillion in revenue over the next decade. And because this change would hurt middle-income families, many Republicans in high-tax states such as New York, New Jersey, and California will oppose it. If congressional Republicans and the Trump administration end up keeping the state and local tax deduction, their tax cuts will add $3.8 trillion to the public debt over the next decade...

If this far-fetched projection sounds like voodoo economics all over again, that’s because it is. Voodoo economics came into parlance in the 1980 presidential election, when George H. W. Bush criticized Ronald Reagan for claiming that his planned tax cuts would pay for themselves. Bush was vindicated just a few years later, when the Reagan administration’s tax cuts blew a huge hole in US public finances.

And yet Republican administrations have persisted in pursuing unsustainable and undesirable tax cuts benefiting primarily the rich, leading to ever-larger deficits and trillions of dollars of additional public debt. The Republicans’ eagerness to pass reckless tax cuts once in power gives the lie to their claims of fiscal rectitude.

Making matters worse, America’s pluto-populist president is peddling a tax plan that will further increase economic inequality at a time when income and wealth gaps are already widening, owing to the effects of globalization, trade, migration, new labor-saving technologies, and market consolidation in many sectors.

Given that the rich tend to save more than middle- and working-class people, who must spend a larger proportion of their incomes on basic necessities, the Trump tax plan will do little for economic growth; it may even decrease it. And it will add far more to the US’s excessively high public-debt burden. It is fake reform, brought to us by an alt-fact administration and a party that has lost its economic bearings.
Wealth Inequality in the US since 1913
22 Nov 2017

Vol. 131
May 2016
Issue 2
Emmanuel Saez and Gabriel Zucman

This paper combines income tax returns with macroeconomic household balance sheets to estimate the distribution of wealth in the United States since 1913. We estimate wealth by capitalizing the incomes reported by individual taxpayers, accounting for assets that do not generate taxable income. We successfully test our capitalization method in three micro datasets where we can observe both income and wealth: the Survey of Consumer Finance, linked estate and income tax returns, and foundations' tax records. We find that wealth concentration was high in the beginning of the twentieth century, fell from 1929 to 1978, and has continuously increased since then. The top 0.1% wealth share has risen from 7% in 1978 to 22% in 2012, a level almost as high as in 1929. Top wealth-holders are younger today than in the 1960s and earn a higher fraction of the economy's labor income. The bottom 90% wealth share first increased up to the mid-1980s and then steadily declined. The increase in wealth inequality in recent decades is due to the upsurge of top incomes combined with an increase in saving rate inequality.