Senator Baldwin is right: AHCA is particularly great for health insurance CEOs, bad for almost everybody else
There are plenty of outrageously bad things about the American Health Care Act (AHCA), the recently proposed Republican replacement for the Affordable Care Act (ACA). The 24 million people who will lose their health insurance coverage by 2016. The $12,900 increase in premiums for older, low-income Americans who will get much shoddier insurance coverage in exchange. The $275 billion in tax cuts aimed directly at the richest Americans. The 7 million decrease in even employer-sponsored coverage under the plan. The $880 billion cut to Medicaid over the next decade. To get a near-comprehensive look at what the AHCA does to taxes, spending and insurance coverage, check out the recent Congressional Budget Office (CBO) analysis of AHCA.
But maybe the most gratuitous way that AHCA coddles rich people is its repeal of an ACA provision that limited the deductibility of executive pay for health insurance companies. The rationale for this provision was clear—the federal government was providing an enormous windfall to private health insurance companies by mandating that all Americans have insurance and by providing subsidies for them to purchase it. In return, we wanted these companies to use that extra money from subsidies and new customers to actually provide health care, not just fatten corporate executives’ salaries. So, the maximum amount that a health insurance company could deduct in an executive’s salary from their corporate income tax bill was reduced to $500,000. Under the AHCA, these companies could deduct up to $1 million in cash pay, and could deduct unlimited amounts of “performance-based” pay.
Two quick things to note: the “performance-based” pay carve-out is a bad loophole that should be closed generally. And $500,000 is an awfully healthy salary; presumably, companies should be able to hire decent people at this salary or less. This sounds like a shocking thought in modern America, I know, but the president of the United States earns less than this (or, if you’re unconvinced that our current president counts as an example of having “hired decent people”, I’d note that the Chair of the Federal Reserve earns well under half of this amount).
Senator Tammy Baldwin of Wisconsin recently criticized AHCA and mentioned these top executive pay deductibility provisions, and argued that the proposed legislation would greatly enrich health insurance CEOs. PolitiFact Wisconsin took odd exception to this. They’re wrong and Baldwin is right.
First, AHCA slashes tax rates faced by the richest Americans. Health insurance CEOs are in this group, so they will make enormous amounts of money from the tax cuts in AHCA. For top 0.1 percent income households in America (and top executives at large companies are extraordinarily over-represented in this group), the AHCA tax cuts will deliver an average tax cut of $165,000 annually.
Everyone wins if the GOP health plan fails, even Republicans
OK, maybe it’s a slight exaggeration, but almost everyone—99 percent of Americans and all members of Congress—will win if the GOP health plan fails.
Let’s start with Congress. Democrats win if they vote against a bad, unpopular plan. Republicans, meanwhile, minimize their losses if they vote it down—even for the wrong reasons. Basically, incumbents in both parties are better off if it goes away, though Republicans have to go through the motions since they’ve bluffed that they had a better plan than “Obamacare” since day one.
Win or lose, it’s obvious that Republicans don’t want to drag out the process of deliberating the American Health Care Act (which Case Western Reserve University Professor Joseph White has aptly dubbed the “Unaffordable Care Act”). That’s why they rushed committee votes ahead of a Congressional Budget Office review while web traffic to analyses of the plan has been so heavy that it crashed the Center on Budget and Policy Priorities’ website.
Until recently, railing against Obamacare played well politically, and Democrats lacked the party discipline to defend the Affordable Care Act (ACA) against attacks, especially after a botched rollout. The ACA slowed—but did not stop or reverse—excess health cost growth in the United States, and also did a good job of spreading these costs among sick and healthy and poor and rich to make health care affordable for most Americans, if not quite the fundamental right enshrined in the World Health Organization’s constitution. (House GOP leader Paul Ryan seems unaware that risk pooling is the whole purpose of insurance.) The CBO report, released this afternoon, confirms that the GOP plan will cause millions to lose coverage—an estimated 14 million next year and a whopping 24 million by 2026.
The economy will continue to improve, as long as policymakers don’t thwart its progress
President Trump has recently claimed that he inherited an economic “mess,” calling the American economy a “disaster.” From a broad macroeconomic perspective, this is simply untrue. The overall unemployment rate has been steadily falling and is essentially back to where it was immediately before the Great Recession started. Recent years have even seen improvements in labor force participation as the labor market continues to firm up. And while other measures, such as the prime-age employment-to-population ratio and nominal wage growth, continue to lag, they have still shown continued improvement over the last several years. To be clear, the economy is still weak and still hasn’t reached genuine full employment like it did in the late 1990s and early 2000s. Many workers and their families are still struggling, and the lower unemployment rate is only now beginning to translate into broad-based wage growth. But the economy is on track to recover, and there are no obvious signs of any underlying weakness that would lead to a recession in the near term. Inheriting a “mess” would accurately describe what President Obama was handed in January 2009—with the economy having lost 3.4 million jobs just in the previous six months and with unemployment having risen 3.4 percentage points over the previous 18 months. President Trump has clearly inherited something quite different—a stable albeit too-slow recovery that is on extremely firm ground.
It’s important to keep this steady improvement in mind as we assess economic progress moving forward. No policymaker should be allowed to claim credit for improvements that are simply a continuation of a trend. To that point, I’m going to lay out some key labor market indicators, discuss their recent trends, and assess their likely progress over the next two years.
What to Watch on Jobs Day: Policymakers can’t claim credit for the continuation of a trend
Tomorrow’s jobs report is notable, because it will cover the first full month that President Trump has been in office. While the president has recently claimed that he inherited a “mess” of an economy, the fact is that the economy has been recovering slowly but steadily, and I expect the February jobs numbers to reflect that. The unemployment rate has been ticking down, the prime-age employment-to-population ratio has been improving, and wages grew across the board in 2016.
To be clear, there is still room for improvement. While we are on the road to full employment, we are not there yet. But the economy is on track and there are no obvious signs of any underlying weakness that would lead to a recession. It’s important to keep this steady improvement in mind as we assess economic progress moving forward. No policymaker should be allowed to claim credit for improvements that are simply a continuation of a trend. Conversely, failure to deliver still lower unemployment in the coming years should be seen as a policy mistake—either by the Federal Reserve or by fiscal policymakers.
The average unemployment rate over the last three months was 4.7 percent, a fall of 0.3 percentage points from the average rate from the same three months last year (5.0 percent). At that rate, the unemployment rate will hit 4.0 percent sometime in 2019. This is not an unrealistic aspiration. The U.S. economy sat at roughly 4.0 percent for two solid years in 1999 and 2000, and policymakers should be aiming for that level today. Only when the labor market is tight enough to deliver sustained rising wages for all workers—regardless of gender, race, or educational attainment—should we say our work is done. Simply put, we want an economy where worker wages are rising, and in order to get there employers need to be competing for workers rather than workers competing for jobs.
Janet Yellen, not Donald Trump, is far more likely to decide whether or not we reach genuine full employment in 2017
In recent weeks, a number of stories have been written about the Trump administration’s excessively rosy projections for economic growth in coming years. And three weeks ago, Federal Reserve Board Chair Janet Yellen testified before Congress about the likely path of monetary policy over the next year. The Trump administration forecasts and Fed decisions are deeply intertwined. While the Trump administration’s precise forecasts are clearly unrealistic in the long-run, we should be clear in noting that the next couple of years could easily see a substantial pickup in economic growth. If this happens, however, we will have Janet Yellen and her colleagues at the Fed to thank, not Donald Trump.
The reason is straightforward: 2017 is the year when the Fed will finally decide whether or not to guarantee genuine full employment by giving the economy “room to run” by not raising rates aggressively. While Fed policy largely sputters when trying to spur growth with lower short-term interest rates, raising rates does reliably slow growth. So for all the chatter about the importance of Fed policy in recent years, their attempts to spur growth with low short-term rates were often futile. But once they firmly decide to start reining in growth with higher rates their policy choices will have real bite.
The metaphor used to describe the problem with using low rates to boost growth was that you can’t “push on a string”. Essentially, the Fed can lower rates to try to induce businesses and households (and even governments) to borrow and spend more, but they cannot force this spending to actually happen. If governments ignore low rates and indulge in spending austerity for ideological reasons, or if households do not respond to low rates because their housing wealth had been torpedoed and hence home refinancing is impossible, or if businesses do not take advantage of low rates to build new factories because they do not have customers for what their current factories are producing, then the Fed cannot do much about any of this.
It’s time we acknowledge women’s contributions to the economy—and how much bigger a role they would play in a more inclusive economy
Women hold 49.5 percent of payroll jobs. The health of the female workforce is hugely important to the health of the overall labor force. And yet—in crucial ways—lawmakers in the United States have avoided commonsense policy changes that have been shown to make it easier for women to balance paid work and their still disproportionate share of responsibilities at home.
Policies like paid parental leave and subsidized child care increase parental labor force participation, which would boost the economy. Many of our peer nations have such policies, and, not surprisingly, their employment rates are much higher than ours. The figure below shows just how far U.S. women have fallen behind some of our international peers. The graph shows the share of women age 25–54 with a job between 1995 and 2015 in Germany, Canada, Japan, and the United States. While women’s prime-age employment-to-population ratio (EPOP) rose over that 20-year period in those peer nations, it actually fell in the United States.
The share of prime-age women with a job has fared worse in the U.S. than in peer countries: Employment-to-population ratio of women workers age 25–54, select countries, 1995–2015
| Canada | Germany | Japan | United States | |
|---|---|---|---|---|
| 1995 | 69.434551% | 66.360158% | 63.233624% | 72.189196% |
| 1996 | 69.577146% | 67.220440% | 63.701741% | 72.770073% |
| 1997 | 70.971110% | 67.399584% | 64.566038% | 73.541046% |
| 1998 | 72.183646% | 68.944387% | 64.036077% | 73.642970% |
| 1999 | 73.245982% | 70.253128% | 63.551051% | 74.147991% |
| 2000 | 73.944309% | 71.210539% | 63.582090% | 74.213847% |
| 2001 | 74.297867% | 71.607431% | 64.124398% | 73.421299% |
| 2002 | 75.348504% | 71.845950% | 63.863976% | 72.259684% |
| 2003 | 76.000458% | 71.981067% | 64.407421% | 72.006189% |
| 2004 | 76.720415% | 72.129055% | 65.028791% | 71.848458% |
| 2005 | 76.488663% | 70.969949% | 65.733178% | 71.963537% |
| 2006 | 76.984912% | 72.647765% | 66.614235% | 72.504467% |
| 2007 | 78.190906% | 74.045933% | 67.370518% | 72.501768% |
| 2008 | 78.008148% | 74.744854% | 67.495987% | 72.301570% |
| 2009 | 77.114622% | 75.420875% | 67.595960% | 70.208609% |
| 2010 | 77.075022% | 76.320711% | 68.157788% | 69.343654% |
| 2011 | 77.207691% | 77.892216% | 68.459240% | 68.967922% |
| 2012 | 77.710148% | 78.235789% | 69.161920% | 69.196894% |
| 2013 | 78.090883% | 78.625264% | 70.773639% | 69.253713% |
| 2014 | 77.444969% | 78.839200% | 71.835052% | 69.997790% |
| 2015 | 77.541653% | 79.212303% | 72.704612% | 70.323786% |
Source: EPI analysis of OECD Labour Force Statistics
Federal contract workers need the protection of the Fair Pay and Safe Workplaces rule
Last week, Senator Warren, joined by her colleagues Senator Murray and Senator Sanders, asked Attorney General Sessions to open a criminal investigation into the deaths and serious injuries of workers employed by VT Halter Marine, Inc., a shipbuilder with United States Navy contracts. Senators argue that, while the Occupational Safety and Health Administration (OSHA) has assessed penalties against VT Halter, the fines “are clearly not a sufficient deterrent for VT Halter.” The senators’ request follows a report from the Center for Investigative Reporting documenting VT Halter’s history of violating workplace safety regulations. Despite the company’s track record, it has continued to receive hundreds of millions of dollars in federal contracts.
Today, the Senate is voting on a resolution of disapproval to block the Obama administration’s Fair Pay and Safe Workplaces rule that would help ensure that law-breaking employers, like VT Halter, do not receive federal contracts. The rule requires contractors to disclose violations of federal labor and employment laws, including the Occupational Safety and Health Act, and directs agency contracting officials to consider a company’s record of violations in awarding federal contracts. President Trump has already stated that he will sign the resolution and block the rule. This, as he announced his intention to increase military spending, leading to hundreds of millions in taxpayer dollars going to federal contractors for the development of new ships, planes, and technology in support of our military. By blocking the rule designed to reform federal contracting, the president and congressional Republicans have essentially ensured that taxpayers will continue to support contractors with a history of violating worker protection laws and regulations.
Trump administration wants to delay rule protecting savers from conflicted investment advice
Following a directive from President Trump, the Labor Department has proposed a two-month delay in implementing an Obama administration rule requiring financial professionals to act in clients’ best interests when recommending investment products or strategies to people saving for retirement (known as the “fiduciary rule”). Under the proposed extension, the rule would take effect June 9 rather than April 10. The public has 15 days to submit comments on the delay.
The rule was six years in the making and has survived three court challenges backed by the financial services industry, which stands to lose an estimated $17 billion a year from ending predatory practices by brokers and other financial professionals passing themselves off as disinterested advisors. It incorporates input from four days of public hearings, over 3000 public comment letters, and more than 100 stakeholder meetings.
Unbeknownst to most people, it is currently legal for financial professionals to recommend higher-cost investment products or rollovers from 401(k)s to higher-cost IRAs when similar but lower-cost options are available, without disclosing that they are working on commission rather than making recommendations that are in their clients’ interest.
Chamber of Commerce’s recommendations to the NLRB would roll back workers’ rights to the Stone Age
Yesterday, the Chamber of Commerce released ten recommendations to “fix” the National Labor Relations Board (NLRB). The Chamber’s policy suggestions are recycled positions that have been the subject of the nearly two dozen hearings on the agency since Republicans assumed control of the House in 2011. Arguing that President Obama’s board “overturned over 4,500 years of precedent,” the Chamber advances a platform that would roll back workers’ rights to the Stone Age.
Since the NLRB issued its decision in Specialty Healthcare, clarifying the standard for determining an appropriate bargaining unit, corporate special interests have assailed it as inviting the proliferation of “micro” units that will allow unions to gerrymander workforces. The Chamber echoes this argument in advocating for the NLRB or Congress to overturn the decision. However, the NLRB’s standard for determining an appropriate bargaining unit in Specialty Healthcare has been upheld in all seven U.S. Courts of Appeals in which it has been challenged. Data on the median size of bargaining units disproves the argument that the standard would lead to the proliferation of so-called “micro-units.” Why then are the Chamber and other corporate interest groups committed to doing away with the Specialty Healthcare standard? They want employers that are committed to defeating an organizing campaign to be able to manipulate who is in a bargaining unit to make it harder for workers to organize. The National Labor Relations Act (NLRA) directs the NLRB to allow employees to organize into units that assure employees “the fullest freedom in exercising the rights guaranteed by this Act.” The standard in Specialty Healthcare does just that.
Congress is laser-focused on rolling back protections for workers, consumers, and the environment
This week, the House of Representatives will consider three bills that further advance a deregulatory agenda that jeopardizes worker safety, consumer protections, and our environment. The House has already passed several bills this session that limit agencies’ ability to regulate. The trio of bills on the House floor this week includes the Regulatory Integrity Act of 2017, the OIRA Insight, Reform, and Accountability Act, and the Searching for and Cutting Regulations that are Unnecessarily Burdensome (SCRUB) Act. The House will also vote on additional Congressional Review Act resolutions to block existing rules, including an Occupational Safety and Health Administration (OSHA) regulation that enables OSHA to hold employers accountable for failing to keep accurate records of workplace injuries and illnesses. It is clear that Congress is laser-focused on rolling back regulatory protections and making it as hard as possible for agencies tasked with safeguarding our nation’s workers to do their job.