Matt McDaniel

7 minute read

Here are the four things you need to know before your coffee gets cold, the March 27, 2017 edition:

 

Healthcareless Politics

On Friday, Republican leadership admitted defeat (for now) on making changes to Obamacare. The Party was deeply divided on the issue with members of the conservative House Freedom Caucus along with grassroots advocacy groups demanding a true repeal of the failing law in opposition to moderate Republicans, the House leadership team, and the President who wanted a political win. In the end, despite overtures to conservatives (which, in itself may have lost more “yes” votes from moderates than it got from conservatives), the whip count showed that the bill would go down in flames. The President called the Speaker, and, despite a threat that the President wanted to make everyone take a vote on the record to show where they stood, he changed his mind and the bill was yanked from consideration.

Despite the embarrassment of having a campaign promise collapse in such a spectacular manner (and the fact that Republicans have been running on repealing and replacing the failing law for nearly a decade with no actual proposal in the works), the event proved humanizing for the often times larger-than-life Donald Trump. Regardless of opinions about the bill, it showed that the politics of “the swamp” were stronger than the business acumen of New York. It’s clear that the President will take the loss to heart and have a much better idea of how to negotiate with the politicians in the future. He has already stated, publicly, that he is not opposed to letting the failing law implode under its own weight and watch Democrats scramble to get on board with a new replacement effort (thus killing the two birds of Democrat opposition and conservatives blocking reform with one stone). However, in letting the law collapse, the President will be perceived as heartless as premiums continue to skyrocket.

Though the reform effort collapsed Friday, there appeared to be at least some residual effort to make headway on a new replacement plan. It remains to be seen what the timetable for drafting and introducing this kind of legislation would be. Given that there are huge pending political issues before the House in tax reform, the debt ceiling, immigration, and the budget, there’s a strong likelihood that any new attempt to repeal or change Obamacare would come in 2018 or later.

The President has expressed his distaste for the House Freedom Caucus and the conservative advocacy groups that torpedoed the healthcare reform bill. Let’s be abundantly clear, as we’ve talked about before here, this boiled down to an argument between ideology and pragmatism. The President was, whether wittingly or unwittingly, drafted onto the side of pragmatism. This was probably the easier road for him to take given his background in business and the fact that he’s generally not a hard-ideologue on conservative issues. Whether White House Chief of Staff Reince Priebus, in coordination with Paul Ryan, duped the President into thinking that this would be a quick-win or whether the President was just trying to show he backed Speaker Ryan isn’t completely clear. Both possibilities are equally likely. However, this incident will have opened the President’s eyes on who he can trust with regard to knowing how things are done in Washington. Despite the failure of the bill, the President was willing to spend an inordinate amount of political capital to support Speaker Ryan. The public face of the relationship notwithstanding, there’s a strong chance that the President will be less-inclined to follow Ryan’s lead on issues in the future.

 

Bring on Tax Reform

Despite the failure of healthcare reform, the President and his team look to be moving forward with an attempt to cut taxes and bring much-needed reform to the American tax code. There is a tremendous amount of political will to get these proposals moving. However, it does remain to be seen to what extent the same arch-conservatives who thwarted healthcare reform will stand in the way of tax reform as well. While no one has explicitly come out in opposition to the proposed changes to the tax code, there are significant factions within the Republican Party that may make reform more difficult (and could lead to the exact same breakdown we’ve already seen). Conservative members may not support any plan that doesn’t go as far as they’d like on changes and reductions while moderates may balk at huge cuts. Though we are still in the predicting phase of the initiative, there’s already a hint of dissent.

Though the failure of healthcare reform is a bad political sign for the Republican Party, the failure of tax reform would be catastrophic to the President’s goals of growing the American economy and bringing more business investment into the country. Already, markets have gotten shakier on the news that the President couldn’t close the deal on healthcare reform and there are real concerns that investors may have over-bought on the promise of a businessman leading the nation. Of course, it is still far-too-early to say whether tax reform will succeed or fail, but many of the market indicators are based on the way investors are feeling and the overall confidence in political leadership. If tax reform fails, there is a large chance that the market will see some of the largest losses in years.

 

The Office of American Innovation

The President will be rolling out a new office in the West Wing aimed at fundamentally re-working the way the Executive Branch operates. The Office of American Innovation is to be headed up by the President’s son-in-law and close confidant, Jared Kushner. The group, made up of successful businesspeople (even some who actually disagree with the President on certain policy issues), will be tasked with bringing new ideas into the stagnant waters of the Federal bureaucracy.

The Office, as it is being reported this morning, will report directly to the President and seems to have super-charged authority over recommending changes in almost any Federal Department. This looks to be Mr. Trump’s attempt to keep the campaign promises he made to fight opioid addiction and make changes to veterans’ services (among other bureaucratic and inter-agency initiatives).

Given the makeup of the Office, staffed, again, with some business leaders who have been vocal critics of the President’s Immigration Orders, the task looks to be non-partisan and, rather, focused on streamlining and innovation.

 

Funds and Accountability for Baltimore Schools

Governor Hogan has put forward an additional $23.7 million for Baltimore City Schools in his supplemental budget. Supplemental budgets are commonplace in Maryland and are used to add or shift funds to important or unforeseen issues in the State. One of these issues was the $130 million shortfall experienced by Baltimore City’s public school system.

Certainly there are a lot of people playing the “blame game” right now with respect to City Schools. It’s interesting that City Schools does seem to be in an annual state of panic over their budget. Mismanagement, fraud, abuse, and lack of oversight are certainly partially to blame for the near-constant shortfalls in the system. Moreover, guaranteed pay increases, lack of accountability for bureaucrats, and a strong-armed union contract make up for another large chunk of the dysfunction. Add onto that the fact that it is convenient for Democrats in Annapolis to have a rallying cry to attack the Governor and you get a situation where it’s not politically expedient to fix the funding formula for Baltimore City. At its most basic level, the funding formula for schools takes into account the anticipated revenue of an area based on projected property tax income. However, Baltimore City has given large property tax breaks for much-needed development that aren’t reflected in funding numbers. Thus, when it comes time to calculate funding, the State thinks the City can afford more than it actually can.

The Governor’s supplement comes as the Mayor and the Democrats in Annapolis are trying to push forward their own plan. The Governor’s plan looks to, more than merely throwing money at the problem, increase transparency and have an outside audit conducted. It would be a shame if the perpetual state of crisis over funding were not addressed immediately. At a point, it becomes clear that some Democrats in Annapolis stand to benefit more from the crisis than from actually helping City Schools’ students.

 

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Of course, there are more things going on in the world, but these should be enough to get your day started.