The government is in its official shut down mode. And it’s a fight that has been brewing for a long time. It’s complicated because there are several different congressional factions, think of them as mini-political parties, that have different goals.
Remember this: The Republicans are in charge. This process could have been resolved within the caucus — if the GOP leadership had the votes. Back in September. And that’s the main problem. There are not enough votes for an affirmative solution. It’s so much easier for one faction or another to say “no.” (The House did pass their latest, short-term version with the support of the so-called Freedom Caucus. But several Senators in the Republican camp are still not on board because that solution doesn’t send enough money to the military and still other senators are not happy with another Continuing Resolution for any additional spending.)
Democrats have not had much say in the government since the election of Donald J. Trump as president. Senate leaders have used budget rules designed to pass legislation with 51 votes. But this short-term spending bill does not qualify — at least for now. More on that shortly.
There are three things on the Democrats’ “must” list. They want domestic spending protected (remember, one GOP faction wants deep cuts into government spending). Party leaders have been successful doing this with every Continuing Resolution so far because the alternative is the Budget Control Act and that would require deep cuts to the military (as well as domestic programs). Because of this threat, the faction in Congress that supports more money for the military has been willing to work with Democrats.
Democrats also want funding for the Children’s Health Insurance Program or CHIP. That is a huge program for Indian Country (along with Medicaid) pays the health care costs for more than half of all American Indian and Alaska Native children in the Indian health care system.
The CHIP program is in the House Continuing Resolution. But, as the National Indian Health Board posted last week, the House bill “does contain a 6-year reauthorization for the Children’s Health Insurance Program but does not include the Special Diabetes Program for Indians. This is a huge miss. The Special Diabetes for Program for Indians expires March 31. The ideal solution would be for the Senate to include both CHIP and the diabetes program in any deal that’s made with the White House.
The bill also does not fund Community Health Centers which could lose up to 70 percent of their budget.
The final sticking point for the Democrats is protecting the people who were brought to this country by their parents or other adults unlawfully as children. This issue is interesting because nearly everyone sees the value in finding a solution to the problem because the United States is their country in all but paperwork. Yet even the rhetoric is changing. A few days ago Republicans were talking about agreement on this point. Today the language is harsh, Republicans saying Democrats are trying to “protect illegal aliens.”
But the Senate bill that the president rejected was bipartisan. Immigration hardliners did not want the deal, even though it would have increased funding for the wall, because it was too lenient on Dreamers. The White House represents the most conservative element on immigration issues.
Of course none of these issues are new. But Congress has not had the votes to pass any plan. So the solution has been short-term spending bills. This government shutdown is about ending that stalemate, resolving the debates, and moving forward.
That said: Don’t be surprised if another “deal” is another short-term pass. But the goal is to force Congress into a real debate. Big picture stuff. (Yeah, right. I know, but I had to write it anyway.)
Rep. Tom Cole, R-Oklahoma, told National Public Radio that he doesn’t think “anybody’s going to negotiate very seriously with a gun to their head.” He said one of the problems is the Senate and the dysfunction over the “rule of 60.” Because of that, Cole said, the Senate hasn’t passed a single appropriations bill. “They didn’t do a real budget this year. The House did.”
The rule of 60 is the power of the minority to call for a filibuster. It takes 60 votes to end debate. President Trump took to Twitter Sunday to call for an end to that Senate rule. “Great to see how hard Republicans are fighting for our Military and Safety at the Border. The Dems just want illegal immigrants to pour into our nation unchecked. If stalemate continues, Republicans should go to 51% (Nuclear Option) and vote on real, long term budget, no C.R.’s!”
Of course Indian Country (and the economy) will be hit hard if this shutdown lasts very long. Lots of families, both government employees and contractors, could lose a paycheck.
The problem is we really don’t know exactly how the Trump administration will manage this particular closure. Some agencies, such as the Environmental Protection Administration, are using year-end funds to continue operation. The White House has posted a round up of agency plans. But we will know about the direct impact next week.
During the last government shutdown, 21-days that started on December 16, 1995, and continued to January 6, 1996, all 13,500 Department of Interior Bureau of Indian Affairs employees were furloughed; general assistance payments for basic needs to 53,000 BIA benefit recipients were delayed; and estimated 25,000 American Indians did not receive timely payment of oil and gas royalties,” according to the Congressional Research Service. The last time around furloughed employees were eventually paid. Eventually.
All told Standard & Poor’s estimated the U.S. economy lost $24 billion last time around.
The Indian Health Service and the Department of Interior posted planning memos in September about what is expected to happen. Basically: Many BIA employees will be furloughed, except for those that work in public safety or who are managers. However the Bureau of Indian Education will mostly continue working as normal.
Former Indian Health Service Director former IHS director Dr. Michael Trujillo told Congress that the government closure “caused considerable hardship within Indian communities. One result of staff furloughs was difficulty in processing funds for direct services and to contracting and compacting tribes so the delivery of health services could continue. Those staff that continued providing health services were not paid on time. Threats to shut off utilities to our health facilities and even to stop food deliveries were endured. We reached a point where some private sector providers indicated that they might not accept patients who were referred from Indian Health facilities because of the Federal shutdown.”
Gavin Clarkson is clear: He supports President Donald J. Trump. And he’s running for Congress because “the swamp is deep, the alligators, bite, and the taxpayers are getting ripped off every day.” He wants less regulation and more oil and gas development. And don’t get him started on what he dismisses as “fake news.” More on that, shortly.
Clarkson, a Choctaw tribal member, is running in the Republican primary for New Mexico’s second congressional district. The district is now represented by the state’s only Republican in Congress, Steve Pearce, who is a candidate for governor. It’s a crowded field. There are at least four Republican candidates and a half dozen Democrats. (Two of the Republicans have already raised nearly a half million dollars between them.) The filing deadline comes up in March and the primary is in June. The district is 5.5 percent Native American, and includes the homelands of the Mescalero Apache Tribe, and the Zuni, Laguna, Isleta Pueblos. A small portion of the Navajo Nation and Ft. Sill Apache are also included.
This is a fascinating district. It’s huge, the largest congressional district in the United States that’s not a single state district, such as Alaska or Montana. It’s also considered a “lean Republican” district by about five points. And Trump did carry the district, but he only barely reached 50 percent of the vote. Obama won over the same voters in his last race.
It’s also a district that is changing demographically. Pew Research says only 40 percent of Hispanics in the district are now eligible to vote, but potentially that number could soon top 56 percent. That would be a game changer and the current divide over childhood arrivals and immigration reform could exacerbate that shift.
Clarkson has served in the Trump administration as the Deputy Assistant Secretary for Indian Affairs. He is a business professor at New Mexico State University. And says he’s the first Native American to earn a PhD from the Harvard Business School.
His short stint at Interior was focused on modernizing the Indian trader regulations.
However Clarkson’s role become controversial after an Inspector General released a report that said stronger “internal controls” were needed over the management of Indian loan program guarantees. ProPublica and The Washington Post reported that Clarkson resigned after the report — something he calls “fake news.” That’s harsh. After reading the stories, it’s clear that someone at Interior had said he had resigned. There is a source there. Two different news organizations would not independently make that fact up. And Interior would not comment on the record, only saying it was a personnel matter.
The issue involves a $22.5 million loan guarantee for an enterprise of the Lower Brule Sioux Tribe that the Inspector General said did not meet guidelines and the deal “went south.” Clarkson blamed Lois Lerner, then an IRS official, for changing the rules. But reports from the Inspector General and from Human Rights Watch cite a the lack of internal control and a fiscal shell game. The Inspector General report said: “Appropriate controls are important due to the level of risk of this Program. Between 2010 and 2016, DCI paid approximately $12.4 million in claims resulting from defaults, and received an additional claim for approximately $20 million, which had not been paid at the time of our review. As of September 30, 2016, DCI was potentially liable for $606 million in guaranteed loans. Should any of the borrowers default on these loans, it is ultimately taxpayers who would carry the burden of bailing out the lenders since their obligations are guaranteed by the U.S. Government.”
Clarkson said he did not personally profit from this venture nor did not resign from the Interior Department until the end of this year. And then, he said, it was to run for Congress. “The story spiraled out of control,” Clarkson said. He said the department said he could not comment, or correct the record, only told to “suck it up.” Now that he is out of government, however, he said he can tell his side of the story.
** Update. The IG report said: “Finally, the company’s business plan relied on an expectation of a favorable tax ruling from the Internal Revenue Service, which it did not receive.” However a 2008 letter from the IRS does say the business plan could raise capital based on an exemption from federal taxes. That, Clarkson said, was later reversed by Lerner.
And in his news release announcing his candidacy Clarkson went on the attack. After exposing “Lois Lerner’s racist practice of conducting IRS audits of tax-exempt bonds thirty-two times more often against tribes than state and local governments,” Clarkson said he was able to convince one of Lerner’s subordinates to admit the IRS’s wrongdoing and change its policy. “Lois Lerner retaliated by pulling the rug out from under my initiative to leverage capital gains tax treatment to attract outside capital investment into tribal economies. She changed the rules in the middle of the game, ignoring the plain reading of a statute, just like far too many activist judges do.”
Clarkson said he is running as a conservative and a lifelong Republican. He said his advocacy of tribal sovereignty is not a partisan issue and he will have support from tribes, individual Indians, and the oil and gas industry.
I asked Clarkson about climate change. He said he’s not convinced it’s necessary to destroy the economy to take action. “I fully support the president for pulling out of climate deal,” he said. We have to “do what’s best for America.” Translation in the Trump era: Do what’s best for gas and oil.
To me, doing what’s best for America means to take climate change seriously and to act accordingly. Clarkson told me as a “scientist” he’s skeptical. However his resume reports that he was awarded a grant from the National Science Foundation to study the dynamics of tribal finance. His expertise is not in climate science, but economics.
This is important because it’s misleading to say that the science is not there when it comes to climate change. It’s a political talking point and nothing more. One of the standards of academic research is the peer review process. According to a recent roundup of scientific studies by the National Aeronautics and Space Administration, “peer-reviewed scientific journalsshow that 97 percent or more of actively publishing climate scientists agree: Climate-warming trends over the past century are extremely likely due to human activities.” My point here is that to say, “the evidence is not there,” is an attack on the scientific process (which is exactly why the Trump administration is so keen to make research less rigorous).
The other issue I asked Clarkson about was Medicaid. Nearly every Republican plan in Congress pushes the idea of turning Medicaid into a block grant program for states. Clarkson said in an email: “I firmly believe that Medicaid is a critical program and must be improved by making it less bureaucratic. I believe that Medicaid has become too costly and complex for states to effectively manage, and it is already the biggest item in state budgets and is projected to absorb as much as 80-100 percent of all state revenues if left unreformed.” He said he supports the Navajo Nation’s efforts to assume Medicaid responsibility for on-reservation members. “The nation’s most disadvantaged, including many needy children, deserve an efficient health care program that will continue to provide essential services,” Clarkson said. “If Medicaid is left as it is currently, there will be no safety net for the poor in the future.”
I, too, would not leave Medicaid as it is. I would expand it. It’s more cost effective (yes, cheaper) than private sector health care. But more important Medicaid has become essential to the Indian health system.
What qualifications are needed to manage (and possibly reform?) the Indian health system? It’s Indian Country’s largest employer with more than 15,000 on the payroll and many, many more people who work in health care for tribes, non-profits and other related agencies. The IHS budget is $6.1 billion. Yet it’s also the least funded national health care delivery system, operating in a political atmosphere where critics ask, why can’t it do more?
The Wall Street Journal published a story last week that raised questions about Robert Weaver, the Trump Administration’s nominee to head the Indian Health Service. The Journal challenged Weaver’s history at St. John’s Regional Medical Center in Joplin, Mo., from 1997 to 2006. However it quoted Jennifer Talhelm, an HHS representative, saying “any suggestion Mr. Weaver is unqualified to run IHS is a pure act of character assassination.”
A few facts: Weaver will be the least educated director of the Indian Health Service ever. If confirmed, Weaver will the tenth permanent director. All but one prior to Weaver have been physicians, most with multiple degrees in public health, science, and health administration. One former director, Robert McSwain, was not a medical doctor, but he was a longtime health manager and holds a Master of Public Administration from the University of Southern California. On his CV, Weaver lists his education at Missouri Southern State University in International Business with an emphasis in Marketing and Accounting; Minor in Spanish; Minor in Vocal Music & Piano. However the Journal reported that he was seeking a degree and did not graduate.
Weaver’s background is insurance. In a September 2016 profile in Native Oklahoma magazine, Weaver said, “We have Native Americans who are brilliant — geniuses — at gaming, but where are the Native American geniuses at insurance? It’s the second-largest cost we pay other than payroll. Yet it just goes to the wayside.” He told the magazine that his business saved the Quapaw Tribe more than $5 million a year.
“I try to be a translator for tribal leaders to understand this convoluted, difficult-to-understand, most of the time full of lies and deception industry, into ‘this is what it is. This is what your choices are.’ I get it,” he told Native Oklahoma.
Perhaps the Indian Health Service should be led by someone with an insurance background. It would surely help if the agency could come up with a better funding model, including a mix of insurance funds (third-party billing in IHS-speak.)
But there are three problems that ought to be clearly addressed through the Senate confirmation process.
First there is the problem of scale. Weaver would jump from managing a $10 million a year small business — one where he can hire and fire at will — to running a $6 billion agency where personnel decisions are made by folks higher in the chain of command at the Department of Health and Human Services or even as a favor to a United States Senator. And firing? Just one such action could take up more time than the three years left in this administration. And that’s the easy stuff. The agency’s operations are complicated by Congress, law, regulation, tribal relations, the Veterans Administration, Medicare, Medicaid, and private insurance.
To his credit, Weaver has been outspoken about the underfunding of the Indian health system. (Question: Will he say so again in his confirmation testimony?) In a paper he wrote a year ago, Weaver said: “Healthcare is a treaty right for all Native Americans. The method of delivering healthcare for Native Americans is the Indian Health Service system established through the Federal Government. The Federal Government allocates funds to the IHS system each fiscal year. This allocation has been and continues to be inadequate to meet the healthcare needs of Native Americans. Currently it is underfunded by thirty billion dollars annually.”
That figure of $30 billion would eliminate the funding disparity for Indian health. (The National Congress of American Indians has published a plan to make that so over a decade.)
The second problem is how to articulate the Indian health story. This is a problem of “duality,” two competing ideas. On one hand you have some significant health and management problems such as those identified in the Great Plains by The Wall Street Journal. On the other hand you have a system that is innovative and includes models of excellence (such as clinics in the Pacific Northwest or the Alaska Native Medical Center.) One story is told. The other less so. I am convinced that a fully-funded system will only happen when we tell both stories. The narrative of failure is not an incentive to invest more money.
The third problem is the Affordable Care Act and Medicaid. Weaver wrote that the law works for Native Americans but overall it was a failure. “We now see that it did not provide health insurance for the forty million uninsured Americans identified as the target market in 2008, it is not affordable for those who were pulled into the ACA system, and the out of pocket maximums associated with the plan effectively make access to healthcare unattainable,” he wrote. The first part of that sentence is factually incorrect. The uninsured rate dropped from 20.5 percent in 2013 to 12.2 percent in 2016, a 40 percent decline. You can argue about the cost of that insurance, but it’s complicated because the ACA required minimum standards for insurance, covering such things as women’s health. All of the Republican plans are designed to save money by getting rid of those standards.
Of course in the Trump era there’s probably not a candidate for any public office who champions the ACA.
But I also don’t see any Medicaid experience in Weaver’s background and that is an expertise area that is critical. Some of the medical, treatment, and ethical issues are extraordinarily complex. They will require a solid team to help consider all of the alternatives that have life and death consequences. (So, if confirmed, he’ll need a lot of help.) Oklahoma is not a Medicaid expansion state, so there would not be a lot of experience in squeezing every dollar from Medicaid by making more people eligible or rethinking the coding of costs. The public insurance of Medicaid (and Medicare) now total $1.05 billion of the IHS budget, but it could be a lot more.
Weaver could use his expertise to help tribes improve insurance for tribal members and employees — and that could boost funding for IHS. Private insurance is now only about $110 million of the agency’s revenue.
So what are the qualifications necessary to run the Indian health system? I have a bias. I have met some of the great physicians who ran the agency. I remember Emery Johnson’s passion and thoughtfulness about what IHS could be. I’d even argue that IHS has had remarkable leadership since its founding. So the standard, for me, at least, is quite high. There are also two Native women who have run state health agencies — an ideal background for managing the IHS. There is a lot of talent out there.
But the Trump administration likes the idea of shaking up government. And, appointing someone to run the IHS with a very different background, does just that. Perhaps Weaver brings a new way of thinking and managing. Then again we would do well to remember the latin phrase that medical doctors learn early in their training, Primum non nocere. It means: First, do no harm.
(Note: I use the phrase, Indian health system (lower case) unless I am specifically talking about the agency. My reason is that the narrative of a government-run health care agency, the Indian Health Service, doesn’t reflect what most of what the agency does now. The funding mechanism that supports tribes and non-profit health care agencies is the largest part of the system.)
Correction: The chart I originally published was misleading. The CBO score for the tax bill (and most of the other measures) looks at the cost over ten years. Appropriations are made in a single year. So that made the tax bill appear more costly in visual form. I am working on a new version now, something that illustrates the downward pressure on federal spending but uses an apple-to-apple comparison. (I also added a sentence in the report below to stress that the tax cuts are measured over a decade.)
Funny thing: I was so intent on getting the area of the bubbles correct that I completely spaced the CBO’s measure of ten years as opposed to a single year for appropriations.
Two take aways. First. I still want to illustrate, visually, the downward pressure on the budget. The balloons I used were misleading, but the point remains the same. The pressure to cut is going to grow in intensity. Second: The reconfigured bubbles (which take up too much space because of their relationship) really show the problem of entitlement spending, such as Medicaid. That’s a whole different topic … but visually, wow.
Elections should be fought over policy not nonsense
Mark Trahant / Trahant Reports
Elections in America are usually fought over nonsense. Trivial topics. Stuff that grabs headlines. Or issues that remind voters why they are in Political Party A or B. (And for good measure there is always contention about the personality of a So So Candidate who does (or does not) connect with voters.)
This problem is particularly acute in the Trump era. The recent news cycle pits President Donald J. Trump versus Steve Bannon. The White House statement that Bannon “lost his mind” is attention grabbing. Our political minds want to know what this means for the next election and the Trump coalition (which still defies logic because it subtracts supporters, rather than reaching out and finding new ones).
But politics ought to be more about policy. What choices are being made in our name? What’s the best way to improve the lives of children, the next generation? How do we invest public resources, that means tax dollars, into making life better? These are questions that get far less attention than the latest presidential tweet.
Then the president and Congress have already set the rules for this debate when they passed tax cuts. Now, every act of Congress, every budget from the administration, will set out to justify (and pay for) that law.
This is the problem: The Congressional Budget Office predicts that the federal deficits will increase to $1.8 trillion over the next decade. “As a result of those higher deficits, debt held by the public would increase from the 91.2 percent of gross domestic product in CBO’s June 2017 baseline to 97.5 percent,” CBO said. That means that the annual budget deficit will be nearly equal to the entire economy.
But CBO is on the conservative side of this argument. The Committee for a Responsible Federal Budget warns that after adding interest costs the tax plan would be enough to “increase debt to 111 percent of gross domestic product … That would be higher than any time in U.S. history, and no achievable amount of economic growth could finance it.”
A federal debt that’s bigger than the entire economy. And, key phrase here, “no achievable amount of economic growth could finance it.”
Already leaders of the Congress — the same bunch who did proposed this tax legislation — are now saying the country cannot afford to spend money on social programs.
Congress gave corporations a tax break worth $1.3 trillion. And another $425 billion was rewarded to small businesses that pay their taxes on individual returns (so-called pass through taxes). On top of that (for desert, perhaps) the Congress gave the very wealthiest, those few who pay estate taxes on inherited wealth, a break worth $83 billion. Even though those numbers reflect a decade of revenue, it still means that many in Congress say there is not enough money to fund the government.
That’s a rotten framework. But it’s more complicated when you add one more layer: The Budget Control Act of 2011. That law was passed to limit Congress’ power to spend freely. It sets in place budget caps for domestic and defense spending. If the caps are exceeded, then an automatic sequester (remember that?) kicks in unless Congress passes a waiver. That deal linked spending for defense and domestic programs.
Now it’s a problem because the Republicans want to spend a lot more money on the Pentagon. They want that part of the budget to go up. But because it’s linked to domestic programs — such as those that impact Indian Country — that cannot happen without an agreement with the Democrats. Wednesday the leaders of both parties in the House and Senate met to try and make that happen. House Minority Leader Nancy Pelosi described the meeting as “positive and productive.”
Democrats, for once, have some power to bargain. More spending for defense cannot happen without their votes. (Republicans remain divided over all federal spending.) So Democrats are trying to see how much leverage they have and over what issues. It’s likely that domestic spending will be a part of any deal, and possibly the Children’s Health Insurance Program. Several Democrats, including Sen. Bernie Sanders of Vermont, have said they will not vote for any budget unless it includes a provision to protect immigrants who were brought to this country as children, the so-called Dreamers. (President Trump removed Obama-era protections for this group and it’s a moral imperative for Democrats (and many Republicans) to protect some 800,000 people from deportation. The Deferred Action for Childhood Arrivals, or DACA, began under President Obama.)
That’s a huge agenda. It’s likely that Congress will again push it forward past its deadline of Jan. 19. Even if there is a deal, say today, then the actual writing of the budget will have to go back to the Appropriations subcommittees to be put into legislative language. That will take time.
Federal spending on Indian Country ought to be in a different category, one that does not yet exist. There should be a line item for treaty obligations. Should.
So far the budget numbers are hard to know for federal Indian programs. The Trump administration’s budget was largely ignored. And the House and Senate committee numbers look lean, but fine. But the thing is until there is an actual deal, none of these numbers matter. After a deal each committee will have to go back and determine what money can actually be spent. If it’s a good deal, the numbers will stay the same or even improve. The alternative? No words.
Of course the bigger issue in Congress is about priorities. This Congress has already decided that tax cuts are the most important thing that had to be done. So every fight over the budget has to somehow go through that filter. There is not enough money because Congress is giving corporations $1.4 trillion so they can be more competitive and profitable. (Funny: thought they were both.)
As economist William G. Gale wrote for the Brookings Institute: “… tax cuts are not free; they eventually have to be financed with higher taxes or lower spending. And once those financing requirements are taken into account, most low- and middle-income households are likely to be worse off than they would have been without the tax cut in the first place.”
Worse off. Then Indian Country knew that before the tax bill ever reached the president’s desk.
The first year of the Trump era has been challenging: The administration and the Congress sought to repeal the Affordable Care Act and radically redesign one of the nation’s best public health insurance programs, Medicaid. That plan failed. And I’ll come back to that point shortly.
But first: Congress did move forward with its other agenda item, to rewrite the tax code and reduce the amount of federal income taxes that most pay. And the two key words here are income tax. That’s important because most people pay more in payroll taxes than income taxes. The Joint Committee on Taxation looked at the numbers a couple of years ago and found that 80 million tax filers that earn $40,000 or less pay no federal income tax and many even get cash refunds. But we pay $121 billion in Social Security and Medicare payroll taxes. Even those families who make between $40,000 and $75,000-pay three times as much in payroll tax as in federal income tax—nearly $190 billion of the former and just $64 billion of the latter. The total income for a household has to exceed $100,000 more before income tax is a bigger cost than payroll taxes. Bottom line: Wealthy people get a tax cut.
The big winner in the tax bill, however, is business. The new law sharply drops what corporations and small business pay in federal income taxes. The Tax Policy Center calculates that savings at nearly three times as much for business owners in 2019 as for people who whose primary source of income is wages or salaries. The Tax Policy Center found that all households would get an average 2019 tax cut of about 1.6 percent of after-tax income (roughly $1,200). Those who make most of their income from wages would get a tax cut of about 1.5 percent of after-tax income, or about $1,200. But owners of pass-through businesses such as partnerships and sole proprietorships would get an average tax cut of 4.3 percent of their after-tax income (about $4,300).
It’s important to note that corporate taxes have gone up in recent years, but are not at historically high levels (as shown in this Tax Policy Center chart.) During the 1950s corporate taxes were 6 percent of the Gross Domestic Product.
One way Congress looks at business taxes is to account for “pass through” taxes. So if you earn money as, say, a freelancer. Then you can deduct expenses on another form. This process could be useful to a few people in Indian Country. If you do work that could be considered a “business” (and make enough to pay income taxes) make sure that you are set up as a business because you will pay less tax under this new law.
So lots of people — and especially companies — will pay less in federal taxes. And the federal treasury will have a lot less funding as a result.
“The tax bill will provide a bonanza to the most well-off Americans and profitable corporations, even as it leads millions of Americans to lose health coverage and ultimately raises taxes on many low- and middle-income Americans,” writes Robert Greenstein of the Center for Budget and Policy Priorities. “And, faced with criticism that the tax bill will swell budget deficits, President Trump and House Republican leaders have made clear that one of their top priorities for 2018 will be to use the fast-track budget “reconciliation” process — the same process they used to pass the tax bill — to cut assistance programs that aid millions of struggling families, to try again to repeal the Affordable Care Act (ACA) and cut Medicaid, or both.”
The process of reconciliation means that budget cuts next year could pass the Senate with only 50 votes — all Republicans. That’s awful. But the good news is that even might be a huge hurdle for Republican leaders. The problem is that the Republican majority is not sure what it wants. Some members want more money for the military and are willing to work with Democrats (who want money for domestic programs to make that so). Others want stark budget cuts; sequester times X. Others just want to find a deal of some kind, something that governs the country.
We already know these divisions are deep because the Republican-only majority has been unable to pass a budget for 2018 (which started October 1). The government is running on a temporary spending bill that expires Jan. 19. Right now the House is working off a funding level that would significantly increase defense spending and slight reduce domestic programs. The Senate is basically working off last year’s budget.
That’s all well and good for now but remember the pressure will increase to balance the budget as the cost of the tax legislation is calculated. As the National Congress of American Indians said: “The current tax reform legislation amounts to little more than a $1.5 trillion increase in the federal deficit over the next ten years. This deficit increase will inevitably create pressure to cut federal programs and services that are extremely important to tribal communities. Deficit-financed tax cuts that lead to austerity budget cuts would affect all Americans, but would disproportionately impact American Indians and Alaska Natives who rely on federal funding of the trust responsibility as well as social programs.”
Congress is governing at two and three week intervals because there are not enough votes to pass a real budget. And that’s not a good sign going forward because the budget only gets more complicated next year because of other issues that Congress has been avoiding.
Minnesota Gov. Mark Dayton has scheduled a news conference Wednesday to announce his pick for the U.S. Senate. The StarTribune reports it will be, as expected, his Lt. Gov. Tina Smith.
“In selecting Smith, the governor is choosing one of his most trusted advisers and someone who has worked for years traveling the state and building relationships with influential DFLers (Democrats) and business leaders,” the StarTribune said.
That’s all well and good. It’s business as usual. The safe bet. Then we in Indian Country know what could have been … and why Peggy Flanagan would have made history. Then, here is the good part, she’s still a candidate for Lt. Gov. in November 2018. And there is reason to think that down the road she could very well be the inside pick for such an office. And so we ought to do all we can to see that Flanagan wins her race. There are six Democrats running in the Minnesota primary for governor. (Flanagan is running with U.S. Rep. Tim Walz and she is the only declared candidate for Lt. Gov.) At least seven Republicans are also seeking election to the Minnesota governor’s office.
Then November already looks to be interesting. There are now eleven Native candidates running for Congress, Governor, and Lt. Gov. There are also new candidates running for state legislatures, county commissions, and to run cities. Give President Donald Trump credit: His actions (or is that his craziness?) encourages people to run for office. We need more of that, not less. (I will post a legislative preview of Native candidates in January.)
Voters in Virginia and Alabama are demonstrating that there is a growing wave; one that could reshape Congress, state houses, and legislatures.
But I will be writing because there is a new deadline for Congress to fund the government this week. There are serious issues that go beyond money, partly because Republicans will need to either hold their caucus together or win votes from Democrats. Tough roads. Which one is the less traveled?
The tax bill, it turns out, was written so hastily that there are errors. Who knew? This means that the House must go to conference and work on a compromise with Senate. (The easy option would have been to pass the Senate bill and send it on to the president). A conference stirs the divisions that exist within the Republican Party. If the House gets its way, the bill could lose Senate votes (and be defeated).
Turns out we’ve been worried about the wrong, Andrew. The Republican tax plan, President Donald J. Trump’s signature legislation, would make Andrew Mellon proud.
Andrew Mellon was a wealthy industrialist who served in government as the Secretary of Treasury. Here’s what Trump’s own Treasury Department says about Mellon: “As the Nation embarked on the most materialistic period in its history, Mellon’s philosophy was one of debt reduction, tax reduction, and a balanced budget. His tax reform scheme, known as the Mellon Plan, reduced taxes for business. His theory was that big business would prosper in proportion to the lightening of its tax load and its profit would be transferred to the rest of the Nation. During much of his tenure, general prosperity and times of peace enabled Mellon to implement his measures. The Great Depression, however, beginning in 1929, undercut Mellon’s prestige and brought him under increasing criticism. Despite the downturn in the economy, Mellon continued his policy of balancing the budget by cutting spending and increasing taxes, which worsened the effect of the Depression on the ordinary citizen.”
History is prologue. Damn. You hardly have to change a word to know that this sentence is about now. Swap today’s Treasury Secretary Steven Terner Mnuchin for Mellon and the story still answers, what’s next?
Both the House and the Senate have now passed the legislation to cut taxes so that business will prosper by the lightening of its tax load and its profit would be transferred to the rest of the nation. The funny thing is that people really believe this load of crap. Then self-delusion was a common thread in the Senate debate. Maine Sen. Susan Collins voted yes because Mitch McConnell promised her budget cuts (including cuts to Medicare) would not follow. She even tweeted proof, a McConnell letter saying Congress has the power to waive such acts. But, does he have the will or the votes to do so?
The conservative wing is, at least, honest about this. When the tax cuts result in a massive expansion of debt they want sharp budget cuts. This is a core belief. And has been since Mellon’s time. Or as the Treasury Department puts it: “Despite the downturn in the economy, Mellon continued his policy of balancing the budget by cutting spending and increasing taxes, which worsened the effect of the Depression on the ordinary citizen.”
Or there was Arizona’s John McCain, the so-called champion of regular order, voting for a 479-page bill with handwritten amendments. A bill that will add (by Congress’ own estimate) about a trillion in debt was passed in a few weeks without the usual hearings or independent scoring. The maverick did not care about process. Get it done.
How bad is this bill? It’s right up there as one of the most unpopular bills ever. An average of polling shows its popular support at about one-third. And, get this, FiveThirtyEight reports that this bill is even more unpopular than tax hikes.
A couple of things about Indian Country: So many of our tribal citizens are the low end when it comes to earning. This bill does nothing to lighten that tax load. Indeed a late night effort to increase tax credits for children, making them refundable. (Remember nearly half of all Americans don’t pay income tax, it’s the payroll tax that is the burden. This would have helped.)
And instead of turning the dial back on fossil fuels this bill aligns the tax code for more development. Alaska Sen. Lisa Murkowski has made this part of the legislation her signature, not health care, and certainly not climate change (as she so eloquently talked about during the Alaska Federation of Natives convention in October.) She owns this.
The Atlantic magazine says this bill “could forever alter Alaska’s Indigenous communities” by development. “The issue still divides Native villages, counties, and Native nations in Alaska. It also sets tribes with differing claims to Alaska’s North Slope against each other.”
This bill also strips the mandate to buy insurance. A win for freedom, right? Perhaps. But it also means that healthy people will not buy as much insurance leaving sicker, older people to pay the bills. It will weaken the insurance framework. At least 13 million fewer people will carry health insurance as a result.
However there are winners: Big corporations, rich would-be heirs (like the Trump children) and religious schools (an amendment by Ted Cruz expands tax-free savings for this purpose).
The process ahead: This bill will still have to be reconciled with the House. There are differences, such as taxing graduate students and deducting medical expenses.
But cutting taxes (and then the budget) is something Republicans have championed long before Andrew Mellon. So this bill is likely to become law soon. President Trump can make both Andrews proud.
Congress has yet to reenact the Children’s Health Insurance Program and states will soon run out of funds to prop up the program. That will mean that thousands of American Indian and Alaska Native children will lose their health insurance. And, the result is the Indian Health Service will have to stretch its already thin dollars to try and cover the budget hole.
The Children’s Health Insurance Program expired Sept. 30. This federal program insures young people and pregnant women who make just enough money not to qualify for Medicaid (but can’t afford private insurance). The idea is to make sure that every child has the resources to see a doctor when they are ill.
It’s hard to break down precise numbers because agencies lump funds from the Children’s Health Insurance Program or CHIP into Medicaid data. But we do know that the law worked really well. We also know there are more than 216,000 children that have health insurance because of Medicaid and the CHIP. Indeed, Native American children rely on Medicaid and CHIP at much higher percentages than other population groups. A study by Georgetown reported that 54 percent of American Indian and Alaska Native children were enrolled in Medicaid or CHIP as compared to 39 percent of all children. “Even though much progress has been made in extending Medicaid coverage to American Indians and Alaska Natives, the uninsured rate for American Indian and Alaska Native children and families remain unacceptably high,” the report said.
Overall the uninsured rate among non-elderly American Indians and Alaska Natives fell by 7 percentage points from 24 percent to 17 percent, according to the Kaiser Family Foundation.
This is a big deal and here’s why: The Indian Health Service is a health care delivery operation that works best when insurance (third-party billing in government-speak) pays for the medical costs. Medicaid, CHIP, Medicare, and other third-party billing now accounts for 22 percent of the IHS’ $6.15 billion budget.
But if Children’s health is no longer funded (because Congress did not reauthorize the legislation) then the Indian Health Service will have to make up the difference. That means taking money away from other patients and programs. It will be a critical problem for clinics because by law dollars from third-party billing (or Medicaid and CHIP) remain local.
Alaska is the state most impacted by Congress’ failure to act because two-thirds of the children in the Native health system are covered by Medicaid or CHIP. Other states where there will be significant hits: Montana, North Dakota, South Dakota, Washington, New Mexico, Oklahoma, North Carolina, and California.
The House of Representatives passed a CHIP reauthorization in early November. But that bill included a $6.35 billion budget cut to other health programs, including the Prevention and Public Health Fund, which provides money for vaccines, smoking cessation, and other initiatives to improve public health. The House would also ban lottery winners from being insured by Medicaid, tighten the timetable for people to sign up, and to change other rules.
It’s unlikely the Senate will agree. But the Senate is not moving quickly to pass its own legislation. The Senate is too busy working out tax cuts that will benefit large corporations and the very wealthy. (Previous post: What matters? Tax fight is about seven competing values.)
Across the country, some nine million low- and middle-income children rely on CHIP for health coverage. And, according to The Hill newspaper, States have asked the Centers for Medicare and Medicaid Services for funding to hold them over in the interim, and the agency has awarded about $607 million in redistributed funds to states and U.S. territories. Tribes will also lose hundreds of thousands of dollars in CHIP-related grants.
Last month, Utah Republican Orrin Hatch, who chairs the Senate committee responsible, called CHIP a “top priority” that had bipartisan support. The committee passed the bill October 2. But it’s up to Majority Leader Mitch McConnell, R-Kentucky, to bring the legislation to the floor for enactment. Then the House and Senate would have to iron out and agree on their differences before the bill can become law.
Why Indian Country should have a voice in this debate
Mark Trahant / Trahant Reports
There is no better way for any legislature — be it a tribal council, a state assembly, or a Congress — to telegraph what’s most important to a society than through tax policy. How a government collects revenue says what constituent groups are seen to matter. And, conversely, what groups and issues are insignificant. And, that of course, is Indian Country.
As Adrian Sinclair wrote in Cronkite News: “Indian Country once again does not have a seat at the table.” Tribes “aren’t treated the same as state and local governments across the board on a whole series of issues,” John Dossett, general counsel for the National Congress of American Indians, said after the hearing. “Tribes are … either ignored or they’re an afterthought.” He said there are many cases where state governments have more power than tribal governments, like the federal Adoption Tax Credit, which gives a credit to parents who adopt a child with special needs. But the credit only applies when a state court, not a tribal court, rules that a child has special needs.
So Indian Country is a perfect illustration for my larger point: A country’s tax policy shows what it values. The key to this idea is simple when a nation wants more of something, then taxes it less. And, other hand, if a nation wants less of something? Tax it more.
All interest on debt was deductible when the first income tax was created in 1894. Why? Because Americans did not like to borrow. It was almost immoral. As a writer for Harper’s Weekly warned a man in debt “must smile on those he hates, he must extend his hand where he would strike, he must speak pleasantly with a curse in his throat … He wears dependence like a yoke.”
But Congress made debt a better deal. You could borrow money for that new farm, or especially a home, and the government would subsidize the loan by making it a tax deductible transaction. By the 1920s car loans were the bigger deal. Americans were borrowing, buying and deducting. Congress created a monster with that policy and today debt is one of America’s great loves. Then in 1986 Congress switched gears: Today individuals can only deduct mortgage interest. But even that single benefit was generous. You could buy a big house. A bigger house. A ginormous house. And deduct 100 percent of the interest up to the cost up to $1.1 million of debt. And that tax deal includes second homes.
So as a policy the Congress was telling we the people buy bigger houses. And go ahead, get that second house in the woods or on the lake.
That’s what tax reform is, setting parameters for what the elected leaders think important for a national policy. So, if it becomes law, this tax reform will change the way we consumers spend money. Perhaps we’ll buy and build smaller houses and rent a cabin on the lake instead of purchasing one. This might be a good outcome for all of us. This is actually a pro-climate policy (please don’t tell Congress.)
This same priority process is true for renewable energy. Congress created incentives for wind, solar and other renewable energy. But, now the Republican plan is to reverse course, and reward oil, gas, and especially coal. Tax policy will favor fossil fuel development and renewable energy will therefore cost more. But will companies still invest? Who knows? We do know the calculations will be way more complicated. And, did I mention, renewable energy will cost more.
Let’s consider the overarching messages, the narrative, that will form policy in the tax bill before the Senate and the one already passed by the House of Representatives.
ONE: The bigger the corporation, the bigger the break
The tax bills paid by corporations are driving the legislation in both the House and the Senate. Republicans argue that if taxes are lower, companies will invest more in the United States (instead of other countries) and hire more people at higher wages. This debate is complicated because the current tax code is full of loopholes (something that Republicans say will be fixed). But the bottom line is that U.S. companies have a higher tax rate than what other countries charge, but, and this is huge, the companies actually pay less in federal taxes than what other other countries charge.
As the Harvard Business Review says: “First and foremost, corporate taxes are important because they help pay for government services. While they don’t account for as much U.S. tax revenue as they once did, they remain one of the central ways the government raises funds. According to the Tax Policy Center, “The corporate income tax is the third largest source of federal revenue, after the individual income tax and payroll taxes.”
The House bill cuts the top rate that large corporations pay from 35 percent to 20 percent. It would be the largest one-time drop in the big-business tax rate ever. And it’s a permanent change (the individual rates expire after a decade) at least until there’s another tax bill.
Companies will also get more deductions for purchasing new equipment. And there is an incentive for companies to move their profits back to the United States from low-tax countries.
The Senate bill is evolving. It also rewards big business. But in order to reduce the cost of the entire package, it delays reducing the corporate rate until 2019. (Imagine every business in the country holding off on just about any new activity because the tax laws changed next year.)
The metaphor: Multinational corporations rule.
TWO: It’s tough being rich
The New York Times’ Nicholas Kristof writes that it’s hard being a billionaire these days. “Why, some wealthy folks don’t even have a home in the Caribbean and on vacation are stuck brooding in hotel suites: They’re practically homeless! Fortunately President Trump and the Republicans are coming along with some desperately needed tax relief for billionaires.”
One way this works is be reducing the tax when someone inherits a wealthy estate. Both versions start this tax at $11 million. The House eliminates the so-called “death tax” in 2024 while the Senate keeps the tax but raises the exemption.
A second provision changes what’s called the Alternative Minimum Tax. The way that works is that after a tax return is completed, and there’s a whole slew of deductions, there is a calculation to see if that taxpayer should still pay something. The idea is to make sure that people earning more than $130,000 a year still pay an income tax, even if they find deductions in every corner. That goes away.
And there is one more goody for the rich. Charitable contributions can still be deducted.
The metaphor: Wealthy families so need our help. OMG.
THREE: Why work?
This part of the debate starts with the corporate tax rates. The Trump administration argues that cutting corporate taxes will benefit workers because companies will reward workers with better wages.
Treasury Secretary Steven Mnuchin claims that “many, many economic studies show that more than 70 percent of the burden of corporate taxes are passed on to the workers.” However economists are divided. As the Center for Budget and Policy Priorities points out “this claim is misleading … the evidence indicates that most of the benefits from a corporate rate cut would go to those at the top, with only a small share flowing to low- and moderate-income families. Mainstream estimates conclude that more than one-third of the benefit of corporate rate cuts flows to the top 1 percent of Americans, and 70 percent flows to the top fifth. Corporate rate cuts could even hurt most Americans since they must eventually be paid for with other tax increases or spending cuts.”
The bottom line is that the tax bill will not make life easier for people earning under $75,000 a year. The income tax portion might go down (depending on family size, smaller in this case is better) but costs will go up for education and health care.
And, on top of that, this tax policy will sharply reduce federal spending across the board. Last week the National Congress of American Indians (NCAI) and the Native American Finance Officers Association (NAFOA) came out against both the House bill and the Senate Finance Committee bills in part because of this point. “NCAI and NAFOA view it as deeply regrettable that neither the House nor the Senate bill takes seriously Indian Country’s priorities for tax reform,” a news release said. “With respect to tribal nations, unless tribal provisions are included, the current tax reform legislation amounts to little more than a $1.5 trillion increase in the federal deficit over the next ten years. This deficit increase will inevitably create pressure to cut federal programs and services that are extremely important to tribal communities. Deficit-financed tax cuts that lead to austerity budget cuts would affect all Americans, but would disproportionately impact American Indians and Alaska Natives who rely on federal funding of the trust responsibility as well as social programs.”
The metaphor: Workers don’t matter.
FOUR: Help mom and pop sell stuff
Most people who own a small business structure their entity as Limited Liability Corporations, S-Corps, or a partnership. This means that the income generated is reflected on the individual’s tax return. The House lowers the taxes on profits from 39.6 percent to 25 percent and has a 9 percent increase on the first $75,000. The Senate goes a different route with a new incentives for small business. This is “pass through income” because of the structure. And this part of reform really does solve a problem. Small business is critical — especially in Indian Country — but does not get the attention (or the breaks) that large corporations do.
Rep. Markwayne Mullin, R-Oklahoma, said last week, “As a former small business owner, I understand firsthand how burdensome the current tax code is on Main Street. The Tax Cuts and Jobs Act delivers relief to mom-and-pop shops in our communities so that they can hire more individuals, grow their business, and invest more in our local economy.”
The metaphor: Small business is cool, too.
FIVE: Elite colleges? Or is it, college only for the elite?
The House bill is an all-out attack on higher education. This is nonsense. Especially when the country needs to be competitive in a digital, knowledge-based world.
First up: Tax private universities’ endowments with a tax of 1.4 percent on portfolios that exceed $250,000 per full-time student. Only about a hundred schools would be affected, and it penalize colleges that have resources. Since those university operating costs will not go down, it’s not likely that this will result in more financial aid for students. The House also makes it impossible for tax-exempt bonds from private — and some public — institutions. This will make campus construction projects more expensive.
The House bill eliminates the deduction of interest for student loans. Americans now owe more than $1.4 trillion on student loans. It already is making it more difficult for young college graduates to buy homes, and transition into the middle class. This provision will be just one more thing. (And student loans are already stacked against the borrower. You can’t get rid of them in bankruptcy.) So instead of solving a problem, Congress is making it worse.
The House bill also repeals the Lifetime Learning Credit, eliminates the Coverdell savings accounts, but does expand the American Opportunity Credit.
The House bill would also classify tuition waivers as income (making a graduate student wealthy for tax purposes.) Imagine a “bump” in student’s income that is equal to tuition, some $30,000, $40,000 or even more.
Laurie Arnold, Colville, director of Native American Studies and an Assistant Professor of History at Gonzaga University, remembers trying to explain this to Congress when she was in graduate school. “Many members of Congress had children enrolled in large/research universities, yet had no idea that graduate students teach the majority of introductory classes at those institutions. In general, the disconnect about this was broad, and many Members fell back on the language that not taxing the stipends was simply another tax break.”
Stipends are now taxed. And Congress is keen to add tuition waivers to the tax revenue pool. This will make it more difficult for people to pay for graduate school, and increase the debt levels for those who do. As a national policy this makes no sense. None.
As UCLA neuroscientist Astra Bryant told Wired magazine: “I mentor two underprivileged undergraduate women, and my concern for them is that an increased tax burden would make it financially impossible for them to afford to pursue a PhD.”
And for Indian Country? There is already a shortage of graduate students and PhDs. Why should it be made more difficult?
“Let me distill that: over one third of American households had trouble putting food on the table, putting a roof over their heads, or getting medical care; blacks and Hispanics are falling further behind whites in net wealth; and 99 percent of Americans hold a diminishing 76 percent share of income in the U.S. These are all alarming trends, but to have one-in-three consumers report that they cannot regularly put food on the table in the U.S., one of the wealthiest countries in the world, is the most deeply disturbing,” Busette writes. “Such a miserly budget, in combination with the tax reform plan, could mean the loss of some very important services for low-income and poor Americans.”
The tax reform measures will require massive budget cuts. Soon. Tribal governments will be hit hard. We already know how difficult sequestration was for tribes a few years ago. The kinds of cuts that will be needed to pay for these tax cuts will cost significantly more than sequestration.
The Center for Budget and Policy Priorities pegs these coming budget cuts at $5.8 trillion, $800 billion in cuts below sequestration levels.
The metaphor: You can’t afford to be poor.
SEVEN: Obamacare? Really? Again?
A serious question: Which house of Congress hates healthcare more?
The House kept the Affordable Care Act insurance mandates, but eliminates medical deductions. So a family that is dealing with a catastrophic, expensive medical event won’t be able to offset any of those costs from their tax bill. Already this provision is limited to higher income taxpayers. It’s only open to people who itemize their deductions, an estimated 8.8 million claimed it on their 2015 taxes, according to the IRS. But for those families that need this break, it’s a big deal.
Then the best thing Congress could do to help people with medical debt is to legislate another expansion of Medicaid. As Kaiser Health News reported: “A study from the Urban Institute may shed light on why Medicaid eligibility remains a pressing problem: medical debt. While personal debts related to health care are on the decline overall, they remain far higher in states that didn’t expand Medicaid. In some cases, struggles with medical debt can be all-consuming.”
The Senate is using tax reform to repeal parts of the Affordable Care Act. Again. The Senate would “save” money by ending the requirement to purchase insurance. It saves tax dollars because the government would not have to pay the subsidies for those who sign up under the plan (including those from Indian Country who get no cost plans under the exchanges).
And, repeating myself here, should a form of these bills become law there will be cuts across the board. The Indian Health Service (as well as Medicaid) will need to restructure because it will have so many fewer dollars.
The metaphor: Healthcare is only for those who can afford it.
A cold December
Congress wants to wrap up this debate before the end of the year and begin the provisions in the new tax year.
One more thing about values. The two tax bills define what’s important to a society. Alaska’s Sen. Lisa Murkowski was a champion on health care and was a key vote to stop the last Affordable Care Act repeal effort in the Senate. But this time there are competing values. She has also been a longtime supporter of opening the Arctic National Wildlife Refuge to oil and gas development. That’s in the bill. It’s her provision. So is she willing to give up on health care for more oil? And what about climate change? Murkowski was eloquent at the Alaska Federation of Natives saying that she is witnessing first-hand the impact in northern communities. This tax bill gives fossil fuels a boost — at the expense of the climate.
What’s really important? We are about to find out.