Down to the Wire on the Border Emergency

Plus, blue state Dems push for a tax break

Down to the Wire on Emergency Border Funds

The Senate passed a $4.6 billion emergency border-funding bill Wednesday, setting up a clash with House Democrats, who passed their own version of the legislation on Tuesday.

What’s next: House and Senate leaders must now decide how to proceed with limited time remaining before lawmakers are due to depart for a 10-day-long July 4th recess. “Lawmakers had hoped to get a bill to Trump’s desk before they leave,” The Hill’s Jordain Carney reported, “but without an 11th hour agreement, prospects for resolving differences between the Senate and House bills are likely stalled until after the break.”

The Senate on Wednesday rejected the House-passed spending bill, which includes greater restrictions on the Trump administration, by a 37-55 margin before overwhelmingly approving its own version in an 84-8 vote. The White House has also threatened to veto the House measure.

Senate Republicans reportedly were urging House Speaker Nancy Pelosi (D-CA) to take up their spending bill rather than enter into potentially protracted negotiations to try to reconcile the two versions. As CNN explains, they are “essentially daring the House to take or leave the Senate bill, which has bipartisan backing and the expected support of President Donald Trump.”



But Pelosi rejected that idea and reportedly urged President Trump in a phone conversation to support a negotiation.

“They pass their bill. We respect that. We passed our bill, we hope they would respect that,” she told reporters, according to The Washington Post. “And there’s some improvements that we think can be reconciled.”

The bottom line: Unless House Democrats make an abrupt turn, it’s not clear how the two sides can move forward, despite a bipartisan desire to provide funding to address the humanitarian crisis at the southern border — and a sense of urgency that was only heightened by the moving photo of a drowned migrant father and daughter, Óscar Alberto Martínez Ramírez and 23-month-old Valeria, that circulated widely on Wednesday. “[L]awmakers of both parties insisted they could not leave Washington without acting,” the Post reported. Time is running short. Stay tuned.

Why Democrats Are Split on Medicare for All

Vox’s Dylan Scott writes that the Democratic debate over Medicare for All boils down to two core disagreements:

“One is on the policy: Would the best insurance system be one fully funded by the federal government? The Democrats who support Sen. Bernie Sanders’s Medicare-for-all bill are saying it is, while other candidates prefer to build more gradually on the public-private system we have now or openly running against the idea of single-payer.

“The other debate is over strategy: Even if Democrats are lucky enough to win full control of the government in 2020, which is by no means guaranteed, should they try to enact another major health care overhaul? Or should they use their time, energy, attention, and political capital for other pursuits?”

Scott breaks down the key differences between the various legislative proposals and think-tank plans, and if you want a sense of how leading Democratic presidential candidate, his piece is worth a read.

But, as the Democratic debates continue and the 2020 campaign unfolds, another of Scott’s points is also worth keeping in mind: Democrats will likely need to win the Senate for any major health-care reform push to succeed, and the size of a Democratic majority in that chamber may well determine the political viability of Medicare for All or other plans. In other words, “there’s also a large chance this could all be moot.”

Charts of the Day: The High Cost of Hospital Care

Hospital-based care is the largest component of U.S. health-care costs, accounting for about a third of total spending, or a projected $1.3 trillion in 2019. That makes hospitals a key target for cost-cutting. “Taming the overall growth of health care costs requires action to lower the prices Americans pay for hospital care,” a new report from the Center for American Progress (CAP), a left-leaning think tank, says.

The CAP report examines hospital profitability. Here are some key stats:

• Hospital profitability is at its highest rate in decades, with total margin across the industry at 7.8% as of 2016. CAP also analyzed data on more than 3,000 acute care hospitals, including for-profit, nonprofit and public institutions. It found that total profit margin for that group was 7%, with some wide variation across ownership type and individual hospitals. For-profit hospitals had an average total margin of 11%, while total margins were lower at nonprofit hospitals (7%) and public hospitals (5%). But more than one-quarter of hospitals lost money in in 2016, including 40% of public hospitals.

• Hospital margins are higher than those in some other parts of the health care sector, though they remain well below margins for drug companies.

• Total profits among the hospitals in CAP’s analysis was $63.6 billion in 2016 — a figure that “suggests that stronger rate regulation could save Americans tens of billions of dollars on hospital expenditures, even if rates were tailored to keep afloat loss-making hospitals that are crucial to patient access,” CAP health economist Emily Gee writes.

• Hospital payment rates across all payers, including Medicare, Medicaid and private insurance, are about 34% higher than what Medicare pays. Commercial insurers are estimated to pay about double what Medicare does for hospital care, the report says. The hospital industry says that Medicare payments don’t cover the full cost of delivering patient care — only reimbursing 87 cents on the dollar in 2017 — and that hospitals would be financially insolvent if they were only paid Medicare rates.

For more details, and to see Gee’s recommendations to rein in the price of hospital care, read the full report.

-->

Are you ready for debate night? Send your thoughts on Wednesday and Thursday's Democratic primary debates to yrosenberg@thefiscaltimes.com. Or connect with us on Twitter: @yuvalrosenberg, @mdrainey and @TheFiscalTimes.And please tell your friends they can sign up here to get their own copy of this newsletter.

-->

Quote of the Day

“Education clearly has not been at the top of his list of priorities to address directly, but he has been very supportive of all the work that we’ve done.”

– Education Secretary Betsy DeVos, in an interview with Denver radio station KDMT, as reported by Politico.

Blue State Dems Push to Expand SALT Tax Break

At a hearing focused on the state and local tax deduction Tuesday, the “familiar politics of taxation—in which Democrats push to raise taxes on high-income people and Republicans resist—turned topsy-turvy,” writes Richard Rubin of The Wall Street Journal.

During debate in a House Ways and Means subcommittee, Democrats argued that the SALT deduction cap imposed by the Tax Cuts and Jobs Act was hurting middle-class families and communities in high-cost parts of the country. Before the law was passed, households could deduct the full cost of their state and local taxes on their federal filings, but the TCJA put a $10,000 cap on those deductions, increasing taxes for some residents of high-tax areas. Representatives from those districts are now pushing to restore some or all of the lost tax break.

Rep. Don Beyer (D-VA) argued that a house in an East Coast suburb might cost more than $700,000 and come with a substantial property tax bill, Beyer said, but that doesn’t mean its owners are rich. “There are no yachts in Falls Church,” said Mayor David Tarter, speaking of the wealthy Virginia suburb he helps run.

Republicans pushed back, using a basic Democratic complaint about the TCJA against them — namely, that raising or eliminating the SALT cap would disproportionately help the rich. A recent report from the Joint Committee on Taxation found that repealing the cap would reduce federal tax revenues by $600 billion over 10 years, with 52% of the benefit flowing to households that earn $1 million or more.

The bottom line: The unusual role reversal, in which Democrats advocated for a tax cut that would primarily benefit the wealthy and Republicans resisted, left the matter largely unsettled. Democrats themselves are divided on the issue, with some preferring to avoid it altogether given its regressive effects. Even if Democrats can come together on a plan, legislation is highly unlikely to advance, given that Republican leaders in the Senate have signaled that any bill raising the SALT cap would be dead on arrival in the upper chamber.

Why Some Overseas Profits Are Staying Overseas

The Tax Cuts and Jobs was supposed to remove the barriers keeping U.S. firms from bringing home profits held overseas, enabling them to boost their investments in the domestic economy. While there was a clear jump in payments made by overseas affiliates to their U.S. parent companies in 2018, at least on paper, Brad Setser of the Council on Foreign Relations said Wednesday that data from the first quarter of 2019 indicates that “U.S. firms have resumed reinvesting a decent chunk of their offshore earnings abroad.”

Overall, there is no evidence that Trump’s tax law spurred U.S. firms to bring intellectual property back home, Setser said, which suggests that the associated profits will continue to flow to overseas affiliates. And one of the big claims made to support the tax legalization — that profits were being held offshore because the U.S. tax system was so punitive — is looking pretty weak. “[T]he notion that firms were so burdened by US tax that they were forced to hold sums offshore that they would quickly repatriate hasn't been born out in the data,” Setser wrote.

News

Views and Analysis