Trump Wants to Divert Military Funds to His Wall Again

Trump Wants to Divert Military Funds to His Wall Again

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Plus, more than 2 million adults in Medicaid ‘coverage gap’
Tuesday, January 14, 2020

Trump Plans to Again Raid Pentagon Funds for Border Wall: Reports

President Trump is planning to shift $7.2 billion in Pentagon funds toward construction of border barriers this year — more than his administration reprogrammed last year and five times what Congress authorized for 2020, The Washington Post’s Nick Miroff first reported:

“Trump took $2.5 billion from military counterdrug programs for border barrier construction in 2019, but this year his administration is planning to take significantly more — $3.5 billion. Trump administration officials also are planning to take $3.7 billion in military construction funding, slightly more than the $3.6 billion diverted in 2019.

“The move would bring the total amount of federal funds allocated to border fencing to $18.4 billion under Trump, who made the border barrier a priority during his campaign for the presidency in 2016. He also pledged to make Mexico pay for the barrier, delighting crowds at his rallies.”

Administration officials reportedly cautioned that the final totals could still change.

One eye on the election: The plans are part of an administration effort to “show major progress” on Trump’s signature campaign promise ahead of the 2020 election, The New York Times reports. The administration recently announced that it had completed 100 miles of barriers along the southern border, well short of the 450 miles the president has repeatedly pledged to put up by the end of this year. The funding plans would reportedly give the government enough money to complete nearly 900 miles of fencing by spring 2022, though a large portion of that would likely replace existing barriers.

As CQ defense policy reporter Andrew Clevenger notes, the Pentagon projects that have seen their funding halted or delayed have disproportionately been in Democratic regions — and that’s likely to be the case again this year. “Once the Pentagon identifies which MilCon projects are being halted to come up with $3.7B, it's a safe bet that most of the $$ will come from Dem-controlled areas,” Clevenger tweeted. “And swing states that POTUS needs to carry to win re-election will probably avoid the worst of it.”

More pushback from lawmakers, including Republicans: The administration’s shifting of Pentagon funds has angered members of Congress, many of whom object to what they call an abuse of power and encroachment on their constitutional power of the purse. “Having failed to get his way in Congress, it appears President Trump is now once again forcing service members and their families to pay for his wall by cancelling even more vital military construction projects,” House Democratic appropriators said in a statement.

Some Republicans, while more subdued, also voiced concerns. “I wish they’d get the money somewhere else, instead of defense," Senate Appropriations Chairman Richard Shelby of Alabama told reporters on Tuesday. "But I do support building the wall.” Other Republicans said Democrats had forced Trump to redirect the money by refusing to provide additional border funding.

Challenges have failed: Lawmakers and the courts opened the door to this second round of reprogramming of Pentagon funds. Congress twice voted to terminate Trump’s national emergency declaration, but each time failed to come up with enough votes to override a presidential veto. And the 2020 spending deal passed by Congress in December, which allocated $1.375 billion toward border barriers, placed no limitation on Trump’s ability to redirect military money slated for other purposes.

Legal challenges to Trump’s border wall also have failed to stop construction. A federal appeals court last week allowed the administration to tap $3.6 billion in military construction funds for the border barrier, reversing a lower court decision that halted use of the funds and called Trump’s national emergency declaration unlawful. The Supreme Court had previously allowed the administration to proceed with construction using $2.5 billion in Pentagon counter-drug funding while litigation in that case continued.

The Trump administration reportedly felt empowered to redirect larger amounts of money this year following the latest court decision.

The bottom line: The administration’s plans are sure to reignite the debate over the president’s money grab — and they likely signal that the border wall will once again play a central role in Trump’s election campaign. “It's not surprising that the White House is moving forward with this method to pay for a major campaign issue,” Clevenger tweeted. “It worked before, and Congress has thus far not mustered the collective will to stop it.”

More Than 2 Million Adults Fall Into Medicaid ‘Coverage Gap’

The Affordable Care Act enabled states to expand their Medicaid programs to include millions of low-income adults, but as of today 14 states have declined to do so (see this tracker for more details on state expansions.) As a result, 2.3 million people in those non-expanding states fall into a Medicaid “coverage gap” in which they earn too much to qualify for Medicaid but not enough to receive tax credits in the Obamacare marketplaces. A new analysis by the Kaiser Family Foundation explains that, “because the ACA envisioned low-income people receiving coverage through Medicaid, it does not provide financial assistance to people below poverty for other coverage options."

Who falls in through that crack? “By definition, people in the coverage gap have limited family income and live below the poverty level,” the Kaiser analysis says. “They are likely in families employed in very low-wage jobs, employed part-time, or with a fragile or unpredictable connection to the workforce. Given limited offer rates of employer-based coverage for employees with these work characteristics, it is likely that they will continue to fall between the cracks in the employer-based system.”

As the chart below shows, more than 90% of those falling into the Medicaid gap live in the South, and a third live in just one state, Texas.

4 Potential Reforms for the Capital Gains Tax

Reforming the capital gains tax is one way to simultaneously address both rising inequality and growing federal deficits, say William G. Gale and Grace Enda of the Brookings Institution. The current tax system allows some kinds of economic income – unrealized gains in a variety of guises – to go untaxed, and Gale and Enda provide some options for policymakers who want to capture some of that wealth, both to cover existing fiscal shortfalls and to reduce inequality:

1. Eliminate the “Angel of Death” loophole: Currently, wealth can be passed on to the next generation on a stepped-up basis, with capital gains and associated taxes wiped out for inheritors and values reset at current levels. Alternatively, estates could be passed down on a carryover basis that keeps original purchase prices in place, leaving the inheritor on the hook for the full capital gains tax at the time of sale. The Joint Committee on Taxation estimates that such a change would produce about $105 billion over 10 years.

2. Tax capital gains at death: Taxing all estates at death would raise billions more than a carryover system, but would likely be difficult to implement for illiquid or hard-to-value assets.

3. Tax capital gains every year: Paying taxes on a “mark-to-market” basis every year would raise more than $1 trillion over 10 years by some estimates, but would also likely create serious problems related to valuations and cash flow.

4. Vary the capital gains tax rate: “Retrospective taxation” would allow the tax rate to increase over time, eliminating the benefits of tax shelters while allowing tax payments to be postponed until an asset is sold.

Tweet of the Day

With the narrowing field of Democratic presidential candidates set to debate again Tuesday night, Adrianna McIntyre, a health policy expert, suggested a new line of health-care questions:

The Democratic debate is tonight at 9 p.m. ET. You can watch it on CNN or stream it on the Des Moines Register site. Send your tips and feedback to Follow us on Twitter: @yuvalrosenberg, @mdrainey and @TheFiscalTimes.

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