Trickle-Down Economics, Part Deux

We will witness a lot of hysteria over the next couple of years about all manner of issues from gay rights to the protection of religious freedom. These issues are important but if you allow yourself to be distracted by the cacophony sure to be generated by them you will fail to observe the ultimate goal of Republicans: the final dissolution of the welfare state established by FDR and LBJ.

The completion of the Reagan revolution will start with the repeal of Obamacare. Republicans will feign an interest in keeping healthcare insurance for the poorest among us but they will make excuses for why they cannot do it, primarily due to fiscal restraints. Within a few years no vestige of the ACA will exist in law and Republicans will have moved to achieve their true objectives, detailed below.

The next item on the Republican agenda will be tax cuts; however, this will not be achieved without taking a wack at another part of the welfare state. The most logical target is Medicaid, an expensive program that Paul Ryan has been wanting to turn into a block-grant program. What does that mean? It means that the states would completely take over caring for the poor’s healthcare needs. The federal government would then dole out a fixed amount of money to each state–surely to be less than the $300+ billion that they now spend.

From a Republican point of view, the beauty of block-granting this program is that the federal government will no longer be on the hook for a set amount of money each year because the spending becomes “discretionary”. The program today requires that a fixed amount be paid out by the federal government for each person added to the program. It is “mandatory” spending. What can Republicans then do? They can lower the amount of money spent on this program each time they want to cut more taxes. The final goal will be pushing this obligation completely onto the states without giving them any federal monies, a so-called “unfunded federal mandate”.

Republican ambition will not stop at Medicaid. If successful with Medicaid “reform” they will then turn their attention to Medicare.

The Republican goal will be to privatize Medicare within the next decade, which would effectively make it unusable by millions of people. Medicare will become unusable to millions because the subsidy to buy private health insurance will not be enough to cover even a basic policy. Millions of seniors, many of whom live solely on their Social Security, will opt for housing and food before medical care and medicine. Republicans will set up a program that appears to provide equivalent services at an equivalent or lower cost. They will then begin a slow, multiyear shift of the cost burden to private individuals by simply not controlling the price of health insurance. Millions of people will simply not use the federal subsidies because they cannot pay the extra for an insurance policy.

The most difficult program Republicans will try to “reform” will be Social Security. It is a given that the retirement age will be raised significantly, probably up to 70. However, Republicans will not stop there. They will propose privatizing the program, turning it into some kind of defined benefits program that redirects a large portion of Social Security tax payments into the U.S. stock market. They will likely grandfather out the old system, probably using a combination of means-testing as they redirect a portion of Social Security payments to private accounts–mainly for those under 50 years old.

If things go as planned the Reagan revolution, which began in 1981, will be complete within a decade. At that point we will have a system that is even more economically stratified than it is now and our economy will be generally more fragile since none of these changes will come with more restrictions or regulations on capitalism or the market economy.

It is hard to see how Democrats can oppose this final destruction of the welfare state since Republicans now control the bulk of state legislatures and all three branches of the federal government. I suspect the only hope for the country is division within the Republican Party among its coalition of religious zealots, white nationalists, and economic libertarians. If these atavistic groups choose to go at each other, and refuse to cooperate on specific agenda items, then Democrats might have time to regroup, creating a more progressive coalition that marries boutique issues of identity politics to the realpolitik of modern economics.

I, however, fear that it may be too late. The Republican coalition is likely to move too quickly to dismantle what is left of the welfare state, and it will not get rebuilt until the next great world-wide economic catastrophe–which, if you believe Karl Marx, might be sooner rather than later.


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