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March 20, 2017

The Federal Reserve raised short-term interest rates last week, giving the nation’s central bank one rate hike in each of the last 3 calendar years (2015-16-17).  Fed Chair Yellen’s post-meeting statement suggested that 2 more rate bumps are likely throughout 2017.  Since the first rate hike occurred 15 months ago, the S&P 500 has gained +17.9% on a total return basis (source: BTN Research).

The first budget proposal by President Trump followed the wishes of the 63 million Americans that voted for him last November: more defense spending.  His $1.1 trillion budget for fiscal year 2018 (dealing with discretionary spending and not the anticipated $2.6 trillion in mandatory spending) recommended a +10% increase for the US military.  12 of 15 Cabinet agencies would see budget cutbacks if President Trump has his way, with the largest reductions occurring in the departments of Agriculture, Labor, State and the EPA (source: White House).

Pivoting from the Affordable Care Act (ACA) to the American Health Care Act (AHCA) got a little harder for the GOP last week.  The release of the analysis completed by the Congressional Budget Office (CBO) showing that 14 million additional uninsureds would result in 2018 under the proposed legislation was unwanted press coverage for the Republican Party.  The study however also showed that AHCA health insurance premiums will drop below ACA premiums (10% cheaper in 2026) and that federal deficits would fall $337 billion over the next decade (source: CBO).


Notable Numbers

RECONCILIATION – Republicans will move the AHCA through Congress using a legislation process called “reconciliation,” a procedure created in 1974.  The House and the Senate can pass “reconciliation” bills with only a “simple majority” rather than the “three-fifths majority” needed for most legislation (source: Congress).

USED BEFORE – “Reconciliation” has been used 24 times by Congress since 1974, including 4 times when the legislation passed Congress but was ultimately vetoed by the sitting president.  “Reconciliation” was used by the Democrats to pass the ACA in March 2010 (source: Center on Budget and Policy Priorities).

DEVIL IS IN THE DETAILS – The AHCA bill is 123 pages long.  The March 2010 ACA bill was 961 pages long and resulted in 13,000 pages of rules and regulations to implement the law (source: BTN Research).

LOTS JOINED – States that expanded their Medicaid coverage enrolled many more lower-income people than anticipated.  E.g., California projected 910,000 would enroll under its Medicaid expansion.  Actual increased enrollment in “The Golden State” topped 3.8 million (source: BTN Research).

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