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Here’s What You Need To Know

Last week, Senate Majority Leader Mitch McConnell announced that if Republicans are unable to pass to their version of Obamacare repeal – the Better Care Reconciliation Act (BCRA) – “then some kind of action” to stabilize “the private health insurance market must occur.” McConnell’s remarks underscore a larger truth that has often been lost in the larger health care debate: with skyrocketing premiums, 86 insurers leaving the exchanges from last year, and 45 counties that are expected to have no insurer to choose from, Republicans are not in a political position to simply move past the issue.

If passage of the BCRA fails, here are the options McConnell and Senate Republicans have to fix Obamacare and keep it from collapsing:

• Providing Certainty On Cost-Sharing Subsidies: House Republicans and the Trump Administration have repeatedly delayed a lawsuit regarding whether or not the President has the authority to allocate subsidies to insurers to help coverlow-income enrollees’ deductibles. The uncertainty over this program has made it more difficult for insurers to plan for the next year. McConnell could pass legislation settling this dispute by making specific allocations of these cost-sharing subsidies. This move should have support from Democrats, including Senate Minority Leader Chuck Schumer.
• Re-Establishing The Reinsurance Program: Obamacare created reinsurance programs that paid out funds to insurers who attracted the sickest customers, therefore mitigating the risk for insurers and incentivizing them to join the market. Yet these programs have now expired. The BCRA currently allocates $50 billion over four years for reinsurance and McConnell could opt to pass a more limited bill funding this program.
• Suspend Or Eliminate The Health Insurer Fee: Obamacare imposes a nearly $14 billion tax on health insurers, which drives up premiums. The tax was suspended for 2017, but it is set to return next year. This could be passed as separate legislation or could be included in a larger spending or tax package.
• Out-Of-State Health Insurance: An idea that has been floated by Sen. Lamar Alexander (R-Tenn.) would allow Americans in counties without a health insurer to purchase insurance in any other state-approved exchange. The proposal would further the Republicans’ long-standing goal of allowing the purchase of health insurance across state lines, while helping to address an issue that is hurting Western and rural America in particular. However, with so many narrow networkswithin exchange-offered plans, such insurance may offer little actual coverage and care.

The Senate is expected to vote on a revised version of BCRA next week, and its failure is far from a forgone conclusion. However, McConnell’s comments do make clear that he is slowly moving the goal posts in the hopes that Republicans can come out of this health care debate without too much political damage done.

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NEWSPAPERS VS. DIGITAL: ANTI-TRUST EDITION

The print news industry has long been struggling to stay alive in today’s digital-centric marketplace. While still trying to integrate high tech into their operations, newspapers are now using a new tactic in their fight for survival: lobbying Congress to exempt them from anti-trust laws so they can band together to take on Google and Facebook.

The News Media Alliance (NMA), a trade association that represents over 2,000 papers in the U.S., argues that the duopolistic dominance of Google and Facebook in the online advertising space has placed the social media giants at an unfair advantage in negotiations with individual media outlets. This legislative push is the first major effort from media industry leaders to limit the market influence of large digital companies. However, it may raise questions about the implications of this industry seeking favors from the very people they are tasked with holding it accountable.

POLITICIZING PHILANTHROPY

The Ford Foundation recently announced it was committing $1 billion over ten years to “mission-related investing,” a growing trend in philanthropy that prioritizes investments into projects and companies with a broad social impact instead of seeking the largest possible financial return.

This approach enables foundations with sizable endowments to use their status as shareholders to pressure corporations, mutual funds, hedge funds, and other vehicles utilized by institutional investors to focus on promoting the foundation’s pet causes or social agenda, rather than generating shareholder value. Ultimately, investing should be about creating value and economic growth, but “mission-related investing” risks undermining the best interests of other shareholders and the company in the service of large foundations’ view of what’s best for the common good.

LUNCH ON THE IRS?

On their 2009 and 2010 tax returns, the National Hockey League’s Boston Bruins fully deducted the cost of providing meals to their players and coaches during trips to other cities for away games. The IRS decided the Bruins could only deduct 50% of the meal costs because they were provided away from the premises of the business, so the Bruins took the IRS to court. Last week, a U.S. Tax Court ruled against the IRS, siding with the hockey team and potentially opening the door for employers to fully deduct some meals provided to employees at business meetings away from company headquarters.

The IRS determined the meals could be fully deductible because they were provided in a space that was leased by the team as a place to operate their business, and took place during the workday. However, it remains unclear if this ruling will apply to meetings at restaurants and other types of corporate meetings where these conditions may not be the same. The implications of the decision are even more uncertain because the IRS has not updated its regulations on meal deductions since 1978, even though Congress has changed the law several times. The case shows yet again how the hyper-complicated and arbitrary nature of the tax code can make planning difficult for businesses, and fail to account for legitimate costs of doing business.

VOLVO’S ELECTRIC MARKETING GAME

Volvo’s announcement that all of its cars will be hybrids or gas-electric hybrids by 2019 was championed by major media outlets as signaling the “death knell of the internal combustion engine.” While the media hype surrounding the new approach allows Volvo to bolster its image as cutting-edge among their affluent customer base, the reality is that the auto manufacturer, which is owned by a Chinese electric car manufacturer, will continue to employ the internal combustion engine, while adding a plugin-hybrid option in each vehicle as a complement.

While higher-end brands like Volvo can make these changes with only relatively small increases in price, many mainstream automakers are unable to do so without rendering their products unaffordable. This dynamic demonstrates how the electric car market remains more of a status symbol for the wealthy than a realistic alternative to the internal combustion engine.

THE NANNY STATE ATTACK ON SCREEN TIME

A new ballot initiative in Colorado proposes to criminalize the sale of all handheld wireless technology – including smartphones – to individuals aged 13 and younger. Proponents argue the measure is necessary to limit child inactivity. However, the proposal may actually have the opposite effect, with opponents pointing out that such devices can promote child independence by providing them a way to contact their parents and call for help when away from home.

In addition, banning smartphones, tablets, and other devices would prevent children from using them for academic purposes, such as research and connecting with tutors. Even worse, the proposal would turn parents, who seek to realize these benefits, into criminals overnight. This measure is another example of how attempts to legislate solutions to perceived societal ills can create more problems than it solves.

Here’s What You Need To Know

Lost among the clamor for President Trump’s tax returns is the release of an annual public document filed by President Trump, along with all other Administration appointees: the Executive Branch Personnel Public Financial Disclosure Report. Members of Congress, and candidates for Federal offices file very similar forms as well. You can see President Trump’s disclosure report, on which he reported assets of at least $1.4 billion, an income of at least $596.3 million, and liabilities of at least $315 million, here.

At Delve, we regularly review such forms in the course of preparing vulnerability studies and opposition research reports for our clients. So to help keep loyal TL;DR readers one step ahead of the pack, we’ve put together this primer on navigating these financial disclosure reports.

• What’s On The Form, And What Isn’t? Personnel financial disclosures detail all of a person’s assets, liabilities, and sources of income, along with those of their spouse and dependent children. These forms also list all honorary positions, gifts, and sponsored travel. However, as discussed in greater detail below, these disclosures only provide a range of income and net worth, rather than exact figures. Despite these shortcomings, personnel financial disclosures offer valuable insights into a public official’s finances.
• Range Of Net Worth: On a personnel financial disclosure form, by subtracting the person’s minimum liabilities from their maximum assets, you can obtain a rough estimate of their maximum net worth. Likewise, by subtracting the person’s maximum liabilities from their minimum assets, you can obtain their minimum net worth. However, this approach cannot provide the full picture because it only measures a potential range of net worth. So, for most candidates, the filing can give a good picture of where their net worth is broadly, but it also presents significant limitations for a person like Trump whose assets and liabilities could far exceed the top bracket of $50 million. In addition, certain assets and liabilities, like personal residences and mortgages on them, along with amount of spousal income, are excluded from reporting requirements.
• Controversial Investments, Debts, And Sources Of Income: Since the form details the individual’s investments, debts, and sources of income, an analysis may reveal whether that person is financially linked to any controversial activity or has conflicts of interest that will make it difficult for them to serve in a public role in an ethical manner. This information is also notable if they are invested in anything that contradicts their policy positions or campaign message. For example, a candidate running on an environmentalist platform that is invested in oil companies may be vulnerable to charges of hypocrisy.
• Questionable Gifts, Sponsored Travel, And Honorary Positions: Filers are also compelled to list any positions in organizations they hold, as well as any gifts or sponsored travel they have received. This information can reveal if they are associated with or are receiving support from any controversial groups. In addition, if the individual has received gifts or sponsored travel, they may be receiving personal favors from sources with questionable motives.
• Timing Is Key: Just looking at what the assets and liabilities are does not tell the full story. Another critical detail is when they were bought and sold. For example, if a member of Congress on a committee covering financial entities sold bank stocks right before a company’s stock crashed, it raises the possibility they had insider knowledge from their position. In addition, changes in net worth and income year-to-year also can be important to look at. If a government official became significantly wealthier after taking office it brings up more questions about how they made this money.

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THE REAL MINIMUM WAGE IS $0
For several years, left-wing groups and progressive Democratic candidates have been pushing to increase the minimum wage to $15 across the country. Seattle was one of the few cities to relent and adopt this policy at the municipal level. A new study by University of Washington economists, commissioned by the City of Seattle, shows the costs of this policy for low wage workers have been three times higher than its benefits.

Many employers responded to the minimum wage increase by laying off workers, reducing their hours, and forgoing new hiring. The UW economists estimate these changes have cost the average low income worker $125 a month. The findings once again demonstrate how policies that are meant to help the poor through government mandates can often have the opposite effect – and could seriously undercut a major talking point for progressive Democratic candidates.

THE GOP’S STRUCTURAL EDGE
A new analysis from The Associated Press demonstrates one reason why Democrats face an uphill battle to take back the House in 2018. Using a statistical method to quantify partisan advantage in the design of Congressional and state legislative districts, the AP study found Republicans have the advantage in four times as many state House or Assembly districts as the Democrats. In addition, Republicans have the advantage in three times as many U.S. House districts in the two dozen most populated states as the Democrats. As a result, the AP estimates that Republicans won as many as 22 additional U.S. House seats in 2016 than would have been expected given their average vote share nationally.

This outcome is the direct result of the Republican efforts to build strong legislative majorities and control of Governors’ offices in order to control Congressional redistricting efforts in a majority of states. Democrats have learned from their 2010 failures, though, and are already gearing up to secure a more favorable redistricting process after the 2020 census, led by President Obama and Eric Holder. The results of 2018 gubernatorial and state legislative races will be critical as to who controls the 2020 redistricting process across the country.

DEMS DENY SPEAKING PRIVILEGES 
During a recent hearing before the Senate Committee on Homeland Security and Governmental Affairs, aimed at discussing the ideology of political Islam, or Islamism, a number of alleged leaders in the global women’s rights movement effectively shut out the testimony of two women who should really be their allies. Ayaan Hirsi Ali and Asra Q. Nomani are both scholars who were born into Muslim families and now devote time to urging their faith to reform. Specifically, they call for modern Muslims to condemn abuses against women – such as honor killings, child marriages, polygamy, sex slavery, and female genital mutilation – performed in the name of Islam.

Despite these efforts seeming to be entirely in sync with the women’s rights positions of Democratic Sens. Kamala Harris, Heidi Heitkamp, Maggie Hassan, and Claire McCaskill, none of them asked either Ali or Nomani a single question during the hearing. Instead, the Senators chose to object to Ali and Nomani’s testimony and claimed it distorted the true nature of Islam. This is just the latest incident of Democratic politicians choosing to ignore issues they claim to care deeply about simply because the facts of the situation do not fit into their political ideology.

REPUBLICAN HEALTHCARE REFORM THAT WORKED
During his tenure, President Obama repeatedly tried to credit Obamacare for the slowdown in the growth of health care spending. However, this trend actually began in 2003, long before the passage of Obamacare. Plus. this decline has largely taken place in Medicare and employer-based coverage, the two areas least impacted by Obamacare. The phenomenon is more likely attributed to reforms passed by President Bush, including the Medicare Part D drug program and making Health Savings Accounts tax deductible for patients in employer-based plans.

Medicare Part D, which allows beneficiaries to select from competing plans offered by private insurance companies, reportedly has accounted for over 60 percent of the slowdown in Medicare benefit payments since 2011. The drug benefit and other Medicare reforms, such as “Welcome to Medicare” check ups, that were signed into law by President Bush placed an emphasis on addressing health issues earlier to avoid more expensive treatment later. So as Republicans once again seek to tackle healthcare reform, it is worth noting that the last time the GOP took on the subject successfully, they focused on ways to deliver better treatments at lower costs for patients and insurance providers.

THE EMERGING AGE OF TECH CONGLOMERATES
Corporations that are made up of several seemingly unrelated businesses, or conglomerates, have often been thought of as relics of the past. However, Amazon’s recent $13.4 billion purchase of Whole Foods highlights how major tech companies have become the conglomerates of the 21st century. Other large tech corporations, like Google – which owns Android, YouTube, Waze, and Nest Labs – or Facebook – which owns Instagram, WhatsApp and Oculus VR – have also arguably become conglomerates.

As these companies continue to grow, they are likely to attract even greater scrutiny from regulators as governments seek to limit their market influence. This dynamic has already begun to take shape in Europe, where regulators have repeatedly challenged allegedly anti-competitive business practices by Google, Apple, Amazon, and others. Even in the U.S., some policy thinkers have begun calling for companies like Amazon to be broken up. It seems only a matter of time before U.S. regulators begin to target them as the new robber-barons. Even the Trump Administration, despite all of its deregulatory zeal, has begun tightening restrictions on H1-B visas and other favored policies of the tech elite.

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With the unemployment rate for 16- to 19-year-olds down to 14.3 percent from a high of 27 percent in 2009, and 41 percent of employers reportedly planning to hire temporary workers for the summer, teens looking for summer jobs have some of the best chances of landing one since the early 2000s.

Yet a recent Bureau of Labor Statistics analysis found that only 43 percent of 16- to 19-year-olds were either working or looking for a job. This figure is ten points lower than in 2006, and almost 30 points down from nearly 70 percent in 1989. With projections showing the teen labor force participation dropping below 27 percent by 2024, there are many theories about why the teens aren’t working like they once did.

• Blame The Boomers: Some argue teens are suffering from the trickle-down effects of older Americans now working past 65 at the highest rates in more than 50 years. While most older Americans putting off retirement are not holding the entry-level jobs teens would otherwise be taking for the summer, they do hold the jobs that more junior employees would hope to be promoted to. So, by remaining in the workforce, older workers may be limiting the advancement of younger employees all the way down to teenage temporary workers.
• Blame The Immigrants: Another argument is that teens are competing for fewer and fewer of these types of temporary, low-skill jobs against immigrant labor. A 2012 study found that less educated immigrants actually impact employment for native-born teenagers far more than their native-born parents.
• Blame The Markets: Northeastern University labor economist Alicia Modestino also points out that the typical teen jobs are drying up – or in other words, “think Blockbuster.” Between the dramatic decline in the retail economy – where many teens were hired as temporary summer workers – and the automation of unskilled labor jobs, the markets are cutting down on the industries where temporary, unskilled work is a viable business strategy.
• Blame The Overscheduling: Finally, there is the argument that teens and their parents are simply prioritizing different things. It is probably true that some teens are simply lazier and spending their summers simply not working, but the biggest shift in priorities seems to be coming from college-bound teens and their parents focusing on volunteer opportunities and extracurricular activities geared toward building attractive resumes for university admissions offices. In July of last year, more than two in five 16- to -19-year-olds were enrolled in summer school – not for failing classes, but rather to earn college credits or build out their academic profile.

Whichever theory or combination of theories is true, many have expressed concern over the non-monetary benefits teens may be missing by not pursuing or being able to get a summer job. They argue these work experiences offer teens perspective on the world outside of the rigid structure of school and home, teach the importance of managing money before there are necessarily serious consequences, and prepare teens for dealing with bosses and co-workers of all ages.

There may not be direct economic consequences of this trend at the moment, but building a generation of workers for whom their first real work experience comes at the age of 22 or older may very well present problems in the coming decade.

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GROWTH OF CONSCIENCE ACTIVISTS

Activist investors have used their pressure tactics on corporate executives and boards almost exclusively in the pursuit of profits. Yet, a new crop of these investors is now using these same tactics for another purpose: forcing companies to consider social good. Firms like Arjuna Capital are showing up at shareholders’ meetings to pressure tech firms to improve their gender pay equity gap and demand oil companies adopt more environmentally friendly policies.

This concept of social conscience investing isn’t necessarily new, but the level of activism is. Corporate executives, who previously only worried about activist investors going after bloated C-suite salaries and inefficient business practices, must now make sure they are not vulnerable to socially conscious corporate raiders who could derail a business strategy with ideological agendas.

LIFTING THE VEIL ON OBAMA’S PEACE NEGOTIATIONS 

The Israeli newspaper Haaretz recently released two documents outlining the Obama Administration’s work on the 2014 Israeli-Palestinian peace talks and how they fell apart. Two key revelations came out in these documents. First, Israeli Prime Minister Benjamin Netanyahu was essentially willing to accept the 1967 borders as a basis for negotiations. Despite this willingness, Obama Administration negotiators refused to accept the draft due to Netanyahu’s demand that the phrase “territorial contiguity” not be used in the document.

Second, U.S. negotiators were willing to go a long way to appease Palestinian Authority President Mahmoud Abbas. After a draft had been carefully negotiated with the Israeli government, Abbas expressed, “anger and disappointment” with the wording over the issue of Jerusalem. In response, U.S. diplomats quickly crafted an updated version of the document that tilted a number of issues toward the Palestinians and was not reviewed by any Israeli representatives. As ill-fated as the Obama Administration’s attempts were to negotiate peace, these documents offer the Trump Administration an excellent model of how not to approach Middle East diplomacy. 

MIGRATION OFFERS NO GUARANTEES

Historically, when Americans have needed a new job, they have picked up and migrated to where jobs are more prevalent (usually large, urban centers). But, Princeton University economic historian Harold James suggests those workers in the rust belt communities of Michigan, Wisconsin, and elsewhere may not be able to rely on this traditional path to the middle class.

James explains how, unlike previous generations who could secure employment after migrating to cities with the skills they already had, today’s unemployed do not possess the skills to secure the jobs they would be migrating to. The study suggest policymakers will have to adopt new approaches to addressing unemployment and lack of upward mobility within these communities.

$1 BILLION CONTEXT ON QATAR

After several key Middle Eastern nations cut ties with Qatar last week, revelations of a $1 billion hostage deal negotiated between the gulf state’s government and a group of terrorists provides some context into the motivations behind the seismic diplomatic move. The government in Doha allegedly gave the money to members of the Iranian security services and an al-Qaeda affiliate fighting in Syria in order to secure safe return of 26 members of a Qatari falconry party who had been kidnapped in southern Iraq.

The other gulf states – including Saudi Arabia, Egypt, Bahrain, and the United Arab Emirates – had cited the Qatari’s funding of regional extremism and terrorism as a chief reason for their decision to cut diplomatic ties; this hostage deal seems to legitimize some of that concern. How all of the parties react to this hostage deal will play into how the U.S. will reconcile the legitimate grievances of these Middle Eastern nations and the critical role U.S. military installations in Qatar play in the region.

BRING DAYTON TO SYRIA?

Anton Mardasov, head of the Department of Middle Eastern Conflicts at the Moscow-based Institute for Innovative Development, recently published an op-ed proposing the idea of bringing to Syria the tactics used during the 1990s to negotiate peace in Bosnia. As Russia and the United States hold back-channel talks to establish de-escalation zones in Syria, Mardasov suggests that a feasible settlement could be reached along the lines of the famous Dayton Agreement – which secured peace in Bosnia and Herzegovina in 1995.

This type of agreement would allow Syria to preserve its army while integrating the government and the opposition military formations into a new armed forces and establishing separate administrative states. Mardasov also explains this potential solution would also allow for Russia and the U.S. to tolerate each other’s military presence in Syria, since it would be an oversight function for the newly formed united military. One of the largest challenges this potential framework would present is getting each side to trust the other, yet Mardasov suggests that Russia could be willing to compromise. The biggest elephant in the room is how a potential settlement deals with Syrian President Bashar al-Assad.

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THE FRENCH FOUGHT THE HACKERS, AND THE FRENCH WON

After the prominent instances of campaign hacking during the 2016 U.S. presidential election, the French were prepared to fend off similar attacks during their recent presidential election. Russian hackers’ attempts to break into the servers of elected French President Emmanuel Macron’s campaign were stymied; Macron’s team created and filled fake email accounts to confuse hackers, proving that this type of information warfare can be successfully counteracted through early warning and rapid exposure.Our own National Security Agency closely monitored Russian hackers during the French presidential election process, but Macron’s campaign had been the target of sophisticated cyberattacks since December. Russian hackers are clearly still seeking to influence international elections. Yet high profile national campaigns are starting to effectively inoculate themselves from these attacks.

FREEDOM CAUCUS CELEBRATED AT HOME

Members of the right-wing House Freedom Caucus have been the cause of near-constant frustration for Republican leadership on the Hill and the White House. Back in their home districts, however, they’re much appreciated by their constituents. Citizens living in the districts of key Freedom Caucus members – like Reps. Mark Meadows (R-N.C.), Dave Brat (R-Va.), and Morgan Griffith (R-W.Va.) – see the group as an effective, successful check on establishment politicians, especially with their ability to influence the GOP healthcare bill to a point where they could actually support it.

Given this support in their districts, it does not appear the House Freedom Caucus is going anywhere, and if Republican leadership hopes to achieve key policy priorities, they will have to consider the opinion of these members.

SMALL RULE, BIG INVESTMENT IMPACTS

A recent, obscure regulation from the Financial Accounting Standards Board (FASB) may have a large impact on how major tech firms – like Alphabet, Intel, IBM, and Salesforce.com – invest in smaller companies. The rule, entitled “Accounting Standards Update 2016-01,” requires companies who invest below 20 percent in other publicly traded companies to value those investments on a quarterly basis. The intent of this rule is to better inform investors and creditors about a company’s financial health.

Previously, companies were only required to post decreases in an investment’s value and could continue posting the investment at cost despite potential increases. But, the new rule creates a potential problem for those investing in other companies because it requires quarterly analysis of these often difficult-to-value investments, potentially creating unnecessary volatility on their balance sheets.

The concern, especially in the tech industry where companies investing in smaller startups is particularly common, is that the rule will discourage larger companies from investing in innovative smaller companies that show promise – thus disrupting the tech ecosystem that has produced significant growth and opportunity in the past.

SLOW YOUR REGULATORY ROLLBACK

Several top lobbyists for major players in the energy industry have relayed a seemingly unlikely message to the Trump Administration: slow down on deregulating the energy sector. Big energy leaders have expressed concern at the speed with which the Administration is deregulating their industry.

They argue deregulation needs to be done carefully to ensure the companies most impacted by the changes understand them and that the markets are not unnecessarily disrupted. They also worry that if not done correctly, lawsuits or a future Administration could force rollbacks of the rollbacks. There is truth to these concerns, but it is also worth mentioning that big companies often play a role in crafting regulations. Thus, they have a vested interest in keeping some of them in place since they can afford to comply, while smaller companies, who might serve as competition, cannot.

THE UNFOUNDED BIAS AGAINST EMERGING MARKETS

Today, only 10% of private capital investment goes to emerging markets – countries with a Gross National Income per capita of $12,475 or less like South Africa, Brazil, and Thailand. Yet, a new study highlighted by Village Capital finds that entrepreneurs in emerging markets have the same or higher levels of education, have higher revenues, employee more full-time individuals, and have founded significantly more companies on average than their peers in “high-income countries.”

Cultural bias likely plays a role in this disconnect between investor perception and entrepreneur quality in emerging markets. But, the larger issue may be that the “one-size-fits-all, Silicon Valley-style approach to investing” greatly limits what types of entrepreneurs appear attractive. Investors pay attention to the university the founders attended, the network they belong to, and their potential for exponential growth, rather than looking to other indicators that have more proven track records as predictive of success.

This reliance on pattern recognition has resulted in more than half of global venture capital going to just three U.S. metro areas (New York City, Silicon Valley, and Boston). Investors who are brave enough to break from this traditional Silicon Valley-style approach may have a great opportunity in front of them with emerging markets.