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President Trump’s tax plan turned out to be a one-page outline, and his infrastructure plan doesn’t yet exist at all. So it was notable this week when the administration’s plan for reforming banking regulation turned out to be a real, substantive document that, as Bloomberg’s Matt Levine put it, “generally seems to have been written by professionals who are familiar with bank regulation.”
The nearly 150-page Treasury Department plan — the first of several expected reports on financial regulation — laid out the Trump administration’s approach for dealing with what it sees as a fundamental roadblock to its goal of faster economic growth: burdensome rules that discourage banks from lending to people and businesses. Much of the administration’s ire is directed at the Dodd-Frank Act, the 2010 law that increased regulation of banks and other institutions in the wake of the financial crisis.
Trump repeatedly criticized Dodd-Frank on the campaign trail last year; once in office, he vowed to “do a big number” on the law, and in February he signed an executive order calling for a review of its provisions (along with other banking rules). But many of the Treasury Department’s proposals are comparatively moderate. Many Republicans, for example, want to repeal the “Volcker rule,” which bans banks from placing financial bets with their own money; the Treasury report, however, proposes only to limit the rule’s scope, not eliminate it entirely. Similarly, the administration wants to limit the power and independence of the Consumer Financial Protection Bureau but not shut it down, as some Republicans have proposed. Most of the Treasury report is dedicated to relatively esoteric proposals that, though significant (and controversial), are unlikely to reshape the financial system in a fundamental way. (The House earlier this month passed a more sweeping rollback of the Dodd-Frank rules, but the bill is unlikely to win Senate approval.)
It isn’t clear, however, that the core problem that the Treasury’s plan sets out to solve actually exists. Dodd-Frank is a complex, unwieldy law that almost no one loves — even former Congressman Barney Frank, one of the bill’s authors, has said parts of the law need fixing. But it’s less clear that the law has significantly constrained lending, or that those constraints are, in turn, holding back the economy. Total commercial and industrial lending is at an all-time high, according to data from the Federal Reserve, and household debt recently surpassed pre-financial-crisis levels (though households owe less as a share of their income than they did before the downturn). Some types of loans, notably mortgages, are definitely harder to get than they were before the financial crisis, but that’s not necessarily a bad thing; irresponsible lending, after all, played a key role in the economic collapse. Beyond those specific areas, however, the problem facing the global economy in recent years has been a lack of demand for credit, not a lack of supply. That doesn’t mean Dodd-Frank shouldn’t be fixed, but it does suggest that those changes are unlikely to deliver the economic rewards Trump is hoping for.
Health care: Looking back to look ahead
Senate GOP efforts to write a bill to repeal and replace parts of the Affordable Care Act are shrouded in secrecy (even some Republicans say they haven’t seen the bill). So while waiting for more details to come to light, health policy organizations and foundations have been working to understand the House version of the bill, which is reportedly serving as the basis for the Senate package. That’s easier said than done: Though relatively short by legislative standards (largely because it is functionally an add-on to the ACA), the House bill involves a lot of moving parts. The effects of some pieces are relatively straightforward, like the rollbacks to Medicaid, but others, such as a series of waivers that states could adopt to loosen insurance regulations, are not. And one criticism of the Republican efforts has been that they are moving too fast to fully explore how they might change the health care landscape.
That change could be substantial. Take those waivers, for example: Under the Affordable Care Act, insurers must cover a broad range of services. Through one of the waivers, the House bill would let states opt out of those requirements in certain circumstances, and the Congressional Budget Office estimates that up to half of the population lives in states that would do so. One big question, then, is which specific services insurers in those states would choose to cover. Although we don’t have a crystal ball to tell us, we can look backward for clues.
An analysis released by the Kaiser Family Foundation this week examined what kinds of services were covered before Obamacare. Most insurers were willing to cover generic prescription drugs, the analysis found, while only 25 percent of individual plans covered maternity care. Treatment for substance abuse and mental health care was more split, with 55 percent of plans covering substance abuse treatment and 62 percent covering mental health services. Those are troubling numbers in a time when the U.S. is experiencing an unprecedented number of drug overdose-related deaths. Sure, it would be unpopular to remove those benefits, but history shows us that without regulations in place, insurers just might.
Immigration: See you in court
Trump’s efforts to temporarily ban travel from six predominantly Muslim countries experienced another setback in the courts this week as a second federal appeals court upheld a block of a revised version of his executive order. After two appeals courts have refused to reinstate provisions of the order, the Supreme Court will decide whether the ban can take effect.
The two appeals courts reached the same conclusion — Trump’s ban is illegal — but they followed somewhat different reasoning to get there. In the latest decision, from the 9th U.S. Circuit Court of Appeals, a three-judge panel unanimously found that the president didn’t adequately explain why allowing entry from the countries was detrimental to interests of the U.S. In a separate decision last month, a majority from the 4th Circuit Court of Appeals found the revised travel order violated the First Amendment’s prohibition on religious discrimination. The court based its decision in part on comments that Trump made during the campaign; Chief Judge Roger Gregory wrote that they revealed Trump’s intent to ban Muslims from the U.S. But even after a court loss that resulted from his own words, Trump hasn’t stopped tweeting that the travel limitations are needed.
The lengthy court battle has introduced another wrinkle to the case: The original justification for the travel ban was that the administration needed time to study vetting procedures for visitors from the six countries. But, critics say, after all the back and forth with the courts, the administration will have had plenty of time to conduct its study.1 They argue, in effect, that courts shouldn’t bother ruling on the temporary suspension at all and should wait to consider whatever new vetting rules the administration comes up with. The proposed ban is only temporary, said Lee Gelernt, deputy director of the national Immigrants’ Rights Project at the American Civil Liberties Union. “Before deciding whether to hear these issues, the Supreme Court should wait to see if the government issues a permanent ban after the review period is done,” Gelernt said.
CORRECTION(June 19, 5:30 p.m.): An earlier version of this article incorrectly described the 9th Circuit’s decision. The court found that the president didn’t adequately explain why it would be detrimental to the U.S. to allow travel from certain countries, not why it would be detrimental to block such travel. The paragraph has been updated.