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Wednesday, May 31, 2017

Congress is investigating another possible Sessions-Kislyak meeting, sources say

Congressional investigators are examining whether Attorney General Jeff Sessions had an additional private meeting with Russian officials during the presidential campaign, according to Republican and Democratic Hill sources and intelligence officials briefed on the investigation. Sessions has previously failed to disclose meetings with Russian officials

Poll: Support for Trump impeachment rises

Poll: Support for Trump impeachment rises

More than three-quarters of GOP voters, 76 percent, don't think Congress should impeach President Donald Trump. | Getty

More than three-quarters of GOP voters, 76 percent, don't think Congress should impeach President Donald Trump. | Getty

An increasing percentage of voters want Congress to impeach President Donald Trump — even if they don't think Trump has committed the “high crimes and misdemeanors” the Constitution requires.

Forty-three percent of voters want Congress to begin impeachment proceedings, according to a new POLITICO/Morning Consult poll, up from 38 percent last week.

"If President Trump was hoping his foreign trip would shift the conversation away from scandals, he may be out of luck," said Morning Consult Co-Founder and Chief Research Officer Kyle Dropp. "Over the last week, support for beginning impeachment proceedings among voters rose from 38 percent to 43 percent."

But that's still less than the 45 percent who don't want Congress to impeach Trump, down a tick from 46 percent the week before.

Only three American presidents in history have faced legitimate impeachment threats.

Much of the support for impeaching Trump comes from political considerations, the poll shows — not a belief that Trump is actually guilty of impeachable offenses, like treason, bribery or obstructing justice.

Of those who want Congress to move toward impeachment, a 54-percent majority of those believe Trump “has proven he is unfit to serve and should be removed from office, regardless of whether he committed an impeachable offense or not.” Only 43 percent of those seeking impeachment believe Trump has committed an offense that meets the high constitutional standards for removal.

The results underscore the intense partisan divisions following last year’s rancorous election. A wide majority of self-identified Democratic voters, 71 percent, want Congress to impeach Trump. But more than three-quarters of GOP voters, 76 percent, don’t think Congress should begin impeachment proceedings.

Despite the sharp split on impeachment, Trump’s approval ratings as president have stabilized, the poll shows. For the second consecutive week, 45 percent of voters approve of the job Trump is doing, while half disapprove. That has recovered from a low of 41 percent prior to Trump’s trip overseas this month.

While poll respondents were not asked explicitly to react to Trump’s first foreign trip, the poll shows voters are skeptical of Trump’s aspirations to help Israel and the Palestinians strike a long-sought peace deal. Only 9 percent think it’s very likely Trump will be able to broker such an agreement. More say it’s either somewhat likely (18 percent), not too likely (28 percent) or not likely at all (31 percent).

Russia probe scares off potential appointees


The growing scandal is giving some candidates cold feet - and distracting aides from finding new recruits.

President Donald Trump has not yet nominated a No. 2 at the Agriculture Department, Education Department, Department of Veterans Affairs and the Environmental Protection Agency, among other posts. | Getty

President Donald Trump has not yet nominated a No. 2 at the Agriculture Department, Education Department, Department of Veterans Affairs and the Environmental Protection Agency, among other posts. | Getty

President Donald Trump’s effort to fill hundreds of vacant jobs across the federal government has hit a new snag: Russia.

Potential hires are paying close attention to the expanding investigations, which have now begun to touch senior Trump aides, with some questioning whether they want to join the administration.

Four people who work closely with prospective nominees told POLITICO that some potential hires are having second thoughts about trying to land executive branch appointments as federal and congressional investigations threaten to pose a serious distraction to Trump’s agenda.

“It’s an additional factor that makes what was an already complicated process of staffing the government even harder,” said Max Stier, head of the Partnership for Public Service, which has advised the Trump transition on hiring.

According to the nonpartisan Partnership for Public Service, the White House has announced nominees for just 117 of the 559 most important Senate-confirmed positions.

That trails the records of Presidents Barack Obama and George W. Bush, who had each nominated about twice as many people by this point in the first year of their first terms.

Trump has not yet nominated a No. 2 at the Agriculture Department, Education Department, Department of Veterans Affairs or Environmental Protection Agency, and dozens of top positions at every federal agency remain vacant. Trump’s nominees for deputy secretary of Commerce and Treasury both withdrew.

One lawyer who represents prospective political appointees told POLITICO that three clients said over the past two weeks that they are no longer interested in working for the Trump administration following the appointment of Robert Mueller as special counsel overseeing the federal investigation into Trump associates’ contacts with Russian officials during the campaign.

“There’s no doubt in my mind that people are being very cautious, to put it mildly,” this lawyer said, adding that there is growing concern in Republican circles that the caliber of hires could deteriorate if the administration’s top picks drop out.

“You’re going to have a situation where they’re going to have trouble getting A-list or even B-list people to sign up,” the lawyer added.

Others agreed. “With all that is going on now, there is certainly a greater amount of hesitation,” said a former government official who regularly speaks with one of Trump’s Cabinet secretaries. “They have a real talent problem that continues to grow.”

A White House spokeswoman said the Russia investigation and the series of news stories that have pummeled the administration in recent weeks have had no impact on hiring. She said the president is recruiting individuals “of the highest quality.”

But the steady stream of palace intrigue stories about internal tensions and plans for a staff shakeup — after months of rumors about various senior officials getting pushed out — are making it harder to persuade people to join the administration, another White House official said.

White House communications director Michael Dubke said Tuesday he will leave his role, while Trump is weighing the possibility of bringing former campaign aides Corey Lewandowski and David Bossie into the White House.

“It’s not the best place to work right now, but you’re still working at the White House, so there are far worse jobs,” the official said.

Former Bush and Obama administration officials who worked on personnel issues told POLITICO they never struggled to find qualified candidates for top jobs.

“I can’t speak to Republicans not wanting to join this administration but, as a general matter, we didn’t have trouble recruiting people — quite the opposite,” said Lisa Brown, who served as White House staff secretary under Obama for two years.

Along with distracting from lower-level hires, the Russia probe has slowed and complicated the process of filling the administration’s highest-profile vacancy — director of the FBI.

Trump administration officials have been frustrated by the difficulties they’ve faced in finding a new FBI director. Top White House officials, including chief of staff Reince Priebus and chief strategist Steve Bannon, hoped to have made a decision made by now.

Instead, leading candidates Sen. John Cornyn (R-Texas), Rep. Trey Gowdy (R-S.C.) and former Sen. Joe Lieberman have all withdrawn from consideration. The White House is now looking at a new field of candidates, and Trump met with two possibilities — John Pistole and Chris Wray — on Tuesday.

“It’s not so easy to find an FBI director in the Trump administration,” the White House official said.

The official added that Trump and his senior team are aware that hiring is not moving fast enough at agencies but said that, right now, “It’s just not priority No. 1.”

A second White House official said he was not aware of any potential nominees dropping out because of the recent news but echoed concerns that the Russia probe would inevitably add to further delays filling empty jobs.

“The problem we are likely to have is it may be difficult to get people to focus on hiring with all of this going on,” the official said.

Andrew Restuccia is a senior policy reporter at POLITICO.

Prior to joining POLITICO, Restuccia covered energy and environmental politics and policy at The Hill. He also reported on energy policy for The Washington Independent and Inside Washington Publishers.

Restuccia graduated from Syracuse University with a degree in journalism. He grew up in Massachusetts, where he got his start as an intern at the Lowell Sun.

House urged to ‘go ugly early’

House urged to ‘go ugly early’
By Scott Wong and Mike Lillis - 05-31-17 06:00 AM EDT

Senior House appropriators are urging GOP leaders to "go ugly early" and pass a massive 2018 spending package before the August recess instead of waiting until the last minute and risk a government shutdown this fall.

The number of must-do items, including extending a popular children's health benefit program and reauthorizing the Federal Aviation Administration, are piling up for September, and appropriators want to prevent a deadline crunch - and avoid another stopgap spending bill at Obama-era levels - by expediting the timeline for the spending bills.

"With the known time constraints we're facing, this is a new idea to make the government-funding process work," said Rep. Tom Graves (R-Ga.), who chairs the Appropriations financial services subcommittee and has been making the case for passing an omnibus package before the summer recess.

"There is no question that this would be a Herculean task," Graves added. "But, if we succeed, we would create more space to address tax reform, financial reform, infrastructure investments and many other challenges while funding the government in a fiscally responsible way."

At the GOP's weekly policy conference last week, Speaker Paul Ryan (R-Wis.) presented rank-and-file lawmakers with several scenarios for how the party could avert a shutdown on Oct. 1: try to pass the 12 appropriations bills one by one through regular order, though almost everyone agrees there's not enough time to get them all through the House and Senate; bundle some of the dozen appropriations bills together in "minibuses" and ship those packages to the Senate; or cut straight to the chase and negotiate a 2018 bipartisan funding deal, given the reality that Democratic votes will be needed to avert a fall shutdown.

Graves stepped to the microphone last week and offered a fourth option: get all 12 spending bills out of the Appropriations Committee, package them in a GOP omnibus bill and pass it on the House floor before Congress adjourns on July 28 for the monthlong summer recess.

Some in the closed-door meeting applauded the idea of Republicans firing off an opening salvo earlier in the process. Fellow Georgia GOP Reps. Barry Loudermilk and Doug Collins voiced support, as did Education Committee Chairwoman Virginia Foxx (R-N.C.), sources said.

Other Appropriations subcommittee chairmen, known as "cardinals" - including Reps. Robert Aderholt (R-Ala.), Tom Cole (R-Okla.) and Mike Simpson (R-Idaho) - have signaled they're open to the Graves plan.

"As a strategy, there is a lot of merit to what Tom is proposing: Let's have the fight in July and go home and message it in August," Cole said in a phone interview Tuesday.

However, Appropriations Committee Chairman Rodney Frelinghuysen (R-N.J.) has not publicly weighed in. "The Chairman is committed to completing all 12 appropriations bills," said his spokeswoman, Jennifer Hing.

In recent years, Congress has pushed the annual spending debate right to the end of the fiscal calendar on Sept. 30, largely due to entrenched disagreements between the parties over the role and scope of the federal government. Those disputes have been only enflamed under President Trump.

Appropriations sources have described the Graves plan as "going ugly early." Rep. Ra l Labrador (R-Idaho), one of the leaders of the far-right Freedom Caucus, doesn't like that term but said he'd back the idea because it avoids the need for another continuing resolution and conservatives can insert policy riders in an omnibus bill.

"I think we should go pretty early. Instead of ugly, let's go pretty. Let's do it right," Labrador told The Hill. "Let's keep the promises we made to the American people. We can put a lot of our priorities in the appropriations bills."

Before moving on to their favored spending bills, though, Republicans must first pass a 2018 budget that sets the top-line spending levels - a process that's already months behind schedule. Budget Committee leaders have been hoping to release a proposal in the second week of June, with a markup to follow shortly after.

"We're working on it, and we're going to bring it out as soon as we get consensus and get all of our people together," Budget Chairwoman Diane Black (R-Tenn.) said last week.

Democrats on the panel are increasingly doubtful that the Republicans will stick to that calendar. They're citing both internal GOP divisions and the vocal criticisms many Republicans lobbed at Trump's budget, which slashed domestic programs nearly across the board, including many favored by Republicans.

"It just looks like they're in pretty much disarray as to what direction they want to go," Kentucky Rep. John Yarmuth, the top Democrat on the Budget Committee, said as Congress was leaving for the Memorial Day recess.

"They obviously are not making much progress in putting anything together."

With that in mind, Yarmuth predicted Republicans would be forced to scrap any plans for major cuts and set next year's spending on a course similar to that established in the 2017 omnibus. And with filibuster power in the Senate, Democrats expect to have leverage.

"They're going to have to come hat in hand to us," Yarmuth said. "I can't imagine a scenario in which they don't have to get Democratic votes."

Those dynamics spell bad news for Republicans, like Labrador, who hope to attach policy riders to a summer omnibus. The resulting clash will pressure both sides to push the spending debate beyond the August recess.

Trump's impatience with GOP grows

Trump's impatience with GOP grows
By Alexander Bolton - 05-31-17 06:00 AM EDT

An impatient President Trump is putting new pressure on Senate Majority Leader Mitch McConnell (R-Ky.) to get rid of the filibuster in order to speed progress on legislation repealing ObamaCare and reforming the tax code.

In a message posted Tuesday on Twitter, Trump urged Republican senators to invoke the so-called nuclear option and "switch to 51 votes, immediately, and get Healthcare and TAX CUTS approved, fast and easy."

Trump also suggested his party wasn't as cutthroat as Democrats when it comes to passing legislation, writing, "Dems would do it, no doubt!"

It's just Trump's latest attempt to press McConnell to eliminate the power to filibuster legislation, something Republican lawmakers firmly rejected when the president floated the idea only a few weeks ago.

That he used Twitter to do so was no surprise - but may have irritated McConnell, who has urged the president to rethink his use of social media.

Tuesday's tweet indicates the president's patience on his legislative agenda is waning.

McConnell has downplayed expectations, repeatedly refusing to put a timeline on the ObamaCare fight even as Trump and Speaker Paul Ryan (R-Wis.) have raised pressure.

McConnell also has raised doubts over whether there is even a path to passing a bill, telling Reuters, "I don't know how we get to 50 [votes] at the moment."

He did warn earlier this month that "we can't take forever."

Other Senate Republicans have suggested an informal goal of holding a healthcare vote before the August recess, just days before Trump's 200th day in office.

GOP leaders hope to have the first draft completed by the time lawmakers return to Washington next week from the Memorial Day recess.

On tax reform, McConnell has sounded more optimistic, saying prospects are "pretty good."

The tacit message to colleagues: Don't let an interminable debate over healthcare derail tax reform.

Yet Senate Republicans can't even get to tax reform until they conclude work on ObamaCare.

The GOP is using special budgetary rules to pass both measures with just 51 votes. But it can't complete tax reform until it finishes work on healthcare, because the tax reform bill is subject to a 2018 budget that assumes savings on ObamaCare legislation passed for the 2017 fiscal year.

Once senators pass a new budget resolution to create a special reconciliation vehicle for tax reform, they will no longer be able to use the one they now plan to use to repeal and replace ObamaCare.

The fact that Republicans are already using the budget reconciliation rules to prevent Democrats from filibustering ObamaCare and tax reform legislation created a bit of confusion with Trump's tweet, which seemed to imply the filibuster was an obstacle. In reality, Democrats would be unable to use it to block a GOP bill under the current Republican plan.

Eliminating the filibuster altogether could speed things along, however, as the rules for reconciliation are strict and it could take weeks to ensure the legislation does not violate a six-part test known as the Byrd rule, according to Senate GOP aides.

Parliamentary experts warn that briefing Senate Parliamentarian Elizabeth MacDonough on various proposals and receiving her feedback before putting legislative language on paper will be a lengthy process. MacDonough will determine what falls under the Byrd rule.

At the same time, there's no guarantee the Senate can agree to an ObamaCare repeal bill with or without budget reconciliation rules. In each scenario, they can only afford two GOP defections.

"The real issue is a lack of consensus within the Republican Party in the Senate," said Dan Holler, vice president at Heritage Action for America.

Conservative and moderate senators are split over ObamaCare's expansion of Medicaid and whether to let states opt out of insurance requirements.

There's also a brewing turf battle among the various committee chairmen involved in a special 13-member healthcare working group over who will take the lead in drafting the legislation.

Senate Budget Committee Chairman Mike Enzi (R-Wyo.) is writing the legislation and responsible for making sure it passes parliamentary muster, but Senate Finance Committee Chairman Orrin Hatch (R-Utah) has primary jurisdiction and expects to take the lead role in crafting the policy.

Asked if the working group or the Finance panel would take the lead, Hatch said, "The Finance Committee, that's the jurisdiction."

"Don't think otherwise," he added. "We're listening to the [13-member] committee, the ad hoc committee. We're interested in listening to anybody, but it's our responsibility."

Enzi, however, told reporters the legislation "comes under reconciliation, so it's a budget function."

But he added, "I've got a lot of help."

Enzi is now laid up after emergency gallbladder surgery in Wyoming, which could further complicate the drafting efforts.

Trump's needling of GOP senators on the filibuster is nothing new.

The president lashed out earlier this month after Democrats claimed victory on legislation funding the government for the rest of 2017, which excluded money for building a wall along the U.S.-Mexico border - a top presidential priority.

Trump tweeted that Republicans must either increase their Senate majority in the 2018 midterm election or "change the rule now to 51 percent."

The call for reform was roundly rejected by Senate Republicans, however.

McConnell tersely stated that Trump's idea "will not happen," and others noted that more than 60 senators have signed a letter to Senate leaders urging them to preserve the legislative filibuster.

20 years from now, I will be in Heaven -This was written by a woman born in Egypt as a Muslim. Make sure you read the  paragraph (in red )  toward the end.

Joys of Muslim Women


By Nonie Darwish

In the Muslim faith a Muslim man can marry a child as young as 1 year old and have sexual intimacy with this child. Consummating the marriage by 9.


The dowry is given to the family in exchange for the woman (who becomes his slave) and for the purchase of the private parts of the woman, to use her as a toy.

Even though a woman is abused she cannot obtain a divorce. To prove rape, the woman must have (4) male witnesses.


Often after a woman has been raped, she is returned to her family and the family must return the dowry. The family has the right to execute her (an
honor killing) to restore the honor of the family. Husbands can beat their wives 'at will' and he does not have to say why he has beaten her.

The husband is permitted to have (4 wives) and a temporary wife for an hour (prostitute) at his discretion.

The Sharia Muslim law controls the private as well as the public life of the woman.

In the Western World ( Canada, Australia, United States and Britain) Muslim men are starting to demand Sharia Law so the wife cannot obtain a divorce and he can have full and complete control of her. It is amazing and alarming how many of our sisters and daughters attending American, Canadian, Universities and British Universities are now marrying Muslim men and submitting themselves and their children unsuspectingly to the Sharia law.

By passing this on, enlightened Canadian, Australians, American and British women may avoid becoming a slave under Sharia Law.


 Ripping the West in Two.

Author and lecturer Nonie Darwish says the goal of radical Islamists is to impose Sharia law on the world, ripping Western law and liberty in two.

She recently authored the book, Cruel and Usual Punishment: The Terrifying Global Implications of Islamic Law. Darwish was born in Cairo and spent her childhood in Egypt and Gaza before immigrating to America in 1978, when she was eight years old. Her father died while leading covert attacks on Israel. He was a high-ranking Egyptian military officer stationed with his family in Gaza ......

When he died, he was considered a "shahid," a martyr for jihad. His posthumous status earned Nonie and her family an elevated position in Muslim society..

But Darwish developed a skeptical eye at an early age. She questioned her own Muslim culture and upbringing.. She converted to Christianity after hearing a Christian preacher on television


In her latest book, Darwish warns about creeping sharia law - what it is, what it means, and how it is manifested in Islamic countries

For the West, she says radical Islamists are working to impose sharia on the world. If that happens, Western civilization will be destroyed. Westerners generally assume all religions encourage a respect for the dignity of each individual. Islamic law (Sharia) teaches that non-Muslims should be subjugated or killed in this world.

Peace and prosperity for one's children is not as important as assuring that Islamic law rules everywhere in the Middle East and eventually in the world.

While Westerners tend to think that all religions encourage some form of the golden rule, Sharia teaches two systems of ethics - one for Muslims and another for non-Muslims.

Building on tribal practices of the seventh century, Sharia encourages the side of humanity that wants to take from and subjugate others..

While Westerners tend to think in terms of religious people developing a personal understanding of and relationship with God, Sharia advocates executing people who ask difficult questions that could be interpreted as criticism

It's hard to imagine, that in this day and age, Islamic scholars agree that those who criticize Islam or choose to stop being Muslim should be executed. Sadly, while talk of an Islamic reformation is common and even assumed by many in the West, such murmurings in the Middle East are silenced through intimidation

While Westerners are accustomed to an increase in religious tolerance over time, Darwish explains how petrol dollars are being used to grow an extremely intolerant form of political Islam in her native Egypt and elsewhere.

Harvard Law Journal Concludes Unborn Babies Have Constitutional Rights

Cortney O'Brien 

The Fourteenth Amendment, which was adopted in 1868, declares that no state shall “deprive any person of life, liberty, or property, without due process of law; nor deny to any person within its jurisdiction the equal protection of the laws.” A debate that has been raging in courtrooms for years is whether the “life” part includes unborn persons.

Harvard Law student Joshua Craddock did some constitutional soul searching to answer that question in a new report for the Harvard Law Journal, concluding that unborn babies do fall under the Fourteenth Amendment’s protections.

One might look to dictionaries of legal and common usage, the context of the English common law tradition, and cases that attempted to construe the meaning of the text in a manner consistent with original meaning. Using this methodology, it is reasonable to construe the Fourteenth Amendment to include prenatal life. The structure of the argument is simple: The Fourteenth Amendment’s use of the word “person” guarantees due process and equal protection to all members of the human species. The preborn are members of the human species from the moment of fertilization. Therefore, the Fourteenth Amendment protects the preborn. If one concedes the minor premise (that preborn humans are members of the human species), all that must be demonstrated is that the term “person,” in its original public meaning at the time of the Fourteenth Amendment’s adoption, applied to all members of the human species.

In addition to using language to prove his point, Craddock puts his conclusions in context, noting that at the time the Fourteenth Amendment was written, several states called the unborn person a “child” in their anti-abortion laws. Moreover, The Stream notes, in 1859, the American Medical Association mandated that the government must protect the “independent and actual existence of the child before birth.”

Using this logic, Craddock notes, the Supreme Court justices were flawed in their 1973 ruling in Roe v. Wade, which granted the right to abortion. When he wrote the majority opinion, Justice Harry Blackmun failed to properly assess the word “person” as it was applied in 1868, Craddock argues.

Will the Supreme Court consider the Fourteenth Amendment in future cases dealing with abortion?

FACT CHECK: Does The Trump Budget Gut Medicaid?

FILE PHOTO: White House Office of Management and Budget Director Mick Mulvaney speaks about of U.S. President Donald Trump's budget in the briefing room of the White House in Washington, U.S. on March 16, 2017. REUTERS/Kevin Lamarque/File Photo

By David Sivak
30 May 2017, 10:06 PM

Last week the White House released a federalbudgetthat, among other changes, would reduce projected Medicaid spending by $610 billion across 10 years.

The proposed reduction has received a lot of negative press. Chairman of the Democratic National Committee Tom Perez, claimsthe budget “absolutely dismantles Medicaid.” The New York Timesreportsthat the budget “cuts deeply into Medicaid.” Other articlessuggestthe budget would “gut” the federal program.

Verdict: False

Medicaid is a healthcare entitlement thatsupportsabout 69 million low-income Americans, including adults, children, the disabled and the elderly. State governments administer the program, which federal dollars heavily subsidize.

In 2016, the federal government spent$368 billion on Medicaid. Federal expenditures are expected to balloon in the coming years, reaching $688 billion in 2027 – an increase of about 87 percent – under baseline projections from the Office of Management and Budget (OMB).

The White House’s proposed budget also grows Medicaid substantially over time, but the increases are less steep year over year. From 2016 to 2027, federal expenditures would increase about 42 percent. The lower growth rate would save the government $610 billion when compared to the baseline estimate.

What many refer to as “cuts to Medicaid” are actually cuts to the growth of Medicaid, not the current size of the program. The Trump administration allocates more for Medicaid every year of the budget. Director of the Office of Management and Budget Mick Mulvaneycallsthe misconception “a classic example of how Washington speaks differently than the world back home.”

Critics counter that despite increased spending in the budget, the size of Medicaid shrinks over time as a percentage of GDP, a measure of the size of the economy, dropping from two percent today to 1.7 percent in 2027.

While this is true, when looking at the size of Medicaid as a percentage of the total budget, it remains, on average, about the same size – 9.6 percent of the total budget – compared to 2016 funding levels. For this reason, it’s misleading to characterize the savings as cuts to Medicaid.

The administration would achieve a slower growth rate by restructuring Medicaid in 2020, allowing states to choose between a block grant or a per capita spending cap. Right now, there is no cap on the matching funds the federal government provides to states.

The administration argues this change would lead to innovation and more efficient budgets at the state level, but it would also likely strain state government’s ability to maintain current levels of service.

The White House proposed Medicaid reforms are similar to those proposed under the American Health Care Act (AHCA), which the Congressional Budget Office (CBO) projectswould reduce Medicaid spending by $834 billion over a 10-year window.

The $834 billion reduction in the AHCA is separate from the $610 billion of savings in the White House budget. Mulvaneybelievesthese savings will overlap with one another and that combined cuts to the growth of Medicaid will be more than $834 billion but less than $1.4 trillion.

Although the White House budget continues to grow Medicaid over time, certain segments of the population may still be negatively impacted down the road. For instance, the CBO projects that lower spending due to the AHCA would result in 14 million fewer individuals on Medicaid by 2026.

The enormous growth projected for Medicaid is driven by the rising cost of healthcare and the aging population of the country. For example, average federal spending per disabled enrollee willincreaseabout 50 percent by 2027 according to CBO estimates. Based on the latest actuarialreportfrom Medicaid, 81.6 million Americans will be enrolled in the program by 2025 under current law – 12.6 million more individuals than there are today.

The White House proposed Medicaid budget may not be able to fully accommodate these demographic trends, but it reflects an attempt to balance the budget within 10 years while not touching programs like Medicare or Social Security.

Congress will ultimately craft and pass a budget. Trump’s proposal is merely a blueprint of the administration’s priorities. But the reaction tothe proposalis evidence of how politically sensitive addressing entitlement spending can be.

Our Verdict:

Politicians and news outlets alike have given the false impression that the White House budget would downsize Medicaid. Although the budget allocates less than baseline estimates, it does not cut funding below current levels. On the contrary, it grows the size of Medicaid and keeps funding levels over time proportional in terms of the total budget. We rate this claim as false.

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China: The Greatest Financial Bubble In History

Authored by James Rickard svia The Daily Reckoning blog,

China is in the greatest financial bubble in history. Yet, calling China a bubble does not do justice to the situation. This story has been touched on periodically over the last year. 

China has multiple bubbles, and they’re all getting ready to burst. If you make the right moves now, you could be well positioned even as Chinese credit and currency crash and burn.

The first and most obvious bubble is credit. The combined Chinese government and corporate debt-to-equity ratio is over 300-to-1 after hidden liabilities, such as provincial guarantees and shadow banking system liabilities, are taken into account.

Paying off that debt requires growth, but the growth itself is fueled by more debt. China is now at the point where enormous new debt is required to achieve only modest new growth. This is clearly non-sustainable.

The next bubble is in investment instruments called Wealth Management Products, or WMPs. You may remember hearing about in the Daily Reckoning and also covered in Bloomberg’s article China Is Playing a $9 Trillion Game of Chicken With Savers.

Picture this. You’re a middle-class Chinese saver and you walk into a bank. They offer you two investment options. The first is a bank deposit that pays about 2%. The other is a WMP that pays about 7%. Which do you choose?

In the past ten years, bank customers have chosen almost $12 trillion of WMPs. That might be fine if WMPs were like high-quality corporate or municipal bonds. They’re not. They’re more like the biggest Ponzi scheme in history.

Here’s how they work. Proceeds from sales of WMPs are loaned to speculative real estate developers and unprofitable state owned enterprises (SOEs) at attractive yields in the form of notes.

So, WMPs resemble collateralized debt obligations, CDOs, the same product that sank Lehman Brothers in the panic of 2008.

The problem is that the borrowers behind the WMPs can’t pay their debts. They’re relying on further bubbles in real estate or easy credit from the government to meet their interest obligations.

What happens when a WMP matures? Usually the bank customer is encouraged to rollover the investment into a new WMP. What happens if the customer wants her money back? The bank sells a new WMP to another customer, then uses those sales proceeds to redeem the first customer. The new customer now steps into the shoes of the first customer with the same pile of bad debt. That’s where the Ponzi dynamic comes in.

Simply put, most of the debts backing up the WMPs cannot be repaid, which means it’s just a matter of time before the WMP market goes into a full meltdown and triggers a banking panic.

Finally, there is an infrastructure bubble. As explained in more detail below, China has kept its growth engine humming mostly with investment instead of aggregate demand from consumers.

Investment is fine if it is directed at long-term growth projects that produce a positive expected return and help the broader economy grow as well. But, that’s not what China has done.

About half of China’s investment in the past ten years has been wasted on “ghost cities,” white elephant transportation facilities, and prestige projects that look good superficially, but that don’t produce enough revenue or efficiencies to pay for themselves.

Much of this investment was financed with debt. If the project itself is not revenue producing then the associated debt cannot be repaid, and will go into default.

The toxic combination of government debt, corporate debt, WMPs, and unrealistic growth expectations have set up China for the greatest market crash in history. But, not yet. As analysis will continue to prove, political forces will put off a day of reckoning until early 2018.

The Middle-Income Trap

Most of the debt statistics noted above are well known. Analysts are relaxed about it. They acknowledge that debt levels are high, but point to the fact that China has the second largest economy in the world, and is by far the fastest growing major economy in the world.

Even though growth rates have fallen from 10% to 6.5% in recent years, that 6.5% growth is still enviable compared to 2% growth in the U.S., and less than 1% growth in Europe. China’s debt burdens are manageable as long as the growth is there to support the debt.

This rosy scenario ignores two harsh realities. The first is known as the “middle-income trap.” The second is a death spiral of rising debt and rising interest rates that choke off growth just when it is needed most. 

When I studied development economics in graduate school in the 1970s, it was widely believed that the most difficult part of moving countries from poverty to wealth was the initial stage. Societies seemed stuck in a permanent rut of primitive agrarian culture and simple resource extraction.

What was needed was a “takeoff” that would move citizens to cities, improve productivity on the land (the “green revolution”), and employ newly urbanized workers with foreign direct investment, foreign aid, and national savings. From there the expectation was that growth would be self-sustaining and economies would grow rich over time — just as Japan and Germany had achieved high-income status from the ruins of World War II.

It turned out that the first part of this model was true, but the second part was not.

In broad terms, the IMF and OECD define a “low-income” country as one with per capital income of less than $5,000 per year. A “middle-income” country lies between $5,000 and $20,000 annual per capita income. Above $20,000 per year of per capita income is generally considered “high income.”

Obviously such measures are somewhat arbitrary. Also, because they are averages they mask a lot of relevant information about income distribution. In the case of China, per capita income is about $8,000 per year, but extreme income inequality means that the median income if far less.

These figures also do not take into account government benefits and social safety nets than can produce a decent quality of life even at lower income levels. China has no robust social safety net (one reason the personal savings rate is so high). This means the $8,000 per year income figure overstates the income security of Chinese workers compared to some other countries.

Even adjusting for income inequality and no social safety net, the Chinese per capital income figure puts it solidly in the middle-income ranks. By way of contrast, India today is stuck in poverty at $1,600 per year. In the high-income ranks, Switzerland’s per capital income is $81,000, almost 50% greater than the United States.

In 1960, per capita GDP for China was $90 in constant dollars. The Chinese Miracle is that per capita income has risen 10,000% in less than 60 years, with most of that coming in the past 35 years since the death of Mao Zedong.

All of this is consistent with the 1960s takeoff theory I studied in the 1970s. The problem is that this growth is not self-sustaining. It turns out that the path from poverty to middle-income is straightforward, but the path from middle-income to high-income is far more difficult.

Moving from poverty to middle-income is just a matter of mobilizing factor inputs of labor and capital. The labor comes from hundreds of millions of citizens moving from subsistence level farms to cities and taking manufacturing jobs. Finance capital comes from export-related savings and foreign direct investment.

The result is an explosion of income through simple assembly-type manufacturing and cheap exports. This process is helped by a cheap currency, which China manipulated from 1995 to 2008.

Moving from middle income to high-income is a different challenge. It cannot be done with more of the same urbanization and manufacturing. It requires high-value added products that come from education, technological innovation, and entrepreneurship.

Germany and Japan managed this after World War II because they had huge reservoirs of human capital in the form of an educated workforce despite the destruction of physical capital.

Since then, only three major countries (other than oil exporters) have moved from middle-income to high income. Those three are Taiwan ($22,000), South Korea ($27,500), and Singapore ($53,000). (Macau and Bahamas also made the leap, but those are special cases based on tourism and gambling that cannot be applied to major industrializing economies).

China is not alone in the middle-income trap. It is stuck there with Malaysia ($9,300), Mexico ($8,500), Turkey ($11,000), and several others.

All of these countries have grown through some combination of assembly-type manufacturing, tourism, energy exports, and commodity exports. None has generated the kind of self-sustaining technological innovation seen in Taiwan, South Korea, and Singapore.

The prospects for China to break out of the middle-income trap are poor. China’s theft of intellectual property and weak rule of law make it an unattractive venue for technology development. Its Communist Party dictatorship also does not allow the free exchange of ideas, social media connections, and entrepreneurship needed to generate high-value added processes.

At the same time, China’s advantages in assembly-type manufacturing are being siphoned away by low-income countries such as Vietnam ($2,100), Philippines ($3,000), Indonesia ($3,600), and others in Central and South America.

Of course, the greatest threat to Chinese output in the manufacturing sector in India. There, one billion people are ready to make the same transition from farm to city that China made in the 1980s and 1990s.

In short, Chinese growth is in severe jeopardyIts manufacturing base is being taken over by competitors and its high-tech future has yet to emerge, and may never emerge in time to avert a debt crisis.

The Chinese Miracle is no miracle at all, it’s just simple development economics. China is now out of time and out of good options. 

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