Thursday, August 3, 2017

Trump's threat to the individual insurance market

Last summer, when the world still made a little bit of sense, I decided to contemplate a horrifying hypothetical.  What if someone as crazy as Trump actually became President?  I wrote a series on it-- "Political science & craziness."  The gist of it was that there is actually a benefit, derived from Thomas Schelling's The Strategy of Conflict.  If you can credibly threaten to carry out threats, even when they are self-destructive threats, then you can extract concessions that sane actors couldn't.  Give me what I want, or I'll blow us both up!  That kind of thing.

The thing is, you get the real benefit from appearing to be crazy, not actually being crazy.  Someone who actually is crazy eventually might blow himself up.  In Part V of the series, I wrote that a significant problem with someone like Trump would be whether or not he could recognize when he was demanding too much, or lock himself into carrying out a threat because he demanded something that just couldn't be done.  Disaster would ensue.  If I threaten to blow us both up if you don't sprout wings and fly, and I'm so damned crazy that I can't back down from a threat, we're both kind of screwed...

And that brings us to the current situation on healthcare.  As I wrote yesterday, one of the more interesting aspects of the current mess is Trump's threat to the "cost share reductions."  I won't go into the policy details, 'cuz I don't give a shit and other people do that better.  Short version:  Congress fucked up when they wrote the ACA and didn't give the President proper authorization to give the money to the insurance companies for when they have costly customer pools.  It was a drafting error, and everyone knows it.  Conservatives sued once they found the error, in order to stop Obama from making the payments, based on the theory that if they could stop the payments, they could collapse the individual markets (possibly true), which would cause a backlash against Obama, which Republicans could use to get unified control of government and repeal Obamacare.

Stop laughing!

Actually, if the individual markets had completely collapsed like that, a unified Republican government would have had a much easier time repealing Obamacare, so really, stop laughing.

However, things are different now that Trump is considering making the decision.  If the courts say, you can't do that, that's one thing.  That means Congress fucked up.  Point of fact, they did.  The proper response is a matter of legitimate debate, but Congress did fuck up.  That's kind of their thing, just like snark is my thing.  It would be different, though, if the President makes the threat.

That's the thing.  Trump has threatened that he will cut off the payments if Congress doesn't act.  Dumb, dumb, dumb.  In a classically Trumpian way.

Let's do this the game theory way.  We use a technique called "backwards induction," which means, we start at the end, figure out everyone's best move at the end of the game, and work our way back to the beginning.  Suppose Trump backs down.  Then, Democrats don't have to do anything.  They've probably won.  Obamacare has holes that need to be patched, but the Medicaid expansion stays, the tax subsidies stay, the regulations stay, and the Democrats will sit on the problems until Trump is out of office hoping that somewhere down the line, the people involved will be less Trumpian.  It's still mostly a victory if they just sit and do nothing.  On the other hand, suppose Trump cuts off the money.  Trump thinks that means the Dems come crawling to him and go along with some Trumpian plan.  Um, no.  Cutting off the CSR doesn't touch the regulations, Medicaid expansion or tax subsidies.  The Republican plans all center on slashing the Medicaid expansion.  Combine that with the fact that Trump collapsing the individual markets will cause a Republican electoral collapse and if Democrats refuse to "come to the table," as Trump says, they can keep the Medicaid expansion, regulations and tax subsidies, and patch the CSR later after they take control.

What about the Republicans?  Here's where Trump's CSR threat might actually carry some weight.  If the congressional GOP actually think he might do it, they might pass a bill to stop him because it would be so disastrous for the GOP.  That's the point about self-destructive threats.  The problem is, which legislators are swayed by the threat?  The House passed a bill.  Trump did a big ceremony for it.  (Did you notice that he had a ceremony for that, like it was an actual piece of legislation signed into law, but skipped the congratulatory ceremony for the Russia sanctions bill?  Hmmm...)  The Senate killed the proposal.  So, which Senators are swayed?  Collins?  Yeah, they got nothin' on her.  Besides, she's probably running for Maine Governor.  Murkowski?  The one who lost a tea party primary to Joe Miller in 2010 and then beat him in the general as a fucking write-in?  And isn't even up again until 2022?  Yeah, she's not fucking scared.  Skinny repeal failed by one vote-- McCain.  What's Trump going to do to McCain now?

So, it is difficult to see how the threat gets Congress to pass anything.  Trump needs to back down.  This returns us to a key point that Schelling makes repeatedly.  Backing down reduces the credibility of your future threats.  And Trump hates to do it.  On this, if I had to guess, I'd guess he will back down.  I don't think he'll blow up the individual markets.  How much confidence do I have in that?  A little, not a lot.  He's reckless and stupid, but he also tends to listen to the last person to talk to him.  He'll have Tom Price telling him "no fucking way" on this, and I doubt even Steve Bannon will advocate shutting down the CSR money.  Trump does make idle threats.  Then again, he is impulsive, so who knows?


  1. Two thoughts:

    1) The WaPo transcript of the call to Nieto fits just so perfectly here that I have to assume that broke after you wrote this.


    1. In theory, you could check the time stamp and confirm that I did, indeed, post this before the WaPo story went up. I did.

      What's great is that he is almost aware of how fucked he is, but he doesn't seem to understand that Nieto isn't motivated by what's best for Donald J. Trump.

    2. I'm on the west coast. All this shit happens before I wake up. To then have to figure out exactly when the Nieto call came out and when you posted.....not worth it.

      To harken back to La Burrita: Stupid doesn't know the opponent's payoffs. Crazy doesn't know their own. Trump is stupid.

    3. As the transcript shows again, Trump is a mercantilist. Everything is zero-sum. He thinks all of the payoffs are 1s and 0s. Therefore, he gets everyone's payoffs wrong. He is both stupid and crazy.