Continuing uncertainty will force more cautious strategies, insurers say, such as bigger rate increases, or pullbacks or withdrawals, because they can no longer stomach the risk. Insurers say they were whipsawed by the Trump administration’s moves last week, when President Trump threatened to stop funding the ACA’s cost-sharing reduction subsidies in an effort to prod Democrats to negotiate over a health bill.
Amid Trump Controversies, Tax Overhaul’s Uncertain Path
Congressional Republicans say an ambitious plan is in the works, but obstacles remain
Nobody is quite sure what the White House position is, or when it will become clear. And the whole process is being slowed down by the struggle over whether and how to repeal the Affordable Care Act, which itself is bogged down in uncertainty.
.. Still, GOP leaders consider handling Obamacare first vital for procedural reasons. It’s necessary to resolve the costs and tax implications of the health plan to write a new budget. And under congressional rules a new budget plan is necessary to provide an umbrella under which a tax overhaul can be passed with a simple majority, thereby avoiding a potentially deadly Democratic filibuster in the Senate.
Global Risks Begin to Recede
It isn’t just the Trump effect; from oil prices to Chinese outflows, the world is looking up
business surveys and markets have turned markedly more optimistic.
This is partly because investors hope that any fiscal stimulus Mr. Trump enacts will spill over to other countries. Yet a confluence of other factors is also at work: Oil prices are on an upswing thanks to production cuts by the Organization of the Petroleum Exporting Countries.
.. Firmer energy prices have pushed actual and expected inflation higher. U.S. inflation hit a five-year high in January. Ordinarily that’s bad, but it is now welcomed by central bankers who worried that too-low inflation can easily become destructive deflation.
.. In mid-July bond markets expected inflation in five to 10 years’ time to average 1.2% in the U.S., 1.4% in the eurozone, and 0.1% in Japan. Those figures have since jumped roughly half a percentage point.
.. hopes for fiscal stimulus under Mr. Trump and a Federal Reserve continuing to err on the side of raising rates too slowly, rather than too quickly, are why expected inflation has risen.
.. projects annual growth in nominal Chinese gross domestic product—economic growth plus inflation—will reach 11% in the current quarter, up from below 7% a year earlier. This growth traditionally has correlated closely with oil and industrial prices.
.. political uncertainty hasn’t been the confidence killer that many feared.
.. Mr. Trump has prioritized rolling back regulations; he has yet to act on his harsh protectionist rhetoric.
.. The global economy is still likely to grow just 3.4% this year
.. China may owe its growth rebound to a debt bubble that could soon burst.
Trump’s $440 billion weapon
The president-elect appears set on becoming personally involved in the contracting process. How far can he actually go?
At first glance, Trump would appear to face significant obstacles in using federal contracts as a form of leverage. But conversations with nearly a dozen contracting experts, many who previously worked on procurement issues for the government, suggest that Trump could easily blow through them — and despite the complex bureaucracy, there would likely be few brakes on his use of the process to score political points, reward his friends and punish his enemies. If he does, it could have another effect as well: driving up prices for federal government purchasing overall.
.. “Boeing’s not going to challenge them on that. If you shoot at the king, you better kill him.”
.. However, that program is years in the making and the Chinese and Russians are developing their own variants of the F-35 jet.
.. just the possibility that Trump could use the contracting process in such a manner could have significant implications across the government and economy, creating new uncertainty for both companies and contracting officers.
.. The ultimate result of Trump threatening to terminate federal contracts, whether to prevent companies from moving overseas or to cut down on perceived waste, could be higher costs for the government. Companies, faced with the increased risk of termination or negative publicity from an angry tweet from the president, would likely raise their prices in response, experts said. “With long-term complicated programs, the things that drive up prices are instability and uncertainty,” Schooner said. “That’s what he just added to the process.”
The president’s involvement in federal procurement is also likely to also slow the process.