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Two Laws to Be Repealed, but Are the Replacements Strong?

Thursday, January 19, 2017 By Deena Zaidi, Speakout | Op-Ed
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On January 20, President-elect Donald J. Trump will inherit an economy that looks very different to what President Obama received in 2009. 

When President Obama moved to the Oval Office, he inherited an ailing economy that was facing a whiplash from the subprime mortgage crisis. The unemployment rate was as high as 7.3 percent, quickly moving towards 10 percent while home prices and stock prices plummeted at a steep rate. Amidst struggling industries and failing banks, a quick revival of the economy meant the introduction of fresh and non-traditional economic policies. With Obama's $787 billion economic stimulus package and subsequent measures, the 2007 recession officially ended in June 2009.

Though the repercussions of the crisis loomed in the coming years, the Obama administration introduced many reforms that have remained unique to his administration. 

As his term draws to a close, many will unanimously agree that he ended the Great Recession, the worst since the Great Depression and got 6 million American workers back at work.

Under Trump, two of Obama's signature policies face a vehement repeal, but in the absence of stronger alternatives, such repeals may only create a situation, far worse than the events that led tothe 2007 crisis. With no replacements, a repeal of the Affordable Care Act (ACA) would mean health care is available only to the privileged and a dismantle of the Dodd-Frank Act would mean a restoration of the power to the Wall Street.

In March 2010, President Obama introduced Patient Protection and Affordable Care Act (ACA) to lower medical costs and make coverage affordable for those who couldn't get health insurance from their jobs or had a pre-existing medical condition. 

The unemployment insurance kept more than 11 million people out of poverty between 2008 and 2012, as per the Supplemental Poverty Measure. The average premium for a family getting coverage on the job is $3,600 lower today than it would be if premium growth had matched thedecade before the ACA. The Act has been beneficial to 57 million senior citizens and Americans with disabilities who are a part of the program. Already, 31 states and Washington, DC, had expanded Medicaid program under the law and allowed low-income groups to access medical facilities. President Obama has urged the Democrats to preserve the law that has reduced the uninsured rate to 8.6 percent in first quarter of 2016 from 15.7 percent before ACA became a law.

But repealing the ACA remains the topmost priority for the Trump administration. 

The ACA plan has been criticized by the Republicans, even though 20 million more American adults and more than 3 million additional children have health insurance than in 2008. A full repeal of the ACA would cost $350 million through 2027 and will deprive a large section of theuninsured and low-income uninsured groups from basic health care. Across the US, many with cancer, heart diseases and other serious conditions are already worried about the consequences ofthe repeal on their coverage.

So far, Trump has only promised that Americans with pre-existing conditions will have access tohealth insurance, even after he disassembles Obamacare. In a weekend interview with TheWashington Post, Trump said the replacement will have "insurance for everyone."But no specifics on the replacement of the ACA have been provided so far.

The second signature Act to be repealed is the Dodd-Frank Wall Street Reform and Consumer Protection Act that was passed as a law in 2010.

Through creation of agencies like Consumer Financial Protection Bureau (CFPB) and Financial Services Oversight Council (FSOC), the law introduced rules that would improve accountability and transparency in the financial system, end "too-big-to-fail,"safeguard the taxpayers' money by ending bailouts and protect consumers from abusive financial services practices. The Volcker Rule allowed riskiest of derivatives to be regulated and the law also ensured accurate ratings by credit rating agencies and Orderly Liquidation Authority (OLA) allowed failed financial firms toliquidate in a systematic fashion while "limiting systemic risk and imposing all losses on thefirm's creditors."

But the success of Dodd-Frank has been debatable since it has been slow in addressing the "too-big-to-fail"issue. In the past, many have suggested that more work needs to be done on it to make it more effective.

Under a Trump presidency, Dodd-Frank will be repealed, but it remains unclear whether this will happen in full or in parts. 

The bigger question, however, is the replacement of the repealed law, which itself raises concern about the repercussions of financial deregulation in the Trump era.

Digging deeper into the issue one would realize that there may actually be no replacement for Dodd-Frank, since the issue of "too-big-to-fail"was never much of a concern to the Republican Party. In an interview, when asked about the breaking up of banks, Trump had replied, "I disagree, but I also think we need to get rid of Dodd-Frank."

Though the Republicans had previously pushed for reinstating a revised version of 1933 Glass-Steagall Act, there has been no mention of it after Trump's election. The 1933 Glass-Steagall Act allowed disintegration of traditional banking activities from speculative ones and interestingly, in 1999, 155 Democrats and 207 Republicans in the House voted for the repeal of the Glass-Steagall. If Dodd-Frank is repealed and there is no stronger replacement, then banks will be bigger, riskier and much less accountable than they currently are.

The Trump administration will need a strong replacement for both Dodd-Frank Act and Obamacare, which they are so adamant on repealing.

Copyright, Truthout. May not be reprinted without permission.

Deena Zaidi

Deena Zaidi is based in Seattle and contributes analytical articles to various financial websites. She also writes a blog, Financial Keyhole. Follow her on Twitter: @deenazaidi.

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Two Laws to Be Repealed, but Are the Replacements Strong?

Thursday, January 19, 2017 By Deena Zaidi, Speakout | Op-Ed
  • font size decrease font size decrease font size increase font size increase font size
  • Print

On January 20, President-elect Donald J. Trump will inherit an economy that looks very different to what President Obama received in 2009. 

When President Obama moved to the Oval Office, he inherited an ailing economy that was facing a whiplash from the subprime mortgage crisis. The unemployment rate was as high as 7.3 percent, quickly moving towards 10 percent while home prices and stock prices plummeted at a steep rate. Amidst struggling industries and failing banks, a quick revival of the economy meant the introduction of fresh and non-traditional economic policies. With Obama's $787 billion economic stimulus package and subsequent measures, the 2007 recession officially ended in June 2009.

Though the repercussions of the crisis loomed in the coming years, the Obama administration introduced many reforms that have remained unique to his administration. 

As his term draws to a close, many will unanimously agree that he ended the Great Recession, the worst since the Great Depression and got 6 million American workers back at work.

Under Trump, two of Obama's signature policies face a vehement repeal, but in the absence of stronger alternatives, such repeals may only create a situation, far worse than the events that led tothe 2007 crisis. With no replacements, a repeal of the Affordable Care Act (ACA) would mean health care is available only to the privileged and a dismantle of the Dodd-Frank Act would mean a restoration of the power to the Wall Street.

In March 2010, President Obama introduced Patient Protection and Affordable Care Act (ACA) to lower medical costs and make coverage affordable for those who couldn't get health insurance from their jobs or had a pre-existing medical condition. 

The unemployment insurance kept more than 11 million people out of poverty between 2008 and 2012, as per the Supplemental Poverty Measure. The average premium for a family getting coverage on the job is $3,600 lower today than it would be if premium growth had matched thedecade before the ACA. The Act has been beneficial to 57 million senior citizens and Americans with disabilities who are a part of the program. Already, 31 states and Washington, DC, had expanded Medicaid program under the law and allowed low-income groups to access medical facilities. President Obama has urged the Democrats to preserve the law that has reduced the uninsured rate to 8.6 percent in first quarter of 2016 from 15.7 percent before ACA became a law.

But repealing the ACA remains the topmost priority for the Trump administration. 

The ACA plan has been criticized by the Republicans, even though 20 million more American adults and more than 3 million additional children have health insurance than in 2008. A full repeal of the ACA would cost $350 million through 2027 and will deprive a large section of theuninsured and low-income uninsured groups from basic health care. Across the US, many with cancer, heart diseases and other serious conditions are already worried about the consequences ofthe repeal on their coverage.

So far, Trump has only promised that Americans with pre-existing conditions will have access tohealth insurance, even after he disassembles Obamacare. In a weekend interview with TheWashington Post, Trump said the replacement will have "insurance for everyone."But no specifics on the replacement of the ACA have been provided so far.

The second signature Act to be repealed is the Dodd-Frank Wall Street Reform and Consumer Protection Act that was passed as a law in 2010.

Through creation of agencies like Consumer Financial Protection Bureau (CFPB) and Financial Services Oversight Council (FSOC), the law introduced rules that would improve accountability and transparency in the financial system, end "too-big-to-fail,"safeguard the taxpayers' money by ending bailouts and protect consumers from abusive financial services practices. The Volcker Rule allowed riskiest of derivatives to be regulated and the law also ensured accurate ratings by credit rating agencies and Orderly Liquidation Authority (OLA) allowed failed financial firms toliquidate in a systematic fashion while "limiting systemic risk and imposing all losses on thefirm's creditors."

But the success of Dodd-Frank has been debatable since it has been slow in addressing the "too-big-to-fail"issue. In the past, many have suggested that more work needs to be done on it to make it more effective.

Under a Trump presidency, Dodd-Frank will be repealed, but it remains unclear whether this will happen in full or in parts. 

The bigger question, however, is the replacement of the repealed law, which itself raises concern about the repercussions of financial deregulation in the Trump era.

Digging deeper into the issue one would realize that there may actually be no replacement for Dodd-Frank, since the issue of "too-big-to-fail"was never much of a concern to the Republican Party. In an interview, when asked about the breaking up of banks, Trump had replied, "I disagree, but I also think we need to get rid of Dodd-Frank."

Though the Republicans had previously pushed for reinstating a revised version of 1933 Glass-Steagall Act, there has been no mention of it after Trump's election. The 1933 Glass-Steagall Act allowed disintegration of traditional banking activities from speculative ones and interestingly, in 1999, 155 Democrats and 207 Republicans in the House voted for the repeal of the Glass-Steagall. If Dodd-Frank is repealed and there is no stronger replacement, then banks will be bigger, riskier and much less accountable than they currently are.

The Trump administration will need a strong replacement for both Dodd-Frank Act and Obamacare, which they are so adamant on repealing.

Copyright, Truthout. May not be reprinted without permission.

Deena Zaidi

Deena Zaidi is based in Seattle and contributes analytical articles to various financial websites. She also writes a blog, Financial Keyhole. Follow her on Twitter: @deenazaidi.