Trump Strikes Back at Pelosi, Blocking Her Overseas Trip

Plus, the great debt debate By Yuval Rosenberg and Michael Rainey Trump Lashes Back at Pelosi, Blocking Her Overseas Trip Friday will be day 28 of the partial government shutdown, but Thursday’s developments offered little hope that closed federal departments and agencies would be reopening soon — and little to allay concerns about dysfunction in U.S. politics. In an apparent retaliation for Nancy Pelosi’s letter Wednesday requesting that the president delay his State of the Union address or deliver it in writing because of the shutdown, President Trump on Thursday abruptly cancelled an unannounced trip to Afghanistan that Pelosi and [other Democratic House members]( had reportedly been set to leave for at 3 p.m. ET. “Due to the Shutdown, I am sorry to inform you that your trip to Brussels, Egypt and Afghanistan has been postponed. We will reschedule this seven-day excursion when the Shutdown is over,” Trump wrote in a [letter]( to the House speaker. “In light of the 800,000 great American workers not receiving pay, I am sure you would agree that postponing this public relations event is totally appropriate. I also feel that, during this period, it would be better if you were in Washington negotiating with me and joining the Strong Border Security movement to end the Shutdown.” Trump added that Pelosi could still make the trip by taking commercial flights if she wanted. The House speaker and congressional delegations typically use military planes for overseas travel, and Trump, as commander in chief, postponed their ability to use such aircraft, [Reuters said](. And [Politico]( reported that a White House official said Trump had canceled all congressional delegations abroad because of the shutdown. Drew Hammill, Pelosi’s spokesperson, [said on Twitter]( that the purpose of the planned congressional delegation to Afghanistan was to thank members of the military for their service and to receive national security and intelligence briefings from those on the front lines. He said the trip required a stop in Brussels for pilot rest, and that the lawmakers were scheduled to meet with NATO commanders, U.S. military leaders and key allies there “to affirm the United States’ ironclad commitment to the NATO alliance.” Some reactions: - “It's actually really revealing that Trump appears to believe the only reason an elected official would go to Afghanistan or Egypt was for PR reasons, as if it's a fun photo op instead of part of the responsibilities of governing,” Susan Hennessey, executive editor of Lawfare and a CNN national security analyst, [tweeted](. Reps. Adam Schiff, chairman of the House intelligence committee, and Eliot Engel, chairman of the foreign affairs committee, were reportedly among those making the trip with Pelosi. - "The president's decision to disclose a trip that a speaker is making to a war zone was completely and utterly irresponsible in every way,” Schiff [said](. - “Why would she want to go overseas with the government shutdown? ... I couldn’t imagine she would even think about going,” [said]( House Minority Leader Kevin McCarthy. - “One sophomoric response does not deserve another. Speaker Pelosi’s threat to cancel the State of the Union is very irresponsible and blatantly political,” Sen. Lindsey Graham (R-SC) tweeted. “President Trump denying Speaker Pelosi military travel to visit our troops in Afghanistan, our allies in Egypt and NATO is also inappropriate.” The bottom line: There’s still no sign that the government will be reopening anytime soon. The stakes are high, but the political brawling seems more like middle school. Other Shutdown Developments State Department calls back furloughed workers: The State Department [said]( Thursday that is calling back its furloughed workers — some 8,000 staffers — and “taking steps to make additional funds available to pay employee salaries” despite the shutdown. State Department employees are expected to return to work next week and will be paid for work performed beginning on January 20, though they will not be paid for the first two pay periods that occurred during the shutdown until after the agency is funded. “Officials said a review of the State Department’s various accounts came up with enough money to pay half a month of payroll,” [The Washington Post reported](. “Beyond that, officials cautioned they will have to see if they can identify other funds that can be tapped should the shutdown extend beyond that.” Furloughed workers will get back pay: Trump on Wednesday [signed]( legislation approving back pay for some 380,000 federal employees furloughed because of the shutdown once government funding is restored. The 420,000 employees who have been required to work without pay were already assured of receiving back pay. Quote of the Day “We are getting crushed! Why can’t we get a deal?” – President Trump to Acting Chief of Staff Mick Mulvaney, after watching some recent coverage of the shutdown, according to [The New York Times](. The Times’s Maggie Haberman and Annie Karni report that the president “has had recurring moments of frustration as he takes in negative news coverage of the shutdown,” but also that he has told aides that he believes the country will not remember the shutdown, but it will remember his fighting to protect the southern border. Fiscal Hawks Push Back on Debt Analysis We [told you]( last week about a new paper from economist Olivier Blanchard that caused a stir by suggesting that government debt may be less problematic than many experts have believed. Blanchard found that in some circumstances — most importantly, when interest rates are low — public debt can be sustained by government without raising taxes and without reducing overall economic output. Some liberal economists, notably including [Paul Krugman]( embraced Blanchard’s analysis, seeing it as offering support for increased spending on social welfare programs that have long been opposed on fiscal grounds. The fiscal hawks at the Committee for a Responsible Federal Budget have a different take on the analysis. In as [memo]( released Wednesday, CRFB said that while Blanchard’s paper demonstrates that small deficits are sustainable in a low-interest-rate environment, the U.S. currently faces large deficits that are structural in nature, with expenditures set to outpace revenues for years to come. To become sustainable in the manner Blanchard describes, those deficits would have to be reduced substantially — to the tune of roughly $5.5 trillion over 10 years, achieved through some combination of tax hikes and spending cuts. On an annual basis, the deficit would need to fall below $400 billion, CRFB said. Given the $1 trillion deficits the U.S. is currently facing, that means cutting outlays or raising taxes by $600 billion a year, just to achieve a “sustainable” level of debt. The bottom line: Hawks like those at the CRFB insist that rising debt is a serious threat, one that will produce “slower income growth, higher interest payments, reduced fiscal space, increased interest rates, and a small but increasing risk of fiscal crisis.” But there are challenges to this view, with some economists coming to believe that the U.S has fewer budget constraints than previously thought. Blanchard himself said that his paper was not intended to argue for or against more government debt, but rather to enhance our understanding of the dynamics involved: "My purpose in the lecture is not to argue for more public debt, especially in the current political environment,” Blanchard wrote. “It is to have a richer discussion of the costs of debt and of fiscal policy than is currently the case." Patient Groups Criticize Trump Drug Pricing Proposals in New Ad Campaign A coalition of more than 50 patient advocacy and medical groups is warning that a Trump administration proposal to reduce certain Medicare drug prices “will put patients’ lives at risk.” The groups, led by the American Cancer Society Cancer Action Network, launched a new [ad campaign]( Thursday in newspapers including The New York Times and The Washington Post, according to [STAT](. Their ad comes in response to recent Trump administration proposals that would allow private Medicare prescription drug plans to place additional limits on what drugs certain patients can use. Those Medicare plans are currently required to cover “all or substantially all” drugs in [six “protected classes,”]( including antiretrovirals used to treat HIV and AIDS; immunosuppressants used to prevent organ rejection; antidepressants; antipsychotics used to treat schizophrenia and related disorders; anticonvulsants used to treat epilepsy; and antineoplastics used to treat cancer. For diseases not in the protected classes, Medicare plans are only required to cover two drugs per condition. Under the Trump administration proposal introduced in November, private Medicare plans would be allowed to exclude from their formularies drugs that experience price increases greater than inflation or some new drugs that don’t represent a “significant innovation” over previous versions. The proposal would also allow insurers to require that patients get prior authorization to use drugs in the protected classes and to require patients to try less expensive drugs first. Trump administration officials [have argued]( that the protected classes leave little negotiating power with drugmakers, leading to higher costs. The new ad campaign says that the administration’s proposals “could interfere with what doctors think is the best course of treatment for their patients and if finalized, could delay patients’ access to lifesaving innovative therapies.” In addition to the American Cancer Society’s advocacy arm, the dozens of groups that have signed on to the new ad also include the American Medical Association, the American Heart Association, the American Society of Clinical Oncology and Susan G. Komen for the Cure. Why it matters: The pushback from these groups illustrates how narrow a tightrope the administration is walking as it seeks to lower drug prices vis increased competition and negotiation. Economists: Time for a Carbon Tax That Pays Dividends Dozens of prominent economists with extensive experience in government service signed a [statement]( in Thursday’s Wall Street Journal calling for a carbon tax. “Global climate change is a serious problem calling for immediate national action,” the economists said, before defining five broad principles to guide a bipartisan effort to create a new tax on carbon: - A carbon tax is the most cost-effective way to harness “the invisible hand of the marketplace to steer economic actors towards a low-carbon future.” - The proposed carbon tax should rise every year to encourage large-scale development. - The price signal of a steadily rising tax should replace “cumbersome regulations” on carbon. - The carbon tax should include a border adjustment to protect U.S. companies and “create an incentive for other nations to adopt similar carbon pricing.” - To enhance the “political viability” of such a tax, the revenues collected “should be returned directly to U.S. citizens through equal lump-sum rebates.” The Journal’s Timothy Puko [said]( that the principles are backed by a group called the Climate Leadership Council, which has proposed an initial tax on U.S. businesses of $40 per ton of carbon emissions. The tax would produce about $200 billion per year, or about $2,000 for a family of four. One of the signatories, former Fed Chair Janet Yellen, said that a “carbon tax is very popular among economists but not very popular among people. Getting a proposal that has some political viability so we can make some progress, I think that’s essential.” In addition to Yellen, the signatories include former Fed Chairs Alan Greenspan, Paul Volcker and Ben Bernanke; former White House advisers N. Gregory Mankiw, Christina Romer, Laura Tyson, Martin Feldstein, Jason Furman and Austan Goolsbee; and Nobel Prize recipients George Akerlof, Angus Deaton, Peter Diamond, Amartya Sen, Robert Shiller and Richard Thaler. Shutdown News - [Chaos on House Floor as Dems Hold Hasty Vote to End Shutdown, Republicans Demand Redo]( – Fox News - [Bipartisan Senate Effort to End Shutdown Hits Wall]( – Politico - [Why President Trump Is Quietly Caving on Parts of the Shutdown]( – Time - [‘She Wields the Knife’: Pelosi Moves to Belittle and Undercut Trump in Shutdown Fight]( – Washington Post - [The Shutdown Is Coming at the Worst Time for the Economy]( – CNN - [Government Contractors to Lose Out on Shutdown Pay, Dragging Down Economy]( – Bloomberg - [Federal Employees Who Take Unemployment Benefits During the Shutdown Will Have to Pay Them Back]( – CNBC - [TSA Acknowledges Financial Stress of Shutdown Is Forcing Growing Number of Officers to Stay Home]( – Washington Post - [As Shutdown Drags On, Some Step Up to Help Unpaid Federal Workers]( – New York Times - [The Shutdown Is Breaking Government Websites, One by One]( – Washington Post - [Cardi B’s Viral Shutdown Rant Made Some Really Good Points]( – Vox Other News - [At Pentagon, Trump Announces Plans to Expand Missile Defenses]( – New York Times - [Trump’s Tariffs Are Producing Billions, but China Isn’t Paying]( – Bloomberg - [IRS to Waive Under-Withholding Penalties for Some Taxpayers After Trump Tax Changes]( – USA Today - [Thousands More Migrant Kids Separated from Parents Under Trump Than Previously Reported]( – NBC News - [HHS Secretary Azar Is Courting Capitol Hill on Drug Prices]( – Washington Post - [Medicare Changes Could Have Some Patients Paying More for Drugs]( – Reuters - [Apple in Talks with Private Medicare Plans About Bringing its Watch to At-Risk Seniors]( – CNBC - [Apple Will Likely Tackle These Three Big Healthcare Challenges Next]( – Fast Company - [The World’s Slow Drift from the Dollar]( – Axios - [Charity Pays a Lot of Health Care Bills]( – Axios Views and Analysis - [Trump Isn’t Even Trying to Convince Voters on the Shutdown]( – Ronald Brownstein, The Atlantic - [The Shutdown Is Doing Lasting Damage to National Security]( – Carrie Cordero and Joshua A. Geltzer, The Atlantic - [Economists Reconsider How Much Governments Can Borrow]( – The Economist - [America Has Never Worried about Financing Its Priorities]( – Brendan Greeley, Financial Times - [Can States Fix the Disaster of American Health Care?]( – Elisabeth Rosenthal, New York Times - [‘Modern Monetary Theory’ Is a Joke That’s Not Funny]( – Michael R Strain, Bloomberg - [With Booming Global Debt, We’re Entering Unexplored Territory]( – Robert J. Samuelson, Washington Post - [On Shutdown, It’s Pelose and Schumer 1, Trump 0]( – Leslie Marshall, Fox News - [The U.S. Should Assess the Economic Value of Drugs Rather Than Leave It Up to Other Countries]( – William V. Padula, STAT - [The State of the Union Address Should Go Away Forever]( – Stephen Mihm, Bloomberg - [No State of the Union? That Would Be Wonderful!]( – Alexandra Petri, Washington Post Copyright © 2019 The Fiscal Times, All rights reserved. You are receiving this newsletter because you subscribed at our website, thefiscaltimes.com, or through Facebook. Our mailing address is: The Fiscal Times 399 Park AvenueNew York, NY 10022 [Add us to your address book]( If someone has forwarded this email to you, consider signing up for The Fiscal Times emails on our [website](. Want to change how you receive these emails? You can [update your preferences]( or [unsubscribe from this list](