2017 Lane Reports

Trumpís Law: So It Begins

The Lane Report, February 2017
Wednesday, February 1, 2017 10:00 am
by Marc J. Lane

Millions of President Donald J. Trump’s supporters continue to applaud his unwavering commitment to “Make America Great Again,” even as shockwaves are sent throughout the nation and the world.  Yet those disheartened by Mr. Trump’s election need not have looked beyond his first day in office to justify their fears.  The President’s official acts in the hours following his inauguration signaled that he really means business and sees no reason to dawdle.

  • A key plank in the Trump campaign’s platform was to “repeal and replace” the Affordable Care Act a/k/a Obamacare, and the President wasn’t about to wait for Congressional action before moving ahead. Instead, the very afternoon he was sworn in, Mr. Trump signed an executive order urging the Health and Human Services Department to “waive, defer, grant exemptions from, or delay” any ACA requirement that would impose a fiscal burden.

More of a mission statement than an edict, the President’s directive, vague as it is, is seen by many of those who deem Obamacare to be irreparably flawed as a constructive step toward its dismantling.  Some argue that the law should be replaced by Federal block grants to the states, allowing them to provide health care to low-income people on Medicaid, a strategy that would certainly present lawmakers with thorny questions.  Others hope that a version of the Patient Freedom Act might become law. That initiative, proposed by Republican Senators Susan Collins of Maine and Bill Cassidy of Louisiana, would allow states to keep the ACA, accept a new GOP health care plan, or choose to have no plan at all.

Many defenders of the Affordable Care Act, while acknowledging it needs to be reformed, anticipate that, with the executive order as a shield, the Administration may sabotage any effort to salvage the law by granting questionable waivers and failing to enforce ACA's less popular provisions, including those essential to the law’s functioning. In their view, the insurance market would likely be destabilized and tens of millions of people the law was meant to protect would likely be denied its benefits, even before any revision or replacement is enacted.

  • Soon after Mr. Trump signed his executive order on Obamacare, he signed an order requiring homeowners who participate in the Federal Housing Authority’s insurance program to pony up six-tenths of one per cent of their mortgage each month. A homeowner with a $200,000 mortgage will pay about $500 more in 2017 than he or she paid in 2016, according to the FHA.

The President’s decision reversed a rate reduction renewed in the waning days of the Obama Administration. It hits first-time buyers and low-income homeowners the hardest, especially since mortgage rates are expected to rise.  The National Association of Realtors estimates that without the rate reduction, 30,000 to 40,000 potential borrowers will be shut out of the market.  While Mr. Trump and some of his supporters characterize the move as fiscally prudent, allowing the FHA to serve more borrowers, detractors of the executive order contend that higher mortgage bills will contribute to the economic disparity plaguing our society, Mr. Trump's populist rhetoric notwithstanding.

  • Before the sun set on Inauguration Day, the Justice Department, now ultimately reportable to Mr. Trump, requested that a Federal magistrate continue for at least 30 days a hearing that had been scheduled for January 24 in a highly publicized Texas voter ID case.  That request was granted.

    The Department, when Attorney Lynch Loretta Lynch ran it, argued that the state had intentionally discriminated against Latino and African American voters when it passed its controversial ID law. There’s no question that the law had a discriminatory effect; that’s already been litigated.  The sole remaining issue before the court is whether or not the legislature’s intent in passing the law was to deny minorities equal access to the voting booth.

Rather than merely picking up where the Lynch team left off, the Federal prosecutors insisted that they needed to get up to speed before adopting a position on the litigation, a reasonable assertion on its face. But skeptics have reason to believe that a Justice Department with Jeff Sessions at its helm will be unsympathetic to minorities seeking to exercise their franchise and may abandon President Obama's signature voting rights case.

Mr. Sessions, the first sitting senator to endorse Mr. Trump for the presidency, grew up in the segregated South and, over his political career, has espoused human rights views not dissimilar from those of the President.  When Minnesota Senator Amy Klobuchar, a Democrat, asked the then-Attorney General nominee about the Texas case, Mr. Sessions, who had been rejected for a Federal judgeship by the Senate Judiciary Committee 30 years ago amid accusations of racial insensitivity and had recently called the Voting Rights Act “intrusive,” responded that,“ . . . I think voter ID laws, properly drafted, are OK.”

Throughout the whirlwind days following January 20, the President has continued to make good on his campaign promises, sometimes fomenting public outrage, condemnation and even legal challenges.  As top Trump adviser Kellyanne Conway tweeted on January 28, "Get used to it. @POTUS is a man of action and impact."  While some Americans cheer, others jeer. But in our sharply divided nation, few remain silent.

Peterborough's problem was daunting: Sixty percent of prisoners serving short-term sentences historically had gone on to re-offend within a year after their release. But policymakers were confident that a solution was within their reach. They attracted private investment to pay experienced social service agencies to provide intensive, multidisciplinary support to short-term prisoners, preparing them to re-enter society and succeed outside the penal system. - See more at: http://www.chicagobusiness.com/article/20131007/OPINION/131009850/a-new-kind-of-futures-contract-for-illinois#sthash.ThgxeiFt.dpuf

The world's first social impact bond, or SIB, was introduced in 2010 to fund innovative social programs that realistically might reduce recidivism by ex-offenders in Peterborough, England, and, with it, the public costs of housing and feeding repeat offenders. Prudently building on the strengths of that initiative, Illinois Gov. Pat Quinn is rolling out SIBs to help solve some of the state's most vexing social problems.

A SIB isn't a traditional bond where investors are guaranteed a fixed return but a contract among a government agency that agrees to pay for improved social outcomes, a private financing intermediary and private investors. SIBs shift the risk of experimenting with promising but untested intervention strategies from government to private capital markets, with public funds expended only after targeted social benefits have been achieved.

Peterborough's problem was daunting: Sixty percent of prisoners serving short-term sentences historically had gone on to re-offend within a year after their release. But policymakers were confident that a solution was within their reach. They attracted private investment to pay experienced social service agencies to provide intensive, multidisciplinary support to short-term prisoners, preparing them to re-enter society and succeed outside the penal system.

The government decided which goals would be supported, but exactly how those goals would be achieved was left to the private sector. It was the investors, through a bond-issuing organization, who ultimately endorsed the allocation of investment proceeds — how much would be invested in job training, drug rehabilitation and other interventions.

If the Peterborough plan eventually shrinks recidivism rates by 7.5 percent or more, the government will repay the investors' capital and share the taxpayers' savings with them, delivering up to a 13 percent return. If the target isn't hit, the investment will have failed and the government will owe the investors nothing.

Illinois' SIB effort was spearheaded by the state's Task Force on Social Innovation, Entrepreneurship and Enterprise — the governor's think tank on social issues, which I am privileged to chair — with support from Harvard University's John F. Kennedy School of Government, the Rockefeller Foundation and the Aurora-based Dunham Fund. A request for information issued by the Office of Management and Budget on May 13 yielded responses from service providers eager not only to reduce recidivism here but also to create jobs, revitalize communities, improve public health outcomes, curb youth violence, cut high school dropout rates and alleviate poverty.

Now the governor has issued a request for proposals intended to spur better outcomes for Illinois' most at-risk youth — by increasing placement stability and reducing re-arrests for youth in the state's Department of Children and Family Services, and by improving educational achievement and living-wage employment opportunities justice-involved youth most likely to re-offend upon returning to their communities.

Kudos to Mr. Quinn for bringing SIBs to Illinois. May they soon start delivering on their promise.

- See more at: http://www.chicagobusiness.com/article/20131007/OPINION/131009850/a-new-kind-of-futures-contract-for-illinois#sthash.ThgxeiFt.dpuf
The world's first social impact bond, or SIB, was introduced in 2010 to fund innovative social programs that realistically might reduce recidivism by ex-offenders in Peterborough, England, and, with it, the public costs of housing and feeding repeat offenders. Prudently building on the strengths of that initiative, Illinois Gov. Pat Quinn is rolling out SIBs to help solve some of the state's most vexing social problems. - See more at: http://www.chicagobusiness.com/article/20131007/OPINION/131009850/a-new-kind-of-futures-contract-for-illinois#sthash.ThgxeiFt.dpuf

Marc J. Lane is a Chicago attorney and financial adviser and the vice chair of the Cook County Commission on Social Innovation.


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