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The US Congress can walk and chew gum

By Michael Knox - posted Thursday, 13 July 2017

Fighting the Opioid Epidemic: The US is in the grips of a new illegal drug epidemic based on opioids (new heroin-like addictive drugs). The House of Representatives provided a $US781 million in funds to fight this epidemic. These include grants, treatment and prevention and support for law enforcement.

More School Choice: The House of Representatives has expanded support for charter school organisations and expanded scholar opportunity scholarship programs to put better education in the reach of more children.

Passed by the House of Representatives but not yet law


There are also a number of major initiatives which have been passed by the House of Representatives are now being considered by the US Senate. These major items include:

1. The American Healthcare Act: The American Healthcare Act was the first of three Bills that was necessary to amend US healthcare legislation. This Bill is a financial Bill or Budget Reconciliation Bill that reduces the future growth of health expenditure to a sustainable level within the budget.

Obamacare was subject to market failure because it was designed upon competition within States rather than competition between States (try to imagine a competitive healthcare market entirely within the State of Tasmania). This would not work and it would break down. This is what is happening to Obamacare.

There are two other necessary reforms. These reforms produce national competition in US concessional healthcare insurance and would reduce the cost of US healthcare insurance to American consumers. Both of these Bills would need the assistance of Democratic senators to pass.

The first makes concessional healthcare insurance provision into a national market which can operate across State lines. The second changes Obamacare's requirement that all plans cover 10 basic categories of benefits. The problem is that this generates a one-size-fits-all policy that reduces the possibility for competition between providers. Changes to these Obamacare categories would also need the assistance of Democratic senators to pass the Bill.

Republicans wish to subsidise pre-existing conditions with Federal government funding. They believe that national markets will then provide much lower cost insurance pools for the majority of consumers of healthcare insurance.


2. Financial Choice Act: The House of Representatives passed this Act to replace the Dodd-Frank Act. The Dodd-Frank Act was passed by the US Congress after the financial crisis. Dodd was the name of the Democratic Senator and Frank was the name of a Democratic Congressman.

The objective of this law was to re-regulate the financial sector, so as to prevent another financial crisis. The problem in the law was one of defining the necessary regulations.

Many of these regulations were left at the discretion of agencies which had oversight of the financial sector. The problem then was a growth of a complex regulation. This web of complex regulations provided a significant administrative burden to small financial institutions.

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The information contained in this report is provided to you by Morgans Financial Limited as general advice only, and is made without consideration of an individual’s relevant personal circumstances. Morgans Financial Limited ABN 49 010 669 726, its related bodies corporate, directors and officers, employees, authorised representatives and agents (“Morgans”) do not accept any liability for any loss or damage arising from or in connection with any action taken or not taken on the basis of information contained in this report, or for any errors or omissions contained within. It is recommended that any persons who wish to act upon this report consult with their Morgans investment adviser before doing so. Those acting upon such information without advice do so entirely at their own risk.

This report was prepared as private communication to clients of Morgans and is not intended for public circulation, publication or for USe by any third party. The contents of this report may not be reproduced in whole or in part without the prior written consent of Morgans. While this report is based on information from sources which Morgans believes are reliable, its accuracy and completeness cannot be guaranteed. Any opinions expressed reflect Morgans judgement at this date and are subject to change. Morgans is under no obligation to provide revised assessments in the event of changed circumstances. This report does not constitute an offer or invitation to purchase any securities and should not be relied upon in connection with any contract or commitment whatsoever.

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About the Author

Michael Knox is Chief Economist and Director of Strategy at Morgans.

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All articles by Michael Knox

Creative Commons LicenseThis work is licensed under a Creative Commons License.

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