Obamacare Mandate and Fed Cuts Interest Rates

Grind for March 6th
“By and large, jazz has always been like the kind of a man you wouldn’t want your daughter to associate with.” – Duke Ellington

Third Times The Charm

The Headline

Supreme Court will review Obamacare for the third time

The Grind

The Supreme Court has agreed to review a lower court’s opinion on the constitutionality of the Affordable Care Act (ACA).

In 2015, the Supreme Court upheld the constitutionality of the ACA based on the individual mandate – a provision that forced most Americans to purchase health insurance or pay a tax. At the time, Chief Justice John Roberts upheld the individual mandate because it fell within Congress’ power to tax.

When the Trump Administration eliminated that tax in 2017, Republicans claimed there was no longer a legal basis for the individual mandate. The following year, Texas and 17 other Republican-led states filed a lawsuit which argued that the entire law was unconstitutional.

Last December, the 5th Circuit Court of Appeals ruled the individual mandate unconstitutional but sent the case back to Texas to decide if other parts of the law could stand without the individual mandate.

Fearing the case would drag on for years, California and 19 other Democratic-led states asked the Supreme Court to review the 5th Circuit’s ruling.

SCOTUS has upheld the Affordable Care Act twice in the past, but not since the addition of conservative justices Neil Gorsuch and Brett Kavanaugh.

The Details

The High Court is expected to announce its decision by next summer, meaning Obamacare will once again be an election issue for candidates. As predicted, Democrats are claiming that President Trump wants to remove the ACA’s protections for children and for patients with pre-existing conditions.

“Our health is the most precious resource we have – we should all be working to improve healthcare, instead of ripping coverage away from those most in need,” argues California Attorney General Xavier Becerra. “As Texas and the Trump Administration fight to distort our healthcare system and the coverage that millions of people rely on, we look forward to making our case in defense of the ACA. American lives depend upon it.”

Side Effects

The Headline

Federal Reserve cuts interest rates in response to coronavirus

The Grind

The Federal Reserve slashed interest rates this week in response to mounting concerns about COVID-19’s potential impact on the global economy, lowering its benchmark rate by 50 points to reach a range of 1%-1.25%.

“It is finally time for the Federal Reserve to LEAD,” tweeted President Trump. “More easing and cutting!”

The emergency rate cut comes directly after a Tuesday meeting in which financial officials from G7 nations promised fiscal action.

On Monday, the Organization for Economic Cooperation and Development warned the virus could produce a global economic slowdown comparative to 2009. If prolonged, the outbreak could push some countries into recession.

“The virus and the measures that are being taken to contain it will surely weigh on economic activity for some time, both here and abroad,” said Federal Reserve Chair Jerome Powell. “We don’t think we have all the answers, but we do believe that our action will provide a meaningful boost to the economy.”

The Details

The emergency rate cut shows just how quickly the virus and its effects are spreading. Just last week, top officials suggested rates would not need to be cut.

“With financial markets in turmoil and evidence growing that the coronavirus is developing into a pandemic, the Fed’s change of heart is entirely understandable,” noted Paul Ashworth, Chief US Economist at Capital Economics.

While the cut is designed to strengthen consumer confidence and keep money flowing, the cut itself could exacerbate fears about the virus.

“They’re doing it to support the markets but that makes people fearful that we must be in bad shape,” said Peter Tuchman, a stock trader at Quattro Securities. “To pull that bullet out so fast and so furiously leaves us with not that much ammo.”

Australia and Malaysia also cut interest rates this week as a result of the virus.

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