Obamacare is a nickname for the Patient Protection and Affordable Care Act (often shortened to Affordable Care Act, ACA). In 2010, President Obama and Congress signed ACA into the law. They wanted all Americans to be able to get health insurance. They also wanted to lower the cost of healthcare. Unlike in the UK, in the US, in order to receive health care, you have to pay. Going to the doctor or the hospital has become very expensive and health care costs are the number one reason of bankruptcy in the US. For example, one visit to the hospital for an emergency costs $1,265 on average and cancer treatment can cost $30,000 roughly. Under this law, hospitals would have to improve their technology to increase better health outcomes, lower costs and improve their methods of distribution and accessibility. The act aims to slow the growth rate of US healthcare spending, which is the highest in the world.
Those with health insurance do not have to pay these costs as their insurance covers most of them; although, they just have to pay a small fee on visit, which is called co-payment. Many US citizens will receive their health insurance as a benefit from their employer. For those who do not receive health insurance by their employer or cannot afford it, will be able to qualify for Medicaid. Medicaid is a programme created by the government to provide payment for medical services for citizens on low-income. Medicare is a federal programme that covers your health insurance if you are 65 or older, no matter what your income is. However, if you are on high-incomes, are not older than 65 and your health insurance is not provided by your employer then you have to pay yourself. Obamacare does not have a requirement, the law requires insurers to accept all applicants, regardless of their condition or sex.
The introduction of Obamacare allowed the amount of people who didn’t have health insurance to decrease. The uninsured rate among adults (18 and over) fell from 18.0% in Q3 2013 to 13.4% by Q2 2014. The rate has dropped by 5% since the programme began.
However, some disagree on whether Obamacare actually reduces the deficit. The original estimate was $143 billion savings; although others forecast that it will add $1.76 trillion to the debt. This would be a burden because Congress passed the ACA by saying that it would reduce the cost of Medicare and Medicaid – which were eating up the entire budget. Experts say that the law imposes too many costs on businesses; however, since the beginning of Obamacare, jobs in the healthcare sector rose by 9%. The new president of the US, Donald Trump, has said that he wants to repeal; although if he does, it is estimated that 22 million people would lose their medical insurance.
As of 20th January 2017, Donald Trump was inaugurated as the 45th President of the United States of America. Along with him, he brought many new policies and vows. Of which one of his vows is to make deep tax cuts while promising to increase government expenditure. He has said that he will be cutting corporation tax from 33% to 15%. Perhaps this is a conflict of interest, and it would suit his company, but there is a reason behind this. According to the Financial Times, this would increase the national debt by $7.2 trillion (including interest costs) over the first decade and by $20.9 trillion by 2036. For most people, this would seem unintelligent. However, this is what is known as expansionary fiscal policy. Furthermore, he has said he will be increasing spending on infrastructure and the military but he will be reducing spending on other categories (apart from health and retirement programmes) by 1% each year.
So how does this work? Fiscal policy is the deliberate manipulation of government spending and taxation in order to influence the economy’s economic growth. A decrease in tax will boost income, demand and GDP. When the government decreases taxes, disposable income increases. This means that consumers will demand more and therefore result in higher production, shifting the aggregate demand curve to the right, leading to an increase in GDP. An increase in government spending will boost demand and production. This will also create more jobs which mean that unemployment will reduce. Government spending increases the potential output of the economy. Also, lower corporation taxes mean that firms can invest more, contributing to AD – as investment is a component of AD, when it increases so does AD.
Yes, Trump is right in saying that tax cuts and additional public spending will lead to faster growth and in the long-run, an improvement in the US public finances. Although, who is the cut in taxes really benefitting? It will far more benefit to high-incomers rather than the low-incomers. Those earning more than $3.7 million a year would receive a tax cut of nearly $1.1 million; however, those who don’t earn as much receive a tax cut of just $110 a year. Furthermore, this policy of his may lead to a budget deficit. This is where government expenses exceed the revenue received. In order to fix this issue, the US government may have to borrow money to finance the difference – this therefore increases national debt instead of trying to decrease it.