Lee Elci: So you got a piece up right now. Will unions grab money from Medicaid beneficiaries? Tell me about this one.
Red Jahncke: Well, it’s the juxtaposition of the elements of state employee compensation against the shift of Medicaid financial responsibility back from Uncle Sam to the states… to the original concept to the program. The program is health care for the poor, and it was launched as a 50-50 partnership between Uncle Sam and the States, with each paying half the freight.
Lee Elci: All right, you’re talking about the unions now grabbing the money on the floor for the special session coming up?
Red Jahncke: Yes. Just to review where this has been in recent weeks. There are four different bargaining units within SEBAC that have declared, quote, an “impasse” in their negotiations with Governor Lamont and have gone to arbitration. They want to get their money. Their wage contract expired on June 30th. So they’re working without a contract, which does not mean they’re not being paid. They’re being paid their last contract rate, which, as we’ve discussed before, is 33% higher than it was when Ned Lamont first took office.
Lee Elci: All right. So, you ‘ve been talking about this for weeks, even months. The governor has sort of played these trickery deals with Medicaid to sort of circumvent what Trump had wanted to do.
Red Jahncke: Well, it’s not that Trump tried to do something. He succeeded. And the law provides that the effectiveness date is May 1st.
For the audience, again, what we’re talking about is the fact that the state of Connecticut taxes its hospitals at a higher rate than any other state in the nation. We are the most reliant on that tax. It’s the fourth largest revenue source for the state. The state taxes hospitals $900 million, which is up to the max allowable by federal legislation, rules and regulations.
And what did Ned Lamont do? In early June? He increased $900 million to $1.2 billion to beat the deadline that was looming in what was then pending legislation. Right. And at that point, the provision of the legislation was there would be a moratorium on hospital taxes, freezing them in place. And Ned thought that he could get in a cool $350 million increase before that moratorium effective date. Well, the legislation reads that the effective date was one month earlier, May 1st.
So it will be interesting to see whether there’s any answer from the official sources in Hartford for the governor as to what’s happened to $350 million tax increase he imposed on hospitals, saying to the hospitals, “trust me.” Whether he’s allowed to collect that or not, under federal law that’s been enacted, no longer federal proposed legislation. All right.
Lee Elci: So, assuming he’s not able. Then what? Tax increases or wage freezes. Where are we then.
Red Jahncke: Well, the point of my column is we have the most generously compensated state employees in the nation already, and they are now pounding the drum. They want additional wage increases. And the way you make up for the loss of the hospital tax revenue is you freeze state employee wages. State employee compensation is the largest item in the budget. Freezing that will save the hundreds of millions and offset the loss of the hospital tax revenue.
Now what you will see is Lamont will cave. He will give them the raises they want, and that will be the first item on the agenda in the special session that’s supposedly to figure out how the state can deal with the loss of federal revenue. Ned wants to run for his third term. He can’t do that without paying off the unions.
Lee Elci: What’s the time frame on that? I mean, what do you think, special session-wise? Or when does this all get figured out?
Red Jahncke: Your guess is as good as mine. I’m not going to try and figure out whether Ned wants the session to be a high-profile session or something that’s done in the dead of night.
Lee Elci: You know, the latter is the one they prefer. You know that. They don’t want anybody to know what’s going on, how the sausage is being made! Red, you know that?
Red Jahncke: Yeah. Yeah. Yeah, yeah.
Lee Elci: Hey, before we run out of time, I. Want to ask you. I know, this wasn’t on the plan necessarily today, but, Trump with the EU deal. That’s a big win, isn’t it?
Red Jahncke: Yes, that’s a big win. You know, I have a 30,000 foot view of Trump and tariffs which is we discussed last time. The One Big Beautiful Bill is law. The CBO scored it and the final score is it will increase deficits and debt by $3.4 trillion dollars. In early June, the CBO scored Trump’s tariff program as generating $3 trillion of revenue. If you look at June tariff revenue, it annualizes to $324 billion. In other words, $3.24 trillion and offsets the One Big Beautiful Bill. Together, they’re deficit neutral.
He is lowering taxes on income, i.e. productive activity. He is raising taxes on consumption. The net is zero. But he’s shifting the incentives for people to go to work and work and produce. Right. And stop over consuming. From the 30,000 foot view, that is absolutely what this nation needs to do.
Lee Elci: I actually agree with you on that. I think your consumption tax is a solid way to to sort of push back against this crazy spending that everybody has.
Hey, one of my economist friends had a little bit of a different perspective on this. He said that although Trump wins politically here on the onset, long term, the European Union may find it easier to turn away from America and sort of, maybe sync up with China or another nation to do more trade with. What are your thoughts on that?
Red Jahncke: I think not. They’re not going back to Russia for natural gas. They’re building natural gas regasification plants as fast as they can. We’re shipping them LNG. That’s natural gas in frozen liquid form. They’re building plants to return it to gas form to replace the Russian gas that they’re no longer importing now that Putin has invaded Ukraine.
China doesn’t have any fossil fuels. So it can’t compete with us as a supplier to Europe, Europe is bound to the US for the foreseeable future. Their only option is to go to the Mideast. The heads of state in Europe, like Donald Trump or not, they’re going to rely upon the United States for their energy needs as a reliable supplier before they’re going to rely on the Mideast for energy needs. And certainly the era where they relied on Russia is over completely. So, I see this as having long legs. That’s the bedrock of the trade relationship.
Lee Elci: Right.
Red Jahncke: They also need to defend themselves. They can’t do that effectively without U.S. armaments. They finally committed to buying U.S. armaments. In other words NATO, all the European members of NATO who were not spending enough on defense are now spending on defense by buying US weapons, which is a net net huge win for Donald Trump because he’s forced them to rearm and he’s forced them to rearm by buying our weapons, which is highly profitable for the United States. So it’s a strategic win, and it’s an economic win.
Lee Elci: Red Jahncke you can find out all about Red at the-red-line.com. Read his columns. Red, thank you, buddy. I got to go. I’m out of time, but I’ll talk to you next time, okay?
Red Jahncke: Sounds good.
Red Jahncke is a nationally recognized columnist, who writes about politics and policy. His columns appear in numerous national publications, such as The Wall Street Journal, Bloomberg, USA Today, The Hill, Issues & Insights and National Review as well as many Connecticut newspapers.