Obamacare is shifting the billiard balls

LA Times: President Obama rolled out a new plan Thursday to make two years of community college free, or nearly so, for millions of students across the country, a major investment that the White House cast as changing the face of higher education.
The program, inspired by new initiatives in Tennessee and Chicago, could benefit up to 9 million students, advisors said. At its heart is dedicated federal funding to cover 75% of tuition, with the states picking up the rest of the tab.

What is happening is New York, California and Illinois education budgets are taking a hit due to the costs of Obamacare. So Obama now has to find a way to cover part of their budgets. We saw the billiard balls start to move with the 2% negative print on GDP growth in Q1, half due to Obamacare. It is continuing.

The same thing happened last quarter when we had an unexpected surge in Social Security retirees.  These are seniors who would rather retire  and skip the Obamacare employer fees. Obama was forced to dumpe 100 billion onto the debt market.

Now in return, Obama has to cover the New York banks, who manage the 17T of, mostly Republican, debt.  So the banks got a deal to run derivative sales with government managed insurance.  This was also part of a recovery from QE which was an implied 15% tax on the bond industry.  The 75 billion in interest subsidies granted to Congress is about 15% of the total Congressional interest costs.  The banks will also get better insurance on mortgages to poor people which is coming down the track.

All of this horse trading  is mostly on the fly.  The California legislature was clueless about all the side effects of Obamacare, as was the new York legislature.  The California political establishment, which funds the Dem party, has been threatening DC. Yes the legislature, out here, is still willing to fund a 68 billion Choo Choo, mostly to save face.  Its the California Flounder.

Can Obama hold this four way deal together?

Well he has one black swan, the deficit spending, economy crashing Republicans who control Congress.  They cannot add. Obama's best advice was to lay low for two years and play golf.   So the betting is that this all blows up in Obama's face, and we get a threat to the economy.  I would not be surprised if Obama does manage to get a mild recession, and he had every opportunity to avoid one.