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The CBO: Working the refs

A good rule of thumb in sports is that the team that’s complaining about the referees isn’t the team that’s winning the game. So what should we make of it when one team suggests abolishing referees altogether?

The “referee” in this analogy is the Congressional Budget Office, the nonpartisan agency tasked with evaluating the fiscal and policy impacts of proposed legislation. Republicans, both in Congress and the White House, have loudly criticized the CBO in recent months over its analysis of their health care plan. White House budget chief Mick Mulvaney took that criticism to a new level this week, however, when he implied that it might be time to kill off the CBO, at least in its present form. “At some point, you’ve got to ask yourself, ‘Has the day of the CBO come and gone?’” Mulvaney said to the Washington Examiner.

The source of Mulvaney’s frustration is the CBO’s report last week estimating that the health care overhaul passed by the House would increase the ranks of the uninsured by 23 million people by 2026, among other effects. Republicans dispute those findings, although they are generally consistent with estimates from outside analysts (including, reportedly, those of the agency Mulvaney runs, the Office of Management and Budget).

There is a long, bipartisan tradition of complaining about the CBO. And the agency’s analyses have been far from perfect. It initially overestimated how many people would sign up for the Affordable Care Act’s insurance marketplaces, for example. Overall, however, the CBO’s analysis of Obamacare turned out to be pretty good and better than most private estimates. And despite their carping over specific estimates, congressional leaders of both parties have historically seen an advantage to having an agreed-upon scorekeeper.

In his Washington Examiner interview, Mulvaney implied that the CBO had strayed from its bipartisan roots and was trying to make the Republicans’ health bill look bad. What he didn’t mention is that the CBO’s director, Keith Hall, served in the George W. Bush administration and was chosen by Republican leaders in Congress. Among those leaders was Tom Price, then the chairman of the House Budget Committee, who at the time praised Hall’s “impressive level of economic expertise.” Price, of course, is now secretary of health and human services and is President Trump’s point person on health care reform.

Health care: Changes from within

While Republican plans to repeal and replace the Affordable Care Act simmer in the Senate, the Department of Health and Human Services has been busy drafting its own changes to how the law is carried out. While Congress writes, and possibly repeals, the bills, the interpretation and implementation of the law are largely up to federal agencies. In the case of Obamacare, that means HHS, and under Trump, it has already introduced several changes to the marketplaces that serve people who don’t get insurance from an employer or a public program. Those changes include shortening the enrollment period, allowing insurers to sell plans that pay for fewer services, and giving the private sector more leeway to sell ACA policies. HHS has also encouraged states to apply for waivers that would place work requirements on some Medicaid recipients or allow states to cover some of the costs of the most expensive enrollees.

Now, the department is apparently taking on one of the most controversial, and popular, of the Obamacare rules, the contraceptive mandate. The ACA requires most companies to offer insurance to their employees, and that insurance must cover a wide range of contraceptives with no co-pay or additional charge to enrollees. According to documents obtained by Vox, the draft policy would allow any company to seek a moral or religious exemption from that contraceptive mandate. As a result, more women would likely have to pay out-of-pocket for contraceptives. That would be a step beyond the existing policy, which grants some nonprofits and companies an accommodation — their plans still have to cover contraceptives at no cost to enrollees, but insurers pick up the cost rather than the companies. As Alina Salganicoff, a vice president at the Kaiser Family Foundation, noted, about 10 percent of large nonprofits currently use the accommodation; it’s not clear how many would take advantage of the opportunity to drop birth-control coverage entirely.

Research has shown that the mandate has saved women a lot of money since the ACA passed. Historically, contraceptives have been estimated to make up 30 percent to 44 percent of out-of-pocket health-care expenditures for women. That decreased dramatically with the ACA, saving women who use an IUD or birth control pills around $250 a year. The rule change hasn’t been made official, but the draft shows that HHS has the power to make some pretty substantial changes to the health insurance landscape, regardless of what happens to Obamacare in Congress.

Immigration: Conflicting priorities

The federal budget that the Trump administration released last week relies on projections of economic growth that most experts consider unrealistic. One factor that could make it even harder for Trump to achieve his goals: his own immigration policies.

Trump, of course, ran on a platform of strict immigration enforcement, and he has made good on those promises so far. There has been a dramatic uptick in immigration arrests since Trump took office, and he has requested billions of dollars to improve border security and ramp up immigration enforcement.

Those policies, however, could be taking a toll on the economy. At an event at the Council on Foreign Relations this week, Robert Kaplan, the president of the Federal Reserve Bank of Dallas, said there is anecdotal evidence that immigrants have become more reluctant to spend money. “They are not going out and shopping. They are staying home,” Kaplan said. “They’re afraid if they go out they may not come home.” Kaplan said it’s too soon to see any such trend in the data, but if it’s real, the effect wouldn’t be trivial: Immigrants had over $900 billion dollars in disposable income in 2014. (Kaplan isn’t the only one expressing concern. In April, 1,470 economists signed a letter to the president emphasizing the economic benefits immigration brings the country.)

Kaplan also highlighted another, potentially even bigger issue: the labor force. One reason that economists are so skeptical of the White House’s economic projections is that the American labor force is growing slowly as baby boomers retire and relatively few young workers come of age thanks to Americans’ low birth rates. Without immigrants, though, the situation would be much worse: The Pew Research Center estimates that without immigrants (both those already here and those expected to arrive in coming years), the U.S. workforce would shrink over the next two decades. Some industries that rely substantially on immigrant workers, such as construction and farming, are particularly worried about Trump’s immigration crackdown, though he has insisted enforcement efforts would not harm those industries.

“Immigrants and their children have made up over half the workforce growth in the country over the last 20 years,” said Kaplan said at the CFR event. “So if we do things that limit sensible immigration, we are likely to slow [gross domestic product].”

The environment: Going it alone

On Thursday, Trump formally announced that the U.S. would be withdrawing from the Paris climate agreement — a fact that had essentially been established in March, when he canceled the Obama executive orders that were meant to fulfill our commitments to that agreement. This marks the second time in as many decades that the U.S. has signed on to an international plan to fight climate change, only to later call backsies on the deal. (In 2001, under President George W. Bush, the U.S. pulled out of the Kyoto climate treaty, which had been signed by Bill Clinton’s administration but was never submitted to the Senate for approval.)

Luke Kemp, an Australian social scientist who studies international climate negotiations, saw this coming. Even before Trump was elected, Kemp said in an interview, it was obvious what was going to happen to the Paris deal. American commitment to the deal was based on an executive order, meaning that all it would take to stop complying was for a different president to take office — and even if a Democrat had been elected last year and left the orders in place, it was inevitable that the White House would eventually shift back to the Republicans, who would likely revoke the order. In May of 2016, Kemp published a paper outlining this problem and discussing how the international community might go about crafting future climate agreements that account for American flakiness and could survive without our involvement. He believes his is the first academic paper to deal with this issue, but he doesn’t think it will be the last. “When I wrote the paper, I framed it as an idealistic measure. Highly unlikely. But now it doesn’t seem all that unlikely, does it?” he said.

Kemp expects China and the European Union to take over from the U.S. as the prime movers on climate negotiations and to pursue deals that aren’t predicated on American participation. And that could have big economic consequences for the U.S. That’s because trade penalties are one of the primary mechanisms that international treaties, including environmental agreements, use to prevent countries that don’t participate from freeloading off the work of others. For example, the Montreal Protocol, a 1989 deal to reduce emissions of ozone-depleting chemicals, forbade its signatories from trading in those chemicals with countries that weren’t part of the agreement. In a climate agreement, a similar penalty might require the U.S. to pay carbon-based taxes on any goods we sold to member countries. In other words, the U.S. can free itself from international agreements, but not from international power.