Does our debt really matter?

The country’s national debt hovers at historically record highs, as the nation’s budget battle begins. It’s a pretty safe bet to expect another budget-busting compromise as well as a hefty increase to our already-overwhelming debt load. At times like this I wonder whether Americans are facing the prospect that someday the United States could be the world’s largest impoverished nation, and if so, does it really matter? Last week’s column examined the subject of debt, both private and domestic, and how large it has become. This week, I begin by asking why debt matters at all? On a personal level, we know the answer, but what about the nation? Debt has been a popular whipping boy for economists and politicians in this country for decades. At times, one or the other political party has found it expedient to become a champion of economic sobriety. Of course, once they recapture control of the government purse strings, they pretend amnesia. The Republicans, for example, spent eight years fighting the Democrats under President Obama on every dollar of proposed spending, except defense. Their argument back then was that any spending would increase the public debt and make it impossible to balance the budget. Republicans even refused to approve funding for our national debt limit and actually shut down the government in defense of what they called fiscal responsibility. Fast forward to 2016-2018, when the same party (and the exact same politicians) added more debt to the country than at any time in our history, while throwing the budget into the red by trillions of dollars. The president’s recent budget proposal only adds...

A nation united in debt

About a month ago, the national debt topped $22 trillion for the first time. What’s more, it only took a year to tack on another $1 trillion. Unless we do something soon, we could see those kinds of yearly borrowing double within the next decade. Let’s define U.S. debt as the sum of all outstanding debt owed by the federal government. Two-thirds of this debt is held by you and me. It is called public debt, while one-third is held by various inter-governmental departments and agencies such as Social Security and other trust funds. We have the distinction of being the world’s largest debtor, although the European Union is a close second. We now have more debt on our books than we produce in goods and services in a year. If you and I were in the same boat (and most of us are), we might have a problem repaying that debt in the future. If interest rates begin to rise, we might need to cut back on our spending just to make the monthly payments. As you might imagine, your debt and the government’s have a lot in common. Using the nation’s debt practices as our model, we find that more and more Americans are accumulating debt. And, what’s more, we are dying with that debt on our books. About 73% of Americans who die have unpaid debt that totals much more than their funeral expenses, according to Experian PLC, a large credit card reporting bureau; the average amount of that debt is about $62,000. As you might expect, unpaid mortgages account for 37% of those liabilities, followed...

Veterans are on the receiving end of the Trump Administration

In the 2019 fiscal budget, the Department of Veterans Affairs received over $200 billion in spending. That’s a 6% increase over last year and counts as the largest amount ever received by the VA. The money will go a long way in implementing an array of much-needed reforms. There will be $400 million ear-marked for preventing opioid abuse. As you might imagine, Veterans are a high-risk group since opioids are used extensively in treating war-time casualties. An additional $1.1 billion will jump-start the overhaul of the VA’s electronic health records, while $1.75 billion will go to implementing the VA Mission Act. That money will revamp and re-write the veteran’s community care programs, which allows for an entire array of new health care choices for the veteran. This will boost the vet’s ability to access private health care at taxpayers’ expenses. On the education front, the Veterans Benefits and Transition Act will help to right some past wrongs inflicted on Post-9/11 GI bill users. Last year, there was a series of technology glitches at the Department of Veterans Affairs that resulted in delayed and inaccurate payments for many thousands of vets attending college. In many cases, the government was not paying the tuition costs, or if they were, the payments were delayed. GI students were being hit from all sides. Schools were charging them late fees, preventing them from access to campus facilities, or were not allowing them to register for their next semester. As vets scrambled to pay the tuition shortfalls, money for mortgage and rents were in short supply causing even more late fees to accrue. Some schools...

Economic prosperity in the United States

The stock market is once again approaching historical highs. Unemployment is at multi-year lows. Interest rates and inflation, if not at record lows, are close to it. The president claims we are enjoying the strongest economy in our nation’s history. Is that true? The short answer, according to a recent study by Bloomberg, would be no, not even close. They went back over the course of the last 43 years and measured the nation’s economy under three Democratic and four Republican presidents. They found that in all but one case both the economic and financial performance of the U.S. was better than it is now. Bloomberg used 14 different gauges to measure a wide range of economic activity. Everything, from manufacturing jobs to the value of the greenback versus other currencies, was included. All the traditional variables such as GDP, unemployment, wages productivity, etc. were also analyzed. It turns out that the economy under the last seven presidents saw the greatest improvement under President Bill Clinton between 1993 to 2001. Ranking number two was Barack Obama. President Obama, readers may recall, took office in 2009 during the worst recession since the 1930s. By the time he departed in 2017, he handed Donald Trump an economy that saw the second-best performance of all seven presidents. Ronald Reagan only ranked number three, followed by George H.W. Bush, Jimmy Carter then George W. Bush (who presided over the largest financial crisis in 80 years). President Trump settles in at the number six place, not quite as bad as George W., but clearly lagging Jimmy Carter. Even though it is early days, with...

Trumps’ war on drug (prices)

For the second year in a row, President Donald Trump called on Congress to do something about the escalating drug prices in America. The president is doggedly pursuing this campaign promise in the face of an army of special interest groups and big drug companies. Hurrah for you, Mr. President. In his State of the Union address he said: He wants our legislators to “deliver fairness and price transparency for American patients. We should also require drug companies, insurance companies, and hospitals to disclose real prices to foster competition and bring down costs.” Given that drug pricing is a complicated area and there have been various proposals and recommendations proposed, I will focus on just a few at a time. One of the president’s proposed actions would reduce drug prices by allowing pharmaceutical companies to offer discounted prices to Medicare and Medicaid directly, bypassing the middlemen, called Pharmacy Benefit Managers (or PBMs). Historically, these PBMs have been useful to insurance companies and large employers. They make their money by negotiating behind-the-scenes deals with Big Pharma acquiring discounts, called “rebates,” for their big clients on certain “approved” prescription drugs. These rebates are targeted to name-brand drugs that are covered by Medicare and Medicaid. Since this is a well-known system of back-scratching, drug companies simply hike prices high enough each year to cover these “rebates.” This year, for example, despite the president’s call to hold down prices, 60 drug companies increased prices on over 300 products, and we are only in February of the new year. Trump wants these discounts, instead, to flow directly to the consumer at the pharmacy counter,...

The pay gap for women is growing

If Citigroup, one of the world’s largest banks, is any indication, women earn 29% less than their male counterparts. It also revealed that only 37% of its managerial jobs were held by females. Wall Street has long been known as “the last bastion” for white males. But to Citigroup’s credit, it just made public its internal assessment of the existing pay gap between the genders. One reason it did so was the new disclosure standards that are now required in the United Kingdom since last April. Last year, when Citigroup first reported these numbers for its UK workforce, women were paid 44% less, and if bonuses were counted, the gap widened to 67%. Kudos to Citigroup for at least narrowing the gap over the last 12 months, but much more needs to be done. However, let’s not pick on Citigroup. Plenty of the nation’s top financial institutions are in the same boat. But, as a result of increasing shareholder pressure, many American companies are being required to fess up and supply data of their own inadequacies in this area. Historically, the wage gap for women in this country has been reported to be 80 cents for every dollar a man receives in compensation. Critics argue that there has been real progress since the Equal Pay Act was passed in 1963. Back then, women only earned 60% of what men did. Over the next thirty years or so that disparity was reduced by half, but it is still 80 cents. Those who think this gap is justified (mostly white, middle-aged and older males) argue that women get paid less because...