The Problem with Our $6 Trillion War Tab

Plus, Pfizer says it's raising prices on 41 drugs By Yuval Rosenberg and Michael Rainey The Big Problem with How We’re Paying Our $6 Trillion War Tab We told you last week that the total long-term cost of post-9/11 wars is [approaching $6 trillion]( according to a [report]( by the Watson Institute for International and Public Affairs at Brown University. It’s huge number, difficult to fully comprehend. But why does it matter? "It’s important for the American people to understand the true costs of war, both the moral and monetary costs," Sen. Jack Reed (D-RI) said in a statement last week, according to [The Hill](. "Our nation continues to finance wars and military operations through borrowing, rather than asking people to contribute to the national defense directly, and the result is a serious fiscal drag that we’re not really accounting for or factoring into deliberations about fiscal policy or military policy.” The U.S. cut taxes in 2001 and 2003 and has largely paid for the wars by [borrowing](. Steven Aftergood, who directs the project on government secrecy at the Federation of American Scientists, echoed Reed’s comments. “Throughout most of US history, it was normal practice to raise taxes in times of war. When we were at war, everyone knew we were at war and everyone helped pay for it at least to some extent,” he [said](. “That is no longer true.” Aftergood says that deficit financing has serious implications now — and will reverberate into the future: “Deferring costs in this way does not mean, of course, that they will not be ultimately paid. It simply means that the cost burden will be shifted onto future generations that will no doubt have defense challenges and costs of their own. … The deferral of war costs into the indefinite future, exacerbated by tax cuts, inevitably means that public awareness of U.S. military operations is diminished or eliminated rather than heightened. It means that the ‘feedback loops’ that are at the heart of deliberative democracy are disabled. The public is not being forced, as it should be, to make difficult choices among competing priorities. Through the illusory magic of deficit spending, we are spared the knowledge of the burdens that we are placing on our future selves and on future generations. The budget lights may be flashing red, but they are shielded from our view.” Also, lest we forget: The Brown University researchers also estimate that between [480,000 and 507,000]( people have been killed in the wars in Afghanistan, Iraq and Pakistan, including more than 244,000 civilians and nearly 15,000 U.S. military and contractors. Quote of the Day “It’s hard to see a sustainable budgetary path forward. Democrats are unlikely to play the fools a third time with regard to addressing the fiscal gap, after Clinton was followed by Bush II and Obama was followed by this [2017] tax bill. This is dangerous for our country, and reflects a broader breakdown of cooperative political norms that are really vital to our national welfare.” – Daniel Shaviro, a tax policy expert at NYU’s School of Law, in a [blog post]( on fiscal policy after the midterm elections Pfizer Says It Will Raise Prices on 41 Drugs When drug giant Pfizer announced in July that it would roll back price hikes on its drugs, it made clear that the change [was temporary](. Facing intense pressure from President Donald Trump, the company said it would defer price increases until the president’s blueprint for lowering prescription prices took effect or the end of the year, “whichever is sooner.” The end of the year came sooner, and the deferrals will ultimately have lasted about six months. The company [said]( Friday it is planning to raise the list prices on 41 of its drugs effective January 15. Most of those drugs will see prices rise by 5 percent, while three drugs will see increases of 3 percent and one will go up 9 percent. Combined, the 41 drugs represent 10 percent of the company’s medicines. The other 90 percent will stay at their current list prices, Pfizer said. “The drug price pledges made earlier this year were just for show — it was obvious at the time, and it's obvious now,” Walid Gellad, director of the Center for Pharmaceutical Policy and Prescribing at the University of Pittsburgh, told [Politico](. “The bully pulpit doesn't work, and even if it did, we don't want a system in which the only way to bring down drug prices is for the president to publicly berate a company — that's not a healthy market and not good policy.” Pfizer said that it expects the list price increases will be offset by higher rebates and discounts paid to insurers and the pharmacy benefit managers who administer prescription plans — and that it expects those companies to share those benefits with patients so that out-of-pocket costs don’t jump. "We believe the best means to address affordability of medicines is to reduce the growing out-of-pocket costs that consumers are facing due to high deductibles and co-insurance, and ensure that patients receive the benefit of rebates at the pharmacy counter," Pfizer Chairman and CEO Ian Read said in a statement. A spokesperson for the Department of Health and Human Services told reporters that the announcement illustrated the “perverse incentives” in drug pricing. "Drug companies raising their prices and offsetting them with higher rebates benefits everyone but the consumer, who routinely pays out of pocket based on list price," spokeswoman Caitlin Oakley said, according to [CNN](. Goldman Sees Sharp Economic Slowdown Ahead Goldman Sachs is sticking to its forecast of a significant economic slowdown over the next several quarters, driven in part by the waning effects from both the tax cuts and the recent increase in federal spending. "We expect tighter financial conditions and a fading fiscal stimulus to be the key drivers of the deceleration," the bank's chief economist, Jan Hatzius, wrote in a note to clients on Sunday. Here are some of the key estimates from the Goldman economics team: - Real GDP growth of 2.9 percent in 2018, 2.5 percent in 2019, 1.6 percent in 2020, and 1.5 percent in 2021. - Core inflation of 1.9 percent in 2018, rising to 2.2 percent in 2020 and 2021. - Unemployment rate falling to 3.2 percent in 2019 and 3.1 percent in 2020. - Five more rate hikes from the Federal Reserve by the end of 2019. - Ten-year U.S. Treasury yields will likely peak at 3.5 percent in 2019 before falling to 3.3 percent in 2020. The slowdown isn't projected to lead to a recession, however, Goldman said, since recent economic growth appears to be self-sustaining to some degree. “For now, neither overheating risks nor financial imbalances — the classic causes of US recessions — look worrisome," Hatzius wrote. "As a result, the expansion is on course to become the longest in US history next year, and even in subsequent years recession is not our base case." Medicare Improper Payments Lowest Since 2010 Improper payments by Medicare in fiscal 2018 dropped to their lowest rate since 2010, the Centers for Medicare and Medicaid Services (CMS) said Friday in a [report]( flagged by [Modern Healthcare](. CMS paid an estimated $31 billion in improper payments over fiscal 2018, which represents 8.12 percent of all payments — down $4.59 billion from 2017, when improper payments accounted for 9.51 percent of total Medicare Fee-for-Service claims. Improper payments include fraudulent claims, payments made to the wrong recipient or for the wrong amount, payments with insufficient documentation, and those when the recipient uses the funds improperly, Modern Healthcare’s Virgil Dickson explains. Improper payment rates dropped for Medicare Fee-for-Service, Medicare Part C, Medicare Part D, Medicaid and the Children’s Health Insurance Program, the first time on record that’s happened for all five programs, CMS said. Budget Process Overhaul Hits a Snag The bipartisan, bicameral congressional committee tasked with overhauling the budget process has hit a procedural snag, Roll Call reports. The Joint Select Committee on Budget and Appropriations Process Reform, which was established by the Bipartisan Budget Act of 2018 to “significantly reform the budget and appropriations process,” faces a November 30 deadline, but co-chair Rep. Nita M. Lowey (D-NY) is pushing for a delay until the bill’s rules for how the amendment process will work in the Senate are clarified. Serious budget wonks can get all of the details by listening to [Roll Call’s 9-minute podcast on the issue](. Happy Thanksgiving week! Congress is out and President Trump will be heading to Mar-a-Lago on Tuesday. So tell us — what else is going on? Send your tips and feedback to yrosenberg@thefiscaltimes.com. Connect with us on Twitter: [@yuvalrosenberg]( [@mdrainey]( and [@TheFiscalTimes](. And tell your friends they can [sign up here]( to get their own copy of this newsletter. 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Samuelson, Washington Post - [Robert Samuelson Is Denying Inequality, Again]( – Dean Baker, CEPR - [Republicans Want to Make Entitlements the Next Caravan]( – Stephanie Kelton, Bloomberg - [Ray Dalio Sees Parallels to 1930s in Today’s Markets]( – Brian Chappatta, Bloomberg - [Eliminating All Student Debt Isn’t Progressive]( – David Leonhardt, New York Times - [End Debt Ceiling Gimmicks, Restore the Gephardt Rule]( – Stan Veuger, American Enterprise Institute - [Talking Points and Health-Care Restrictions Prevent People from Enrolling in ACA]( – Julie Burkhart, The Hill - [Medicaid Expansion Popular Among College Graduates. Does Education Foster Empathy?]( – David Matsa, USA Today - [Does the Economic Boom Guarantee Trump’s Reelection?]( – James Pethokoukis, American Enterprise Institute - [Michael Bloomberg’s $1.8 Billion Donation Is Great News for Johns Hopkins University — and Bad News for America]( – Leslie Albrecht, MarketWatch Copyright © 2018 The Fiscal Times, All rights reserved. You are receiving this newsletter because you subscribed at our website, thefiscaltimes.com, or through Facebook. Our mailing address is: The Fiscal Times 712 Fifth AvenueNew York, NY 10019 [Add us to your address book]( If someone has forwarded this email to you, consider signing up for The Fiscal Times emails on our [website](. Want to change how you receive these emails? You can [update your preferences]( or [unsubscribe from this list](