Watchdog Group Warns of Dangers of 'Debt Denialism’

Plus, did Trump lower drug prices for the first time in 50 years? By Yuval Rosenberg and Michael Rainey Budget Group Warns of Dangers of ‘Debt Denialism’ The Treasury Department forecasts that the federal budget deficit will surpass $1 trillion this year, adding to a $22 trillion national debt. Policymakers have been relatively unperturbed by the debt and deficit growth, though, with the president’s top economic adviser [saying]( last week that the fiscal outlook is not “as bad as many people say.” Some Republicans continue to insist, contrary to evidence, that their tax cuts will pay for themselves. At the same time, the president is looking to boost defense spending and some Democrats are proposing bold and expensive new programs or calling for non-defense spending increases to match higher military outlays. Meanwhile, an unconventional school of economic thought called Modern Monetary Theory — whose proponents [argue]( that deficit fears “distract from the many legitimate challenges facing our country and leave us poorer than we could otherwise be” — is gaining [increased attention](. And even mainstream economists are downplaying the need to worry about mounting debt and deficits. “The levels of debt we have in the U.S. are not catastrophic,” Olivier Blanchard, an economist at the Peterson Institute for International Economics and former chief economist at the International Monetary Fund told The Wall Street Journal recently. “We clearly can afford more debt if there is a good reason to do it. There’s no reason to panic.” The headline on that [article]( “Worry About Debt? Not So Fast, Some Economists Say.” Budget watchdogs are calling it all “debt denialism” and warning that it “could not come at a worse time.” In a new paper, the Committee for a Responsible Federal Budget lays out its counterargument, explaining why we should worry about the national debt, even if we’re not currently in the midst of a crisis. “The rapid aging of the population means that deficits and debt are on course to explode in the coming decades,” the paper says. “With a strong economy and unemployment rate below 4 percent, now is the time to begin reducing deficits, not increasing them. As President John F. Kennedy once said, ‘the time to repair the roof is when the sun is shining.’” The group says that our high and rising debt will: - Depress income growth; - Drive federal interest payments higher, crowding out other spending priorities; - Work to raise interest rates; - Reduce the country’s ability to respond to the next recession or emergency; - Add to the burden on future generations; and - Increase the risk of a fiscal crisis. Read the CRFB paper [here]( or if you want to dive into the details, check out CRFB’s [answers to nine key questions]( in the current fiscal debate. UnitedHealth CEO Slams Medicare for All The CEO of industry giant UnitedHealth Group weighed in on Medicare for All proposals Tuesday, saying that plans being debated by Democrats would harm the nation’s health care system if enacted. "The wholesale disruption of American health care being discussed in some of these proposals would surely jeopardize the relationship people have with their doctors, destabilize the nation’s health system and limit the ability of clinicians to practice medicine at their best," CEO David Wichmann said on an earnings call. "And the inherent cost burden would surely have a severe impact on the economy and jobs — all without fundamentally increasing access to care.” A major player: UnitedHealth is the largest health insurer in the U.S., covering almost 50 million people — nearly as large as Medicare itself, Bloomberg’s Drew Armstrong and John Tozzi [pointed out](. A lot at stake: UnitedHealth recorded revenues of $226 billion last year, and the company’s stock has risen sharply over the last 10 years. Shares were down Tuesday, however, despite positive earnings news, with analysts citing “investor jitters” over Medicare for All. MarketWatch’s Tomi Kilgore [said]( that investors were “reacting to chatter about changes in the regulatory landscape” for health care — chatter that Wichmann was trying to address, although his approach may have backfired. Here's how UnitedHealth's stock has done over the past 12 months: Wichmann and his predecessor, Stephen J. Hemsley, have been among the highest paid health care executives in the country. Wichmann’s total compensation was [$17.4 million]( in 2017, while Hemsley reportedly earned [$279 million]( between 2010 and 2016. The industry pushes back: Until now, health care executives have remained quiet amid the growing debate over health care among Democratic presidential candidates, but a [Washington Post story]( last week said that UnitedHealth has been working behind the scenes to undermine Medicare for All. Steve Nelson, CEO of UnitedHealthcare, a division of UnitedHealth Group, said “we’ve done a lot more than you would think” on the issue, while seeking to “tread lightly” to avoid the political spotlight. Nelson, who earned $7.5 million in 2017, ended up very much in the spotlight in the wake of the Post article, however, with presidential candidate and leading Medicare-for-All proponent Sen. Bernie Sanders [tweeting]( last week, “Our message to Steve Nelson and UnitedHealthcare is simple: When we are in the White House your greed is going to end. We will end the disgrace of millions of people being denied health care while a single company earns $226 billion and its CEO makes $7.5 million in compensation.” Wichmann’s public comments this week “represent an escalation” in the political struggle, The Hill’s Nathaniel Weixel [said]( in a battle that so far has been fought largely by advocacy groups and lobbyists. A different path: Wichmann said he doesn’t oppose the idea of universal health coverage but wants to maintain a role for private insurers. “The path forward is to achieve universal coverage, and it can be substantially reached through existing public and private platforms," he said. Did President Trump Bring Down Drug Prices for the First Time in 50 Years? Acting White House Chief of Staff Mick Mulvaney said on “Fox News Sunday” last week that “Drug prices in this country actually came down last year for the first time in 50 years. That’s because Donald Trump’s president.” In a new fact-checking piece, Kaiser Health News and Politifact rate that claim [“Mostly False.”]( “We interviewed five experts who all agreed that, no matter which metric was used, evidence is lacking to unequivocally say drug prices decreased last year,” Kaiser’s Shefali Luthra writes. “The most generous reading came from Matthew Fiedler, a health economist at the Brookings Institution: It’s ‘within spitting distance of something that’s true.’” Luthra notes that Kaiser Family Foundation data show that total spending on prescription drugs grew in 2018, but at a slower pace than in prior years. Still, that’s not the same as a decrease in spending or in prices. Data provided by the White House in support of Mulvaney’s claim showing that the consumer price index (CPI) for prescription drugs fell in January 2019 compared with 12 months earlier provides an incomplete picture, Luthra explains, in part because it “doesn’t account for whether manufacturers lowering their list prices have also changed the size of the rebates they provide. That’s essential information in understanding if the real price of a drug — what insurance pays and, ultimately, what consumers pay — has actually changed.” The CPI data also doesn’t include many high-priced specialty medications sold via mail order, and the January-to-January snapshot might not reflect broader trends. “There is also no evidence to support the argument that Trump himself is responsible for changes in drug pricing,” Luthra concludes. The bottom line: “This year, the list price of more than 3,000 drugs went up, while the price of only 117 went down, according to data compiled by Rx Savings Solutions,” Luthra says. “Last year, [an analysis by the Associated Press]( revealed that, from January to July, 4,412 branded drug prices went up, while 46 were cut.” Number of the Day: 4.4 Million If the 14 states that have not expanded Medicaid under the Affordable Care Act all decided to do so, 4.4 million uninsured adults under the age of 65 would become eligible for coverage, according to a new factsheet from the Kaiser Family Foundation. That number represents 39% of the uninsured nonelderly adult population in those states. Click through to [the Kaiser site]( for a state-by-state breakdown of the 14 states. “If you’re walking back into Notre Dame Cathedral in 10 years’ time, that’s a major achievement,” one construction director with experience working on cathedrals told The Washington Post. The [Post's piece]( explaining why cathedrals are vulnerable to fires and take a long time to rebuild is worth a read. Tell your friends they can [sign up here]( to get their own copy of this newsletter. Send your tips and feedback to yrosenberg@thefiscaltimes.com. Or connect with us on Twitter: [@yuvalrosenberg]( [@mdrainey]( and [@TheFiscalTimes](. GOP Tax Overhaul Hurt the Housing Market: Fed Economists Did the 2017 tax overhaul depress the housing market in 2018? In a new research report, economists Richard Peach and Casey McQuillan at the Federal Reserve Bank of New York say there’s a good chance it did. The housing market slowed significantly from the fourth quarter of 2017 to the third quarter of 2018, according to Peach and McQuillan, with sales of new single-family homes falling by 7.6% and sales of existing single-family homes dropping by 4.6%. Interest rates rose by more than half a percentage point during the period, producing predictable headwinds for the market. But the size of the slowdown was larger than expected relative to the interest rate increase, leading the researchers to look at the tax overhaul as a possible source. Peach and McQuillan found that key changes in the tax code — the reduction of income tax rates, the $10,000 cap on the deductibility of state and local taxes and the reduction in the mortgage interest write-off — combined make it more expensive — and less financially appealing — to own a home, especially in coastal areas with high housing prices and property taxes. The increase in costs of home ownership went beyond what was expected from higher interest rates, creating a drag felt throughout the housing market during the period. The bottom line: “While certainly not conclusive,” Peach and McQuillan write, the evidence “is consistent with the view that changes in federal tax laws enacted in December of 2017 have contributed to the slowing of housing market activity that occurred over the course of 2018.” The researchers said that an upcoming Fed paper will present empirical evidence that supports their conclusions. [Read the full analysis at the New York Fed’s Liberty Street Economics blog](. News - [Employer Market May Be the Next Political Healthcare Challenge]( – Modern Healthcare - [‘Stop the Bull’: Feud Erupts Between Rick Scott and Chuck Schumer Over Puerto Rico]( – Politico - [Democratic Proposals to Overhaul Health Care: A 2020 Primer]( – The Hill - [Fox News’ ‘Medicare For All’ Question to Bernie Sanders Audience Gets Unexpected Reaction]( – HuffPost - [‘Stop Sanders’ Democrats Are Agonizing Over His Momentum]( – New York Times - [New Beneficiaries Are Leading to Financial Woes for Hospital ACOs]( – Modern Healthcare - [Workplace Wellness Programs Barely Move the Needle, Study Finds]( – Kaiser Health News - [The Disturbing Links Between Too Much Weight and Several Types of Cancer]( – Washington Post - [Microsoft’s Carbon Tax Move]( – Axios - ['Frustration Grows' as Congress Delays Puerto Rico Disaster Relief Discussions to May]( – NBC News - [A Guardian of Global Capitalism Warns Capitalism Has a Problem]( – NPR - [Government to Measure Who Gets What Share of the Economic Pie]( – Wall Street Journal (paywall) - [California City Begins Universal Basic Income Experiment]( – The Hill Views and Analysis - [Mick Mulvaney’s Master Class in Destroying a Bureaucracy From Within]( – Nicholas Confessore, New York Times - [A Bernie Sanders Exchange on Fox Highlights a Big Trump Vulnerability]( – Greg Sargent, Washington Post - [Sanders’s Medicare for All Goes Too Far]( – Noah Smith, Bloomberg - [Trump’s Attacks on Health Care Will Backfire]( – Steven Rattner, New York Times - [Obamacare Marketplaces Fare Better in States That Embrace Them]( – Paige Winfield Cunningham, Washington Post - [Don't Believe the Lies About Single-Payer Health Care]( – Garrett Adams, Courier Journal - [Measles Outbreak Drains Resources We May Need for a Future Epidemic or Bioterrorist Attack]( – Joe Lieberman and Tom Ridge, USA Today - [Congress Scorns Trump Plan to Cut, Weaponize Foreign Aid]( – Joe Davidson, Washington Post - [AOC Wants to Fund Federal Literacy Programs. But They’re Failing for a Reason.]( – Megan McArdle, Washington Post - [Tax Day Trauma: Paying for Our Massive National Debt]( – Maya MacGuineas and Ed Rendell, The Hill - [Foul Play with Generic Drugs Threatens American Lives]( – J.D. Hayworth, The Hill - [Three Proposals to Give Americans a Tax Break and Increase Labor Force Participation]( – Ryan Nunn, Brookings Institution - [How to Stop Rising Inequality in the Next Recession]( – Stephen Gandel, Bloomberg - [Will We Survive the Next Financial Crisis?]( – Ben Bernanke, Timothy Geithner and Hank Paulson, Politico - [Electric Cars Are Finally Starting to Take Off. Congress Should Keep Them Affordable.]( – Jack Gillis, Washington Post Copyright © 2019 The Fiscal Times, All rights reserved. You are receiving this newsletter because you subscribed at our website, thefiscaltimes.com, or through Facebook. 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