“The Affordable Care Act offered states a huge infusion of federal money to expand Medicaid eligibility to low-income adults, and about 30 states took that deal right away in 2014. Since then, new medical debt in those states has fallen 44 percent, a dramatically bigger drop than was seen in the states that refused to expand the program over the same period. Those states showed only a 10 percent decline.”
“nonmedical debt had fallen by similar amounts in expansion and non-expansion states over the time period they studied, 2009 to 2020, strengthening the case that Medicaid expansion was the difference with medical debt.”
“In states that expanded Medicaid, both the lowest- and highest-income groups saw their medical debt drop after expansion, but the amount of medical debt added annually decreased much more for the former (by $180, from $458 to $278) than the latter (by $35, from $95 to $60).
In non-expansion states, on the other hand, the lowest-income group averaged a $206 average increase in new medical debt, from $630 to $836. But the highest-income bracket still saw a small decline in new debt for medical care.”
“Those states are concentrated in the South. Eight of the 12 non-expansion states are in the region. Nearly one in four Southerners have some medical debt in collections listed on their credit report, compared to 10.8 percent of people in the Northeast and 12.7 percent in the West.”
“According to a recent congressional report, credit card balances actually declined sharply, by $76 billion, in the second quarter of 2020. You might also assume that, with the guillotine of joblessness hanging precipitously in the balance, Americans might defer large purchases, like homes or cars. Again, you’d be wrong: By the fourth quarter of 2020, mortgage debt grew to $10 trillion (compared to a fourth-quarter 2019 statistic of $9.56 trillion), and auto loan debt reached $1.4 trillion.”
“During the worst part of Covid, people were pretty cautious. Debt did rise, but not all debt rose. For example, the US experienced the largest recorded quarterly decline in credit card balances (about $76 billion, see the Congressional Research Service study of May 6, 2021). For one thing, people stopped spending; they really just cut back on expenditures. That’s one of the reasons that businesses were so hard-hit: Aside from the lockdowns and all the rest of it, people weren’t buying stuff.
But I would say that what really saved it from being a total disaster was the three stimulus checks. That first stimulus check was spent almost entirely on expenses, and it appeared that was the period of highest unemployment. When the second stimulus check came out, people were more likely to spend that on debt; that may be one reason that we began to see a decline in credit card debt. And then by the time we got to the third stimulus check, some people were spending it, some people were buying down debt, but a surprising number saved it. The personal savings rate actually reached a high in April of 2020. Who would have believed it?”
“The Census Bureau began doing a survey that was very helpful during the pandemic called the Pulse survey, which comes out every week and asks people about their economic difficulties. In the survey that covered May 12 through 24, there were still 26 percent of respondents who said they were having trouble paying their household expenses. That’s a red flag. And 9 percent of adults were in households where they said that at least some time in the past week, there had not been enough to eat. So it appears to me that the people who have been in dire straits are not going to get out of those dire straits any time soon.”
“a review of the literature about the impact of government spending on growth reveals that, generally, such spending crowds out the private sector. This dispels the hope that more spending will produce economic wonders.
Deficit spending will eventually result in higher taxes for future generations. That’s a profoundly unfair burden. Debt is also expansive in and of itself, as interest payments on an enormous amount of debt—even when interest rates are low—will result in a larger and expanding deficit. According to Brian Riedl at the Manhattan Institute, Congressional Budget Office data reveal that by 2049, “Interest payments on the national debt would be the federal government’s largest annual expenditure, consuming 42% of all projected tax revenues.”
Eventually, growing debt will also slow economic growth. Lower growth means fewer innovations, lower wage growth, and higher unemployment. It’s all-around bad news. Finally, higher debt could result in a debt crisis. These are good enough reasons for me to want to restrict the size of government and impose fiscal prudence.”
“Interestingly, recent concerns over inflation have highlighted one additional reason why higher debt is problematic. You see, when it comes to inflation, people’s expectations about the price trajectory in the next few years are what really matters. So, it matters less than we think that the current inflationary forces are likely transitory. If people believe that inflation is here to stay, they will try to protect themselves from it today, and we will indeed have inflation today.
Under that scenario, to get inflation under control, the Federal Reserve will have to raise interest rates. And this is where your debt levels matter. Higher interest rates result in a large increase in overall interest payments fairly quickly, as so much of our debt needs to be rolled over on a short-term basis. A sudden increase in interest rates would slow down the recovery, too, which hurts lower-income Americans.
If the Fed were immune to political pressures, this reality might not matter. However, we can expect that political pressure to be enormous. No administration would be happy to see a large increase in interest payments suddenly show up on its balance sheet followed by a large increase in the size of the deficit, especially if that administration is already planning to spend a larger amount of money in the first place. This pressure only grows under an administration that will resist any rate change that could hurt growth. The Fed may also be slow to act because it has made addressing inequality one of its priorities.”
“Do I know what expectations are and how long inflation will stick around? I don’t. But in truth, no one really does. That’s part of the point. In that context, fiscal prudence now is the best course of action, because with so much political pressure in the worst-case scenario, there will be fewer opportunities when the Fed must actually raise interest rates.”
“Republicans raised the debt ceiling with minimal drama under Donald Trump. Now Democrats are prepared to make them publicly refuse to do the same for Joe Biden.
Senate Republicans are digging in deeper and deeper in their resistance to raising the nation’s borrowing limit, with 46 of them vowing to oppose an increase this fall that will need at least 10 Republican votes. Yet Democrats still plan to burn their most expedient ticket out of the debt mess, with no intention to shift course and pass an increase along party lines.
Their move to pass a budget resolution without tackling the debt ceiling, completed last week, adds a perilous deadline to Democrats’ season full of lofty promises on infrastructure and social spending. It’s not only the majority party facing a fall challenge, however: Republicans will have to actually block a debt ceiling increase instead of just talking about it.
The borrowing fight is perhaps the most immediately consequential drama during a momentous fall for Biden and the Democratic agenda. In addition to raising the debt ceiling, Democrats must fund the government past Sept. 30, devise a likely multitrillion-dollar spending bill and put Biden’s infrastructure bill over the top in the House. Democrats will also make one last-gasp effort at passing voting rights legislation.”
“The Congressional Budget Office (CBO), the legislature’s nonpartisan number-crunching agency, says the bipartisan infrastructure bill would add about $256 billion to the deficit over 10 years. The real figure is likely to be higher, because the package contains a few gimmicky elements that are designed to trick the CBO’s forecasting metrics.
The biggest of those gimmicks is the promise that Congress will reallocate more than $200 billion of COVID relief funds to cover infrastructure costs. It remains unclear exactly what unused COVID funds will be redirected, and the bill only rescinds $50 billion in actual budget authority from previously passed COVID relief bills, according to an analysis by the Committee for a Responsible Federal Budget (CRFB).
Other proposals to save and redirect federal dollars to pay for the infrastructure bill are also unlikely to materialize. Take the $49 billion lawmakers plan to “save” by further delaying an already-delayed Trump administration regulation altering how prescription drug discounts are applied by health insurers. “Because the Congressional Budget Office projected that the so-called rebate rule would increase federal spending in Medicare and Medicaid by about $177 billion over a decade, due to a rise in Medicare premiums (and therefore, taxpayer-funded subsidies for Medicare premiums), lawmakers get to count a further delay in the rule (beyond the Biden administration’s one-year delay) as ‘savings’ for the federal government,” explains the National Taxpayers Union.”
“When you filter out the gimmicks designed to game the CBO score of the infrastructure bill, the CRFB says the package will probably add $340 billion to the deficit over 10 years.”
“But as the CBO’s report makes clear, actually paying for the infrastructure makes those benefits bigger than they otherwise would be. A fully offset infrastructure package would boost GDP by an estimated 0.11 percent over the next 30 years while a deficit-financed package would barely break even. That’s because, as the CRFB notes, running higher deficits to pay for infrastructure spending will reduce private investment over the long term and, thus, lower future economic growth as well.”
“Biden’s plan would see the federal government spend “what amounts to nearly a quarter of the nation’s total economic output every year over the course of the next decade”—a threshold that has never been hit since World War II, with the exception of 2020 and 2021—while also collecting “tax revenues equal to just under one-fifth of the total economy,” which would also near a record high.
That really sums it up. Record levels of spending that would well exceed even a historically high share of the economy devoted to funding the government.
While Biden’s proposal does not envision budget deficits rising as high as they did last year—when the government spent $3.1 trillion more than it collected in tax revenue—his budget calls for deficits of at least $1.6 trillion for the foreseeable future, the Times reports. The national debt measured as a share of the economy’s overall size will exceed the all-time record high of 113 percent, set during World War II, by 2024. And it will keep growing.”
“Like all presidential budgets, Biden’s is mostly aspirational; Congress will have the final say. But with Democratic majorities in both chambers, something similar to the president’s proposal is likely to be adopted.
After Republicans effectively traded away any claim to fiscal responsibility during the Trump administration by backing bigger budgets and higher deficits, Biden rode into office with the chance to spend big with fewer of the usual political impediments. In his joint address to Congress last month, Biden promised to build “a union more perfect, more prosperous, and more just.”
Apparently it will also require more spending, more taxes, and more borrowing.”
“Wiping out student loan debt for American college graduates would benefit the wealthy much more than it benefits less privileged students, according to a new working paper from the National Bureau of Economic Research. “Blacks and Hispanics would also benefit substantially less than balances suggest,” the authors say.
In the paper, titled “The Distributional Effects of Student Loan Forgiveness,” economists Sylvain Catherine and Constantine Yannelis conclude that universal student loan “forgiveness would benefit the top decile as much as the bottom three deciles combined.””
“”There are a number of ways in which debt can be discharged, with important distributional implications. For example, forgiveness can be universal, capped or targeted to specific borrowers. These debt cancellation policies can benefit different socioeconomic and ethnic groups. This paper explores their distributional impacts. We find that the benefits of universal debt forgiveness policies largely accrue to high-income borrowers, while forgiveness through expanding income-contingent loan plans instead favors middle-income borrowers.””
“full or partial loan forgiveness regardless of income and loan size would be “highly regressive, with the vast majority of benefits accruing to high-income individuals,””
The New Americans: Economic, Demographic, and Fiscal Effects of Immigration National Research Council. 1997. The National Academies Press. https://www.nap.edu/read/5779/chapter/6#138 Yes, Immigration Hurts American Workers George J. Borjas. 9/10 2016. Politico. The Impact of IllegalImmigrationon the Wagesand EmploymentOpportunitiesof Black Workers The United States