Trump Clearly Has No Problem with Debt and Deficits
A self-proclaimed “king of debt,” President Trump has produced a budget that promises red ink as far as the eye can see. With last year's $1.5 trillion tax cut reducing revenues, the White House gave up even trying to pretend that its budget would balance anytime soon, and even the rosy economic projections contained in the budget couldn’t produce enough revenues, however fanciful, to cover the shortfall.
The Trump budget spends as much over 10 years as any budget produced by President Barack Obama, according to Jim Tankersley of The New York Times. And it projects total deficits of more than $7 trillion over the next decade — "a number that could double if the administration turns out to be overestimating economic growth and if the $3 trillion in spending cuts the White House has floated do not materialize in Congress,” Tankersley says.
Trump — who once promised to both balance the budget and pay down the national debt — isn’t the only one throwing off the shackles of fiscal restraint. Republicans as a whole appear to be embracing a new set of economic preferences defined by lower taxes and higher spending, in what Bloomberg describes as a “striking turnabout” in attitudes toward deficits and the national debt.
But some conservatives tell Tankersley that the GOP's core beliefs on spending and debt remain intact — and that spending on Social Security and Medicare, the primary drivers of the national debt, are all that matters when it comes to implementing fiscal restraint.
“They know that right now, a fundamental reform of entitlements won’t happen," John H. Cochrane, an economist at Stanford University’s Hoover Institution, tells Tankersley. "So, they have avoided weekly chaos and gotten needed military spending through by opening the spending bill, and they got an important reduction in growth-distorting marginal corporate rates through by accepting a bit more deficits. They know that can’t be the end of the story.”
Democrats, of course, have warned that the next chapter in the tale will involve big cuts to Social Security and Medicare. Even before we get there, though, Tankersley questions whether the GOP approach stands up to scrutiny: "This is a bit like saying, only regular exercise will keep America from having a fatal heart attack, so, you know, it's ok to eat a few more hamburgers now."
Tax Refunds Rebound
Smaller refunds in the first few weeks of the current tax season were shaping up to be a political problem for Republicans, but new data from the IRS shows that the value of refund checks has snapped back and is now running 1.3 percent higher than last year. The average refund through February 23 last year was $3,103, while the average refund through February 22 of 2019 was $3,143 – a difference of $40. The chart below from J.P. Morgan shows how refunds performed over the last 3 years.
Number of the Day: $22 Trillion
The total national debt surpassed $22 trillion on Monday. Total public debt outstanding reached $22,012,840,891,685.32, to be exact. That figure is up by more than $1.3 trillion over the past 12 months and by more than $2 trillion since President Trump took office.
Chart of the Week: The Soaring Cost of Insulin
The cost of insulin used to treat Type 1 diabetes nearly doubled between 2012 and 2016, according to an analysis released this week by the Health Care Cost Institute. Researchers found that the average point-of-sale price increased “from $7.80 a day in 2012 to $15 a day in 2016 for someone using an average amount of insulin (60 units per day).” Annual spending per person on insulin rose from $2,864 to $5,705 over the five-year period. And by 2016, insulin costs accounted for nearly a third of all heath care spending for those with Type 1 diabetes (see the chart below), which rose from $12,467 in 2012 to $18,494.
Chart of the Day: Shutdown Hits Like a Hurricane
The partial government shutdown has hit the economy like a hurricane – and not just metaphorically. Analysts at the Committee for a Responsible Federal Budget said Tuesday that the shutdown has now cost the economy about $26 billion, close to the average cost of $27 billion per hurricane calculated by the Congressional Budget Office for storms striking the U.S. between 2000 and 2015. From an economic point of view, it’s basically “a self-imposed natural disaster,” CRFB said.
Chart of the Week: Lowering Medicare Drug Prices
The U.S. could save billions of dollars a year if Medicare were empowered to negotiate drug prices directly with pharmaceutical companies, according to a paper published by JAMA Internal Medicine earlier this week. Researchers compared the prices of the top 50 oral drugs in Medicare Part D to the prices for the same drugs at the Department of Veterans Affairs, which negotiates its own prices and uses a national formulary. They found that Medicare’s total spending was much higher than it would have been with VA pricing.
In 2016, for example, Medicare Part D spent $32.5 billion on the top 50 drugs but would have spent $18 billion if VA prices were in effect – or roughly 45 percent less. And the savings would likely be larger still, Axios’s Bob Herman said, since the study did not consider high-cost injectable drugs such as insulin.
