The Economy: 5 Things You Should Know for 2020 (and beyond) – Part 6
Summary and Future Challenges
The United States has enjoyed a prolonged period of economic growth; a record period of economic growth. Since 2010 economic growth has continued, the unemployment rate decreased to a 50-year low, and the stock market has generally increased reflecting the strong economy. The economic growth has largely been driven by factors favorable for increased consumer spending, including 1) increasing consumer income resulting from the continued decrease in the unemployment rate, 2) an environment of extremely low interest rates, 3) a generally increasing stock market generating capital gains, 4) tax cuts; including a temporarily reduction in social security taxes in 2011 and 2012, and the corporate and individual tax cuts of 2018, and 5) relatively low inflation.
What could go wrong? There are some concerns. Despite the ten years of economic growth and a 50-year low for unemployment, budget deficits and federal debt have increased significantly. Spending now has created concerns for later. The growing deficit is of particular concern due to the relatively low unemployment rate; it will be hard to lower the rate and significantly increase individual and corporate tax revenues. Any blip in the economy could significantly increase an already growing deficit and record amount of debt. Eventually, a looming shortfall in social security funding will have to be dealt with.
The stock market has enjoyed a rebound in 2019 following a decline in 2018, buoyed by optimism over resolving, or at least mitigating, trade issues with particularly China. Growth in corporate earnings, stock buybacks, and Federal Reserve interest rate cuts have all helped fuel the market. However, interest rate cuts may have bottomed out and any retreat from resolving trade issues (particularly with China) will likely hurt the market. Corporate earnings have benefited from the tax cuts and growth in consumer spending. As the economy bumps up to near full employment, continued growth in consumer spending becomes challenging.
Despite the robust economy, health care, including the coverage and the cost of that coverage, remains a major economic concern. From the Kaiser Family Foundation based on data collected from surveys:
- Despite the nation’s strong economy and low unemployment, what employers and workers pay toward premiums continues to rise more quickly than workers’ wages and inflation over time. Since 2009, average family premiums have increased 54% and workers’ contribution have increased 71%, several times more quickly than wages (26%) and inflation (20%).
- About one-fourth of U.S. adults (26 percent) say they or a household member have had problems paying medical bills in the past year, and about half of this group (12 percent of all Americans) say the bills had a major impact on their family.
- At least one-fourth of insured adults indicate it is difficult to afford to pay their deductible, the cost of health insurance each month, or their co-pays for doctor visits and prescription drugs.
- Annual family premiums for employer-sponsored health insurance rose 5% in 2019 to average $20,576 this year. On average, workers contribute $6,015 toward the cost of family coverage, with employers paying the rest.
Yes, the economy and stock market have been strong; but significant challenges remain.
For further information on health care from the Kaiser Family Foundation:
- Data Note: Americans’ Challenges with Health Care CostsBenchmark
- Employer Survey Finds Average Family Premiums Now Top $20,000
CBEI Blog Series: The Economy: 5 Things You Should Know for 2020 (and beyond)
Part 1: Economic Growth and Unemployment – Positive Trends for a Long Time
Part 2: What’s Been Driving Economic Growth
Part 3: The Timing of Those Tax Cuts
Part 4: The Yet to be Paid Increasing Costs of the Federal Deficit and Debt
Part 5: Drivers of The Stock Market
Part 6: Summary and Future Challenges