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The Beltway Bubble


The Federal Reserve's annual study is the latest evidence that Washington isn't addressing most Americans' core concerns.

President Donald Trump is preoccupied with a wall on the southern border and tariffs on products from Mexico (a country which, incidentally, emerged earlier this year as the United States’ largest single trading partner).


Democrats on Capitol Hill are obsessed with impeachment, the Green New Deal and which of their two-dozen candidates to be their party’s presidential nominee will be invited to the first Democratic presidential debate in Miami later this month. (Yes, it’s starting already.)

As for the nearly 250 million people that make up the adult population of the United States? Most are, according to an annual study released last month by the Federal Reserve, just worried about how they are going to pay their bills each month.


To understand the appeal of outsider candidates like President Trump, Sen. Bernie Sanders (I-Vermont) or Rep. Alexandria Ocasio Cortez (D-New York), one must only recognize that what is happening on Capitol Hill, in the White House and on the campaign trail does not address the most pressing day-to-day concerns of the vast majority of Americans. For example: members of Congress will take all of August off from legislating; observing a longstanding tradition affectionately known in Washington as “August recess.”


By comparison, according to a BankRate survey, 40 million Americans cannot afford to take a vacation this summer.


The Federal Reserve study is weightier and like its report the year before, the Fed’s “Report on the Economic Well-Being of U.S. Households in 2018,” released on May 23, found Americans’ financial difficulties go much deeper than a delayed trip to the beach.


In fact, about four in 10 Americans would have trouble handling a surprise expense of $400 or more. Twelve percent would not be able to deal with such an emergency no matter what they borrowed or sold, while 27 percent said they would be forced to take out a loan or sell a possession in order to weather the crisis. Additionally, 17 percent of adults already are not able to pay all of their current month’s bills in full, but if a $400 unexpected expense arose, that figure would increase to 29 percent. Only half of Americans have any “rainy day” funds set away for financial emergencies, including job loss.


The Fed also found, “volatile income and low savings can turn common experiences – such as waiting a few days for a bank deposit to be available – into a problem for some.”


Americans in rural America were less likely than their urban counterparts to say they feel good about their economic situation. Racial and educational differences also play a large role in whether an individual is anxious about their financial well-being or not.


A question about the American measure for success – whether one is doing better than his or her parents did – also painted a picture of individuals left behind. One-in-five Americans said they are not better off than their parents.


Retirement savings could be one reason. One-quarter of Americans have no retirement savings at all, and even those who do have savings do not feel savvy about how they are planning. Six in 10 non-retirees who have retirement accounts said they have a low level of comfort when making decisions about these investments. And in Washington? According to the trustee of the program, the Social Security Administration won’t be able to pay all of its beneficiaries beginning in 2035 and no one on Capitol Hill is seriously looking at the issue.

Access to credit helps many Americans deal with their financial anxieties. While only 10 percent of adults told the Fed they have struggled to pay their bills because of monthly changes in income, individuals with “less access to credit are much more likely to report financial hardship due to income volatility.”


For about a quarter of Americans, credit won’t help, however, because they don’t have it or struggle to get it.


According to the Fed, 22 percent of Americans qualify as unbanked, or underbanked. Of the Americans who applied for credit in 2018, 23 percent were denied at least once and 31 percent were either denied or offered less credit than they requested. Additionally, one-quarter of adults who are not confident in their ability to get approved for a credit card have experienced hardship from income volatility in the prior year, versus six percent who are confident.


Credit, though, is a double-edged sword.


Americans are drowning in debt. The situation today is not like what we saw before the Great Recession. It is worse. The total student debt burden has more-than doubled since 2007. When taking into account student loans, mortgages, credit cards and auto loans, Americans now owe nearly $13.7 trillion, a figure is about $1.4 trillion higher than it was at the end of 2007.


The financial stresses that Americans face affect our health and welfare. For example, the Fed found one-quarter of Americans went without some sort of medical care because they were worried about treatment cost. (A survey last year by Harris Poll put that figure much higher, at 54 percent.)


Also embedded in the Fed report was this statistic: 21 percent of adults in 2018 personally know someone addicted to opioids or prescription painkillers. Individuals personally exposed to the opioid epidemic, the Fed said, are less likely to view the local economy as good or excellent than those not exposed. The authors concluded, “Even after accounting for race, rural or urban status, and neighborhood income, the modest relationship between opioid exposure and self-assessed local economic conditions remains.”


Addressing the opioid epidemic was number five in a Politico poll that asked Americans what they wanted Congress to concentrate on this year. Action to address prescription drug prices, reduce the deficit, improve infrastructure and eliminate hate crimes were numbers one through four.


Meanwhile, in Washington, the national U.S. debt, at more than $22 trillion, is $2 trillion higher than it was this time last year, Americans spend, by far, the most money per year on prescription drugs of any country in the world and the eight iteration of discussions among White House and Congressional officials around infrastructure broke down last month.

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