USA Inc. is a non-partisan report that looks at the U.S. federal government (and its financials) as if it were a business. Investor and Analyst, Mary Meeker, authored the report with the goal of informing the discussion about our financial situation and outlook. USA Inc. examines the country’s income statement and balance sheet, aiming to interpret the underlying data and facts, and illustrate patterns and trends in easy-to-understand ways. The report also analyzes the drivers of federal revenue and the history of expense growth, and discusses basic scenarios for how revenue and expense growth might change to help America move toward positive cash flow.
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About the Author
Mary Meeker is a partner at Kleiner Perkins Caufield & Byers and a former research analyst at Morgan Stanley. Since beginning her career as a securities analyst in 1986, Mary has focused on emerging technology trends and companies. Her reports on Internet trends are widely read around the world. She has covered companies that have created more than 239,000 jobs over the past 24 years while the companies increased their collective market value by more than $800 billion. These companies include Apple, Microsoft, Dell, Adobe, Intuit, Electronic Arts, Activision, Yahoo!, Amazon.com, eBay, priceline.com, Google and Alibaba. Mary graduated from DePauw University. She also received an MBA from Cornell and a Doctor of Letters from DePauw.
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16 of 17 people found the following review helpful
Format:Paperback|Amazon Verified Purchase
Starting with the great stuff. This Powerpoint-book conveys information visually. Long term trends jump at you immediately. I hope this is an emerging trend among nonfiction authors.
More specifically, this book conveys excellent information regarding the rising costs of Social Entitlements (Medicare, Medicaid, Social Security) and health care costs. Medicare and Medicaid are the main causes why USA Inc incurs rising yearly Budget Deficits and has a negative net worth of $44 trillions. Social entitlements will consume 50% of the Federal Budget by 2018 (slide 250), 100% of the Federal Budget by 2080 (slide 270) and 100% by 2025 when adding net interest expenses (slide 441). The related health care costs are rising due to an aging population, expensive technology, and rising utilization.
The choice of corrective actions (increase in taxes and reduction in benefits) to render Social Security sustainable are modest (slide 255-265); but, the ones to shore up Medicare are draconian (slide 271-278). End of life care is exorbitant as last year of life accounts for 28% of all Medicare spending (slide 286). Returning Medicare and Medicaid to long term solvency will prove challenging. Reducing reimbursement rates to health care providers is tough since hospitals already incur net losses of - 9% of revenues for Medicare patients and - 12% for Medicaid ones (slide 300). Hospitals make up those losses by cost shifting to privately insured patients where they make up staggering profit margins of + 32%. This is one of the main causes of the health care crisis associated with skyrocketing insurance premium, employers dropping insurance coverage benefits, and a rising uninsured population.
The international health care cost comparison (slide 108-113 and 316) demonstrates how our pre-health care reform system was egregiously more expensive and less effective than any other major OECD country. We pay a lot more, and get less health than anyone else. There is no doubt the system should be reformed. We also bear responsibility for our health care costs as our rate of obesity has skyrocketed since 1990 (see map of the US slide 288). Costs related to obesity amount to 7% of overall healthcare costs.
The study of the drivers of the Fiscal Budget (222 - 234 and 356 - 359, 368): GDP growth on the tax receipt side and government policy and demographic changes on the spending side is insightful. Also, the benchmarking of growth rates in various tax receipts and government spending is interesting. You can see how entitlement expenses growing at 6% p.a. over the past 40 years at twice the GDP rate have swamped everything else. Our increase in consumer spending from 62% of GDP to 71% of GDP since 1980 was driven by health care spending (slide 405). Health care and housing spending have nearly doubled as a % of GDP since 1965 (slide 406). And rising unfunded entitlements are often a long term driver of debt crisis for many countries (slide 423). See the fate of the PIGS countries on this count (slide 427). All those trends calls for a restructuring of our social entitlement programs.
Within the section on Defense Spending (63 - 70), Meeker reveals that Defense spending is clearly not a fiscal issue. As a % of GDP such costs are historically moderate at only 5% of GDP.
The visual explanation of the housing bubble (183 - 186) is excellent. You can see the negative correlation between the U.S. Personal Savings Rate and the U.S. Homeownership Rate. Something was clearly wrong. The related section of Freddie Mac and Fannie Mae (195-199) and the potential ultimate cost to taxpayers is also excellent.
We also have an education crisis. Even though education spending has risen from 3.7% to 6% of GDP since 1960, our performance ranking among OECD countries has plummeted.
For the not so good stuff, there are a few arithmetic mistakes. Slide 107 describes who pays for health care (48% Government, 32% private insurers, 12% individuals). That adds up to 92%. It should add to a 100%. Slide 29 should be taken out. It attempts to teach one the difference between a trillion and a billion. It suggests a trillion is 217 times a billion (instead it is 1,000). On slide 364, hours work per week can't possibly have decreased by 0.22% per year since 1970, yet have remained constant at 39 to 40 hours.
Additionally, comparing Government Spending to a company's finance as Meeker does has limitations. In her language, any net loss and any debt is bad. But, in Government Finance those concepts are not so meaningful. Instead, the key benchmark is whether the Debt/GDP ratio is sustainable. Let's say a country wants to maintain a moderate Debt/GDP ratio of 50% and has a long term real GDP growth of 2.5% and an inflation rate of 2.5%. This implies a sustainable Budget Deficit of: 50%(2.5% + 2.5%) = 2.5% of GDP. In other words, such a country could run Budget Deficits at 2.5% of GDP forever and its Debt/GDP ratio would remain stable at 50%. This sustainable leverage framework is absent from the book. Instead, Meeker asks (slide 233) how can we shore up this "business" so it can break even or generate a profit within this decade. On the next slide, she suggests that running net losses (Budget Deficits) always boost the Debt/GDP ratio. As clarified, those statements are either incorrect or raise the wrong issue.
Another weakness of the book is to make very long dated historical comparisons that are irrelevant. A graph on page Xi shows that from 1790 to 1930 Federal Government Spending averaged only 3% of GDP. But, any fiscal history prior to the early 1970s when Medicare and Medicaid were fully operational is not relevant. It conveys a misleading message that in former centuries our Federal Government was run more efficiently at only 3% of GDP vs 24% now. But, there is a huge difference between having no government (3% of GDP is pretty much that) and an efficient government (probably around 20% of GDP).
All in all, this still makes for a great reference. If you are interested in the subject, I also strongly recommend the The Coming Generational Storm: What You Need to Know about America's Economic Future.
More specifically, this book conveys excellent information regarding the rising costs of Social Entitlements (Medicare, Medicaid, Social Security) and health care costs. Medicare and Medicaid are the main causes why USA Inc incurs rising yearly Budget Deficits and has a negative net worth of $44 trillions. Social entitlements will consume 50% of the Federal Budget by 2018 (slide 250), 100% of the Federal Budget by 2080 (slide 270) and 100% by 2025 when adding net interest expenses (slide 441). The related health care costs are rising due to an aging population, expensive technology, and rising utilization.
The choice of corrective actions (increase in taxes and reduction in benefits) to render Social Security sustainable are modest (slide 255-265); but, the ones to shore up Medicare are draconian (slide 271-278). End of life care is exorbitant as last year of life accounts for 28% of all Medicare spending (slide 286). Returning Medicare and Medicaid to long term solvency will prove challenging. Reducing reimbursement rates to health care providers is tough since hospitals already incur net losses of - 9% of revenues for Medicare patients and - 12% for Medicaid ones (slide 300). Hospitals make up those losses by cost shifting to privately insured patients where they make up staggering profit margins of + 32%. This is one of the main causes of the health care crisis associated with skyrocketing insurance premium, employers dropping insurance coverage benefits, and a rising uninsured population.
The international health care cost comparison (slide 108-113 and 316) demonstrates how our pre-health care reform system was egregiously more expensive and less effective than any other major OECD country. We pay a lot more, and get less health than anyone else. There is no doubt the system should be reformed. We also bear responsibility for our health care costs as our rate of obesity has skyrocketed since 1990 (see map of the US slide 288). Costs related to obesity amount to 7% of overall healthcare costs.
The study of the drivers of the Fiscal Budget (222 - 234 and 356 - 359, 368): GDP growth on the tax receipt side and government policy and demographic changes on the spending side is insightful. Also, the benchmarking of growth rates in various tax receipts and government spending is interesting. You can see how entitlement expenses growing at 6% p.a. over the past 40 years at twice the GDP rate have swamped everything else. Our increase in consumer spending from 62% of GDP to 71% of GDP since 1980 was driven by health care spending (slide 405). Health care and housing spending have nearly doubled as a % of GDP since 1965 (slide 406). And rising unfunded entitlements are often a long term driver of debt crisis for many countries (slide 423). See the fate of the PIGS countries on this count (slide 427). All those trends calls for a restructuring of our social entitlement programs.
Within the section on Defense Spending (63 - 70), Meeker reveals that Defense spending is clearly not a fiscal issue. As a % of GDP such costs are historically moderate at only 5% of GDP.
The visual explanation of the housing bubble (183 - 186) is excellent. You can see the negative correlation between the U.S. Personal Savings Rate and the U.S. Homeownership Rate. Something was clearly wrong. The related section of Freddie Mac and Fannie Mae (195-199) and the potential ultimate cost to taxpayers is also excellent.
We also have an education crisis. Even though education spending has risen from 3.7% to 6% of GDP since 1960, our performance ranking among OECD countries has plummeted.
For the not so good stuff, there are a few arithmetic mistakes. Slide 107 describes who pays for health care (48% Government, 32% private insurers, 12% individuals). That adds up to 92%. It should add to a 100%. Slide 29 should be taken out. It attempts to teach one the difference between a trillion and a billion. It suggests a trillion is 217 times a billion (instead it is 1,000). On slide 364, hours work per week can't possibly have decreased by 0.22% per year since 1970, yet have remained constant at 39 to 40 hours.
Additionally, comparing Government Spending to a company's finance as Meeker does has limitations. In her language, any net loss and any debt is bad. But, in Government Finance those concepts are not so meaningful. Instead, the key benchmark is whether the Debt/GDP ratio is sustainable. Let's say a country wants to maintain a moderate Debt/GDP ratio of 50% and has a long term real GDP growth of 2.5% and an inflation rate of 2.5%. This implies a sustainable Budget Deficit of: 50%(2.5% + 2.5%) = 2.5% of GDP. In other words, such a country could run Budget Deficits at 2.5% of GDP forever and its Debt/GDP ratio would remain stable at 50%. This sustainable leverage framework is absent from the book. Instead, Meeker asks (slide 233) how can we shore up this "business" so it can break even or generate a profit within this decade. On the next slide, she suggests that running net losses (Budget Deficits) always boost the Debt/GDP ratio. As clarified, those statements are either incorrect or raise the wrong issue.
Another weakness of the book is to make very long dated historical comparisons that are irrelevant. A graph on page Xi shows that from 1790 to 1930 Federal Government Spending averaged only 3% of GDP. But, any fiscal history prior to the early 1970s when Medicare and Medicaid were fully operational is not relevant. It conveys a misleading message that in former centuries our Federal Government was run more efficiently at only 3% of GDP vs 24% now. But, there is a huge difference between having no government (3% of GDP is pretty much that) and an efficient government (probably around 20% of GDP).
All in all, this still makes for a great reference. If you are interested in the subject, I also strongly recommend the The Coming Generational Storm: What You Need to Know about America's Economic Future.
12 of 13 people found the following review helpful
By Timothy
Format:Paperback
Outstanding research and work simplifying the gordion knot of the federal budget. When the intentionally obfuscated federal budget is put in such simple analytical terms, the conclusions are irrefutable - we are on a collision course with reality. Hopefully this book will become the "Common Sense" of our generation.
Timothy Burke
Timothy Burke
Format:Paperback|Amazon Verified Purchase
USA Inc should be required reading for all voters. A companion guide illuminating biz-speak would be helpful to many who are learning.
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