Brian Dake

Now, signs of a looming debt crisis among U.S. consumers are beginning to flash, and it is a triple whammy: credit card balances are at an all-time high, annual percentage rates (APRs) are up and more consumers are taking on debt than in 2021.

Discover Financial Services CFO John Greene issued an ominous warning last week, noting a sharp uptick in delinquencies. “In the card portfolio, the net charge-off rate of 2.37% was 87 basis points higher than the prior year and 45 basis points higher sequentially,” he said during the firm’s fourth-quarter earnings call.

The Federal Reserve Bank of New York recently reported a 15% year-over-year increase in total credit card balances for the third quarter of 2022, which amounts to the largest surge in more than 20 years.

A new report from CreditCards.com released Monday shows nearly 3 out of 4 (72%) credit card debtors added to their balances over the past year. Nearly half (48%) took on additional debt due to rising costs, while 34% saw their balances jump due to rising interest rates. Twenty-four percent reported having a disruption in household income.

According to the company’s sister site Bankrate.com, there are also more people carrying debt, too. Some 46% of credit card holders are carrying debt from month to month, up from 39% a year ago.

The Internal Revenue Service today issued the 2023 optional standard mileage rates used to calculate the deductible costs of operating an automobile for business, charitable, medical or moving purposes.

Beginning on January 1, 2023, the standard mileage rates for the use of a car (also vans, pickups or panel trucks) will be:

• 65.5 cents per mile driven for business use, up 3 cents from the midyear increase setting the rate for the second half of 2022.
• 22 cents per mile driven for medical or moving purposes for qualified active-duty members of the Armed Forces, consistent with the increased midyear rate set for the second half of 2022.
• 14 cents per mile driven in service of charitable organizations; the rate is set by statute and remains unchanged from 2022.

The standard mileage rate for business use is based on an annual study of the fixed and variable costs of operating an automobile. The rate for medical and moving purposes is based on the variable costs.

It is important to note that under the Tax Cuts and Jobs Act, taxpayers cannot claim a miscellaneous itemized deduction for unreimbursed employee travel expenses. Taxpayers also cannot claim a deduction for moving expenses, unless they are members of the Armed Forces on active duty moving under orders to a permanent change of station. For more details see Moving Expenses for Members of the Armed Forces.

Taxpayers always have the option of calculating the actual costs of using their vehicle rather than using the standard mileage rates.

Taxpayers can use the standard mileage rate but generally must opt to use it in the first year the car is available for business use. Then, in later years, they can choose either the standard mileage rate or actual expenses. Leased vehicles must use the standard mileage rate method for the entire lease period (including renewals) if the standard mileage rate is chosen.

Notice 2023-03 contains the optional 2023 standard mileage rates, as well as the maximum automobile cost used to calculate the allowance under a fixed and variable rate (FAVR) plan. In addition, the notice provides the maximum fair market value of employer-provided automobiles first made available to employees for personal use in calendar year 2023 for which employers may use the fleet-average valuation rule in or the vehicle cents-per-mile valuation rule.

Senate leaders unveiled a $1.7 trillion year-long federal government funding bill early Tuesday morning.

The legislation includes $772.5 billion for non-defense discretionary programs and $858 billion in defense funding, according to a bill summary from Democratic Sen. Patrick Leahy, chair of the Senate Committee on Appropriations.

The sweeping package includes roughly $45 billion in emergency assistance to Ukraine and NATO allies, boosts in spending for disaster aid, college access, child care, mental health and food assistance, more support for the military and veterans and additional funds for the US Capitol Police, according to Leahy’s summary and one from Sen. Richard Shelby of Alabama, the top Republican on the Senate Appropriations Committee. It also includes several major Medicaid provisions, including one that could disenroll up to 19 million people from the nation’s health insurance program for low-income Americans.

However, the bill, which runs more than 4,000 pages, left out several measures that some lawmakers had fought to include. An expansion of the child tax credit, as well as multiple other corporate and individual tax breaks, did not make it into the final bill. Neither did legislation to allow cannabis companies to bank their cash reserves – known as the Safe Banking Act Act – or a bill to help Afghan evacuees in the US gain lawful permanent residency. Also, there was no final resolution on where the new FBI headquarters will be located.

The spending bill is the product of lengthy negotiations between top congressional Democrats and Republicans. Lawmakers reached a “bipartisan, bicameral framework” last week following a dispute between the two parties over how much money should be spent on non-defense domestic priorities. They worked through the weekend to craft the legislation.

The Senate is expected to vote first to approve the deal this week and then send it to the House for approval before government funding runs out on December 23. The bill would keep the government operating through September of 2023, the end of the fiscal year.

Tens of millions of additional federal dollars are headed to Wisconsin to provide thousands of additional homes and businesses access to reliable, high-speed internet, the White House announced Thursday.

Speaking to reporters during a press call, Jacob Leibenluft, who leads a branch of the U.S. Treasury Department tasked with overseeing projects created by the American Rescue Plan, told reporters that $40 million for broadband infrastructure will be sent to Wisconsin — enough funds to connect an estimated 8,000 homes and businesses to high-speed internet.

That $40 million is just a portion of $189 million earmarked for Wisconsin through the Capital Projects Fund. The Capital Projects Fund is a $10 billion project created by the American Rescue Plan aimed at ensuring “that all communities have access to … high-quality modern infrastructure, including broadband,” according to the Treasury Department.

Joseph Wender, another Treasury Department official and director of the fund, said the remaining $149 million will be awarded at a later date after the department approves plans for how the money is going to be spent.

Public Service Commission of Wisconsin Chair Rebecca Cameron Valcq said the state plans to use at least portions of the remaining funds on “digital connectivity” and “multipurpose community facility” projects. She said those projects — which she did not offer more details about Thursday — are under review by the Treasury Department.

Some $45.6 billion in pandemic unemployment benefits may have been fraudulently paid to criminals between March 2020 and April 2022, the US Department of Labor’s Office of the Inspector General said in a memorandum on Thursday.

Fraud within the nation’s unemployment system skyrocketed after Congress enacted a historic expansion of the program to help Americans deal with the economic upheaval sparked by the Covid-19 pandemic in March 2020. State unemployment agencies were overwhelmed with record numbers of claims and relaxed some requirements in an effort to get the money out the door quickly to those who had lost their jobs. Within five months, more than 57 million people filed claims for unemployment benefits, the inspector general’s office said.

“Hundreds of billions in pandemic funds attracted fraudsters seeking to exploit the UI program — resulting in historic levels of fraud and other improper payments,” Inspector General Larry Turner said in a statement.

Nearly a million Social Security numbers were used by people who filed for benefits in two or more states, resulting in benefits paid from more than one state, the inspector general’s office said. They received nearly $29 billion in potentially fraudulent payments. And 1.7 million Social Security numbers associated with suspicious email addresses were used to file for $16.2 billion in benefits.

The inspector general’s office said that it has had difficulty getting unemployment insurance data from state workforce agencies until subpoenas were issued. In some cases, the data sent was incomplete or unusable.

The inspector general’s office also took issue with the Department of Labor’s Employment and Training Administration, which oversees the unemployment insurance program, saying the agency has not implemented the office’s previous recommendations including to collaborate with state agencies to establish effective controls to mitigate fraud and to work with Congress to require state agencies to cross-match high-risk areas.

“ETA’s lack of sufficient action significantly increases the risk of even more UI payments to ineligible claimants,” the inspector general’s office wrote in the memorandum.

The inspector general’s office also announced Thursday that more than 1,000 people have been charged with crimes involving unemployment benefits fraud since March 2020, and there have been more than 400 convictions to date. It has opened more than 190,000 investigations into unemployment benefits fraud, an increase of more than 1,000 times in the volume of the office’s unemployment insurance work.

Yesterday, the Public Service Commission of Wisconsin (PSC) announced the creation of a new, additional area code to overlay the area in which the 608 area code is now in service.

The 608 area code is expected to run out of assignable prefixes (the three numbers in a phone number following the area code) in the first quarter of 2024. The new 353 area code will be used to provide telephone numbers to new customers. All current customers will retain their existing telephone numbers and will continue to dial and receive calls without change.

The Commission approved the petition by the North American Numbering Plan Administrator (NANPA), the neutral third-party area code relief planner, to overlay a new area code. This decision will provide additional numbering resources to meet the demand for telephone numbers. The new 353 area code will be in service by late 2023.

An area code overlay adds a second area code to the geographic region served by the existing area code. Therefore, multiple area codes co-exist within the same geographic region. Once the 608 area code runs out of assignable prefixes, new customers in southcentral and southwestern Wisconsin may be assigned telephone numbers in the new 353 area code. Customers will continue to dial the three-digit area code for all calls to and from telephone numbers with the 608 and 353 area codes. The price of a call will not change due to the overlay. Customers can still dial just three digits to reach 911, as well as 211, 311, 411, 511, 611, 711, 811, and 988, the new Suicide & Crisis Lifeline.

The plan filed by the North American Numbering Plan Administrator can be found here: PSC REF#: 440694

Yesterday, Governor Tony Evers announced that Wisconsin high school juniors and seniors heading back to school this fall will have 14 new occupational pathways that local employers can support, thanks to ongoing modernization efforts by the Wisconsin Department of Workforce Development (DWD).

Working in collaboration with school consortiums, employers, the Wisconsin Technical College System, and other partners, DWD has modernized the framework for a total of 75 Youth Apprenticeship (YA) program pathways to help industries like construction, health sciences, marketing, science and engineering, and transportation find and develop home-grown talent.

DWD’s YA Program Modernization Initiative resulted in 14 new occupational pathways in which local employers can offer apprenticeship opportunities to students. These include:

• Agriculture, Food, and Natural Resources, new pathways: Arborist and Dairy Grazier.
• Architecture and Construction, new pathways: Gas Distribution Technician, Heavy Equipment Operator/Operating Engineer, and Utilities Electrical Technician.
• Arts, Audio Visual Technology and Communications, new pathway: Media Broadcast Technician.
• Health Science, new pathways: Phlebotomist and Resident Aide.
• Information Technology, new pathway: IT Broadband Technician.
• Manufacturing, new pathway: Electro-mechanical/Mechatronics.
• Transportation, Distribution, and Logistics, new pathways: Airport Operations and Management, Aviation Maintenance Fundamentals, Aviation Airframe and Powerplant Technician, Aviation Avionics Technician.

The YA program is coordinated and provided around the state by consortia that often consist of school districts, technical colleges, and chambers of commerce. Of the 421 public school districts, 321 districts, or 76.2 percent, had students enrolled in YA for the 2021-2022 school year.

Employers interested in becoming a youth apprenticeship sponsor can find more information here.

President Biden signed the Inflation Reduction Act into law on Tuesday, saying “the American people won, and the special interests lost.”

The bill, which was passed by the Senate earlier this month and the House of Representatives last week, costs an estimated $437 billion, with $369 billion going toward investments in “Energy Security and Climate Change,” according to a summary by Senate Democrats.

Democrats project that the legislation will reduce the deficit by bringing in $737 billion. This includes an estimated $124 billion from IRS tax enforcement, the projected result of hiring 87,000 new IRS agents who will ramp up audits.

The bill also imposes a 15% corporate minimum tax that the Joint Committee on Taxation predicts will raise $222 billion, and prescription drug pricing reform that the Senate estimates will bring in $265 billion.

One thing the Inflation Reduction Act is not expected to do, according to multiple analyses, is reduce inflation. The Congressional Budget Office said the bill will have “a negligible effect” on inflation in 2022, and in 2023 its impact would range between reducing inflation by 0.1% and increasing it by 0.1%.

They’re not just racking up higher balances on their credit cards as sky-high inflation and rising interest rates hit household wallets, though. A study released Tuesday by the Federal Reserve Bank of New York’s Center for Microeconomic Data shows a 13% cumulative year-over-year increase in credit card balances. That’s the largest jump in 20 years, since 2002.

Credit card debt stands at $890 billion as of the end of the second quarter, according to the quarterly report on household debt and credit. While credit card balances typically rise during the second quarter, the $46 billion increase makes the second quarter one of the highest jumps on record since 1999. The last time total credit card balances were this high was the first quarter of 2020.

“Americans are borrowing more, but a big part of the increased borrowing is attributable to higher prices,” New York Fed researchers wrote Tuesday. Not only did balances increase, researchers note, but the number of new credit cards was up too.

Mortgages, auto loans, retail cards, and other consumer loans also rose at a fairly rapid clip. In total, non-housing debt grew by $103 billion during the second quarter, the largest increase recorded by the New York Fed since 2016.

Overall, Americans’ total household debt increased by 2% to $16.15 trillion during the second quarter, according to the New York Fed. That puts balances about $2 trillion higher than they were at the end of 2019, prior to the onset of the pandemic.

Wisconsin companies will pay 8.47 percent less in worker’s compensation insurance rates starting October 1, 2022, giving a boost to businesses​ around the state, the Wisconsin Department of Workforce Development reported.

The 2022 rate decrease, approved by the Wisconsin Commissioner of Insurance, marks the seventh year in a row worker’s compensation insurance premiums have declined in Wisconsin. The latest reduction in premiums is expected to save Wisconsin employers some $146 million.

“Strong partnerships among employers, workers, training providers, and other stakeholders are helping to keep employees safe and healthy on the job,” said DWD Secretary-designee Amy Pechacek. “Wisconsin’s proactive, collaborative approach is delivering real benefits for workers and their families while supporting the competitiveness of employers statewide.”

Worker’s compensation insurance rates are adjusted annually by a committee of actuaries from members of the Wisconsin Compensation Rating Bureau. This independent body examines and selects the methodology and trends that produce the proposed rate adjustment, which is then reviewed and approved by the Wisconsin Commissioner of Insurance. While the overall rate level will decrease by 8.47 percent, the impact to policyholders will vary based on specific circumstances.