Discussing our economy must involve our debt, the scale of which is astounding.
In October 2018, the monthly U.S. budget deficit was $105 billion. The previous October, it was $63.2 billion. Yes, there are timing issues that cloud such comparisons, but the trend is clear and disturbing.
Some experts say we’re on course for a $1 trillion or more budget deficit in 2019. With little desire from Congress or the American people to decrease spending, and no tax policy changes designed to increase revenue, hopes of a reversal are dismal.
Our debt has grown without resistance because there’s been little pain over the last decade. Inflation and interest rates were low, and the Federal Reserve was on a bond buying spree.
That’s all changing though.
In 2017, federal debt interest was $163 billion, or 1.4 percent of gross domestic product (GDP). The Congressional Budget Office (CBO) expects that to rise to $915 billion, or 3.1 percent of GDP, by 2028.
That sounds bad, but some skepticism is required.
The 2018 projections called for the deficit to increase by $779 billion, when it actually rose $1.2 trillion! Plus, these estimates don’t account for crises like war or recession in the next 10 years. And yet, the CBO projects that interest on our debt could surpass defense spending and other discretionary expenses.
In a recession, that 2019 deficit of $1 trillion or more could head north of $2 trillion.
And will our debt will decrease? Doubtful. By the mid-2020’s, we’ll probably be near $30 trillion.
One “remedy” seems certain – Congress opens the purse strings in a crisis.
When big banks suffered in 2008, legislators created new obligations. With many big pension plans now in trouble, will we see more of the same?
I’m sure you can guess what I think.