I am not an economist and even they often don’t agree, but shouldn’t we be concerned about the Country’s deficit and debt?
Nobody I know likes taxes, but does debt and growing interest payments present a greater risk? Federal interest payments are over one trillion dollars a year – that is a million, million by the way.
I sometimes think, can we get to the point where nobody, not even another country wants to invest in the US? I suppose that is far fetched, but a scary thought. What if the demand increases for a higher return on Treasure bonds?
Social Security is now redeeming the trusts treasury bonds to pay benefits, is that cash coming from more debt somewhere?
At what point, if there is a point, will debt and interest payments reach a limit?
I know the analogy is not totally accurate, but I think about a family in deep credit card debt using cash advances to make the next payment on another card or perhaps rationalizing charging a family vacation to get away from it all.
Given the circumstances, I am flabbergasted that there is even talk of tax cuts. We have yet to have a serious discussion about fixing Social Security (or Medicare) and it’s over ten years since the trustees warned of the need for action. Some people are planning retirement assuming there won’t be Social Security. That’s not fair.
What does the combination of all this mean to average investors, to Americans planning retirement or in retirement depending on investments, to the HD community?
Is inflation back on the radar? Will higher interest rates be good or bad for retirees. Should higher taxes be part of retirement planning? Will working people pay more into Social Security or see benefits changed?
Needless to say I don’t have any answers and absent a crystal ball, I’m not sure anyone has. Nevertheless, none this is going away.
How do we plan for more Inflation, higher interest rates, higher taxes or more do it yourself required in lieu of government safety nets – like subsides for health insurance that often support early retirement?
Do Americans think about this stuff? Do they see the huge numbers as a risk, as impacting their lives? I don’t think so.
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QUINNSCOMMENTARY 
Keep in mind that reducing the size and growth of the federal government by eliminating activity that doesn’t add to the nation’s financial wellbeing isn’t a call for austerity (a la the Greeks) nor for punishing “needy” Americans. Instead, it is essential to triggering increased economic growth.
Cutting federal spending releases the private sector from having to compete with the feds for capital. it will increase economic growth over the decades to come far in excess of that short term sugar high.
High debt has already slowed economic growth, increased inflation, triggered higher interest rates – where the feds are crowding out the private sector.
The prime rate has doubled during the Biden Administration. The inflation rate, too!
Commitments to reduce federal spending, and in turn federal debt, will prompt increased business and consumer participation, adding to short, intermediate and long-term GDP growth – investing not spending.
However, most investors learned long ago that without disruption, the Beltway Bandits are predisposed to and will simply continue existing and add more spending – until they cannot.
Consistent with the famous statement on trends by Herb Stein: “If something cannot go on forever, it will stop.”
Hopefully the beltway idiots not only stop spending more but curtail unnecessary, duplicative or counterproductive spending prior to sending America over the cliff or into a brick wall.
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What reduced federal spending will be replaced by private sector given bulk of the federal budget is on safety net and social programs.
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Al Lindquist:
Jack, per usual you spent time and energy giving in my opinion an excellent response. I would find it difficult to add anything to what was written.
Yes, inflation is still a an issue because all that $ pumped into system is still with us and even when tightening the Fed did not induce a recession–I suspect Trump will face a recession.
Interest rates are creeping up as the fear of inflation and financing the enormous debt, debt as a % of GDP, is being made known in stock and bond markets. One can learn a great deal from the bond market.
Sure, our kids and grandchildren will pay more for SS and Medicare–they won’t touch seniors but will go after young folks.
Yes, as Jack says it will take a crisis, like we had in 2008 to bring about change. Painful as it will be I suspect we do band aid type debt reduction until the ..it hits the fan. Like the fires in LA will bring about changes so it will take a debt blaze to make us think about our income/outgo problem.
Remember, our educational system has rotted away–the basics are overlooked while we promote DEI and gender transformation–so folks little know nor care, in my opinion, about a big problem facing the country.
Thanks again Jack–excellent analysis in my humble opinion.
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“I am not an economist and even they often don’t agree” … Harry Truman supposedly responded to that point about economists who disagree or hedge, by once asking “Can you find me a one handed economist”.
Debt and growing interest payments do present a greater risk than in the past, however, raising taxes is not the answer. Returning to 2000 levels of spend (or 2001, post 9/11), adjusted for inflation, is the answer. Even at that level of spend, and current revenue, we would still be running an annual deficit due to interest on the debt. At that point, additional taxes make sense to stop the stupidity.
Yes, redeeming the Treasury Bonds does add to the annual deficit, if only because those debt instruments have to be replaced with other debt.
Yes, the yield on Treasury bonds will continue to increase.
Bill Clinton recognized the Social Security and Medicare issues – for one thing, in 1993, he signed legislation that removed the cap on FICA-Med taxes. 1993 – 30 years ago!
The Social Security and Medicare systems are not and never were FAIR! And, they were never intended to be EQUITABLE, either? And, they never will be. They are income transfer systems, they incorporate “social” features/structures.
All this means little to everyday Americans where 75+% live paycheck to paycheck, and most are in debt themselves (where personal debt is at an all time high according to the Federal Reserve).
“Will working people pay more into Social Security or see benefits changed?” Congress is likely to wait until the wolf is at the door and then create a variant of 1983 – some increased taxes, some prospectively reduced benefits, and like my Senator Howard Metzembaum (D-OH) did in 1983, lie to us and tell us that they “saved” Social Security and Medicare (then, retire, and move to Florida to avoid Ohio’s estate and income taxes he favored).
Yes, some of us have answers.
Let each American decide how to fill the funding gap for Social Security and Medicare – reducing their own benefits or paying more in taxes, or a combination.
Taxpayers want the government to scale back spending, and while they do not yet vote, Americans under age 18, and generations yet unborn also want the federal government to spend less.
Stop forgiving student debt.
Stop trying to pick winners and losers in the economy.
Be rational about Climate Change, if you are worried about rising seas, contact the Dutch – the experts. Attack the everyday issues (forest management), whether or not you think we can reduce CO2 while China and India keep adding coal-fired power plants.
https://www.instituteforenergyresearch.org/fossil-fuels/china-and-india-are-building-coal-generating-capacity-for-energy-security/
Do Americans think about this stuff? Most are hyper-focused on their everyday. So, this muck should be laid at the feet of members of Congress and our Presidents, past, present, and yes future – presidents who increased spending dramatically, without specific dedicated taxes including Bush II (Medicare Part D), Obama (Health Reform), Trump (TCJA), Biden (IRA, etc.), and soon to be Trump II.
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