US Debt held by the public is soaring out of sight. It’s even worse than it looks for reasons I explain.
Within a few years the debt-to-GDP ratio of the US will topple highs set in WWII. This time, there will not be a huge baby boomer led recovery.
Deficit Set to More Than Double from 2022
The above image is from the CBO Monthly Budget Review: July 2023
The federal budget deficit was $1.6 trillion in the first 10 months of fiscal year 2023, the Congressional Budget Office estimates—more than twice the shortfall recorded during the same period last year. Revenues were 10 percent lower and outlays were 10 percent higher from October through July than they were during the same period in fiscal year 2022.
Outlays in the first 10 months of fiscal year 2023 were $5.3 trillion, $473 billion (or 10 percent) more than during the same period last year, CBO estimates. If not for the shifts in the timing of certain payments, outlays so far in fiscal year 2023 would have been $536 billion (or 11 percent) more than during the same period in fiscal year 2022.
The lead chart and discussion that follows are from the 64 page 2023 Long-Term Budget Outlook of the CBO.
The long term view is grim. Here are a few more charts.
Population Growth and Demographics
“Deaths exceed births beginning in 2042 in CBO’s projections, largely because of the aging of the population. Thereafter, population growth is driven entirely by immigration.”
Population by Age Group
“In CBO’s projections, the number of people ages 25 to 54 (the ages at which people are most likely to work) grows more slowly than the number of people age 65 or older, who are less likely to work and who are generally eligible for Social Security and Medicare.”
As a result, Medicare will take an increasing chunk of deficit spending.
“CBO’s estimation, health care costs per person will continue to rise. The aging of the population also contributes to growth in spending on health care programs and on Social Security. In 2023, outlays for Social Security, Medicare, and Medicaid, for people age 65 or older, amount to less than 30 percent of all federal noninterest spending; but in 2053, such outlays amount to more than 40 percent of all noninterest spending.”
Composition of Outlays for Major Health Care
“Spending on Medicare is projected to account for more than four-fifths of the increase in spending on the major health care programs over the next 30 years.”
Composition of Outlays
The CBO projects net interest will rise from 10 percent to 23 percent of total outlays.
Major Health Care programs, of which Medicare will comprise about 80 percent, will increase from 27 percent to 38 percent.
The total of Major Health Care and Interest is 23 percent + (38 percent * .77) = 52 percent.
Social Security is another 28 percent * .77 = 22 percent.
That makes the total of Major Health Care + Interest + Social Security 74 percent of total outlays, leaving 26 percent for everything else. Good luck with that.
Interest Rates
CBO’s 2022 and 2023 Projections of Deficits and Federal Debt
Major Assumptions and Additional Economic Factors
- Supplemental Nutrition Assistance Program [Snap – Food Stamps] are extended after their authorizations lapse.
- Spending on Medicare and Social Security continues as scheduled regardless of the amounts in those programs’ trust funds.
- Interest rates will remain below average and below the 10-year Treasury Note Rate.
- The unemployment rate generally declines over the 2023–2053 period in CBO’s projections. The unemployment rate averages 4.6 percent over the next decade and falls to 4.1 percent in the third decade.
- The annual growth of Total Factor Productivity (TFP) is projected to average 1.1 percent from 2023 to 2053. That projected growth rate is 0.3 percentage points slower than the average annual rate of growth since 1950 and 0.1 percentage point slower than the average rate since 1990.
- In CBO’s projections, over the next decade, federal discretionary spending measured as a percentage of GDP falls below the levels recorded in past decades.
Those are a sample of some of the major assumptions and additional economic factors. I believe points one and two are a given.
Expect Things to Be Worse Than Projected
No politician will dare touch Social Security or Medicare. The rest are debatable.
If interest rates rise, so will interest spending. The treasury had an opportunity to issue more debt at lower rates and failed.
The major reason to expect things to be worse is the CBO projects no recession and never does. Neither does the Fed. The CBO even upped its near-term projections on many fronts.
When recession does hit, deficits will certainly rise more than projected.
Biden’s Green Energy Inflation Reduction Act Needs a Big Bailout Already
Subsidies we not enough to make Green energy nonsense work.
Note that Biden’s Green Energy Inflation Reduction Act Needs a Big Bailout Already
The Shocking Truth About Biden’s Proposed Energy Fuel Standards
In case you missed it, please consider The Shocking Truth About Biden’s Proposed Energy Fuel Standards
Regarding Recession
Regarding recession, please see Mainstream Media Finally Wakes Up to the GDP vs GDI Recession Discrepancy
No One Will Fix This
Compromise is always more spending for this in return for more spending on that.
Bnd both parties want to spend more on the military.
“Neither party will fix the deficits. Neither party will do anything about mounting debt. No one will do anything about anything because the political system is totally broken.” Mish
I remember when my dollar bills said silver certificate instead of Federal Reserve Note. That change may money debt based from asset based. I wonder how much silver the Fed would have to stockpile if we went back to the good old days?
spent my childhood sifting through bags and bags and bags of “silver” coins, from 1965 to at least 1975, we kept the pure silver dollars, halves, and quarters and dimes. and returned the defaulted silver coins to the butcher the baker the candlestick maker and the banks and groceries. net affect. pure silver by the thousands of pounds. cost basis. free. or child labor cost to feed us. hat tip mom. LBJ defaulted in 1965. Nixon in 1971, and FDR in 1933. not to mention lincoln with greenbacks.
Correct, and Europe is worse, which is why defaults and CBDC’s are coming, and war is needed as an excuse / distraction.
I agree 100% about a distraction
CBDC’s will easily track ALL transactions (and will tax them all too, to keep this Ponzi scheme going indefinitely). Unfortunately this will hurt the lower class the most
So to sum things up:
From the government’s POV people who don’t work are bad. People with underlining health conditions causing them not to be able to work and require funding to live are really bad. People who stopped working and are owed $ through SS & Medicare are really bad.
People who are still working and have a ways to continue to pay taxes are good. Young people who have their whole lives ahead of them to work and pay taxes are really good.
Well, couldn’t we just make a virus to take out the elderly and people with underlining conditions and it doesn’t effect the youth or healthy individuals? We could even release it in a country that we don’t like.
Mish not only missing a population boom. Imo in the 1940s 50s and into the 60s there was growth due to new products. Think cars Refrigeration phones and such. Also i think the home loan program went a long way to spur growth.
We are a mature economy now. Pretty much everyone has a fridge that needs one. You dont need a new one unless your old one breaks.
The monopoly concept of Debt Only is THE problem. Public debt is a complete side show that Finance would love to have you argue about forever. Meanwhile, the banks overload the economy with PRIVATE debt which is the ACTUAL problem. As it can be historically confirmed that every new paradigm APPLIED concept has been in complete conceptual opposition to the current one this means that MONETARY GIFTING is the new paradigm…and all we need to do is find the most beneficial and efficacious ways to implement that concept into the economy.
Sorry, if many of you have long standing acculturated no longer relevant or true orthodoxies that you’ve self actualized, but new paradigms are both the solutions to old paradigms and are the destroyers of orthodoxies.
So work on it if you would please. Thanks. 🙂
Hi Steve,
I like the broad net you cast in your statement. It really does show the problem of debt based economies.
Sometimes you loose me on your “rebate on consumption idea” but I always felt you recognize the true systemic defects of our economy.
Thank you. The discount/rebate policy at retail sale is simply mimicing the process the banks use to create upwards of 97% of our new money…namely accounting. The difference is the policy is monetary gifting which breaks up the banks’ monopoly paradigm of Debt Only. Whats good for the goose (the banks) is good for the gander (every individual and (legitimate) commercial agent). Retail sale is participated in and thus experienced by everyone. Its the most potent point of effect for policy. That is actually a new macro-economic insight.
jubilees have been used for thousands of years when societies get too indebted, private and public. in one form or other this is our fate.
Its our fate to have a multi-nation disintegration if we’re too stupid to not have a debt jubilee. And then, the problem isn’t really resolved because the private debt will just go back to building up again. The answer is to integrate debt jubilee directly and continuously into the economic process.
That will terminally deal with the problem, and the 50% Discount/Rebate policy at retail sale as well as the 25-50% debt jubilee at point of loan signing cuts the cost of every product and service by 75% and with the rebate back to the merchant they get their full price and everyone and the entire economy gets the benefits of price deflation.The Accounting that the banks use to enforce their monopoly paradigm is turned on them in the above two paradigm changing policies.
Steve, let me try to understand this.
I have a bridge which I will sell to you for $1 trillion.
You pay me the discounted price of $500 billion.
Someone creates another $500 billion and gives that to me.
I am happy. You are happy. I have a $1 trillion. You have a bridge and are out $500 billion.
Except, of course, if “you” are really me. Then “we” have $500 billion, a bridge, and are, indeed, truly happy.
And this leads to price deflation?
The actual cost to the consumer is 50% of the total cost. Any way you add it up…that’s price deflationary. And every seller/creator gets their full price. It’s the very mundane but magic of the accounting process where equal debits and credits sum to zero.
The only way this works is if the seller gets their full price in interest-free dollars (issued by a sound government) that spends less than it takes in
The seller gets the entirety of the discounts they give to the consumer…in dollars. Full stop. That single policy ends inflation forever, doubles yours and everyone else’s purchasing power and greatly increases demand for virtually all enterprise’s goods and services. Its a paradigm change in economics in a single policy. All additional policies are basically stabilizers of the paradigm change.
As for interest free dollars, the truth is public debt is not the problem, its private debt that gums everything up. Having said that, money could just be created as money with no debt attached to it without doing the prestidigitation that the FED and treasury immediately go through in issuing treasuries. It’s just a way to benefit the banks who buy the majority of such guaranteed income.
There is no avoiding a default. We can manage it, and if we’re lucky postpone the default for decades like Japan has done, but eventually the debt will overhwelm the system organically or as a result of some shock such as a war or pandemic (real or imagined)
the debt continues to be created (at interest) with every dollar printed. It was never going to be payable the day it all started
“Neither party will fix the deficits. Neither party will do anything about mounting debt. No one will do anything about anything because the political system is totally broken.” Mish
The million dollar question is how does this play out when as someone said this becomes “unglued”. No doubt anyone with any critical thinking knows this is unsustainable. I can put a timeline on Social Security. Highly likely that the 2028-32 president will have to deal with this issue and what changes will be made? As big as an issue social security is, everything else combined dwarfs social security.
As to when and what and how exactly this plays out, I dont know but I do know that it will be painful to society as a whole.
I also follow Maneco on youtube and he had one visitor stating that if the CBO is as wrong in the next 10 years as it was in the previous 10 years on government receipts and spending, all government revenues will not even meet interest payments on the debt. Cant remember the exact specifics of his numbers but that is a definite possibility going forward.
Social Security isn’t a big problem, a little increase in contributions will fix the SS income/expenditure gap.
Medicare and Medicaid are the one thing that can blow up the budget within the next 5 years. It is fixable just by enforcing the laws against collusion, price fixing, closed shop etc to slash the costs. Nuts that an operation that is under 10 grand in a good European hospital is 200 grand in the US or that a medicine can have a 10,000% markup in the US.
medicare……will just cut back on underwriting treatments and drugs. no more knee replacements. geezers use canes. fat people die younger. ………europe does health so much cheaper. we are grifters. doctors, patients, insurance cos……..
I believe that in Canada, your CPP is actually invested in stocks, bonds, private equity, farmland etc.
Something the US should have done long ago as well.
“I believe that in Canada, your CPP is actually invested in stocks, bonds, private equity, farmland etc.”
Yes, CPP was changed in 1998 to create an “arms length fund” away from government. Canada & the US had nearly identical demographics and it was known that the CPP now Social Security in there present states were not sustainable. Canada has made changes to insure the solvency of CPP while Social Security hits the wall 10ish years.
CPP is projected solvent for the next 75 years. One major difference between CPP and Social Security is that Social Security is much more generous. The maximum payment for CPP is $1300 (although in Canada pension also generally includes OAS Old Age Security roughly $700). There are clawback rules for OAS however.
CPP is currently in the process of CPP enhancement to increase payments. One needs to put it in perspective. The following article stating “The CPP Max Will Be Huge In The Future”
https://www.planeasy.ca/the-cpp-max-will-be-huge-in-the-future/
Even when the changes are instituted over the next 40 years, it will still be below US Social Security but it will likely be solvent.
“Canada & the US had nearly identical demographics and it was known that the CPP now Social Security in there present states were not sustainable”
Meant to say CPP and Social Security
“US Debt held by the public is soaring out of sight.”
That’s what parabolic arcs end up looking like. Soaring out of sight. Then the crash, as they are unsustainable. It is interesting how the same pattern keeps repeating over and over again, down through history, along with the pattern of wars and the rise and fall of empires. No reserve currency has ever been permanent. How long does the U.S. have left?
Volker wrote about rediscovering the business cycle, as the law of the cycle wouldn’t allow the business cycle to be terminated. Up phase, down phase. Debt crash or currency crash? Neither sound appealing.
The U.S. will repudiate its debt and issue a new currency, like France did.
The last time repudiated its debt was in 1797. You are probably referring to the time after WW II where France retired old notes and issued new ones because of very high inflation made the number value on the old notes ridiculously high.
It was in 1959, where the “nouveau franc” replaced the “ancien franc”, with 1 new=100 old
I am pretty sure Japan, China and Europe have a worse ratio. The really interesting issue is who is going to crash first. I bet it’s China.
https://www.ceicdata.com/en/indicator/russia/government-debt–of-nominal-gdp
” Russia Government debt accounted for 15.5 % of the country’s Nominal GDP in Mar 2023, compared with the ratio of 14.9 % in the previous quarter.
Russia government debt to GDP ratio data is updated quarterly, available from Dec 2011 to Mar 2023.
The data reached an all-time high of 17.8 % in Mar 2021 and a record low of 8.5 % in Mar 2012. ”
https://www.ceicdata.com/en/indicator/saudi-arabia/government-debt–of-nominal-gdp
” Saudi Arabia Government debt accounted for 23.0 % of the country’s Nominal GDP in Mar 2023, compared with the ratio of 23.8 % in the previous quarter.
Saudi Arabia government debt to GDP ratio data is updated quarterly, available from Dec 2016 to Mar 2023.
The data reached an all-time high of 32.5 % in Mar 2021 and a record low of 12.0 % in Mar 2017. “
Toot toot!
Beep beep. 90% of politicians get re-elected. It is basically a rubber stamp thing. Feinstein is basically withering in office, having gotten there in 1992. McCain died in office, as have some others.
The public was played by the public health agency Covid response. Fauci said masks don’t work, then recommended them. A recent Cochrane review of 78 mask studies, said they did little to nothing to stop airborne viruses. Fauci now ignores “the science.” There was never any out patient treatment recommendation of any kind, yet there were non prescription ways to treat Covid symptoms, to help people keep themselves out of the hospital. Denninger said that there was a 6 month period at the hospital in the area he now lives, that 89% of the Covid patients did not come out alive. Odd how the new head of the NIAID said that Remdesivir was a silver bullet. But then, she was involved in the testing of Remdesivir for use against Covid. A later study determined that it didn’t improve 28 day mortality in Covid patients. Not a silver bullet. Dr. Marek had a better hospital recovery rate than the Prep Act Protocol. He was obstructed from saving lives and lost his license to practice.
Yes, the public was played all along.
What kills me even more, 85% of the SHEEPLE took vaccines, and believed every word of the Covid Scamdemic and they STILL DO.
I am seeing masks re-appear in a BIG way only days ago.
Remember this: PEOPLE ARE MUCH MORE IGNORANT than we previously believed. THEY believe in Politicians, and they VOTE for them and then lose the CONNECTION between the results and the promises almost immediately and they then say things like: “OH, but MY party is better than the other one!?
CHOOSE your POISON, folks.
Choo, Choo!!! Good comment DJ
“Think how stupid the average American is. Then realize that half are even dumber than that.”
— George Carlin
dumb as stones
One of the reasons Healthcare is exploding now is because of vaccine injuries. There are a significantly higher percentage of people that are disabled collecting disability benefits. All of these graphs don’t take into consideration the 40% excess deaths due to the vaccines. NONE of this is being talked about by the MSM…I consider Fox News to be part of the MSM. MSM is controlled by Pharma.
Choo, Choo!!! Good comment LC
Shocking, I TELL YOU, SHOCKING THAT:
NEITHER party will solve this or any other issue that matters. WHY?
Because they are IN LOCK-STEP, they mutually created this destruction and they benefit from it while none of US, those who “hire” them suffer the consequences.
SHOCKING, I TELL YOU!
Mish: The long term view is grim.
You hit that nail on the head, albeit the nail has a 10” round head and the hammer is a sledge variety.
Our Baby Boomer Generation, so to speak, were the roaring 20’s for our period of time, and much like the 20’s all good things come to an end. Also much like the 20’s, when the birth rate dropped massively, the generation following the boomers did as well.
We are in a position right now, where our smartest/wisest members of society from the past boom, are at their collective oldest. Unfortunately we are also in a position right now, where are youngest, including maybe 10 Million border crossers, are the least educated, most manipulated, propaganda led, useful idiots (think 60’s) trying to change the World with slogans, thinking boys can have babies, letters identify you, race is used as a wedge, unions own teachers and tell them how and what to teach, we have a dementia patient for a president, if that’s what you call them now?
Our Colleges turn out less educated and World Ready students today than Ever Before! Where we used to lead the World, we have now become what the World around us doesn’t accept as Leadership, and gee I wonder why…
We can default bonds held by chinese goverment, and Arabia Saudi.
Play the default card and the Chinese and Saudis will not buy any more US bonds. They will also stop as much as possible trade in USD, purchases from the US and cooperation with the US. Fast track to the USD being dumped as the trusted reserve currency and then how will you fund your trade deficit?
tried and true. FDR did it in reverse. outlawed gold convertability of dollars to us citizens but honored foreign citizens.
Good article Mish. And mostly good comments.
Now, what to do about this debt and demographic problem?
There is nothing that anyone here can do about it. There are no fiscally responsible politicians who will fix this, because no one will vote them into office. And even if one or two fiscally responsible politicians do get elected, they are overruled by the rest. This is one of the reasons I don’t bother to vote. Waste of time.
All you can do is look after yourself and those close to you. Bickering over which political party is better (or worse) is very common, but not very productive. Neither party is going to fix the debt problem.
For the optimists out there, your biggest hope is a huge productivity boost over the next few decades from AI. In conjunction with a lot of immigration of young bright professionals and entrepreneurs to offset our sagging demographics.
But as always, I have no say in either of those things happening.
Technically we all have a say in things. In fact if no one ever voiced their opinion through voting or other means (protests, demonstrations, revolutions etc) then we’d all still be living in a feudal system or something similar.
Of course the time line can easily be decades or more to affect real changes so people shouldn’t be discouraged if something doesn’t happen immediately (that’s modern societies worst problem in my opinion, everyone expects things to happen immediately and they don’t have patience for things that take time).
I encourage everyone to vote if they want to.
However I personally consider it a waste of time. My vote will never make the difference between who wins and loses. Just as my opinion on an internet blog will never change what corporate leaders or politicians do.
I understand this sets me up to be ridiculed. But I just don’t care.
TEXAS TIME. bingo. 100% correct. also men can handle being both an activist, protester, politically involved, even running for local offices, and winning, AND also being a very astute investor in real estate, improving busted up old 200 year old homes, and profiting by renting them out and selling when needed. also trading stocks and FX. plus be a lifelong student and raising a fine crop of kids, and married for decades. MEN CAN HANDLE ALL THIS. I HAVE. one does NOT have to be a nihilst about civilization engagement. the real kicker is, as the ancient wise men wrote, it makes life worth living. bitching about being involved as a waste of time, is itself a waste of time. or as the greeks said, a life not worth living. if stacking shekels is the only goal.
Invest in oil stocks and all will be well.
Nope. There are more important things than money and oil stocks. But I am not here to discuss my health, family or friends. I am here primarily to discuss economics and investing.
Five years ago, I would have been touting tech stocks.
But for the last three years I have been touting oil stocks as a great investment. And they have been. I expect them to remain a great investment for many more years.
But they represent less than 60% of my stock portfolio. I try to be somewhat diversified and always hold a little cash as well.
Bulls make money. Bears make money. But pigs get slaughtered.
lots of truth. but politics is economics is business is war is family life……… it is all one subject called civilization. or perhaps anthropology 101.
Does TT have to respond to every single message?
In a Global Debt Ponzi (GDP) you not only have to have more debt, it also has to accelerate at an exponential rate. That is why they always go bust in the end. The sooner we stop accepting fake money as if it were real, the better off we will all be.
Healthcare is the exploding cost in the budget. It’s the one that’s going to go first even if politicians don’t want to touch it.
It will also be the easiest to justify too. Something along the lines of ‘you got to live a full life and now it’s time to come to grips with the cycle of life’. Historically old people were always the first to be cast out (when food was low, the older men would go out with the premise to ‘hunt’ and would never return) when times were tough.
It will start with reductions on crazy amounts of money spent keeping people alive for 2-3 more months when they are terminal / end of life because that’s where 80% of the costs are (hospital/hospice). You’ll simply be given a ‘shot’ to pass away peacefully or else you’ll just simply not be admitted/given care unless you pay out of your own pocket. Then it will trickle down from there to younger and healthier medicare patients.
U.S. Healthcare Cost are way higher than anywhere in the World by far! If we take the massive profits out of the mix, and treat it as it should be, and that is not a money making endeavor as it sits today, then we would be so much further ahead than where we sit today.
Millionaires in the Medical Field don’t treat patients any better than Millionaires in the Political Field.
If you want, and I believe we need, better Medical Care, then REMOVE THE HIGH PROFITS, and treat it like it should and needs to be treated.
If you want, and I believe we need, better Political care, then REMOVE THE HIGH PROFITS, and treat it like it should and needs to be treated.
Good luck with that. Health care makes more political contributions than any sector of the economy. By far. They own both sides of the aisle.
Why do you think the ACA was enacted? It wasn’t to make health care affordable. It was to make sure health care would never be affordable.
they should rename hartford CT as Obamaville. he is the greatest insurance salesman of all time.
You make some good points TexasTim65 when you say:
” Healthcare is the exploding cost in the budget. It’s the one that’s going to go first even if politicians don’t want to touch it……….
……It will start with reductions on crazy amounts of money spent keeping people alive for 2-3 more months when they are terminal / end of life because that’s where 80% of the costs are (hospital/hospice).”
Most accidents happen closest to home. Most people are terminally ill closest to death. It is really important to live meaningful lives so that when the time comes, we are not clinging on to a few extra moments tying to achieve the feeling of what we missed out on.
It is really important to live a full life, but is even more important to not be an obstacle for others living a full life. The true fullness of life strikes this balance.
Debt to GDP Alarm Bells Ring, nobody cares, so where does that leaves us? Truthfully, Democrats suck, and the people running the country are a bunch of assholes! I mean how can the US Southern Command cancel the showing of the Sound of Freedom to our military members because it’s political? Our country is in so much trouble. I can see no light, only darkness.
I find it disingenuous that not many financial pundits discusses 900,000 BILLION spent YEARLY on Department of Defense. How about the amount spent on welfare for illegals and our homegrown generational welfare people. No mention.
All I can say about the debt, deficits and our eventual bankruptcy is a big “DUHHHHH!”
There are some financial pundits that know “maff” and say it’s mathematically not possible to pay off this debt. I’ve watched a few on the internet with their videos. Plan accordingly and good luck.
The monetary costs of people on the Dole is quite small compared to the Social cost to all of us , including the recipients. It is really just hush money for the destructive forces of Outsourcing industry, and In-sourcing labor through open borders.
I think most people enjoy it when they are making a contribution to society, but the real opportunities have diminished over time with the destruction of creativity that concentrated wealth and increased bureaucracy produces.
With the millions of Americans with no space in the puzzle board to fit into, what are they to do?
One of the failures of the much lauded evolution to a Service Sector Economy is that hardly anybody is really producing anything meaningful anyway. We have become a Nation of Bureaucrats, Paper Pushers, Back Scratchers, with a few necessary occupations mixed in the recipe. To criticize someone who has not found a place in this crazily designed economy is to look in the mirror and ask ones self “What have I Produced that is so Noble” ????
I have done ok with my occupation because it really helps people with their material needs, but it is not something that uses my best talents. I would say my best talents are unprofitable in the highly regulated In-sourced and Outsourced Economy we are experiencing in America.
I am not the Brightest Bulb on the Christmas Tree, but do take some pride in my high Double Digit IQ. I can only imagine the struggle that people with Lower Faculties have in an Economy that is Predatory by Design.
Many hands make light work, but the System as Designed, has many People working hard doing useless work, and many People without useful work to do at all.
=No politician will dare touch Social Security or Medicare. The rest are debatable.
ONLY THIS TIME I WONT AGREE w/ !
Sorry Mish , military budget is untouchable!
rest of is debatable!!!
Folks, stop worrying – word has it The Koch family, Heritage Foundation, and bunch of anonymously funded think-tanks with the word “Liberty” in their names has funded Arthur Laffer to draft up new and improved charts and graphs that prove, beyond doubt, that even more tax cuts for the super-wealthy will decrease the deficit.
Because, welp, trickle-down n’ stuff.
.
I miss the good old days that the Laffer Curve created
Don’t pee on my leg and tell me it’s rainin’!
ha ha ha. war mongering radical “conservatives”, brainwashed middlebrows to underwrite for profit wars at NO COST. everyone loves a free lunch. like magic.
“Major Assumptions and Additional Economic Factors
5. The annual growth of Total Factor Productivity (TFP) is projected to average 1.1 percent from 2023 to 2053.”
This, IMHO, is the worst assumption the CBO is making. As people get older they get sicker and productivity declines. I can give you an endless list of people I know in their 40’s, 50’s and beyond that need hip replacements, knee replacements, have diabetes, or other problems. A few I know have cancer, one has stage 4 cancer is now on permanent disability and he’s in his 50s. Long Covid? New Covid? Growth of fungal infections, growth of flesh eating bacteria, growth of malaria, etc.
Who will take care of these sick people? It often falls on the wife/mother/women to do this so that means a loss of more labor and there are already shortages of child care, nursing, and teachers (jobs top heavy of women).
So now we ALL know what is coming, who is positioning for profits and an exit strategy?
“Who will take care of these sick people?”
“Open The Pod Bay Doors Hal.”
I predict health care costs will come down because they have to do so. It is low hanging fruit to match the health care expenditures of other countries that have better health care results.
The deficit is predicted to be $2T in 2023. https://www.cnn.com/2023/09/06/politics/federal-budget-deficit/index.html#:~:text=The%20federal%20budget%20deficit%20is,to%20a%20government%20watchdog%20group.
World GDP is expected to increase around 2-3% in 2023. https://www.imf.org/en/Publications/WEO/Issues/2023/07/10/world-economic-outlook-update-july-2023
World GDP is around $100T. https://www.visualcapitalist.com/visualizing-the-105-trillion-world-economy-in-one-chart/#:~:text=By%20the%20end%20of%202023,2023%20World%20Economic%20Outlook%20report.
Therefore the increase in the US deficit ($2T) will take 67% of the world increase in GDP ($3T). If the Fed doesn’t buy the Treasuries then we will suck the increase in capital from the rest of the world. Luke Gromen has said many times when the US deficit is greater than 50% of the world GDP increase then the markets come unglued. We will see what happens.
I think that the US is “undertaxed” but I also think that the US spends unwisely. While I would prefer that taxes be at the pre-Bush tax cut level I would happily take spending cuts if they we voted in by a democratically elected Congress. I am not holding my breath for either.
Ah yes, a fiat currency discussion and the deficits that ensue.
The underlying theme of most economic blogs. Well maybe all.
I want to be triillionaire!
No one wants to solve the debt issue. It can last a long time. See Japan.
I think the situation will be delayed (not solved) by requiring 401K and pension plans to invest a portions of the funds in US government securities. It will be done to safeguard your retirement. It’s for your own good that we stop speculating with your future.
And to get the donors on board, we will have 3 approved funds managed by Blackrock State Street and Vanguard. They will charge a small administrative fee.
This is already the case. Your 401k money that isn’t invested in a stock or index gets lent to the government in the form of bond sweep purchases. I know fidelity certainly does it as their default funds are SPAXX or FZFXX. I don’t know the tickers for other brokers but they all do it.
https://www.optimizedportfolio.com/fidelity-core-position/
=See Japan.
totally diff situtation due of Japan itself. it is totally diff society !
——
besides, there is NO bond market in japan, no savings, etc.
it is just all printed!
so country is living in terminal condition: pay (=PRINT) as you go!
Defense (should be called Offense) is a good portion of our spending. Significantly reducing that would go a long way to balancing the budget.
Until one of dozens of dictators decides to try to amaze the world and takes us on if only to do collateral damage. The defense budget is around 16% of the budget and is VERY popular spending (popular = votes = done). Perhaps you should suggest cutting Social Security or not pay the interest on the national debt. Im sure no one will notice …
Total nonsense. We spend way more on defense than every one else and in no way do I feel we could stop a dictator from doing anything they want. Defense is a way for defense contractors to make money. Not provide safety for US citizens.
We stopped Putin from taking Ukraine.
putin has controlled the part of ukraine he vitally wanted. the land bridge to his only warm water port in crimea. they are really just fighting over how large a DMZ will be.
wars are extremely popular with the amerikan idiot middlebrow.
and also so profitable to C suite at MIC and wall street and doom porn war teeveeeeeeee
Do you like Meloni or not?
With or without prosciutto?
=Defense (should be called Offense) is a good portion of our spending.
putin stooge!
:)))
Putin is definitely bringing our defense shortcomings to the limelight. Maybe we should just focus on defending ourselves and not meddling throughout the world
us MIC got to waste much of their old armaments. now they can replenish. guess who pays.
You could cut defence to $0 and the rise in healthcare costs just this decade will more than that. Healthcare has risen from 4% of GDP to 20% and only needs to continue on its current rate of growing at double the GDP growth that at some point it will be bigger than the entire government expenditure. And before it reaches that point reality kicks in. Default, rationing of healthcare, encouragement of MAID like in Canada (which could mean they will deny you treatment, deny you palliative care and push you to end your pain by a jab).
The healthcare industry is the swamp. The charts above indicate how the swamp
plan to extrapolate their power since the covid vertical tsunami.
Investors are fully committed to support the swamp for 5%. When it stops ==> the swamp will shrink.
As the man said: It doesn’t matter. We owe it to ourselves.
We are doomed I say!
Doomed!
The fact is that fiscal conservatives are not rewarded at the ballot box, regardless of party. There are more fiscal conservatives on the GOP side, but the establishment has mostly given in and joined in the spending fun. Democrats don’t seem to care one way or another, as most of them fully believe in Modern Monetary Theory.
All of this is the voters’ fault.
I feel like we are playing musical chairs, waiting for when the bottom falls out. Only when things get very, very hard will voters finally relent and start electing politicians who prescribe fiscal discipline. The problem at that point is that there won’t be much money available for safety net spending, and it will be calamitous.
Maybe they have a plan for a digital currency reset or something similar. I don’t know, but I wouldn’t put it past the degenerates who run our country.
Digital currency will not solve any problems just make it easier for the government to track all your purchases and stop many people from buying non government sanctioned items in the future maybe tobacco, liquor and certain meds will be illegal to purchase.
“Only when things get very, very hard will voters finally relent and start electing politicians who prescribe fiscal discipline.”
And, even then, they will vote for the politicians who prescribe fiscal discipline *on the other guy*. Pink Floyd said it best in their song Money, ‘Share it fairly, but don’t take a slice of my pie’.
The voting has been rigged for years…if anyone thinks change is made at the voting booth..,forgetaboutit
If so, how was trump allowed to be elected, and why didn’t he fix it while in office. He said before he ran that the only way he could lose is if the vote is rigged, so he ‘knew’ about it.
He didn’t try to fix it. Didn’t raise a finger. If the voting system is still rigged, that’s on trump. He had the presidency and both branches of congress when he came in. There was nothing to stop him but endless golf vacations.
you mean trump lied to his nit wit fans? nah. no way.
When they wrote that song they were already wealthy and had been for years so they do like money. Great album thought.
It’s a fundamental flaw of democracy. We’re witnessing the failure of a republic because we’re at the bottom of the race to the bottom for how low candidates will stoop to get elected. Trump did for “being a selfish, awful person” what Clinton did for oral sex.
We just skipped 100 years toward the world of Idiocracy in 5.
Jesus died for u. Trump is going to jail for u.
“It’s a fundamental flaw of democracy. ”
democracy=socialism=bankruptcy
Hahah yes.
correct. the voters, love free lunches. paid for by grand kids. they can just drop a zero in everyone’s account everywhere. 10x baby.
Forgetting one small thing: there is nowhere else to go. When the Roman empire fell, people scattered to the wind to the four corners of the earth and started over somewhere else. There is no other planet or country for us to escape to. So, despite your graphs, we will continue to accept dollars for work and pay dollars in taxes and borrow all we want and all negatives will be ignored. You cant escape a bad financial situation when there is nowhere else to go …
not remotely accurate. learn some history. sounds cartoonish. i happen to vote in italy. FFS amerikans are thick. public school doing the job of producing knuckleheads.
“Debt to GDP Alarm Bells Ring, Neither Party Will Solve This”
Quite conversely, BOTH parties are only intent on exacerbating the problem by driving the national debt load faster and higher. They only differ on what/who the newly created, debt backed money will be wasted on.
Sad but true both parties are only interested catering to the groups that got them elected, No party is willing to make the tough cuts and policies that the country really needs.
There are no tough cuts to be made. 85% of Federal govt spending alone is wildly popular amongst the American public. Cut Social Security? Medicare? Interest payments? Defense? All the easy stuff has been done.
Votes must be bought.
Agreed but … let’s presume we had a candidate for president whose primary goal was balancing the budget and paying down the debt. This would mean large tax increases and large entitlement cuts. Neither party would touch them w/a 10 foot pole. But let’s be hypothetical and say one party welcomed them. They would be mocked by the other primary candidates and would be annihilated in the primaries. But let’s be crazy hypothetical here and say they won their party’s primary. They would be mocked and annihilated in the general. But let’s be really hypothetical and say they won the presidency … congress would fight them on tax increases and spending cuts. If they could push some thru, look for an assassination.
Bottom line, the patient needs chemo and radiation … but we’ve been giving them morphine while the problem worsens. Anyone who takes away the morphine and starts real treatment will be seen as the bad guy.
They should implement small changes.
Increase taxes and cut spending at small amounts over at least 5 years to see if that reduces the debt to GDP ratio as well as deficits.
Make necessary adjustments after 5 years.
Debt-to-GDP ratios are obviously contrived metrics. Unprecedented large deficits “absorb” a disproportionately large share of N-gdp (as gov’t spending is a component / factor of gDp).
To appraise the effect of the federal budget deficit on interest rates, it is necessary to compare the deficit, not to the debt to a GDP-ratio (a contrived figure), but to the volume of current net private savings made available to the credit markets (including concealing green-backing or the monetization of gov’t debt by the commercial and the Reserve banks)..
I don’t want to pay a dime more in taxes and as someone who spent several years doing Lean Management there is no doubt waste which could be cut in government. Yet, as a 66 year old politically active citizen I know we’ve gone through basically 40 years of tax cuts and corporate, state, and federal taxes are at historic lows. I don’t believe cuts will solve this issue and neither party will buck the Billionaires who are bribing and perverting our political system. I’ve saved money all my life but don’t see opportunities for my grandkids future like I had and like our country and world could be
I predict that within two years there will be some form of wealth tax. Probably, following Ron Wyden, we will see some form of punitive increase in capital gains taxation. Simply putting a time-weighted tax on capital gains (e.g. tax rate increases as holding period increases beyond some threshold) would be easy to administer and encourage more turnover of capital assets. The core of Bidenomics is spend now, pay later in the form of higher taxes. The Republicans are trapped by this.
“I predict that within two years there will be some form of wealth tax. ”
I predict you are crazy.
A wealth tax is unconstitutional and this Supreme Court will rule as such.
Biden keeps adding tariffs to more foreign goods, which raises revenue much like a sales tax… and that is legal plus the peasants won’t revolt, instead they will actually praise Biden.
Biden just uses tariffs as a national sales tax. Need more tax money? More tariffs. The peasants will not revolt but instead rejoice and praise Joe.
What is the difference between a wealth tax and death duties? Both are a tax on wealth. So why is one unconstitutional and the other not?
Bingo. Mish wrong
The difference is that with death duties the person being taxed is dead so can’t object.
as all estate attorneys and accountants know, the clients don’t complain or call as much, when they are dead.
Mish, what’re the chances that 401K nationalization will happen within the next decade or two?
I don’t know
freedom fest owner, mark skousen taught us the CIA etc already have that plan on shelf. it’s been tried and true in many other nations. lots of places to force peoples money to be invested in the national and state governments. pensions of states, then ERISA, then regular brokerage accounts. force all apple and jpm shares be converted to us bills notes and bonds…………..all this has happened in other democracies that go bust.
= usa 1year deficit is about 2 trln$ in 2023
there was reporting, even you confscate ALL MOENY FROM RICH FOLKS (1+ bln$)
money will be enough for just a few years.
and what next???
There already is a wealth tax. It’s usually called “printing money”.
It wouldn’t be easy at all. the IRS would have to value everything. And in the end, all it would do is push forward cap gains tax collections because any wealth tax on an asset would be added to the cost basis, which would reduce the capital gain when sold.
And it would create problems for assets that didn’t generate revenue. People would be forced to sell assets to pay the tax. It would be very damaging to the economy.
some jurisdictions in usa already have forms of wealth tax.
Robbing Peter to pay Paul won’t work. The deficits must be cut. The only thing untouchable is interest.
What if Peter wants to have if more than Peter wants to keep it? Interesting.
So, isn’t the solution to this problem easy? Just devalue the currency. Lower the value of the dollar 50% and boom! GDP doubles in nominal terms and fixed debt stays the same. Of course, all our living standards decrease by 50%, but then debt/GDP is lower than 60%. If this happens, seems like it is best to be on the same side as the government, debt-wise, and to be heavily indebted with fixed interest rate debt and underlying productive assets like oil wells or farmland. Savers and bondholders would get hammered
Yep, you got it – maintain confidence in the smoke & mirrors economy. No trader will be concerned that their confidence is 100% based on the belief that the Fed will never fail (until it does and as long as we fools place our trust therein). We are such idiots.
with our current electronic currency, the FED could easily with treasury just drop another zero in every bank and brokerage and insurance and personal account. as you properly surmise. currency debasement. like FDR did. like nixon did. like so many empires did for millenia. who wants to be a trillionaire?
If everyone’s bank account suddenly increased 10x, where would the banks get the money to honor deposits? Because right now, bank deposits are backed by debt, so the only way this would work is to add a 0 to all debt owed. Including government debt. So you would have 10x more money, but also owe 10x more. Great for those who are debt free, but if you have $250 in the bank and a $300k mortgage, it would be horrible.
empires defaulting on their currency will never be pretty.
= Lower the value of the dollar 50% and boom! GDP doubles in nominal terms
I guess Weimar republic was nice in 1920xxx!!
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you joked right??? GDP is spending by consumer + gov !
if you lower dollar, and USA RUNS BIGGEST TRADE deficit too, inflation will hit real hard. prices will go up 20 30 %.
spending will fall. and gdp NOMIMAL will fall. no moeny for discrete stuff ouside spending on basic one!
alx
I never said this Dollar devaluation was a good thing, but it is the most likely outcome. I also don’t think a great reset of the dollar to rebalance debt to GDP would lead to Weimar conditions. More like the Pound in the early 90’s when George Soros and Jimmy Rogers became geniuses
“ I don’t think a great reset of the dollar to rebalance debt to GDP would lead to Weimar conditions”
Glad to near this is true. Phew!
And since the whitehouse continues to report the current economic trainwreck as “unprecedented successs” … we can deValue 75% and most sheople will believe the news media instead of their own pocket books.
My wife is currently holidaying at our home in Egypt. They have devalued by 50% since last year, The Egyptian pound used to be worth $1.50 in the 1970s, now worth 3.3 cents officially or 2.5 cents black market. Current bond yield 24%. GDP to debt is about 1 to 1.
So your suggestion of devaluing the currency to boost GDP does not work. There are even worse cases like Lebanon, Zimbabwe, Argentina or Weimar Republic where inflation/ devaluation just led to ruin.
As for the various tables and graphs that are in Mishs article I’d say they are trash. How can they predict what percent of government expenditure will be interest payments in 2053 when nobody has a clue what the interest rates will be in a year let alone 30. The higher the debt goes and the more that inflation messes with things the higher interest/ bond rates there will be for the next 30 years causing the debt to blow out causing the rates to keep rising. At some point the bubble will pop and that will be long before the dates on those projections.
Not wanting this to happen, but a devaluation or a hard default seem to be the only two ways to solve this. Spending cuts certainly wont happen. Interest on the debt will consume more than half of revenue in a couple of years. Devaluation and inflation seem the most likely way out. People value the number on their brokerage statement moreso than the purchasing power of that number
The U.S. will repudiate its debt and issue a new currency, like France did.
The problem is we don’t control the value of USD. Other countries do. If we print, they’ll print commensurably and USD will remain where it is.
You don’t understand how money is created. It’s created by issuing debt. If you double the amount of money, you would also double the amount of debt owed.
The only way to lower debt is to stop borrowing. Over time, debts are paid off. It’s bad for the economy and is deflationary. This is what’s been going on in Japan the last few decades. Private citizens stopped borrowing. And the government amassed huge debts to keep the economy from collapsing.
Money is an obligation and an obligation is a debt.
Federal Reserve could also create money buy buying assets like junk bonds, stocks, or just give it away, as in helicopter money. Don’t say it isn’t possible. Even more likely if we get a cbdc
“If you double the amount of money, you would also double the amount of debt owed.”
..To a Central bank which will let you roll it over interest free for the next 25 millennia.
Mindlessly regurgitating “money is debt”, does not add anything meaningful, when “debt” can mean absolutely anything the Humpty Dumpties at The Fed wants it to mean at any given instant. On a hard Gold standard, you would be right: The technical term “debt owed”, would match what is colloquially considered “debt owed.” While, OTOH, if The Fed will let you roll over all your debt indefinitely as long as you pledge a milligram of foot fungus in collateral for each trillion and happen to be a good and well indoctrinated dilettante, and then decides to hold the fungus to maturity, it no longer means anything useful at all. Instead, it’s just mindless, pompous babble. Aimed at nothing aside from fooling morons.
“debts are paid off. It’s bad for the economy and is deflationary.”
Having less debt never was, never will be “bad” for anyone’s “economy.” Less debt, ALWAYS leaves A person, Two persons, a Million persons, an “Economy” worth of persons…, BETTER off. NO exceptions.
Man, the nonsense some people can be suckered into mindlessly and uncritically regurgitating….
“And the government amassed huge debts to keep the economy from collapsing.”
Not to prevent some mythical guy named “The Economy” from scary sounding “collapsing.” But instead, simply to save overspending but connected idiots in Tokyo Society, from having to hand “assets” they; being the idiots that all such as they invariably are; had wasted, over to more competent people.
The only thing bankruptcy does, is redistribute. Nothing gets destroyed. Corn doesn’t stop growing, oil doesn’t stop flowing, houses and roads don’t fall down, machinery don’t seize, people don’t lose any skills…
The one and only thing that the Newspeak phrase “the economy will collapse” refers to, is a redistribution: From incompetent dilettante idiot connected current “owners”, to more competent people. Which is exactly the one and only thing central banks, and governments “saving the economy”, exist to prevent in the first place: Connected rank idiots losing spoils they are too stupid and incompetent to hold on to on their own. Nothing else. Whatsoever. Not here. Not in Japan. Not in Andromeda. Not prior to the Big Bang.
i’d suggest we would go back to the future. a time of fed note, treasury dollar, state backed dollars, bank backed dollars and also gold and silver coin. and silver certificates. competing dollars. also there were confederate dollars. maybe maga dollars printed at mar a lago and trump tower.
The Dollar is free floating so you can’t devalue it.
Lower the interest rates and dollar will devalue.
Remember kids: The financial crisis in 2008 was only believed to be a sub-prime mortgage issue- until it wasn’t.
It was about nobody knowing who the hell was holding anything of value, and who will go down next. In other words, complete loss of confidence.
Today it’s different, since the FED can print dollars (or create emergency facility xyz) faster than China can produce steel and concrete – or chips.
Bernanke was solely responsible for the GFC. Bernanke can’t define MO. The currency component was the largest factor, and an increase in currency was contractionary.
Governments will default, even the US. They will call it something else. Perhaps freezing principal payments with interest only payments, I’m sure a favorable rate for the defaulters. This has a precedent. It’s
also a way they can deny a default title.
Central banks will buy the debt. Japan has shown the way.
Japan is unique. The Japanese save more and keep more of their savings bottled up in their banks. This destroys money velocity. Banks aren’t intermediaries. The whole is not the sum of its parts. Savings are not synonymous with the money supply. The lending capacity of the banks is dependent on monetary policy, not the savings practices of the nonbank public.
Everyone in Zimbabwe did become a billionaire. Apparently, they weren’t happy about it, though.
Don’t worry!
Whatever it is – we’ll be eating three times a day. We’ll living in our houses. We’ll be still driving our cars. Crisis means resetting the currency value.
Don’t worry!
You may want to look at history. The Weimar Republic for example.
I actually have researched what happened in Weimar Germany. Surprisingly, the trade unions made out well as they were able to demand pay raises in line with inflation. Stocks kept up as well