If Congress extends the TCJA tax cuts with no offsetting savings, the deficits will surge. 
Long-Term Budget Outlook Synopsis
Please consider the Peterson Foundation Statement on CBO Long-Term Budget Outlook
“Today’s CBO report shows debt rising rapidly over the next three decades, and serves as a timely warning for this year’s tax policy debate.
“Over the next 30 years, debt will grow to a staggering 156% of GDP. Annual interest costs will exceed $1 trillion next year, and total a stunning $76 trillion over the next three decades. This report also shows that the depletion of Social Security’s retirement fund is just 8 years away, which would result in immediate, automatic cuts for all beneficiaries.
“As bad as this outlook is, it represents an ‘optimistic’ scenario, because policymakers are currently considering adding trillions more in tax cut extensions, which would only add to these levels of debt.
As CBO reported last week, extending the expiring provisions of the 2017 Tax Cuts and Jobs Act without offsets would double the deficit and send debt soaring to 214% of GDP. And if interest costs are one percentage point higher than expected, debt would balloon to 250% of GDP, showing just how sensitive our fiscal health is to the unpredictable interest rate landscape.
For the CBO report, and I highly recommend a look, please see Long-Term Budget Outlook 2025 to 2055.
2055 Economic Projections
- Debt held by the public: 156% of GDP
- Budget deficit: 7.3% of GDP
- Outlays: 26.6% of GDP
- Revenues: 19.3% of GDP
Other Projections
- Debt held by the public reaches 107% of GDP in 2029, exceeding the historical peak reached just after World War II.
- Deficits average 6.3% of GDP over the 30-year period, which is 2.5 percentage points more than they averaged over the past 50 years.
- Net outlays for interest increase more than one and a half times, reaching 5.4% of GDP in 2055. Outlays for the major health care programs climb to 8.1% of GDP in 2055.
- The growth of real GDP averaged 2.5% per year over the past 30 years. Over the next 30 years, real GDP growth averages 1.6% per year.
- Without immigration, the U.S. population would start to shrink in 2033. Slower growth of the population leads to slower growth in the labor force.
Snake Oil Analysis
Speaker of the House, Mike Johnson is leading the way for Trump’s snake oil magic. It’s a repeat play of the 2017 TCJA act.
In 2017, Republicans put a 7-year expiration on the TCJA. That way, they were able to avoid long term budget constraints.
Now the snake-oil salesmen now say they are not increasing the deficit, they are just continuing current policy.
How $4.5 Trillion Becomes Zero
Please consider Republican Lawmakers Eye Fiscal Policy ‘Gimmick’ to Finance Trump Tax Cuts
Due to the deficit impacts of extending the expiring tax cuts, Senate Republicans want to scrap “current law” baseline and instead use “current policy” baseline, which treats renewing the TCJA as an extension of current law rather than new policy.
This would make the House’s $4.5 trillion budget resolution, in theory, cost zero dollars rather than trillions.
After Trump endorsed the House version, Senate Majority Leader John Thune, R-S.D., said the Senate would keep its version as a “backup plan” while working with the House to make the $4.5 trillion resolution more doable.
The Congressional Budget Office, the Tax Foundation, and the Committee for a Responsible Federal Budget all agree the TCJA extension will decrease tax revenue for the federal government by at least $4.5 trillion from 2025 through 2034.
‘Optimistic’ Scenario
The Peterson Foundation correctly notes the snake oil and the optimistic nature of that snake oil.
Trump also wants no tax on tips, no tax on Social Security, more military spending, restoration of state-and-local tax (SALT) dedications, and a new iron dome defense shield. He recently proposed interest deductions for made-in-America autos.
Not a bit of that is factored into the CBO projections.
In 2017, elimination of SALT deductions was needed to make the 7-year projection work. Now, to buy House Democrat votes (primarily big blue tax states like NY), Trump proposes restoring SALT.
Lutnick Says Tariffs Can Eliminate the IRS and Balance the Budget
On March 12, I commented Lutnick Says Tariffs Can Eliminate the IRS and Balance the Budget
By “External Revenue Service” Commerce Secretary Howard Lutnick means tariffs.
Click on the above link for a video cheered on by Fox News, watched 317,000 times, and liked by 686 fools.
To balance the budget with tariffs, the administration would need to bring in $7 trillion. To replace individual and corporate income taxes, tariffs would need to bring in $3.1 trillion.
Tariffs brought in about $30 billion for the full year in 2024.
Reciprocal Tariffs
We have an annual trade deficit of $918 billion.
Team Trump proposes $918 billion in “reciprocal tariffs” to make the trade deficit go away.
But to balance the budget and eliminate personal income taxes, Trump would need to collect $7 trillion in tariffs on a net trade deficit of $918 billion.
Since that is impossible, we would need to faithfully collect 200 percent all tariffs on total imports ($3.3 trillion) with no trade frictions, no retaliations, and full compliance.
Are you ready for that miracle? Me too. But wait, there are still more benefits to this amazing deal.
Trumps Claims
- Tariffs will increase revenue enough to balance the budget
- Tariffs will bring manufacturing back to the US
- Tariffs will reduce inflation
- Tariffs will increase exports
Conflicting Economic Madness
Points 1 and 2 conflict. Tariffs cannot simultaneously bring back manufacturing and raise enough revenue to balance the budget.
Points 2 and 3 conflict. Since the US is one of the world’s highest cost producer of goods thanks to unions, tariffs will not reduce inflation.
Points 2 and 4 conflict. Since the US is one of the world’s highest cost producer of goods and other countries will retaliate, tariffs will not increase exports.
One House Republican Stands Alone
Only one House Republican, hard-line deficit-hawk rep. Thomas Massie, stood up against this budget nonsense.
“Why would I vote to continue the waste fraud and abuse DOGE has found?” wrote Massie on X. “We were told the CR in December would get us to March when we would fight. Here we are in March, punting again!”
I discussed the result in Hoot of the Day: House Republicans Suddenly Like Clean Energy Tax Breaks
Trump is one of the biggest snake oil salesman in history, and all but one Republican is too fearful to do anything about it.
Starting Now
Unless you are logged in, you cannot vote
I am handing comments differently – for perhaps a week or so
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Truthseeking: Debt ratio to GDP is irrelevant…what it really matters is the tax revenues percentage to service the debt….currently close to 35% and going up….
Once it gets to 70%, expect FED to buy all government debt on a monthly basis.
Mish: That’s very close
We need to distinguish productive debt from unproductive debt. Productive debt is debt that brings in enough revenue to service the debt.
Dropping bombs and funding the NPR are examples of unproductive debt.
The key point, as Truthseeking mentioned, is servicing the debt. Clearly, we are in an escalating setup that is not servicing the debt.
The TCJA extension will not pay for itself this time and didn’t the first time.
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I am about ready to require logging in to comment or vote on comments.
There is too much nonsense and I am deleting a lot of garbage.
Within 2 weeks I will make the change
“Not a bit of that is factored into the CBO projections.”
“The key point, as Truthseeking mentioned, is servicing the debt. Clearly, we are in an escalating setup that is not servicing the debt.”
Maneco 64 had an episode a yearish ago stating that the CBO was always off in its projections always low on the revenue and expenditures. Within a decade it was highly likely that just revenues would not be enough to pay the interest. A % point here or there makes a tremendous difference.
My belief is that &hit will hit the fan well before revenues fail to meet interest payments.
Regarding the numbers above, I’m assuming that you’re saying that that debt service (interest) is 35% of tax receipts? Right? What would the number be if you included the current portion of entitlements? That should be part of debt service.
Not sure what you mean by your question. What do you want to do with entitlements, take it out of all expenditures and then calculate what % of the rest is debt service (ie all (expenditures-entitlements)/debt service)?
Note that SS for example is funded by a direct payroll tax so it’s not funded by tax receipts like say Medicare is.
Trying to figure actual government committed (required spending), like interest on debt, Medicare, Medicaid, food stamps, welfare, and all other entitlements as % of tax revenue. I would leave SS taxes and payments out. That’s a whole other can of worms.
Also VA benefits.
SS is funded only in part by the direct payroll taxes. But they aren’t enough to pay all the benefits. The balance is supposed to come from the SS Trust Fund. But since the government spent all the $ in the trust fund the Treasury borrows cash and adds it to the public debt. So why pretend that SS payments are entitlements and don’t have to be paid. If SS benefits are not paid 50 million Boomers will march on Washington and shut down the government until their benefits, that they paid extra for, are reinstated.
I suspect that I am not a complete outlier here but based on current law and based on the 2025 IRMA schedule ( additional cost for Medicare Part B and D for higher earners) when I turn 65 and assuming I begin SS at 65, approx 1/3 of my SS payout will get returned to the federal government in the form of taxation and Medicare costs. Not 100% of federal taxation on SS flows back to SS. I mention this just to say that I am not of the opinion we are having a complete discussion on the puts and takes associated with both SS and Medicare.
I started taking SS at age 62 (already retired) , not because I needed the money, but because I expected that my tax bracket would go up once Required Minimum Distributions from my IRA kicked in. I am confident that I made the right choice for me but it might not be the right choice for you. Run your own numbers and then decide.
What you say is true. Of course in the past excess SS payments were used to offset deficits so they looked lower in the past. This is one reason why comparing deficits now to ones in the 90s doesn’t make sense since then SS was masking it and now SS is exaggerating it.
The larger point remains though that SS is funded by a special tax rather than general taxes. So it doesn’t make sense to include SS with general revenues.
I did not list percentages, only an idea.
I seriously do not know how to calculate what percentage of US debt is actually productive.
Probably none, at least I cannot think of any government debt that is self servicing.
Fiscal Year Revenue FY 2023 $4.44 trillion FY 2022 $4.90 trillion FY 2021 $4.05 trillion FY 2020 $3.42 trillion FY 2019 $3.46 trillion FY 2018 $3.33 trillion FY 2017 $3.32 trillion FY 2016 $3.27 trillion FY 2015 $3.25 trillion FY 2014 $3.02 trillion
Information from: https://www.thebalancemoney.com/current-u-s-federal-government-tax-revenue-3305762
Just eyeballing the numbers during the first Trump term, the average income tax revenue was around $3.35 trillion. Years prior were all lower. Thus. the Trump tax cut did not reduce revenue, nor did revenue increase much while he was president. The increases in this decade are influenced by Covid and inflation so it is hard to tell if there was much revenue change due to policy. Changing tax rates do not have a proportional impact on government revenue but raising them is a general detractor for investment and taxpayer moral. I do not see any upside to letting the Trump first term tax cut expire. We do not have a revenue problem, we have a spending problem.
From the referenced article: “The U.S. government estimates its total revenue to be $5.49 trillion for fiscal year 2025.” Seems to me, a $5.5 trillion budget spending target would be reasonable.
A deficit? Well, what do you expect, if the money that is spent into circulation is first created as an interest-bearing debt, by the Federal Reserve (=Bank of England)? The debt will only increase exponentially as time goes on.
Debt situation cannot be repaired raising taxes, 20% of GDP seems to be the maximum the private sector will give up no matter the rate. See chart at link:
https://fred.stlouisfed.org/series/FYFRGDA188S
And yet last few years, tax revenue up but dwarfed by increased spending. Not a tax problem, a spending problem. Fundamental flaw of democracy, you vote for those who give you free stuff on the public credit card. Need constitutional amendments to limit public debt. Problem no longer can be solved absent default or hyperinflation.
‘Economist’ Paul Krugman made a valid point that transfer payments should not be counted in government spending then divided by GDP to get a spending percent. He says the transferred money is spent on real things by private person recipients in the private economy. I don’t entirely agree with Krugman. Some of that money sticks to government workers’ fingers when making the transfer, and the taking and paying does have an effect on the persons whose money is taken and who receive unearned money.
As to Mish’s statements about tariff’s, IMHO they look like Smoot-Hawley 2.0. IMHO there is no way that #1 or #4 can be obtained. #2 could happen, but likely would be accompanied by Great Depression level impoverishment and shrinking of the economy. And instead of #3 we could easily get Great Depression levels of deflation. If #3 does occur it will be the mother of all stagflations.
We have the greatest debt. Nobody has ever seen a debt greater than ours.
“Now the snake-oil salesmen now say they are not increasing the deficit, they are just continuing current policy.”
It’s the semantic lie. Discontinuing the policy would decrease the deficit. Extending the the policy creates a deficit that otherwise would not be there, thus it is an increase in the deficit, even if the size of the deficit itself does not change, simply from the policy being extended.
One consideration: Severe recessions can create a relative nonlinear increase in the debt to GDP ratio primarily by falling GDP’s, but also by possible counter cyclical increases of deficit spending. The ratio increased from 16% in 1929 to 40% in 1933, (Smoot-Hawley 1930) a 250% increase – greater than the 125% increase in WW2 from 49% in 1940 to 114% in 1945. A global stock market crash/severe recession over a year or two causing a 125-200% increase in the ratio could be a possibility where the huge existing governmental, corporate, private citizen debt burden becomes significantly more severe.
Mish, I thought you had Libertarian leanings. My understanding of Austrian economics is we use logic and deductive reasoning, as well as observation, to make conclusions; however, you seem to be increasingly Keynesian, using mathematical projections which to me are as unreliable as betting on what Trump may say on a day-to-day basis.
Worse, in the Lutnick article you cite, your (CBO) table shows a deficit of around $2 Trillion approaching $3T, yet within a few sentences you say tariffs would have to bring in $7 trillion to balance the budget. You say to replace individual and corporate income taxes, tariffs would need to bring in $3.1 trillion. My guess is you got those numbers reversed because that is what I see in the table: total revenue of around $7T and a deficit of $3T.
Regardless, as the table does show, the problem is not revenues, which have hovered around 18% of GDP since they stabilized after WW2, plus or minus 1% on average and maybe 2% in more rare cases. Spending is the problem, which until Reagan, also hovered around an 18% of GDP average. Spending is now around 23-24% of GDP, producing our 6% deficit. Spending, not revenue, is the problem (unless you are liberal and want the govt to solve all your perceived injustices in the world).
My understanding is that Reagan had a deal with Tip O’neal where Reagan agreed to cut taxes for Tip’s promise to cut future spending $3 for every $1 in tax cuts. Tip never came through and thus the GOP became RINOs, simply interested in controlling where the spending went, not bothering about the level of spending. Thus. spending was “off to the races.”
I am not a huge fan of Trump because he is a loose cannon. I hated that on 60 minutes (during his 1st run I believe), when asked about the deficit, he said he would not be around when it became a problem, so why should he worry about it. This is not what I want in a leader; I want a fiscal conservative who reins in our out-of-control government (and not a real estate guy who exists “for debt leveraging”).
Herein lies they key – I believe you severely underrate Lutnick and this admin, Trump aside. On All-In, a video podcast of millionaire (billionaire?) venture capitalists, Lutnick turned me into a “hopeful believer” in this admin. Lutnick is a long-term friend of Trump and believes he is a genius, a big-picture kind of guy like Reagan. Lutnick did not mention but I have always believed Trump’s 1st admin was plagued by two things: (1) The “DIMs” (as in DIMwitted DEMs), and allies like the “Lame Scream” media, opposing Trump at every turn; and (2) Trump’s cabinet was filled with loyal RINOs, meaning loyal to the Deep State and RINO causes, not loyal to Trump.
Lutnick was the transition team leader and this time is difference. The selection process for Trump’s cabinet this time looks unlike anything I am aware of, and certainly NOT whether you had a certain skin color or penis (or chopped off penis) between your legs. It appears Trump has a talent ladened cabinet committed to limited govt. If the DIM screaming got anything right, it looks like Project 2025 is being implemented.
All evidence thus far is that Trump is looking to significantly shrink the size of govt, particularly a lot of programs Carter created that have “gone nowhere” except huge spending (Dept of Edu, spending trillions to lower student success measures; FEMA, a govt failure best left to state and local leaders; has Trump targeted the Dept of Energy yet(?), which has never produced lower energy prices like Carter claimed it was designed to do, and also has not been able to control energy prices, another rose-colored glasses goal).
Lutnick also pointed out the disparity in tariffs, which has arisen mostly because the US tried to help countries devastated by war by allowing them to protect their home markets while having free access to ours. Japan exports $41 trillion in autos to the US but imports bare $1.4 trillion from us, a ratio of almost 30x. When was WW2, yesterday? I think 75 years of an unfair trade policy is enough, don’t you?
I have been anti-tariffs based on what I now believe is incorrect thinking. The failure of tariffs during the Great Depression was the timing, imposing tariffs when the world was already in a global depression and not nearly as dependent on global trade. The world economy is in reasonably good shape and is globally very interconnected. If countries want a tariff fight with the US, as the largest economy and importer in the world, our “stick” is multiple times larger. If we have to “take bad-tasting medicine” to cure us, now is the time.
Moreover, do I care if we have a recession? No. GOP Presidents often have recessions early in their admin as they clear out the malinvestment of prior DIM admins. The Biden admin produced malinvestment unseen before, even exceeding the Tech Bubble, which was based on a booming economy driven by innovation, whereas Biden simply spent money unproductively, directed to family and friends (likely so DIM politicians got their cut, like contributions or direct dollars like revealed in the USAID exposures). In fact, it is better to have the recession early so the economy(ies) can recover, proving the GOP policies are the right solution, much like Reagan did conquering inflation. And elsewhere you even talked about wanting to see unproductive numbers versus what we see now. Lutnick, as Commerce Secretary, is working to provide just that number and I can’t wait to see it. I am particularly tired of a govt producing faulty economic statistics designed (or manipulated is a better word) to hide reality and protect spending.
So, returning to the disparity of tariffs, S. Korea’s ratio is 10.6 times and Mexico is 11.2x, but Mexico is only “the IKEA of autos,” importing “ready to assemble” auto sections (like complete engines, chassis, bodies and wheels), mostly from Asia, and I believe primarily China, with Mexicans simply assembling the complete auto so they avoid any tariffs due to prior North American free trade agreement(s). Canada and Germany’s ratios of 2x and 3x pale by comparison. Nonetheless, are even these auto export/import ratios fair? No way!
The US has long tried to lead by example and force. I believe it is time for us to abandon both. While the world has crept toward free markets, the world should have learned by now. It is time for America to stop spending our money, time, efforts and soldier’s lives trying to push a world toward principals we have actually largely abandoned.
Is this going to produce inflation? I don’t know. If it does, at a minimum, to me it will be a “right kind” of inflation because it will be inflation for foreign produced goods, which are mostly manufactured goods. It seems to me this would be a progressive “hidden tax” not largely impacting low income people, who presumably spend on food, clothing, utilities and housing, not much of which is imported (sorry avocado lovers!).
Again, I believe the All-In episode with Lutnick is a must watch. I am convinced this admin is composed of people who can do great things… and I am hopeful that Trump stays out of the way! 🙂
https://www.youtube.com/watch?v=182ckTL2KBA
The high debt after wwII was brought down in part through an extremely high and progressive tax rate on wealthy earners. Apparently the Trump “plan” is more or less the opposite.
Extremely high tax rates on the rich divert attention from high tax rates (though not so high) on everyone else.
Also, the Government and the Fed resorted to what is now called “financial repression”, plus inflation, thus cheating people who bought war bonds of the nominal value of those bonds.
The only compensation is that with every other developed nation so badly damaged in the war, we had something like a monopoly in manufacturing and selling things for a decade or more.
Eisenhower made a priority of paying down WWII related debt. He did not support the Hungarian Revolution in 1956, as it would have been very expensive to start a war with the USSR.
Mish you are selling Snake Oil just as much or more than the Trump team.
The current (as of today) ratio of our debt to GDP is 1.21 to 1. The Intragovernmentail debt (see the link below) is way more important than the Public Debt. Take a look that each item on the list below and then tell us which one of these items you would default on. Don’t let yourself be Gaslighted.
If you are one of Mish’s folllowers please ask Mish to get real.
https://www.crfb.org/sites/default/files/styles/media_image_default/public/images/Gross%20Debt%20v%20Public%20Debt%20Figure%203_1.JPG.webp?itok=F69ZAWzV
As I noted elsewhere, SS is a specific pay as you go program funded by payroll tax. It will get paid in its entirety without any need to issue debt via bonds.
Many other things you list there are future payments for retired workers. In other words they aren’t due *now* so they can’t be collected now (ie workers in their 30s aren’t eligible to collect yet). The ‘debt’ listed there is projected amounts owed in the future. So again, it’s not debt that requires bonds to pay since until it’s due no one knows how much is owed.
Hi Tex,
Check what the SS Admin. people project. Their future projection is that SS is underfunded by $20 Trillion. ($24 Trillion for Medicad)
What I discribe is not $ owed in the future, this is money barrowed in the past. I’d wager my MBA from Texas A&M on it.
Which money do you think was borrowed in the past? SS definitely didn’t borrow money in the past since it ran surpluses till recently when it’s been drawing them down.
Much of the projects on those sites are future payments. Its similar to forecasting your future need to eat (ie 20 years from now you still need to eat food). So right now you have a deficit of food 20 years from now because obviously you aren’t saving food now for 20 years from now. Some of that food deficit (pension obligations) will be met in the future from future work (both in the food case for you and the pension obligations).
They forecast these things based on estimates based on current assumptions (ie person making 100K gets say 75K pension and they will collect at age 60 and live on average 25 years and get 3% COLA etc etc). It’s obviously useful to do these things to get an idea of where you need to be. But it’s just as obvious that over the next say 30 years (assuming our guy was age 30) that he will be funding INTO that pension and it will be growing (at various assumed rates of return) and so on. But no one knows for sure where things will be in 30 years.
Incidentally when I started working at age 23 I had nothing saved and no idea what I’d need in retirement 40 or so years later. If someone in 1988 told me I’d need like 3 million (approx number needed today) to retire and that I had a 3 million retirement deficit I’d have thought it looked hopeless based on salaries of like 30K. Yet all these years later as I get close to retirement I somehow will exceed that 3 million…
Wow. You are still getting your arithmetic backwards. The SS wasn’t doing the barrowing. The Tresury Dept was barrowing every dollar us Boomers paid into the SS Trust Fund. Now the Tresury Dept has to barrow money so it can provide the cash that SS needs to pay benefits. See JayW below.
So debt to GDP is over 100% for the USA. I looked up current Debt to GDP for the Netherlands where I live. It is 47% per 2024, down from 67% in 2014. Norway is at 55%, Sweden at 32%. I know the USA dismissed Europe as an economic basket case, and there’s certainly plenty that could be improved, but there may be a few things the USA can learn from Northern Europe when it comes to budgetting.
Bernie wants to take us to Denmark. The route he lays out appears headed to pre-Milei Argentina.
Why would anyone use the “debt held by the public” percentage, which excludes the very real debt owed to the Social Security system, and understates the explicit debt substantially? Intragovernmental debt is about 20% of the debt! Seems disingenuous.
There is no debt owed to SS. It’s a pay as you go system funded by payroll deductions. Its due to ‘run out’ in the early 2030s when the deductions won’t meet the obligations without some changes (increase the SS tax on payroll or reduce benefits or something combination).
FICA (Social Security payroll) taxes already do not pay for all the benefit checks that Social Security issues. So the Social Security Administration cashes in the bonds it has from lending past surpluses to the Federal Government. (The Federal Government finances those payments to SSA by borrowing.) The bonds SSA has will be all cashed by the early 2030s. Then by law benefits will have to be cut.
Of course, we expect the law to be changed by then …
You are just factually incorrect. The Federal govt owes SS/Medicare $2.6 trillion. What do you think is in the SS fund but US bonds?
I’ll be dead.
So will I.
Your up and down vote has evaporated. Not sure what’s happening
👋
Hi
It seems futile to have this discussion. Since 1980 we have heard tax cuts pay for themselves. Yet, history show they do not. We have Trillions in debt and the morons in Washington are still trying to pass more tax cuts.Yes, we need spending cuts too. WHen I was in corporate world doing lean manufacturing each department had to propose a budget for each year which was 5% less than previous years. Heck government could do 1% a year and then forget tax cuts and repeal both Trumps and GWB Jr tax cuts and we would be balanced in 10 or so years.
I have heard that for every $5 in tax revenue, the US gov’t is spending $6. Of that $6, close to 20% is spent to service the current debt.
I have a feeling that we will be caught in a vicious loop if we maintain the current path we are on. Nobody will be buying our debt at current yields. To keep the buyers in a buying mood, returns will have to rise which will keep increasing the deficit. Wash, rinse, repeat…until it all comes crashing down.
I think you just described the outcome of all Ponzi schemes.
To get our $ back or at least stop the bleeding, the boomers should sue the Democratic Party and the Majority Media to recover what they took from us.
Just import 7x more stuff and charge tariffs … And then there’s the good ole monetize the debt routine …
You impose reserve requirements on all deposit liabilities and raise reserve ratios to accommodate fiscal deficits.
156% by 2055 my butt.
Again, for the millionth time, Intragovernmental debt counts, because it’s ALWAYS paid off with public debt. ALWAYS.
$36.2 / $29.9 = 121%
Let’s assume DOGE does not result in significant savings, especially when you factor in what’s likely to be additional tax cuts. Once taxes are cut, it’s HARD to roll them back. As such, there may not be a material change to the $2T annual deficits for any foreseeable future.
So in 5 short years, we’re at $46T+ in debt. It’s absolute certainty that we’re going to have a recession in the next five years. The additional money spent by Congress will be at least $3T and that’s being conservative. So, $50T by 2030 isn’t out of the question. Growth may average 2% over the next 5 years, so we’re looking at ~ $33.3T.
50 / 33.3 = 150% in 5 short years.
There’s absolutely no telling what the debt to GDP ratio will be by 2055, but rest assured 156% is absurdly low.
In 10 years’ time there’s going to be so much chaos from AI & robotics that it’s hard to even guess what the economy is going to evolve into. My guess is there’s going to be a lot of social & economic unrest.
“So, $50T by 2030 isn’t out of the question.”
“In 10 years’ time there’s going to be so much chaos from AI & robotics that it’s hard to even guess what the economy is going to evolve into. My guess is there’s going to be a lot of social & economic unrest.”
$50T is definitely in the ballpark by 2030. I agree there is going to be a lot of social & economic unrest. Debt doesnt matter until it matters and that day is approaching.
“Debt doesnt matter until it matters and that day is approaching.”
It’s like nuclear fusion is always 30 years off. Well, it ain’t 30 years off anymore which parallels our looking debt crisis.
Dear JayW, You hit the nail on the head with your first sentance. I hope is OK if I use these words in my future communications. Thank you.
So you’re saying we are doomed?
Yes. It appears that our politicians have learned nothing from Germany’s experiment with irresponsible fiscal/monetary policy in the early 1920’s. So why should the eventual results be any different even though the American collapse is taking longer.
Remember what the Terminator said when observing the kids playing with guns, while they were in Mexico?
TDs, savings/investment type accounts approximate $13,898.7 trillion. So, if Congress knew what it was doing it would re-impose Reg. Q ceilings on TDs and gradually lower them. This would increase the volume of loanable funds in the short-term market which would feed back into the long-term market benefiting housing and the Federal Deficits.
See: “Profit or Loss from Time-Deposit Banking” in Banking and Monetary Studies, Comptroller of the Currency, United States Treasury Department, Irwin, 1963, pp. 369-386
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 the monetization of gov’t debt by the commercial and the Reserve banks).
parse dt; net private savings; deficit; percent
10/1/2013 2462.787 680… 3.62%
10/1/2014 2847.983 485… 5.87
10/1/2015 3162.291 442… 7.15
10/1/2016 2984.788 585… 5.10
10/1/2017 3366.586 665… 5.06
10/1/2018 3986.622 779… 5.12
10/1/2019 4712.634 984… 4.79
10/1/2020 10636.04 3132. 3.40
10/1/2021 8382.799 2772. 3.02
10/1/2022 2264.383 1376. 1.65
10/1/2023 3868.898 1684. 2.30
10/1/2024 3948.589 1833. 2.15
I have written in “Thomas Massie” for President the last 2 Presidential Elections, and proud of it!
I wrote in Mish in the last election and proud of it.
But yes, good idea
A policy of classifying debtors as “Too big to save” vs Too big to fail” would help. I’d put Mish’s favorites at the top of the list: Chicago, LA and NYC.
I haven’t heard any discussion on here of Trump’s “Golden Dome” missile defense shield. Sounds expensive.
How is funding a missile shield going to affect future federal spending and deficits?
If we build this “Golden Dome” are we still going to get our $5000 DOGE dividend checks?
It’s Reagan’s Star Wars initiative all over again. In other words, vapor ware.
Why would it take so long?
How do you log in on this site to vote?
Just like imposing tariffs, essentially a tax, not keeping the tax cuts passed in 2017 would be damaging to the private sector economy which is what funds the bloated government spending. It is only common sense that job cuts and reduce capital funding for profitable projects would occur. The only way our government is going to get out of our fiscal mess is to reduce spending as government spending is nearly 100% consumption, consuming our wealth. There is a lot of criticism over what Musk has been doing some founded some off the deep end, but he is exposing waste, and congress needs to act to make the required cuts. I find it hard not to believe that anyone who is against improving government spending efficiency is illegitimately receiving funds via that waste in one manner or another.
There are lot of candidates for bankruptcy. Sad as it is, the US is not the leader, and owns the reserve currency, too. Like with credit card deadbeats, some percentage will default, and the system will muddle through for a while. I would say 2055 is a stretch.
Sadly, it’s baked into the system. Intelligent life is hard to find.
Trump was elected to make sure it wouldn’t happen.
You can’t own enough gold.
Look at the gold chart. It ascend rapidly and steeply. Looks likely goes up above 4000 – 5000 in a few months time.
‘Tariffs are a tax on your grocery bill’ | Canada pays for billboard in Cincinnati area amid trade warhttps://www.wcpo.com/news/local-news/tariffs-are-a-tax-on-your-grocery-bill-canada-pays-for-billboard-in-cincinnati-area-amid-trade-war
this country has been faking it for too long with a nasty consequence racing toward us. We are quite nearly out of altitude, behind the power curve and soon to crash. Fancy dancing will not overrule fundamental arithmetic. Basic physics is accelerating us toward a rather nasty outcome and political juggling on either/both sides is highly unlikely to help. So, we will get to see if it can be pulled out before meeting the ground and when or, alternatively, vigorous steps (and a lot of pain passed around) may avoid the crash. Still denial and incipient pain in place. Time to get real real fast.
Debt ratio to GDP is irrelevant…what it really matters is the tax revenues percentage to service the debt….currently close to 35% and going up….
Once it gets to 70%, expect FED to buy all gov debts on a monthly basis.
That would be a repeat of the German Reichsbank’s behavior when it could no longer find enough buyers for German government debt at reasonable interest rates.
What makes you think there will be a USA in 2055?