New CBO (Congressional Budget Office) Projections Look Grim
In past emails, I have discussed the deficits and debt problem a lot. Remember the Debt Bomb video on our site. And I always referred to the CBO projections of additional debt over the next 10 years as $14.5 trillion IF there were no new government programs (but expecting that there likely would be more). So here we go. The new CBO projection is now $18.8 trillion added to the Federal Debt over the next 10 years (and with our out-of-control Congress, it will probably continue to get worse).
Now the projections in 10 years is $50 trillion - more or less, but there is no less. It will just be more and more and more UNLESS we do something about it. The projection has increased $5 trillion over the LAST YEAR. In the past decade, interest rates were artificially low. Now they are returning to ‘normal’. If our average interest rate on government debt in 10 years is 4%, do the math - that's $2 trillion in interest expense alone for the Federal government. Wow, Wow, Wow (4% is not a random guess. There is no way to know for sure, but the average maturity of Federal Debt currently is about 6 years, and the interest rate on 5 year notes is 4.06% and 7 year notes is 3.98%, as of February 16, 2023 for an average of 4.02% - the Treasury does not sell 6 year notes). The Doom Loop is coming (See Facts, No Spin #75, Ever Heard of the Doom Loop?). The Treasury says every year in their published annual financial statement: ‘The Current Fiscal Path is Unsustainable’. It has said that for a number of years and the day of reckoning appears to be coming. So, what is the problem and what should we do? The problem is clear to me, out of control spending by ALL parties. It didn't just start, it was baked into the cake with Social Security, Medicare, Medicaid when they were passed and expanded constantly over many years under Democrats and Republicans. It is truly a bi-partisan problem and it just keeps getting worse. . We hear some politicians say that they want to cut spending, without detailing the painful cuts needed to do so. Voter fear. They want to be reelected and fear being ousted if they recommend anything the voters don't like. I get that and if I were in their shoes, I would probably do the same thing. Others want to keep on spending even more and raising taxes. I get that too; it appeals to a lot of voters until they understand what taxes must be raised - theirs. Taxing the rich sounds good, but even if that were a good idea (it is not), every analysis shows there is not enough money there to pay for all this spending. That means taxing everyone - a lot, like Sweden who has even more ‘free’ programs. BUT, that is not a formula for economic growth Just the opposite. And they don’t seem to realize many of their ideas hurt the folks they are trying to help. Sounds good, feels bad. So, how do we fix this problem? Education. The ‘voting public’ needs to know the facts and the real alternatives, and then any thoughtful voter will insist that our representatives fix the fiscal insanity. Non-discretionary spending (entitlements and other programs on auto pilot) consumes 70% of the federal budget. These are not voted on each year, but can be changed if the Congress has the will to do so. Entitlements must be addressed but can only be adjusted if the public is informed and will support reasonable change. No, we are not pushing grandma over the cliff and we are not suggesting that we cut off current beneficiaries - cut the demagoguing and get to the facts. But a slow reform over some years in a thoughtful program is essential or the Fiscal Cliff will get closer and closer - until we go over headfirst. BOTTOM LINE Folks, it is up to us. Learn about the problem and the solutions. They are not draconian, and we can live with them to avert a calamity in the future. Support reasonable change. Go to our website and Contact Congress and let them know you support moving forward to fiscal sanity. And if they don’t fix the mess, then you will vote for someone else. If they get that message, you can bet they will react wisely. LEARN ECONOMICS, THEN VOTE SMART