In early February, my colleague Larry Edelson wrote about the Congressional Budget Office’s Budget and Economic Outlook.
Specifically, how U.S. debt is expected to increase 75% in the next 10 years.
Frankly, I almost fell out of my chair when I took a gander at the numbers back then.
And, I thought, there’s no way they’re going to get worse.
Unfortunately – and as mind-blowing as it seems – that’s just what’s happening now.
In the 2017 Long-Term Budget Outlook issued March 30, the CBO revised their forecast upward for U.S. federal debt-relative-to-GDP – predicting a staggering 150% by 2047.
You read that right: 150% of GDP! See for yourself …
As you can see, this chart clearly highlights the soaring U.S. debt load, exploding from 77% of GDP in 2017 to 150% in 2047.
Certainly, these facts alone should have your head spinning. But the situation will only get worse because our government’s outlandish spending will only get worse. Here are just a few of the primary contributors:
- Higher costs for healthcare programs and Social Security.
- Higher interest payments to service debt-load explosion.
- Slower productivity and a shrinking labor force.
- GDP growth expected to average just 1.9%, well below the 50-year average of 2.9%.
The CBO goes on to say that their analysis of high and rising debt in the U.S. would have serious budgetary and economic consequences.
In fact, not only does soaring debt weigh on economic growth and limit upcoming budgetary policy, it also increases government interest costs and limits lawmakers’ ability to navigate unexpected events.
The CBO estimates that to bring federal debt back in line with its 50-year average of 40% of GDP, the government needs to cut non-interest spending and boost revenues like you’ve never seen before.
In fact, to bring U.S. debts back in line, we would need to slash spending and boost revenues each year until 2047. The goal for 2018 alone would total a staggering $620 billion.
My advice: Don’t bet on it.
What does this mean for you?
The harsh reality is that years of government overspending and irresponsible fiscal policies brought us here.
And the day of reckoning is quickly approaching, especially as more and more sovereign debt crises crop up around the globe.
It’s clear that U.S. lawmakers have a choice to make: Tighten their financial belts or ratchet up taxes to maintain their spending habits.
And that means higher taxes to generate more revenue.
It also means that they’ll have to get more aggressive about how and where they pull more cash out of our businesses … our communities … our bank accounts. Even if it requires looting the economy, holding back wages and cutting social services.
This is the kind of reckless behavior that Larry often warned us about. The kind that wipes out governments … wreaks havoc in financial markets … and puts central banks and treasuries out of business.
But in every crisis, there is opportunity. You just have to know where to look and – most importantly — when to pull the trigger.
Good investing,
Mike Burnick
Rodolphe Meganck May 3, 2017
There will be (probably end 2019) a new crisis, worse then the one of 2008. All the markets and the countries will be destabilized.
In Europe, the reds will send the unions on the streets. It will end with revolutions in France, Italy, Spain and
Great Britain. In my opinion : WWIII in 2022, just like Larry predicted. Conclusion : how could we make in such con-
ditions reliabel economic and investment scenarios for the future.
Buy GOLD now and FOOD when scary times begin.
EAN PUGH April 29, 2017
We in Europe are continually amazed by the knocking of the Euro by USA “experts”. In your reports today you state it id doomed as Government Debt is 90% of GDP. In an adjoining article you state USA Government debt is due to rise to 140%. STRANGE!
You do not understand that in Europe Personal Debt ie Credit card, HP, car loans and house loans are tiny in comparison to USA and are not in default generally again in contrast to USA.
The only exceptions are UK which is really a piranha state for World Hot Money and Ireland which is so small it does not count.
The USA needs a strong EURO and a strong Europe to form a stable geopolitical barrier to the chaos elsewhere
Kenneth Swanson April 15, 2017
As always very informative! It seems we are headed for rough seas!!
Guess I should consider investing in Junior Gold stocks!! Or Chinese silver Pandas!??
Gail L. Legate April 9, 2017
You left out one obvious alternative. The Fed can buy surplus debt without limit and rebate most of the interest to the Government. To say that Congress “must” cut spending or raise taxes is incomplete and politically very unlikely: and either would cause economic collapse in the current environment. The ratio of debt to GDP is an arbitrary standard without firm meaning and should not be taken for obligatory response. The wealth of a nation is not measured in budgets, revenue versus debt, or even gold… it is the productivity of its people and their ability to enhance the quality of life. To encourage productivity requires further deficit spending, considering our current fiscal commitments which obligate most of our budget. That will lead inevitably to inflation of the currency by the Fed as the only viable alternative. Your advice should focus on that. What will preserve economic power? Gold? It has historic precedent, but is also of arbitrary value and hated by central banks. Natural industrial and agricultural resources? Maybe, if they are used carefully. Technological breakthroughs can work wonders but they are hard to predict. Confidence! If we can trust our future prospects in terms of opportunity to produce and be compensated in an inflationary environment, that will make all of the difference. We must avoid jousting at windmills (especially those that we cannot control), and uncooperative trade that inhibits each area from profitably doing what it can do best, so that our interlocked economies will benefit. Our best defense against changing monetary and physical environment is to have a strong economy to facilitate alternative responses.
Gail Legate
You may use my comments
johannes April 8, 2017
WW 2s debt load was financed
through the sale of bonds to the citizens and the USD was not a fiat currency as it was backed by gold. Big difference from today’s printing of worthless paper.
David April 6, 2017
Correct me if I’m wrong, but the CBO usually does not include state or municipal debt. * US data excludes debt issued by individual US states, as well as intra-governmental debt; intra-governmental debt consists of Treasury borrowings from surpluses in the trusts for Federal Social Security, Federal Employees, Hospital Insurance (Medicare and Medicaid), Disability and Unemployment, and several other smaller trusts; if data for intra-government debt were added, “Gross Debt” would increase by about one-third of GDP. The debt of the United States over time is documented online at the Department of the Treasury’s website. *Wikipedia
Steve April 6, 2017
Another scary prediction. What should we be doing now, defensively to be prepared for the Debt. explosion???
Thomas Smith April 6, 2017
Cut spending money ? ?To buy votes, create jobs, put people to work instead of freebies, ????
Mike April 6, 2017
Take the taxes on the Ultra Wealthy back to where they were in 1982 before Reagan cut them without cutting Federal Spending and alot of this problem goes away….. 🙁
Geos April 6, 2017
We survived 120% in WWII but can’t survive 77% now? 150% is pure hype. Click bait fear mongering does not add to your credibility.
Randy April 5, 2017
Thanks for the laugh! Just yesterday I was looking at global GDPs. We arent in the worst shape but we are in the top 10 loser states with a GDP of 104% Dec 15 2016.
Greece was 176% and steadily climbing, round 4 bail-outs coming up. This is like keeping the dead cow in the barn instead of taking it out and burying it.
If you look at this chart and line the tops up starting in the 50s
Randy April 5, 2017
I recently studied a few global GDP reports that noted US Debt to GDP ratio was at 104% last Dec 15th, and Greece at 176% also, while Japan lead the pack by a furlong at 250%. What in the hell is going on over there? Russian GDP a paltry 17%… these guys, huh?
But bit coins will save the day and help globalize. Easier for governments to track bit coins than dollars. Just think, bit coins will stop all crime, and it will be fun, they said.
Charles Bernold April 5, 2017
MIKE
WHEN IS IT TIME TO LOAD UP ON GOLD AND SILVER PER CYCLES
TO SAVE OIR SELF
CHARLES
Richard Brown April 5, 2017
I caught the same thing that Steve did, but after listening to to our do-nothing congress I was not offended. Thanks for your astute reporting.
Daley April 5, 2017
Sound logic Mike, if the world was the way it was when the 40% figure was utilized. The world has changed dramatically since then and it seems like most of the countries in the developing nations are in the same boat. So everything being equal, we should be able to weather the storm until another black swan flies in. Thanks for the food for thought though.
Joe April 5, 2017
It will be hard to get the deficits and debt under control when the corps and wealthy private equity and hedge fund managers pay next to no taxes thanks to their lobbyists. Corps only paying 12% of tax revenue now compared to 30% a few decades ago. Hedgies and PE types paying only 15% income tax rate or less on billions in income thanks to the “carried interest ” invention.
Tony R April 5, 2017
I would really like to hear your take on the Fed wanting to unload their 4.5 trillion dollar balance sheet and the impact on the markets.
Thanks.
Lyle p brundige April 5, 2017
I really enjoy your news letters. Very informative. I encourage all readers to become debt free. Own land free and clear, hold in a safe place an abundance of simple gold and silver coins, and stash cash! 20 dollar bills. Just in case. Debt free is key! Owe no one!! Thanks for all your insite. Lyle from north Illinois.
Stephen Safran April 5, 2017
Mike
I did Not appreciate the headline of this article because of the sensational title!
It reminds me of a come-on advertisement. I initially expected that you had stated the U.S. Debt was 150% of GDP! You then explained this was a prediction of what you expect it to be in 2047! Please don’t do this trick again.
Respectfully,
Steve
William L Pettingill April 5, 2017
I agree with Steve. Please don’t do this sensationalistic trick again.
Bill
Craig April 5, 2017
Let me also add my 2 cents and agree with Steve. You loose credibility with sensational headlines that are only projections.
Dr Rob Lee April 6, 2017
I was expecting to see 150% not 77%.
In 2047 it might be 400%.
Fed wanting to unload their 4.5 trillion dollar balance sheet should blow the projection out of the water.
Rob
KJ April 5, 2017
The day of reckoning ( worl wide) is around corner ..
A. Witter April 5, 2017
I’m fairly certain the day of reckoning will approach long before 2047 and our monetary system will implode before then, too.