Deficit Debacle. Click to keep reading…

27 Dec Deficit Debacle. Click to keep reading…

It’s expected that the budget deficit will expand to $1 trillion in 2019, almost 5% of GDP. While the deficit topped out at $1.4 trillion in 2009, that occurred during a recession, versus today’s long-running expansion. There are many factors that are contributing to the deficit, including tax cuts, payouts to retiring baby boomers, and interest payments on the current debt. The 2018 cost of that debt grew by 20% to $371 billion. Worse yet, it’s projected that by 2028, publicly held debt will reach 96% of economic output, the highest rate since the 1940’s. In the meantime, it’s likely that cuts to Medicare will begin in 2026, and cuts to Social Security by 2034.

Any downturn in the economy will add to the deficit, and force the government to spend more to shore up the economy. The deficit pain will really kick in sometime in the late 2020’s and early 2030’s, when the cost of entitlement programs outstrips tax revenues.

Controlling the deficit is not a priority in Washington. Neither party is pushing for tax hikes or the spending cuts necessary to rein in the deficit.–Kiplinger Letter, Vol. 95, No. 49.