Real Wealth

U.S. Debt Explodes to 150% of GDP!

by Mike Burnick | April 5, 2017

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.

The national debt is like a relentless cancer eating away at our economic system.

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