71 Trillion In Debt By 2060

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Happy Halloween!

Now I am not trying to scare you by that headline of 71 trillion in federal debt by 2060, but I am trying to give everyone a reality check of what is to come in America.

I have spent the last few years trying to convey a story that federal debt has been used as a scarecrow to install fear into people walking into the deficit cornfield. Or another way to look at it is that a deficit is some kind of dark force that the government should avoid at all costs.

When the recent tax cut was passed, the token Republican line has always been that the tax cut will pay for itself and be deficit-neutral.

Ha Ha Ha Ha Ha Ha Ha! (Joker Laugh)

Seriously, these guys have been hilarious with this gimmick for decades. Let me tell you, as long as they can get away with that more power to them. Deficits without creating higher inflation or rates is a goldilocks movie. Trying to accomplish a balanced budget with our demographics and low tax rates is genuinely a scary Halloween flick.

On a Facebook live, I did talk after the tax cut was passed I discussed how we should see a one trillion dollar deficit by 2019 but not to worry about the deficit-increasing regarding higher rates and inflation.

I am not going to try to convince you that deficits and debt are an excellent or terrible idea. What I just want to say is the same thing I have been saying for years. The notion that debt isn’t going to massively increase over the years 2024-2057 is a flat out lie that any politician is making. It is time for some honesty from both parties to accept the fact that we are going to give birth to the debt baby soon.

I just want to leave you with these 3 points.

1. The Debt Baby isn’t even born yet.

She is coming in the year 2024. We are all part of this birth, and the debt party will start and party hard during the years 2024-2057. 1-2 trillion deficits will be the norm during this time frame. Any recession we have during those years will just add more debt as mandatory payouts are only a bigger and more significant portion of our budget.

It is what it is. We have 23 trillion in debt now, most likely, it will be 28 trillion-plus by the end of 2024. Just add 1-2 trillion dollars of debt per year from 2024 to 2060, and you can see my estimate of 71 trillion in debt by 2060 is probably too conservative of a view.

From Doug Short:
https://www.advisorperspectives.com/dshort

Demographics 65 October

2. Does Debt matter if rates are low and inflation is low?

Yes, it does matter that inflation is low, and rates are low. As long as the inflation rate growth is low and interest rates to the borrower are low, nobody is going to do anything meaningful about federal debt expansion. No one is going to cut entitlements, decrease military spending, and no one is going to raise taxes for revenue needed to change the debt curve. Raising taxes on the rich to pay for social ideas is different than raising tax rates to provide revenue to attack the rising debt. It is what it is, folks. I don’t care anymore, do you!

(This chart is before the most recent tax cuts so as you can see tax rates have been falling since the 1960s)
TAX REALITY

From Doug Short:
https://www.advisorperspectives.com/dshort/updates/2019/10/10/consumer-price-index-september-headline-at-1-71

October CPI Long

3. Get ready for big-spending ideas to be talked about a lot!

My 71 trillion by 2060 estimates doesn’t take into account Medicare for all, student loan debt cancelation, more benefits given for social security, affordable housing, universal basic income, job guarantee, climate change policies, more aid to states due to climate change damage and more military spending. I’ll be honest. I don’t take any politician too seriously with their talk until they elect, and they have control of the Senate. So, I personally don’t see all of these big ideas coming true anytime soon. In time one or two can maybe get worked out in some form, but in general, politicians always over promise and underdeliver.

However, as a society, we are getting older, which means more government spending naturally has to occur. Also, the Boomers + Gen X vs. the Millenials & Gen Z are a thing. The young and old want more stuff done for their benefits. So, look for a lot of discussion on big government spending to be the norm over the next few decades as well. As long as interest rates stay low and inflation stays low, nobody will stop talking about new big government spending plans.

One final note:

A lot of the fear around federal debt was based on the idea of currency induced inflation. If we print so much, $,  inflation will take off as the dollar will be worthless. Some of these same people are now complaining that the Fed was too tight with their recent rate hikes. That inflation is too low and that the dollar is too strong. Some of them wanted to be part of the federal reserve so they can cut rates. Oh, the Irony of 2019.

If there is anything you can get from my work over the years, one thing is for sure. Don’t listen to the extreme right or left. They have been wrong about America since birth, and they will be wrong about America when they all pass on to the afterlife. Some people just always want to ice-skate uphill.

Enjoy Halloween and don’t forget that the GM strike will impact the jobs data tomorrow. Job growth is still beating by estimates for the year, and the longest economic expansion is always moving on.  Most important!

All American Bears Have Failed Since 1790!

The Graveyard is long, and they’re still talking trash about America in the afterlife. 

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Logan Mohtashami is a financial writer and blogger covering the U.S. economy with a specialization in the housing market. Logan Mohtashami is a senior loan officer at AMC Lending Group,  which has been providing mortgage services for California residents since 1987. Logan also tracks all economic data  daily on his own facebook page https://www.facebook.com/Logan.Mohtashami