The national debt has topped $20 trillion, and with President Donald Trump’s annual budget deficits to be near $1 trillion for the next few years, U.S. debt will likely surge to $25 trillion (perhaps higher) by the time he leaves the Oval Office.
As the Federal Reserve gradually raises interest rates, the federal government will pay hundreds of billions of dollars just to service the debt. Today, Washington forks over $500 billion per year in interest costs, and it could very well surpass $1 trillion in a couple of years.
When you factor in $120 trillion in unfunded liabilities and expenditures and a paucity of considerable spending cuts, the present fiscal mess will metastasize into a financial catastrophe.
And it seems some Fed officials are sounding the alarm.
According to Reuters, Dallas Federal Reserve Bank President Robert Kaplan echoed the recent warnings from Goldman Sachs, which suggested that the president’s spending initiative could inevitably lead to an “unsustainable” debt total. He thinks that the Republican tax bill could lead to significant economic growth and a reduction in the unemployment rate, but it wouldn’t be perpetual.
“This projected increase in government debt to GDP comes at a point in the economic cycle when it would be preferable to be moderating the rate of debt growth at the government level,” Kaplan said.
“While addressing this issue involves difficult political considerations and policy choices, the U.S. may need to more actively consider policy actions that would moderate the path of projected U.S. government debt growth.”
He is also in favor of gradually raising rates this year.
What is remarkable is that the U.S. central bank enabled Capitol Hill’s spending fix and debt binge. All of a sudden, the occupants inside the Eccles Building sound the alarm.
People don’t believe the economy can or will collapse. It reminds me of how few believe they will one day die and take that into account. Personally I have no such illusions as I was homeless while still in high school and was after high school off and on. I faced mortality many times as well and I am very happy to still be here. It is the “bad” times that shape us. Can be for the positive or negative, bitter or better. Guess that is why for the last 33 years I choose to help kids? We make choices to depend on the status quo but I know just because things are doesn’t mean they always were or will be tomorrow. We faced the full wrath of Harvey right here. Now tell me why it is silly to be prepared again? Thank God I live on the Texas coast where people still help each other. I still am waiting to hear back from FEMA (actually not as I care for myself). The government was not here for us as they are too busy looking out for themselves. Lesson learned.
When will the government politicians wise up and get rid of the FED and issue money it needs above tax revenues, interest free like our Constitution says.