Randy Chambers’ Post

The U.S. isn’t fighting a war, a crisis or a recession. Yet the federal government is borrowing as if it were. This year’s budget deficit is on track to top $1.9 trillion, or more than 6% of economic output, a threshold reached only around World War II, the 2008 financial crisis and the Covid-19 pandemic. Publicly held federal debt—the sum of all deficits—just passed $28 trillion or almost 100% of GDP. If Congress does nothing, the total debt will climb by another $22 trillion through 2034. Interest costs alone are poised to exceed annual defense spending. But the country’s fiscal trajectory merits only sporadic mentions by the major-party presidential nominees, let alone a serious plan to address it. Instead, the candidates are tripping over each other to make expensive promises to voters. Economists and policymakers already worry that the growing debt pile could put upward pressure on interest rates, restraining economic growth. Vice President Kamala Harris, the Democratic nominee, and GOP rival Donald Trump aren’t the same on fiscal policy. She has outlined or endorsed enough fiscal measures—tax increases or spending cuts—to plausibly pay for much of her agenda. He has not.   Still, both were parts of administrations that helped produce those deficits. Both have promised to protect the biggest drivers of rising spending—Social Security and Medicare. And both want to extend trillions of dollars in tax cuts set to lapse at the end of 2025, amid bipartisan agreement that federal income taxes shouldn’t rise for at least 97% of households. In the past few months, Trump has unveiled a series of tax cut proposals, including exempting tips from taxation, eliminating income taxes on Social Security benefits, and lowering tax rates for U.S. manufacturers. These measures, combined with extending his first-term tax cuts, would amount to over $6 trillion in tax cuts, which critics argue would significantly increase the federal deficit without providing meaningful benefits to the middle class. Harris matched Trump’s tips idea and called for an expanded child tax credit, including $6,000 for parents of newborns.  How did the U.S. fiscal path simultaneously become economically more alarming yet politically less relevant? Federal debt and deficits have blown past various imagined red lines and feared consequences have not materialized. Interest rates, at least until 2022, stayed low. The dollar remains the world’s reserve currency, giving the U.S. far more running room than other major countries. “We’ve learned we borrowed more than we realized we could,” said Jason Furman, a Harvard economist who was a top aide to President Barack Obama. “And we’ve actually borrowed more than we expected.”

The growing federal debt hurts people directly, and it harms national interests. Good thing there's new legislation in Congress to fix it. The federal debt burden hurts our country and as individuals/families. Fortunately, members of Congress are increasingly taking these problems seriously and are proposing solutions as legislation. 1. Rep. Blake Moore & Rep. Marie Gluesenkamp Perez' Comprehensive Congressional Budget Act would fix Congress' core problem: it currently only covers ~27% of spending and 0% of revenue while including only one committee. Their bill: all spending, all revenue, all committees. 2. Sen. Joni Ernst and Rep. Buddy Carter's SUBMIT IT Act would get the process started on time by leveraging the President's desire to give a State of the Union address to get important documents when due in early February. 3. Sen. James Lankford, Sen. Maggie Hassan, Rep. Jodey Arrington, and Rep. Jimmy Panetta's Prevent Government Shutdowns Act would reverse the Carter Admin's creation of shutdowns & get Congress to complete its work on time (or close) through a more efficient, bottom-up process. 4. Sen. Mike Braun and Rep. Tom Emmer's Responsible Budget Targets Act set stable, predictable, revenue-based spending caps while phasing out deficits and keeping emergency spending from being a loophole. 5. A well-crafted constitutional amendment would strengthen statutory targets like RBTA. Sen. Braun and Rep. Nathanial Moran's Principles-based #BBA and Rep. Arrington's Business Cycle wisely permit or propose medium-term balance instead of volatile annual balance. What is dangerously broken can be fixed. These heroes in Congress have big pieces of the solution. Read more on Townhall.com Salem Media: https://lnkd.in/eyhCJi4N

“But the economy under Trump was great!” This is something I have heard again and again from voters in the past couple of weeks. And to be fair, they’re strictly correct. Growth was amazing, unemployment was rock bottom, and inflation was low. All of that was possible, however, because Trump greatly increased the national debt, by about $6.7 trillion. Whenever this fact is brought up, there is equivocation about how all recent presidents have raised the national debt. After all, Obama raised it by $7.6 trillion, and Biden by $4.7 trillion. Why is Trump so different? To answer this, I’ll use an illustrative analogy. Let’s say you have two friends, Joe and Donald. Both have come to you privately and spoken about their problems with debt. As a professional accountant, you take a look at their finances. Joe’s wife was diagnosed with late stage cancer last year, and he has been saddled with medical bills. She also had to quit her job, leading to even more financial hardship for them. As a result, he has gone into debt to make ends meet for his family. Donald, on the other hand, got a new credit card and went on a spending spree. He bought fancy jewelry for his wife, a new sports car, and he takes his family out to an overseas vacation every few months. Both Joe and Donald are in debt. But someone on the outside looking at both of them would see that Joe is pale, tired, and tightening his belt, whereas Donald is boasting about all the new things that he’s bought. They might conclude that Donald is better with his finances, because even though both of them are in debt, Donald is living a better life. But that ignores the key of Joe’s predicament, which is the health care emergency that ruined his finances through no fault of his own. And this is the same situation as with Trump, Biden, and Obama. Both Obama and Biden were dealing with the fallout of major financial downturns caused through no fault of their own and had to spend to make up for it, through ARRA and the ARP, respectively. Trump inherited a decent economy from Obama and still spent a ton on tax cuts, which made the economy even better. But he did so while driving the country further into the debt that he complains about constantly, without a pressing need to do so. The economy has recovered from the inflation induced by the COVID recovery, and Trump will likely do the same thing he did last time: cut taxes on the rich, sending us further into debt for no other reason than to enrich the 1%. But hey, at least “the economy will be good”, right?

The Congressional Budget Office's latest projections highlight America's concerning fiscal trajectory, dominated by escalating interest costs. By 2024, interest expenses are set to reach $892 billion, a 36% surge from the previous year. This uptrend, driven by mounting debt and rising interest rates, follows consecutive annual spikes of 35% and 38%. The current high interest burden is not a short-lived issue but a persisting trend fueled by growing debt and elevated borrowing costs. Learn more: https://lnkd.in/gGQ7wMv5

The latest CBO report shows skyrocketing federal spending, deficits, & debt under the Biden Admin, with no economic justification. 📈 Major contributors include Biden's student loan cancellations & the Inflation Reduction Act. Urgent policy changes are needed to prevent financial instability & restore confidence! 💵 Here's the latest piece from our own Larry Kudlow! 👇 https://lnkd.in/eAx7KpH8

With the new chancellor Rt Hon Rachel Reeves hinting strongly at her vision for growth in the approaching Budget, our Chairman and former permanent secretary at HM Treasury Lord Gus O’Donnell has offered his ideas to make this a reality. Writing in the Financial Times, Gus explains how it is possible to stimulate growth whilst also assuring investors that the UK’s public finances are on a stable footing, such as: 📈 recognising the assets that are created from investments 📈 a ten year capital planning term 📈 more #Treasury scrutiny of the link between public investments and growth 📈 greater use of private sector funding and the actions needed to attract it Read the full article on the FT’s website (paywall): https://okt.to/w8mXIE #Lab24 #LabourPartyConference #UKBudget #Economy #EconomicGrowth

https://lnkd.in/e9h4Dqpt I know some would say this is a post for MetaFace or some other social site (none of which I'm a part of), but I would think this would concern hard-working Americans everywhere. How is this in any way acceptable? Nobody would run their household finances this way, and any CEO who ran their business in this manner would be dismissed. Yet we continue to add to our national debt at a staggering pace. In the year 2000, our national debt sat at just over $5 trillion. Over the past 23 years, our elected leaders have overseen budgets (and deficits) that have increased our obligation by 700%. Note that our current interest payments on this debt now exceed what we spend on defense programs. Think about that for a minute.... And with looming challenges to Social Security, Medicare, and other entitlement programs, how does this end? It doesn't seem that anyone in Congress is concerned about this or has any plan whatsoever to curb spending and align expenses with income. Where is the accountability here?

With federal debt rising to unprecedented levels and programs like Medicare and Social Security facing insolvency, concern is mounting across the political spectrum. How did we get here and what can be done? Join us for a free one-day event in DC titled “Federal Debt: The Baseline and Options for Reform” co-organized by the Penn Wharton Budget Model, AEI, the Brookings Institution, and the Burch Center for Tax Policy and Public Finance. Experts from academia, government, and industry will discuss the federal government’s current fiscal track, its causes and consequences, and what can be done to put us back on a sustainable path. Event Details: • Date: Monday, May 13, 2004 • Time: 8:30am – 2:45pm ET • Location: AEI, Auditorium, 1789 Massachusetts Avenue NW, Washington, DC 20036 (Please note you can attend in person or online.) We hope you can join us on May 13 for this important event! Registration and additional event details can be found in the link below.  #FiscalPolicy #PolicyAnalyisis #EconomicOutlook #Wharton https://lnkd.in/es3qmaZE

It wasn’t that long ago that candidates vying for the White House tried to win voters over with their plans to reduce the budget deficit, or, better yet, leave the country with no deficit at all. But now, as the dangers of a widening deficit and mounting debt grow, former President Donald Trump and Vice President Kamala Harris are making little effort to address it. This was the subject of our lead story in last week's issue of The Rising Tide. Subscribe here: https://lnkd.in/gXXfjQuf Both Trump's and Harris's economic policy agendas, if enacted, would add to the ever-growing deficit, several nonpartisan groups project. That’s a major problem because Americans cannot afford to have a president who takes the issue lightly. It affects everything from your ability to buy a home to the government’s ability to deal with emergencies like Covid on the line. A budget deficit occurs when a country’s spending exceeds what it collects in revenue, primarily through taxes. The government makes up the difference by borrowing money through sales of securities like Treasury bonds and notes. The deficit is expected to widen under the status quo and could get even worse under proposals by both Harris and Trump, if enacted. Already, the US is knee-deep in debt. At $28 trillion, publicly held federal debt is worth almost as much as the entire US economy. Even Federal Reserve Chair Jerome Powell, who seldom weighs in on what elected officials should do, is concerned. “It’s probably time, or past time, to get back to an adult conversation among elected officials about getting the federal government back on a sustainable fiscal path,” Powell said in a “60 Minutes” interview earlier this year. During the Trump-Harris presidential debate earlier this month, the budget deficit was mentioned just twice, when Harris jabbed Trump for his proposals, which are expected to add considerably more to the deficit than hers. However, neither she nor Trump spoke about trying to reduce the deficit, and the moderators of the debate didn’t ask about it. No matter who wins the presidential election, there will be a “mandate to make things worse unless something changes,” said Maya MacGuineas, president of the nonpartisan Committee for a Responsible Federal Budget. The debt contributions both candidates’ plans carry would undermine “every part of their agendas about helping American families,” she said. Wider deficits tend to go hand-in-hand with owing more money to people who buy US debt, creating more risk for the people who loan us money and likely making them demand higher interest returns from the US government. In turn, since banks and other lenders often base interest rates on US bond yields, that could make it more expensive for everyday Americans to get a mortgage. Additionally, when the government spends more money to pay interest on its debts, there’s less money available to, for instance, invest in new infrastructure.

EXPECTING A FED RATE CUT? THINK AGAIN (and deeper)! https://lnkd.in/ePFbdCh8 As an investor, I welcome cuts in Fed Funds Rates. But as a realist and novice observer of economic theory, there maybe a bigger economic dilemma that most market prognisticators appear to be overlooking. Since 2020, US federal debt held by the public has exploded by $10.87 trillion, a 63.34% increase. The TOTAL federal debt (including intragovernmental holdings) currently exceeds $35.17 trillion. In contrast, US household debt was estimated at $17.06 trillion and business debt at $19.1 trillion ($36.16 trillion combined) as of Q2-2023 meaning total Federal debt now likely exceeds private sector debt for the first time in history. As government debt increases it competes with private borrowing. Banks and investors can get a high, guaranteed return on Treasury bonds. Banks are forced to pay higher rates on savings and CD’s to attract funds to lend, requiring them to charge higher rates on mortgage, consumer and business loans. Thus, more investors have cash on the sidelines resulting in artificially constrained stock markets, IRA’s, 401k’s, private and public pension funds harming future retirement savings and spending. High Federal Funds rates compete with and stymy consumer and business borrowing. Additionally, homeowners, consumer and business borrowers are forced to spend more of their cash to service mortgage and other debt (or not borrow at all) equating in fewer discretionary funds for other investment and spending. Overhwhelming Federal debt also puts the US credit rating at risk keeping Treasury yields and broader interest rates correspondingly high. As the Treasury issues more debt to fund rampaging government spending it may overwhelm the Fed's ability to control rates and could force Fed rates to remain high, or go even higher. Remember economics 101: higher demand for limited supply (i.e. monetary supply) increases the cost of funds. Conversely, the money supply (M2) decreased by $2.8 trillion (or 13%) since peaking in April 2022. This drop in money supply is the largest tracked since the Great Depression. (Murray Rothbard observed in the lead-up to the Depression, money supply fell by 12% from a peak of $73 billion in mid-1929 to $64 billion at the end of 1932.) The price of the fall in money supply and increased borrowing demand by government may reduce the likelihood of any significant reduction in the Fed Funds rates. While factors such as consumer spending, unemployment rates, and a stock market rally may be positive moves, the Fed likely has limited ability for even a moderate Fed Funds rate cut in the face of uncontrolled expansionary government fiscal policy. The Fed faces a tough challenge unless the US government (both Dems and GOP) can demonstrate even a small measure of fiscal control. The odds of that happening are much greater than that of my winning the PowerBall lottery.