USAFacts’ Post

We think that the unprecedented surge in the deficit this year is a key reason why a recession has yet to materialize. A surge in the deficit this large can sometimes artificially maintain growth in the very short-term. But, given higher interest rates on government debt, this kind of support can’t last. Read the latest Wesbury Weekly Commentary here > https://lnkd.in/eg-qr8ik Brian Wesbury #economicanalysis #cashflow #spending #useconomy

Nice article on our growing deficits and debt problem. Other than social security and medicare, the article does not provide much data on government spending. Unfortunately the electorate is not well educated on the spending and to some degree believes there is a bottomless pit of money. For example, a 50% effective tax rate on the top 1% wage earners and corporate profits will not balance the spending. There is no fair share of taxes that will balance the budget. If our political parties do not communicate these facts to the electorate, then we should stop all political contributions. What do you think?

Just like us, State Governments also run on their budgets. Sometimes, a state expenditure may shoot higher in these budgets than the revenue. This situation leads to a fiscal deficit. State Development Loans (SDL) are bonds issued by state governments to fund this fiscal deficit. Each state can borrow up to a set limit. SDLs serve as a way for state governments to finance infrastructure projects, healthcare, education, and other important programs that contribute to their states' development. Just like other central government bonds, the RBI manages SDL. RBI makes sure that the SDLs are serviced by monitoring the payment of interest and principal. However, this does not mean that RBI guarantees SDLs. Yes, SDL doesn’t carry a sovereign guarantee. And for that reason, these also provide 0.25% to 0.5% extra yields compared to long-dated government bonds. Check out our blog to learn more about SDL. Link in comments.

The NYT writes, after adjusting for the on-again, off-again effects of Joe Biden's student loan forgiveness junket, America's fiscal deficit jumped to $2 trillion in 2023 from about $1 trillion in 2022. Officials downplayed the increase, focusing instead on the strength of the economy and Biden’s proposals to reduce future deficits, largely by raising taxes on high earners and corporations. There's growing concern about the grim fiscal trajectory. The national debt topped $33 trillion this year, and fiscal watchdogs warn that within the next three decades, the cost of interest on the debt will be the nation’s largest expenditure. The Congressional Budget Office projects that by 2053, federal debt held by the public will be 177% of GDP. Net interest on the debt increased to a record $659 billion in 2023 from $475 billion last year. The The Peter G. Peterson Foundation, a fiscal watchdog, noted that the $10.6 trillion in projected net interest costs over the next decade would be more than twice as much as what the US has spent on interest over the last 20 years. “Our fiscal affairs are completely off track,” Kent Conrad, a senior fellow at the Bipartisan Policy Center, told lawmakers at a congressional hearing about the need for a new fiscal commission. “Rising deficits and debt are an economic and a national security concern.” To Sum It Up: Biden officials acknowledge the deficit grew significantly more last year than the admin had predicted. A CBO analysis suggests the unexpected growth was the result of rising borrowing costs and a decline in tax revenues. Our Take 1: Not a word from the Biden admin or the NYT about the effects of gov't spending hundreds of billions of taxpayers money attempting to replace our incumbent energy system with a more costly and less reliable one. How is it possible that politicians can't see how utterly impractical are plans to spend additional trillions on the goal going forward? Our Take 2: It's simply infuriating to see our elected officials blithely spend $2 trillion more than the Treasury brings in and then point to woefully lackluster GDP growth of 2.1% as proof it's all worth it. One can only conclude that our political leaders see us as imbeciles and rubes lacking both the common sense and agency to throw them out of office. 💵 👀 #economics #inflation

The horse is out of the barn! The fiscal deficits tied to the Inflation Creation Act, among other acts, as well as soaring interest rates, will create a non "transitory" level of deficits that will crowd out social expenditures. Get ready for a higher level of interest rates that will do serious damage to the economy. As they say "putting the genie back in the bottle" through wishful thinking and artificial intelligence is not going to happen. Get ready for higher for longer and serious damage at the back end. Commercial real estate, corporates, credit cards, car loans, mortgages? We'll find out when the new rates take hold. And they say that the Fed achieving a soft landing will be a success... What about the damage?

Do you think a Government's finances should be managed in the same way a household would manage their finances? Nicola Willis does. It means she is keen to run surpluses and not borrow. The trouble is the Government needs to invest in infrastructure rectify a big deficit and deal with very fast population growth. Families are happy to borrow to buy and/or build a house. Why doesn't the Government want to do that? S&P says it should and shouldn't be afraid of debt. https://lnkd.in/gy9mpssz

If you feel like your finances are in crisis-mode because of #studentloan payments, here's some encouragement! Just simply re-create your budget. If you take the 💰 you would have been spending on those payments from the categories you are currently using it in, you will be able to cover your payments. Remember, there will be some spending cuts, but focus on your goal to #paydebtoff, and achieve #financialpeace.

Sounds like Margaret Thatcher. Civil unrest and mass unemployment within two years of her coming to power. She was rescued by an outbreak of jingoism in the Falklands conflict. This “household budgeting” mentality explains Willis’s decision to can the investment in the vital inter-island ferry link with no alternative idea. Although as others have noted, households carry large debts from investing in their infrastructure - their house. Borrowing by governments to invest in infrastructure projects stimulates the economic growth that she and Luxon bang on about. On the other hand selling off vital infrastructure and public services simply hands money to the private sector (perhaps that’s a good thing in the eyes of the gang currently in charge) because government (i.e. taxpayers) remains the backstop in the event of abysmal performance by private operators - normally after the assets has been stripped and copious dividends paid. Look at the disasters in the UK for example in the water and railways sectors. Can someone please have a word with her?