The National Deficit — Does Anyone Care?

The National Deficit: Does Anyone Care Any Longer?

 

Way back in the early days of 2019, a zillion years ago in these hectic “Breaking News on the Hour” Trump Administration years, I wrote a blog entitled “Does Anyone Care About the National Debt?”

 

https://authorjkgeorge.com/does-anyone-care-about-the-national-debt/

 

In my un-humble and probably biased opinion, that was a good commentary, but based on the thunderous vacuum of much of my blog feedback, it landed in the “Land of Nod,” so to speak.

 

Reviewing those blog comments, along with recent articles in The Wall Street Journal along with AP articles in the Austin newspaper, the situation has gotten much more dire. A Journal story of August 22 includes a graph projecting the National Debt will grow by at least $1 Trillion a year over the next decade. In the year 2029 alone, the deficit will reach a staggering annual increase of $1.4 Trillion at the current pace, with current tax rates and spending. These additional annual deficits will have added another $12 Trillion to the existing $21 Trillion, which is up from $13 Trillion in 2010. Thirty-three Trillion dollars! Is your head spinning?

 

The last time the US had a budget surplus was the four years of the Clinton presidency, from 1998 through 2001. It’s not rocket science to explain the numbers. After the worldwide real-estate bubble meltdown and credit freeze in the final year of the George W. Bush administration in 2008, the economy was so fragile that the US Fed injected huge amounts of credit to shore up the banking systems -- not only this country, but of major international economies as well. These decisions were bipartisan. During the ensuing recovery, the US ran a significant deficit during the eight year Obama administration. This would have happened no matter which administration would have been in office, but it has been pointed out by biased right-wing comments as some sort of Democratic malfeasance. It is correct that the Obama administration coincided with a significant increase in fiscal deficits. That much is true. But after the credit freeze in 2008, massive injections of stimulus spending were required. Following the severe recession, the economy was extremely weak; tax revenues were the lowest in years.

 

Figure 1: US Debt by Presidential Term

(Please disregard the text at the bottom of Figure 1.)

 

The economy then grew each year, and has continued to grow now for ten straight years. Instead of gradually tightening spending, the Trump administration promised, and then delivered on a significant tax cut, consisting nearly entirely for wealthy US citizens and US corporations. As expected, this stimulated the economy – at least in the short term. Along with reduced revenues, spending for the military and also social benefits such as Social Security and Medicare has increased. The combination of these main four factors has resulted in the sharpest increase in national deficits in the nation’s history. This has come during a strong economy, the first time ever.

 

Figure 2: Projected US Budget Deficits for the Trump Administration

This situation is a recipe for disaster at some point in time. At present, a strong US dollar buys plenty of imported goods cost effectively. This keeps the cost of living low, but hurts our export sector and thus manufacturing jobs. If and when interest rates tip back up to normal historic levels, and if and when the economy goes into a dip, the situation will be dangerous. These will happen; economies do not grow forever. Rome was not built in a day, but it did not last forever.

 

Comments are welcome and will be published, pro and con without the writer's identity. Make your comments below, or send to me via email at n3bb@mindspring.com

 

Enjoy life; it's the only one we will get.

 

Jim George

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3 Responses

  1. JK James George
    From "Bert," Just to let you know, Jim, I've read your blog. The situation leaves me dumbfounded! I see no relief in site because I've lost faith in this self-serving government. A change will happen, for better or worse. Thanks for "putting it out there".
  2. JK James George
    From JS. Good article. It seems that no one does care. I'd always thought the conservative way to handle money was to pay off your debts when times are good. Honestly, I think Trump gave a tax cut primarily to make himself look good by boosting an already healthy economy. Now, we have a higher deficit, and the economy looks like it's headed for a recession anyway. By the way, the deficit was reduced to a much lower percentage of the economy, 2.4% as I recall, during the Obama administration. It looks like those tax-and-spend liberals do a better job of managing the deficit than the supposedly fiscally responsible Republicans do. They love their tax cuts, but then don't follow through with the necessary cuts in government spending.
  3. JK James George
    From BH. As I started reading your newest blog today, I remembered you had written about it before. Yes, I for one, am still concerned! Your explanation was impressive and I liked the graphs. However isn't a lot of the spending due to the politicians wanting money and favors for their states? I used to joke that one reason we need a woman president is because usually the woman in the family is the one who can keep them on a budget. Perhaps the reason no one is listening to you is that most people are running their person finances in a deficit as well. It's amazing to me how people don't know the difference between a necessity and a luxury these days. I feel we are all a bit spoiled and addicted to a certain life style that may disappear one day soon. Meanwhile, keep reminding us with your words of wisdom.

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