WATCH your wealth....NO one else is.

www.barrons.com/articles/national-debt-f...?mod=hp_COMMENTARY_2


Unfortunately, more recent political leadership has concluded that deficits do not matter. Both Republicans and Democrats have settled on deficits as the easiest way to pay for politically popular initiatives, be they lower taxes (Republicans) or higher spending (Democrats). Elected officials are wary of braving the political pain of deficit reduction, knowing their successors could easily squander those hard-fought battles with more deficit-financed spending and tax cuts.

Case in point is the current election. Both presidential candidates are proposing tax and spending giveaways to curry favor with voters. The nonpartisan Committee for a Responsible Federal Budget projects

that Vice President Kamala Harris’ proposals will increase the debt by $3.95 trillion over the next 10 years, which pales in comparison to Donald Trump’s plans, which will increase it by $7.75 trillion. Neither candidate is talking seriously about our unsustainable fiscal position, much less the related issue of projected funding shortfalls in two of our most important safety net programs, Social Security and Medicare. Based on current projections, the Social Security trust fund will run out by 2035, while Medicare’s Hospital Insurance fund will be depleted by 2036. Absent reforms to shore up these programs—and avoid automatic cuts—funding gaps will have to be filled with hundreds of billions in new deficit financing each year.

The dollar’s privileged status as the world’s reserve currency enables our fiscal indulgences. As the late Sen. Alan Simpson (R., Wyo.) once famously said, investors keep buying our debt because we are “the best-looking horse in the glue factory.” But as we continue to climb in the rankings of the world’s most indebted nations—we rank 4th among the other advanced economies in the Organization for Cooperation and Development—that perception could easily change.

There are hints that our privileged status is already eroding. Foreign ownership of U.S. Treasuries has fallen from 34% in 2012 to 28% in 2024. The dollar’s share of global reserves has fallen from more than 70% in 2000 to 58% today.

Make no mistake, if we continue on this path, investors will eventually lose confidence in our debt. The change could be gradual or sudden, but the consequences will be painful, no matter the pace. The federal government’s interest costs, already at $892 billion for 2024, will increase dramatically, as investors demand a higher risk premium. That will force painful tax hikes or spending cuts. Private sector borrowing costs tied to Treasury rates will also spike, damaging economic growth. Banks, managed funds, insurance companies, pensions, and other investors will be exposed to trillions of dollars in market losses as the Treasuries they hold lose value, precipitating widespread distress in our financial system.

The Chartered Financial Analysts Institute recently surveyed

over 4,000 of its members about the state of U.S. finances. These are investment analysts who have received the CFA Institute’s gold standard certification of competence and integrity in investment analysis. A supermajority (77%) believed the U.S.’ finances were on an unsustainable trajectory. A significant majority (61%) believed that the U.S. lacks the political will to reduce its debt-to-GDP ratio, while 63% believed we will begin to lose our reserve currency status within the next 5-15 years.

Our political leadership needs to listen to these seasoned professionals and others warning of danger ahead. Those include major credit rating firms who have downgraded our debt or lowered its outlook. The time to act is now, when the economy is strong. At some point, there will be another economic downturn. It may well provide the inflection point for lost investor confidence. How much higher will our debt need to go to provide relief during the next recession? Will investors still buy our debt when our economy is struggling? And at what rate?

In the past, deficits have provided the means to respond to crisis. In the future, they may well be the cause of it.

Guest commentaries like this one are written by authors outside the Barron’s newsroom. They reflect the perspective and opinions of the authors. Submit commentary proposals and other feedback to This email address is being protected from spambots. You need JavaScript enabled to view it.

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And the difference between the Harris addition and the Trump one, the difference that makes the Trump addition "pale in comparison", is that the "lost" revenue from a tax cut is added to that figure, even though such cuts generally result in a healthier economy, which provides more tax revenue than a struggling economy would. The projections presume that the economy, and therefore revenue subject to taxation, would be the same with or without the tax cuts, a presumption which negates their projections entirely.

I was talking with my broker the other day and with the Fed lowering rates, he thought I should put my cash in equities. I told him I was in no hurry. Both administrations will spend like crazy so interest rates will continue to remain high, along with inflation. He reflected on what I said and finally admitted I was right.

FRED.....good call,gotta wait and watch. JMO (perhaps u need another finance advisor?)

Lets start by cutting the 85 billion we waste of the Department of Education. Fire everyone and level the building. That would just be a good start.

Rick wrote: Lets start by cutting the 85 billion we waste of the Department of Education. Fire everyone and level the building. That would just be a good start.

Give that money to the states to spend on students instead of paper pushers.

Turning a federal spending item into block grants to the States doesn't result in a reduction to federal spending. If the department, and all of its grants, are eliminated, a cost savings of $85 billion/year, that would only leave another $915 billion/year that needed to be cut to return to a balanced budget.

Having a balanced budget isn't going to do a thing to reduce the capital amount due on the debt, so that would still leave us paying more for interest on that debt than we do for defense of the Union, or Medicare, and soon it would be a larger item on the annual budget than even Social Security.

Look, getting rid of the entitlement programs and other federal intrusions into State affairs is going to be painful, I get that, but it has to be done. The vast majority of the current federal debt isn't debt that the government owes to itself (Social Security "Trust Fund"), it's public debt, debt that is owed to entities outside of the federal government. We have to start paying that principle amount down, and the only way to do that is to eliminate the "mandatory spending" items created by Congress, not the ones enumerated in the Constitution, which currently account for roughly 60% of the annual federal budget.

A DoD is required under the Constitution, federally guaranteed student loans are not, housing assistance is not, even Social Security and Medicare are not programs required by the federal Constitution. All of the "mandatory spending" items in the federal budget represent federal intrusion into State sovereignty, which should be returned to the States.

It's either that or we start selling off federal lands managed by BLM and the national parks to raise the cash needed to pay off the loans . . .

Sadly neither nominee is a fiscal conservative. I hope if Vance eventually takes over or assumes power in Trump's administration he becomes one.

He is our only hope.

FredHayek wrote: Sadly neither nominee is a fiscal conservative. I hope if Vance eventually takes over or assumes power in Trump's administration he becomes one.

He is our only hope.

You keep talking like Trump didn’t learn anything from his 4 years as president. He spent a lot of money because that’s what BOTH sides wanted during Covid. I know you don’t like him, but you really have no idea what he learned and what he will do now, given his experience with the corrupt system.

Hopefully President Trump gets a chance to improve my opinion of him, but I think even if he wins the courts will continue to fight him every step of the way with LawFare. And Democrat politicians will do whatever they can to deny his agenda.
And if he does actually achieve anything, the Leftist media will refuse to cover it. Instead blaming him for anything that isn't perfect.