WRITE OF CENTER
In 2024 the top New Year’s resolution was reportedly saving money and getting your financial situation in order. But the inflation crisis has taken its toll on families with consumer debt at its highest-ever recorded level.
One way of getting finances in order is creating and living within a budget. It’s a noble goal to not spend more than you have. I wish this was the top resolution for our own government.
Because we don’t have a fixed budget, federal government shutdown loomed but was averted in November by the passage of another continuing resolution (CR). That five-month CR provides current-level funding for certain agencies through January 19 such as Agriculture, FDA, Transportation, and HUD; and other departments such as Defense and Homeland Security, through February 2.
The current budget deficit is approximately $34 trillion. That represents around $100,000 for every U.S. citizen, or $260,000 for every taxpayer. President Biden likes to claim that he is the only president to reduce the budget deficit. He claims it has been reduced by $1.7 trillion since he took office.
Like most claims this president makes, it serves you well to actually look into it for yourself.
When Biden took office in 2021 the deficit was $27.8 trillion. The current $34 trillion deficit is not lower as he claims, but $6.2 trillion higher.
If you add in another $2 trillion in 2024 as he proposes, Biden would have delivered nearly $8 trillion in deficit in his four years of a befuddled term in office.
The federal government had gross revenues in 2023 of around $4.5 trillion. We spent close to $700 billion on interest. The Congressional Budget Office (CBO) forecasts spending at current levels will result in approximately $50 trillion of deficit in 10 years, and interest payments of $1.5 trillion per year.
In 2022, 8% of revenue went to interest on the national debt. According to CBO, today we are clearly headed very close to spending 25 percent of our revenues on interest.
In 2022, mandatory spending, such as Social Security, Medicare, and Medicaid, made up twothirds of our budget. These costs are automatic and not approved by Congress. Approximately 25 percent went to non-discretionary spending, on such items as national defense.
With interest headed to 25% of our spending, the only way to keep up with current levels is to keep printing money and go further into debt. With the Biden administration and Democrats unwilling to cut a dollar from discretionary spending, it appears that is where we are headed.
As a bond trader for most of my career, trading the debt of hundreds of corporations and many governments, I experienced many corporate defaults and several sovereign debt crises.
As debt matures, institutions like the U.S. government need to refinance that maturing debt. Investors such as pension funds and other countries are the source of refinance.
When the market starts to figure out that a company or a country will no longer be able to service its debt, a few things can happen.
1) The market requires a higher rate of interest to invest in the debt. We are seeing that now with our country’s debt.
2) The much more painful result happens when investors say “no mas” which triggers a debt restructuring, or a default.
The results of a default have enormous, long-lasting consequences for the citizens of a country. Severe economic slowdowns with drastic rise in interest rates and a devaluation of the currency are often the penalties.
Our current government leaders clearly either do not understand this, or they do and just don’t care. It is up to us to change this trajectory the Democrats have taken us.
I implore you to call your U.S. congressman and senators and ask them what they are doing about it. There are a number of Republicans who “get it” and are really trying to draw a line in the sand.
However, the Democrats will do everything in their power to keep us headed on this disastrous path. It is imperative we vote them out of power. That should be our no. 1 New Years resolution.
Check our website (www. kcrptx.com/) to learn more.
Michael Wheeler is Chairman of the Kendall County Republican Party.
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