Pop goes deficit: all warning signs are there

The question that extends with millions of dollars that no one has a good answer is whether excessive spending in the United States will create unlimited and destroyed levels of debt. Looking at the extent of the current and expected data on these budget problems, the numbers can be confusing.

For the 2025 fiscal year, the Federal Budget is estimated at 7 trillion dollars in gunfire and $ 5.1 trillion of revenue with a deficit of $ 1.9 trillion. The current national debt is about 37 trillion dollars with GDP at the end of the year, estimated at $ 30.5 trillion. About 30 trillion dollars from this 37 trillion dollars is publicly built.

On the current track, US debt should grow by $ 22 trillion over the next decade. By 2035, budget expenses are estimated at about $ 10.7 trillion, with $ 8 trillion of revenue with a deficit of $ 2.7 trillion.

The total national debt will be about 59 trillion dollars with $ 52 trillion of those that were publicly held. In 2035, benefits payments will double to $ 1.9 trillion and 17-20 percent of expenses, with an increase of 950 billion dollars in interest payments, which amount to 14 percent of expenses.

Of course, the old proverb can be about “cursed lies, lies and statistics.” The Trump administration is betting on the country that the law of its beautiful big bill will make America rich again.

The mix of tax cuts and definitions that bring trillions supposed to charge the economy in a long -term effort to overcome the national debt.

But those assumptions, if history is relevant, does not work. Despite the common myth, the flowing economy and tax cuts did not generate the necessary growth to reduce the deficit.

Customs duties are consumer taxes and they will surely increase inflation. This year, definitions are estimated to bring $ 300 billion, less than 5 percent of the $ 7 trillion budget and less than one percent of the debt of $ 37 trillion.

One solution to this dilemma is to reduce spending. The Ministry of Governmental efficiency aims to obtain discounts of $ 2 trillion. So far, in the cancellation bill, Congress has approved $ 9 billion of discounts – by only 0.45 percent of what he promised. Where can the main cuts to close the deficit gaps?

The current budget allocates $ 4.43 trillion or 63 percent for mandatory programs – to a large extent social security and health care. Ediscus spending, by 25 percent of spending, is divided between $ 1 trillion for defense and $ 711 for defense. Use of debts representing 952 billion dollars, or 14 percent of spending.

Assuming that mandatory programs cannot be violated beyond the medical aid discounts in the budget bill, the closure of the deficit means reducing all defensive spending and benefits payments, or a set of all interest payments, all unclear spending and $ 200 billion in defense.

This is not possible.

Returning to the issue of the threshold of Matthew, debt and deficit are no longer sustainable, the Congress Budget Office estimates that by 2035, the percentage of debt to GDP will be about 118 percent.

The Governmental Accountability Office estimates that this percentage can reach 200 percent after a decade without significant financial changes.

Both believe that the debt ratio to the gross domestic product of 120 percent or the highest may be a collapse point, which threatens non -sustainable. But there is no strong evidence to prove or refute these speculation.

In all possibilities, the issue of sustainability will be determined by the markets. Historically, countries whose currency is borrowing like the United States is often more effective to control debt more effectively than those that have been exposed to greater foreign exposure. But if investors lose confidence in US Treasury bonds, borrowing costs will increase with increased interest to urge lenders.

There are at least four other negative consequences that can lead to lack of sustainability:

• Increase debt can close private investment and reduce economic growth.
• Payments of the highest benefits can be consumed more shares of the federal budget that give other necessary spending and impose consideration of compulsory programs that will be political dangerous.
• High inflation and assets can reduce the Federal Reserve’s ability to carry out its two function in controlling inflation and ensuring minimal unemployment.
• Finally, credit classifications may suffer from significant cuts, which requires an increase in bond returns, which increases borrowing costs.

This is a very disturbing picture. If Trump’s budget and economic plan work, everything should be fine. But in the view of many, this is a bad bet.

The PC is the budget budget. This happened only once in 30 years, not since the beginning of the century. And increased productivity to bypass debts is also a cure – something that has not yet happened.

Meanwhile, all ideas are welcome, and certainly before 2035.

Harlan Olman, PhD, is a distinguished column writer in UPI, a great advisor to the Atlantic Council in Washington, DC, the head of two private companies and a major author of the doctrine of shock and dread. He and David Richards are authors of a book coming on preventing the strategic catastrophe.