Tag Archives: Government debt

Tax Cuts will Balloon US Debt to 120% of GDP, but Boost to Economy will be “Short-Lived”, by Wolf Richter

Posted on November 8, 2017 | Leave a comment

The US debt to GDP ratio is now 105%, and regardless of what happens to Trump’s budget, that percentage will continue to rise. If Trump’s budget was to pass unscathed, it would rise even faster. From Wolf Richter at wolfstreet.com:

US is the “most indebted AAA-country” and runs “the loosest fiscal stance,” but the dollar as Reserve Currency still props it up: Fitch

It’s uncertain what if anything in the mix of tax cuts and tax increases being kicked around in Congress will become law. But Fitch Ratings believes that some combination will make it, and that it will sap US government revenues. “Under a realistic scenario of tax cuts and macro conditions,” the US deficit would rise to 4% of GDP next year, and balloon the US debt to 120% of GDP by 2027.

And that might be the best-case scenario.

That debt-to-GDP ratio just shot up to 105% – based on annualized Q3 GDP of $19.5 trillion and the US gross national debt of $20.5 trillion that had spiked by $640 billion in eight Weeks, following the suspension of the debt ceiling in September. The debt-to-GDP ratio was 103% earlier this year.

Fitch said in the report that it expects some version of the package to pass the US Congress, and that it “will be revenue negative, even under generous assumptions about its growth impact.”

The tax package, which includes cutting the corporate tax rate from 35% to 20%, “would deliver a modest and temporary spur to growth,” Fitch said. Even with these tax cuts, Fitch expects US economic growth to peak at 2.5% next year and then fall back to 2.2% in 2019 – the same kind of economic growth the US has seen since the Financial Crisis. So any boost to output from the tax cuts would be “short-lived.”

These tax cuts would “not pay for themselves or lead to a permanently higher growth rate,” Fitch said, adding:

The cost of capital is already low and corporate profits are elevated. In addition, the effective tax rate paid by large corporations is well below the existing statutory rate.

Throwing in these tax cuts to add to demand “at this point in the economic cycle” could boost inflationary pressures and “lead to additional monetary policy tightening.”

To continue reading: Tax Cuts will Balloon US Debt to 120% of GDP, but Boost to Economy will be “Short-Lived”

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Total Government And Personal Debt In The U.S. Has Hit 41 Trillion Dollars ($329,961.34 Per Household), by Michael Snyder

Posted on July 28, 2017 | 1 comment

Got a spare $329,000? Probably not, but that’s each person’s share of US government and personal debt. From Michael Snyder at theeconomicollapseblog.com:

We are living in the greatest debt bubble in the history of the world.  In 1980, total government and personal debt in the United States was just over the 3 trillion dollar mark, but today it has surpassed 41 trillion dollars.  That means that it has increased by almost 14 times since Ronald Reagan was first elected president.  I am searching for words to describe how completely and utterly insane this is, but I am coming up empty.  We are slowly but surely committing national suicide, and yet most Americans don’t even understand what is happening.

According to 720 Global, total government debt plus total personal debt in the United States was just over 3 trillion dollars in 1980.  That broke down to $38,552 per household, and that figure represented 79 percent of median household income at the time.

Today, total government debt plus total personal debt in the United States has blown past the 41 trillion dollar mark.  When you break that down, it comes to $329,961.34 per household, and that figure represents 584 percent of median household income.

If anyone can make a good argument that we are not in very serious debt trouble, I would love to hear it.

And remember, the figures above don’t even include corporate debt.  They only include government debt on the federal, state and local levels, and all forms of personal debt.

So do you have $329,961.34 ready to pay your share of the debt that we have accumulated?

Nobody that I know could write that kind of a check.  The truth is that as a nation we are flat broke.  The only way that the game can keep going is for all of us to borrow increasingly larger sums of money, but of course that is not sustainable by any definition.

Eventually we are going to slam into a wall and the game will be over.

One of my pet peeves is the national debt.  Our politicians spend money in some of the most ridiculous ways imaginable, and yet no matter how much we complain about it nothing ever seems to change.

To continue reading: Total Government And Personal Debt In The U.S. Has Hit 41 Trillion Dollars ($329,961.34 Per Household)

 

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