What Is the Bomb Ticking Away?
“We’ve got a 6%-7% budget deficit. We’re fast-pouring consumption like crazy,” Jones told CNBC. Budget deficits are a negative balance between a government’s spending and revenues. When the government spends more than it collects in tax revenues, there is a deficiency.
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The Congressional Budget Office projected Wednesday that the deficit could grow to $2.6 trillion, or about 6% of the U.S. GDP, over the next 10 years.
The Economy Has Grown a Little Bit
The Commerce Department reported last month that the U.S. economy has grown by 3.1 percent in 2023. This is better than the expected performance from some doom-saying analysts.
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There were some concerns about the possibility of stagnant or even negative economic growth in the U.S. Several factors contributed to these concerns. Ongoing challenges like inflation and geopolitical tensions made many fear that 2023 would not grow at all.
U.S. Deficit Narrows Thanks to This
The U.S. deficit is smaller than expected due to spending cuts and a growing economy. A deal that President Biden and congressional Republicans struck last year has helped cut spending back to help save money.
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A surge of 5.2 million new workers entering the labor force has also helped with economic growth and the current deficit.
Debt Relief Sputters
However, the deficit declines are offset by an increase in the estimated budget costs from Biden’s clean-energy agenda, an aging U.S. population, and higher interest rates on the national debt.
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According to the New York Times, Phillip L. Swagel, the budget office’s director, believes that the decline in deficits is “on track to rack up more debt as a share of its total economic output in 2034 than at any other time in its history.”
How Much Is the National Debt?
At the same time, the U.S. deficit essentially doubled in 2023 to $1.7 trillion. The national debt has just surpassed $34 trillion, which Forbes says is the equivalent to 123% of the total economic output in the U.S.
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These numbers have others, like Federal Reserve Chairman Jerome Powell, call attention to the growing deficit issue in the U.S.
National Debt Is Growing Faster Than the Economy
Powell told CBS’s “60 Minutes” that the national debt was “growing faster than the economy.” There are several factors contributing to the U.S. debt that is growing, and the budget deficit is one of the most glaring.
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The government spends more money than it collects in revenue each year, creating a deficit. These deficits are financed by issuing debt, leading to an ever-increasing debt pile.
The Debt of the Country Is Increasing
Many analysts believe that the U.S. debt will only grow. According to the New York Times, the U.S. will add another $19 trillion to its national debt over the next decade.
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Over the next decade, the mounting costs of an aging population and higher interest expenses continue to weigh on the nation’s fiscal outlook, the nonpartisan Congressional Budget Office said on Wednesday.
U.S. Is Still Spending Money
Lawmakers are also in a debate right now about providing more aid to Ukraine and Israel during their ongoing conflict, and whether or not to expand the child tax credit and restore expired business tax breaks.
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The budget office projected that the annual deficit will grow to $2.6 trillion in 2034 from $1.6 trillion this year.
How Much Will the U.S. Spending Increase This Year?
This year, the U.S. will spend over $12 trillion just on interest payments for its debt. That’s more money than ever before in the history of the U.S. government.
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Think of the U.S. economy as a pie. This year, a huge slice of that pie (bigger than ever!) goes just to paying interest on debt. That means there’s less money left for other things like healthcare, education, or national defense.
The U.S. The Treasury Secretary Isn’t Worried… Yet
U.S. Treasury Secretary Janet Yellen said that she is not worried about the increasing national debt, according to Forbes. The U.S. economy should be alright if there is a check on the net payments made on the debt.
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Those payments are projected to rise from 2.5 percent to 2.9 percent over the next years, according to the Office of Management and Budget.
Jones’s Final Warning
Jones believes that the U.S. could become a strong economy if the government cooled down its spending habits.
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“The only question is … when does that manifest itself in markets?” he added. “It could be this year, it could be next year,” Jones said to CNBC. Productivity may mask and it might be three or four years from now. But clearly, clearly, we’re on an unsustainable path.”