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The Ever-Growing National Debt

December 07, 2023

According to a New York Times article, “U.S. Deficit, Pegged at $1.7 Trillion, Effectively Doubled in 2023,” the government is taking in less tax revenue but continuing to spend. Expenses continue to rise, especially with the increase of interest rates.

The government has to pay interest on all the treasuries it sells to finance the deficit. What can you expect when tax rates keep getting cut without correspondingly cutting expenses? Yet how can you cut what is a major portion of the budget – Social Security and Medicare when the U.S. demographic is aging and collecting the benefits? According to the Social Security Administration, almost 10,000 baby boomers a DAY become eligible for benefits.

Add to that fiscal spending during the pandemic, the Trump tax cuts in 2017 and you have a recipe for a red flag warning.

Where do we get revenue? Taxes. Here’s what has happened to personal tax rates over the years.  According to the Wolters Kluwer, a global provider of professional information, federal historical top tax rates were:

1981 70% 2001 39.1%
1982 50% 2002 38.6%
1987 38.5% 2003 35%
1990 33% 2013 39.6%
1992 31% 2022 37%
1993 39.6% 

Corporate taxes come into play as well but that is a subject for another time. According to the Brookings Institute, the U.S. Federal Deficit in 2023 has grown from 3.8% last year to 5.7% this year. When was the last time the national budget was balanced? 1998 – 2001.

Alternatively, Europe, according to the International Monetary Fund (IMF), is making headway reducing the government deficit. The Eurozone, as part of its rules require member countries’ debt to be no more than 3% of GDP. This was suspended due to the pandemic but is once again moving towards that number.

The IMF calculates eurozone governments deficits will fall this year to 3.4% of GDP reaching 2.4% in 2024.

We have our work cut out for us.

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