You read that right: U.S. debt will nearly double over the next 10 years.
In fact, according to the Congressional Budget Office and their latest Budget and Economic Outlook, debt held by the public will catapult from this year’s $14.17 trillion to $24.9 trillion in 2027.
That’s $24.9 trillion with a T!
They say growth in spending — particularly Social Security, Medicare and net interest — will outstrip revenue growth. And that’s just the tip of the iceberg.
The culprit: Reckless fiscal policies that are now coming home to roost.
But the fact is this is just the latest installment in the sovereign debt crisis that I’ve been warning about. And things are going to get worse before they get better. Consider …
- Rising interest rates that triple debt-service costs over the next 10 years — from this year’s estimate of $270 billion to $768 billion in 2027.
- Anemic economic growth, with GDP running at an average annual rate of 1.9% in years 2022 to 2027.
- An aging population and rising per capita healthcare costs.
- Reduced lawmaker flexibility to use tax and spending policies to respond to unexpected challenges.
- Increased probability of a U.S. fiscal crisis, including greater risk that investors will become unwilling to finance the government’s borrowing.
But there’s more: Debt held by the public as a share of GDP is through the roof …
As you can see from this chart, debt held by the public goes from 77% of GDP in late-2017 to 89% by 2027 — levels not seen since 1947.
But here’s where it goes really off the rails: The study projects 10-year interest rates will top out at 3.6% in the later part of the projection period. That’s a 50% increase from current levels.
And I even think that’s conservative: The 10-year could easily reach 4%, 5%, even 6% as this crisis unfolds.
Is that a big deal? You bet! The CBO says a 1% increase in interest rates would add an extra $1.6 trillion in cumulative deficit AND raise U.S. Treasury borrowing by $264 billion.
And don’t forget: These projections don’t account for any fear premium associated with a debt-rating downgrade, a sudden spike in interest rates or a waning foreign appetite for U.S. debt. Plus, they don’t even touch President Trump’s campaign promises of…
- $1 trillion in infrastructure spending over 10 years.
- Increased military spending.
- Funding the Mexico/U.S. border wall.
- Tax cuts for individuals and corporations.
- No change in entitlement spending.
What does this mean for you?
Simple: When the government fails to meet its obligations, it’s going to come after you — the taxpayer — for more money.
And it’ll do the same for businesses and companies of every stripe — you can mark my words.
This kind of reckless behavior will ruin governments … disrupt entire markets … and wipe out central banks and treasuries in the process.
Plus, it will devastate government pensions and government benefit programs of all kinds.
And it will push leaders toward more desperate measures, including confiscations and outright seizures.
So, hold on to your hats! And make sure you have sound investment advice, like my members enjoy.