We need to keep our financial homes organized and not make things worse.
In this new world, I expanded my podcast listening to try to get to know another team. The high point on my list is “all” – starting out as four high-tech venture capital hosts, so smart and very rich. Currently, they are three, as one of their group David Sacks has become the “White House AI & Crypto Czar”. Their perspective seems to be less regulation, and support for AI and other technological advancements will lead to a larger economic faction and provide more for the middle class. They don't seem to be ideology, and when Trump does mean something, they don't like it.
Interestingly, the group “discovered” a major issue with the federal budget in the United States, which seemed to support Musk and his several slaves’ efforts to cut spending to avoid a collapse. To me, it is surprising: 1) the fiscal situation should be “news” for this otherwise well-known group; 2) the organization does not seem to understand how the government spends money; 3) they never question the wisdom of big tax cuts, which will further increase deficits and debt.
Our current financial situation has not emerged overnight. Since the government's operating surplus in 2001, we have shifted steadily from wealth to rags and were originally scheduled to repay the government's debt in 2009. The bipartisan committee of the responsible federal budget conducted a wonderful analysis of policy changes that contributed to the country’s fiscal deterioration (see Figure 1). Indeed, this deterioration has been a bipartisan effort to cut taxes and increase spending, which prevents us from paying off federal debt, and the deficit equals about 100% of GDP. Of course, debt becomes more burdensome when interest rates rise, but there is really no news here.
As far as the federal government spends money, personnel costs only account for a small part of the total. Basically, the federal government is described as an insurance company with a permanent army. We use money to retirement and health benefits for the elderly and those with disabilities (Social Security and Medicare), and programs that provide health care (Medicaid) and income support to those in need (see Figure 2). The other two main components are defense spending and debt interest. The cost of staff is about 4% of the total expenditure. Random dismissal of government employees will not solve any problem, it will only cause interference with the public service.
Finally, who can pretend that anyone who cares about the U.S. fiscal situation wants to carry out massive tax cuts? According to the Congressional Budget Office (CBO), the government currently plans to make up 6.2% of GDP in 2025. If no corrective action is taken, a deficit of approximately this size will be predicted approximately throughout the entire CBO forecast period. Debt inflation due to these ongoing deficits. Federal debt in the public's possession rose from 100% of GDP this year to 118% of GDP in 2035, which is greater than any moment in our country's history (see Figure 3). Importantly, these forecasts assume that most of the tax cuts under the Tax Cuts and Employment Act of 2017 have expired at the end of 2025. If these tax cuts are not allowed to expire, the debt-to-GDP ratio will increase. How do people claiming to worry about the U.S. fiscal situation to fight for tax cuts?
In short, I like to listen to another team, but when they get into my lane, they simply don't make any sense.
