Some notes on the USA’s continued trajectory into third world status – “odious debt” creation – consequences of spending like drunken sailors is INTEREST ON DEBT plus costs of migrant invasion
Odious debt = “In international law, odious debt, also known as illegitimate debt, is a legal theory that says that the national debt incurred by a despotic regime should not be enforceable. Such debts are, thus, considered by this doctrine to be personal debts of the government that incurred them and not debts of the state. “
Sort of like the premise that overseas wars that don’t threaten US territory should be funded by indeividuals, not by the Federal government.
The Congressional Budget Office put out this report:
The Budget and Economic Outlook: 2024 to 2034 | Congressional Budget Office (cbo.gov)
“In CBO’s projections, federal budget deficits total $20 trillion over the 2025–2034 period and federal debt held by the public reaches 116 percent of GDP. Economic growth slows to 1.5 percent in 2024 and then continues at a moderate pace.”
Which prompted this article in Just the NewsL:
“The debt held by the public will increase from $27.1 trillion at the present to $48.3 trillion by the end of 2034.
The Committee for a Responsible Federal Budget pointed out that the CBO projected that "the trust funds for highways and Social Security Old-Age and Survivors Insurance will be exhausted by the end of the decade."
Check out that last paragraph again. That is a real 2030 forecast – screw Net Zero targets – this is reality not fake science or funny money.
This prompted me to go down the rabbit hole of the swamp.
How does this relate ro interest on debt? Well, let’s spin a yarn for some context.
Back in 1992, the EU was formed and signed something called the Maastricht Treaty. Article 1 of that Treaty said this:
EUR-Lex - 11992M/TXT - EN - EUR-Lex (europa.eu)
“Article 1
The reference values referred to in Article 104c(2) of this Treaty are:
- 3% for the ratio of the planned or actual government deficit to gross domestic product at market prices;
- 60% for the ratio of government debt to gross domestic product at market prices.”
Although not strictly adhered to, countries (the EU equivalent of US States) such as Denmark and Germany have conformed. They achieved these constraints by using high taxation – of around 40% of GSP activity, compared to around 30%. All power to them, they balance their fiscal books.
I suspect that the US also pays the same as a proportion of GDP once you factor in the high costs of health in the USA plus compulsory Obamacare premiums as taxes.
Denmark’s debt to GDP is around 30% Denmark Government Debt to GDP (tradingeconomics.com)
Germany’s Debt to GDP is around 66% Germany Government Debt to GDP (tradingeconomics.com)
Here is a link to an article on countries with the highest and lowest government debt to GDP ratios.
Debt to GDP Ratio by Country 2024 (worldpopulationreview.com)
Maybe Article 1 of the EU was informed by a 2010 paper (revised 2011) by Reinhart and Rogoff that explained the diminishing returns from high levels of government debt to GDP:
Growth in a Time of Debt | NBER (not peer reviewed)
“First, the relationship between government debt and real GDP growth is weak for debt/GDP ratios below a threshold of 90 percent of GDP. Above 90 percent, median growth rates fall by one percent, and average growth falls considerably more. We find that the threshold for public debt is similar in advanced and emerging economies.”
There are a few other observations – but the point is that there are thresholds of government debt to GDP, beyond which there are diminishing GDP returns from the burden of debt.
In the usual style of economists, interest burden does not feature, even though it is significant at high levels of debt and interest rates.
Ok, what’s been happening in the US over the last few years?
For GDP, from here:
U.S. GDP by Year, Compared to Recessions and Events (thebalancemoney.com)
Missing 2022 and 2023. Working backwards from the 2022 Debt to GDP ratio of 123% for 2022 and 30.824 trillion bucks of debt in the table below we get a dubious 25 trillion bucks of GDP for 2022!
Anyway, this is to give some broad context, not to provide pinpoint accuracy.
And debt from here:
US National Debt by Year (thebalancemoney.com)
And for debt now we have around 34.21 trillion bucks
U.S. National Debt Clock : Real Time (usdebtclock.org)
Current dollar US GDP – 4q2023 first estimate – is 27.94 billion.
Which gives a US debt to GDP ratio of the same 123% as 2022 and leads me to suspect that the numbers are bogus and the next estimate of 4q2023 GDP might be revised – downwards!
Well, we are in the realms of “funny money” with measurement errors and estimates dominating the changes in the numbers.
Now, here is the Residents budget from page 140 of 184 here:
budget_fy2024.pdf (whitehouse.gov)
GSP for 2022 shown as 25 trillion bucks. Debt to GDP for 2023 ad 2024 at around 100% of GDP. See how “funny money” works?
If you want to get an idea of how deep the swamp is – check out some of the other 184 pages! My opinion is that all that spending could be done at half the price in the private sector if education was not dominated by the “woke” and the “dumbing down” plus “eradications of spirit” by the Maoist/Marxist/Cult of Moloch.
Never mind.
Let’s get to the nub of the fiscal problem.
Spending.
US Federal spending is split between 3 types - Mandatory, Discretionary and Supplemental.
Federal Spending | U.S. Treasury Fiscal Data
Congress cannot agree how much money to waste in the latter two, so it votes on Continuing Resolutions to keep the government running.
President Biden Signs Continuing Resolution Into Law (executivegov.com)
Mandatory spending for 2024 fiscal year is around 4.2 trillion bucks.
U.S. government: proposed spending by program 2024 | Statista
Discretionary spending is around 1.59 trillion bucks.
Appropriations Watch: FY 2024-2024-02-08 (crfb.org)
“With the enactment of the Fiscal Responsibility Act (FRA), appropriations bills were marked up in the House and Senate in June and July. The FRA caps total base discretionary spending at $1.590 trillion for FY 2024, with base defense spending capped at $886 billion (a 3 percent increase from FY 2023) and base nondefense spending capped at $704 billion (up to a 9 percent decrease from FY 2023, depending on how it is measured). “
Military spending was discretionary? Who knew!
Supplemental spending is not in the same ballpark as these other two types of spending.
Even so, requests by the Resident for 40 billion here and 50 billion there are substantial.
Ok, that’s spending. 4.2 trillion mandatory spending, 1.6 trillion discretionary spending and, say, 0.2 trillion in Supplemental spending. Total 6 trillion bucks. That compares to the 6.9 trillion bucks in the Residents budget I the table above – remember it’s funny money!
Now for revenue.
From here:
Government Receipts (whitehouse.gov)
Total receipts are guesstimate at 4.8 trillion bucks for 2024 and 5 trillion bucks for 2025.
Note the jump in individual income tax receipts from 2 trillion to 2.4 trillion over 2021 and 2025 – and the and the almost doubling of corporate income taxes – oh and the 13% increase in social insurance collections? Maybe not so much in line with inflation and GDP.
Anyway!
Here’s the beef.
There is no specific attention paid to the increase in the interest on debt OR the costs of open border.
Back in 2016, the Fed Funds rate was 0.6% and bind yields were around 2.5% - government debt was 20 trillion bucks – replacement cost at say 2% = 400 billion bucks a year.
Now, the Fed Funds rate is 6.5% and bond yields are at 4% - government debt is 34.2 trillion bucks at a replacement cost of say, 5% = 1.7 trillion bucks a year.
That’s an increase in debt replace met cost and the cost of new debt of 1.3 trillion bucks a year.
Which POTUS candidate have you heard from with a plan to reduce spending on interest on debt? I doubt they have even considered this as an issue that can only be addressed via the “discretionary spending” part of the federal budget.
Here’s the rub. Discretionary spending is “only” 1.6 trillion dollars.
The interest in debt EXCEEDS discretionary spending.
Now factor in the cost of allowing criminals to invade the southern border. Ten million of them costing the overall economy 50,000 bucks each to clothe, feed, house, health, educate, translate, secure ECERY YEAR )plus travel to the cities of their choice) plus another 50,000 bucks a year for indirect costs such as taking jobs from Americans, crime (caused by poverty), infecting Americans with disease, taking up judicial resources for processing, denying previously available public facilities for their use, and so o and so forth.
10 million times 100,000 A YEAR = A TRILLION BUCKS A YEAR – just for the criminals invading the border In the last 4 years – how about the prior 25 years?
Is there a supplemental budget for that? I can’t see it in any “funny money” budgets!
No cost estimates for mass deportation of 25 million criminal from this and past regimes costs either.
So, interest in debt plus criminals – a few trillion bucks at least in costs out of 5 trillion in tax receipts and 7 trillion in spending.
Should be a major election issue, right? Then with the resources that frees up, maybe education, health care and crime. No way that the defence budget can be halved right?
I guess the Pentagon has to meet its spending targets post the withdrawal from Afghanistan in August 2021. The cost of that over 20 years was the odd 2.3 trillion dollars – around 100 billion a year. Have to spend those “savings” to even begin to justify an increase in the “discretionary” compoanent of the federal budget, right?
Dreaming, of course, but imagine if the interest burden could be reduced by a trillion bucks, all the criminal immigrants could be deported, and the Pentagon’s budget halved.
Potentially, 2.5 trillion boosts to the fiscal position and America would be the envy of the world, fiscally speaking.
Onwards!
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