Disclaimer: The information provided in this news article is for informational purposes only and should not be considered as financial or investment advice. Readers are advised to consult with a professional financial advisor before making any decisions.

By Doug Young – 27 October 2024

debt deficit

Introduction

The US has recently hit one of the largest deficits in its history, raising concerns about the financial security of its citizens.

Amidst uncertain economic times, experts are delving into the implications of this staggering deficit and whether individuals should consider alternative investments.

The Staggering Deficit

Despite experiencing economic growth, the US faced a daunting reality as the Treasury Department confirmed a record-breaking deficit of $1.8 trillion for fiscal year 2024. This marks the third-largest annual deficit in the nation’s history.

What makes this deficit even more striking is the fact that it occurred during a year of economic expansion. Previous years with higher deficits were confined to the height of the global health crisis, making the current situation even more concerning.

Revenue and Spending

The Treasury managed to collect record receipts of $4.9 trillion. However, it was overshadowed by the soaring spending, which reached a staggering $6.7 trillion.

This deficit highlights a concerning trend where the government’s expenditures continue to outpace its revenue, exacerbating the debt burden. Even with a substantial influx of $5 trillion in revenue, it was not sufficient to prevent the government from sinking deeper into debt.

Growing Debt Burden

The gross federal debt has ballooned by $2.3 trillion since the end of fiscal year 2023, reaching an alarming $35.7 trillion.

This news has not gone unnoticed by policy analysts, with Maya MacGuineas, President of the Committee for a Responsible Federal Budget, expressing strong concerns. She highlights that the US is now borrowing nearly double the amount it borrowed annually before the global health crisis.

This trend, projected to grow indefinitely, raises questions about the sustainability of the nation’s finances.

Challenges and Consequences

One of the biggest challenges faced by the US is the increasing cost of servicing its debt.

In fiscal year 2024 alone, the Treasury spent a staggering $882 billion on net interest, making it the second-largest federal expenditure after Social Security. Surprisingly, more money was spent on servicing the debt than on defense or Medicare.

This highlights the urgency of addressing the growing debt burden and its potential consequences for the country’s financial stability.

Deficit as a Percentage of GDP

The current deficit represents approximately 6.4% of the US GDP, significantly higher than historical averages over the past 50 years.

According to the nonpartisan Congressional Budget Office (CBO), future deficit numbers are expected to increase. The CBO projects that the deficit could grow to $2.8 trillion by 2034, making up nearly 7% of GDP.

Additionally, the forecasted growth of the gross federal debt to $57 trillion by that same year, an increase of 60% in the next decade, paints a bleak fiscal picture.

Bleak Fiscal Outlook

With the upcoming election, the fiscal outlook for the United States remains bleak, regardless of the election outcome. Both campaigns have shown minimal interest in addressing the pressing issues of fiscal debt and deficits.

Analysts express growing concerns about the sustainability of the US fiscal situation. Terry Haynes of Pangea Policy, a macro policy forecasting firm, notes the lack of desire from either campaign to discuss these critical matters.

Gold as a Safe Haven Asset

Amidst the growing economic uncertainty, gold has emerged as a safe haven asset. Its strong performance, with a 32% increase for the year, has been attributed to concerns about the US fiscal situation.

Many strategists and analysts now endorse gold as a reliable safe haven asset, surpassing the traditional choice of government bonds. The increasing discussion around gold as a safe haven indicates the growing apprehension about the sustainability of the US fiscal trajectory.

Conclusion

As the US grapples with a record-breaking deficit, individuals are urged to carefully consider the implications for their financial security.

The rising debt burden and the projected growth of deficits demand greater attention and proactive financial planning.

The increasing endorsement of gold as a safe haven asset amidst economic uncertainty suggests that individuals may want to reevaluate their investment strategies. It’s important for them to assess their financial situations and make informed decisions to safeguard their economic well-being in these uncertain times.

Disclaimer: The information provided in this news article is for informational purposes only and should not be considered as financial or investment advice. Readers are advised to consult with a professional financial advisor before making any decisions.

bulletins cta 3