As much as I’d love to shake it, I still try to be “good.”I brush my teeth and floss. I try to eat well (most of the time) and not drink too much, but drink water and exercise when I can. I work hard, pay my taxes, try to save and invest, but enjoy life. I check in with those I care about and show kindness to others in greater need. I even try to stay positive, present and in the moment.

BUT sometimes, like when I am doing research on our government’s budget projections, I can get angry and sad (“sangry”) at the same time. Because, when I combine that with other areas I believe could use more attention from Congress (and others that could use less), it feels like they aren’t taking care of my family and future generations. Or any of our families. And isn’t that their main job—to serve the greater good of the people of this country?

So no matter how much I follow the rules, and do all the right things, the future can feel, well, broken. But, before I descend further here, let me share what sparked this—and why I can so easily fall into the black void.

What sparked this: 

• Congress can’t agree on spending. As I shared back in May (and April), we had come close to breaching the debt ceiling but, within a few days of it, a deal had been agreed to raise it, in exchange for some reduced spending. However, since that time, Congress has not “appropriated” their budgets—which actually funds existing programs and other things. They are on recess now, returning September 12. They will then have until September 30th to finish appropriations. They haven’t gotten through this process because there is still quite a bit of disagreement on the amount of spending and where it should be spent. Interestingly, they can extend time with “continuing resolutions” but at the end of the year, the debt limit bill says discretionary spending will be cut by 1% if not fully appropriated.

• Interest rates are higher now and so is debt. The US government’s interest costs have more than doubled in the last two years and rates haven’t been at these levels since 2007. Meanwhile, debt has increased over that time. You can see in the chart below the amount of debt as a percentage of gross domestic product (GDP), which is the value of all the goods and services we produce, has risen steadily (in red), while so has the cost of that debt (in blue) more recently.

Why I get “sangry:” Our entitlement system. The big three “entitlements” are Social Security, Medicare, and Medicaid—the biggest of which is Social Security. The idea of the way the system works today came to be in the 1960’s, when it was needed because more than a third of the elderly population lived in poverty. Initially, it was met with opposition—likened to socialism and communism. But by the early 1970’s, entitlement supporters got the support needed to pass legislation. However, this system was created with no built-in way to calibrate spending relative to national income, to other government spending, or to itself. As a result, it has expanded beyond any other spend we have. I am supportive of the safety net…but it was not set up responsibly.

What has suffered because of this spending? Non-defense discretionary spending. 

What is that? It’s spending on things like healthcare, infrastructure, education & training, and science & energy. Just all the things, in my opinion, future generations need. 

Here’s a chart to show you what I mean:

• Expressed in multiple terms, entitlements have risen from 1.0x non-defense discretionary spending in 1970 to 3.0x in 2022. 

• Based on the CBO projections, by 2042, entitlement payments plus interest owed on borrowings are expected to use up all revenue collection thereafter. At this point, the CBO expects the ratio of total federal debt held by the public to GDP to be 140%, compared to the 93% today. 

This, to me, feels like “generational theft.” 

And it’s a political hot potato. What is required to help close this gap—raising taxes more than has been done in decades, cutting entitlement spending, or a combination of both—remains a very tough decision for Congress. And I get it. That’s either costing many people more money or potentially taking something away from them. But either way, this needs to be figured out.   

And one other chart I think is interesting as we talk about filling budget gaps:

Over the last 40 years, you’ve seen the stock market expand wealth for some and not others. Combine that with the fact that most individuals have had to support the growing US budget more and more, while corporations have not had to, with decreased spending on education, science, and infrastructure… and it just feels like the deck has been stacked against your average citizen. I still love this country, but this ship needs to start moving in a better direction. 

As for the markets, it should affect yields, applying upward pressure—especially short term yields—as discussions are had in the halls of Congress this fall. And longer term, it can have impacts on our growth. That being said, where we are in the cycle—be it growth, slow growth, or recession—should have a greater impact on the direction of yields and markets than the debt issue over the next couple years. 

So what can we do about it? Besides voting, exercising your right to free speech, etc. The one thing you can do for yourself and your family is save and invest. Build up those cushions and use them to better your family. 

Sources: 

1st chart: Board of Governors of the Federal Reserve System (US), Market Yield on U.S. Treasury Securities at 10-Year Constant Maturity, Quoted on an Investment Basis [DGS10], retrieved from FRED, Federal Reserve Bank of St. Louis; https://fred.stlouisfed.org/series/DGS10, August 15, 2023.

U.S. Office of Management and Budget and Federal Reserve Bank of St. Louis, Federal Debt: Total Public Debt as Percent of Gross Domestic Product [GFDEGDQ188S], retrieved from FRED, Federal Reserve Bank of St. Louis; https://fred.stlouisfed.org/series/GFDEGDQ188S, August 15, 2023.

2nd and 3rd chart: Data that supplement CBO’s February 2023 report The Budget and Economic Outlook: 2023 to 2033.