You know that 12 inches is a foot. It doesn’t change. It’s a fact of life. Why, then, is the value of the dollar thrown around like a rubber ball? This can’t go on forever, and the government hates discipline. You can expect there will be cuts to services and increases in taxes before any attempt to reduce government spending takes place. That’s why, despite solid tax revenues, America’s deficits are soaring. The Wall Street Journal’s editorial board explains:
You may have heard that the 2017 GOP tax cuts blew a giant hole in the federal budget—or so Democrats tell voters. The Congressional Budget Office’s revised 10-year budget forecast out Tuesday offers a reality check. Spending is the real problem, and it’s getting worse.
CBO projects that this year’s budget deficit will clock in at roughly $2 trillion, some $400 billion more than it forecast in February and $300 billion larger than last year’s deficit. This is unprecedented when the economy is growing and defense spending is nearly flat. The deficit this fiscal year will be 7% of GDP, which is more than during some recessions.
CBO says deficits will stay nearly this high for years, and the total over the next decade is now expected to total $21.9 trillion compared to $19.8 trillion in its February forecast. Debt held by the public will grow to 122.4% of GDP in 2034 from 97.3% last year.
Notably, CBO’s revenue projections are little changed. Revenue is expected to total 17.2% of GDP this year—roughly the 50-year average before the pandemic, as the nearby chart shows. But CBO significantly revised up projections for federal spending. Outlays are now expected to hit 24.2% of GDP this year and average 24% over the next decade. Wow.
Action Line: Since America fatally broke with the gold standard in 1971 there has been a steady erosion of spending discipline in Washington, D.C. That erosion has turned into a landslide during the Biden administration. People are scared. Putting America back on track with a solid dollar could work wonders for savers and the country as a whole. When you want to talk about gold as part of your investment portfolio, I’m here. In the meantime, click here to subscribe to my free monthly Survive & Thrive letter.
