Editor’s note: Contributing columnist, Steve Nicklas, expresses his views and insight on various topics in Marketplace.
— Steve’s Marketplace —
Our federal government provides a not-so-shining example of how overspending can push anyone or anything off a financial cliff – into Grand Canyon-like depths.
The accumulating interest on the national debt engulfs our country like quicksand in the Okefenokee Swamp. The more irresponsibly we act, the more we sink. And an analysis of the federal debt/deficit gives you a queasy, sinking feeling.
This past week, the U.S. Treasury Department quietly confirmed our worst concerns. The interest payment on the $33.5 trillion national debt approached $1 trillion for the fiscal year – for the first time.
Also problematic, the U.S. government surprisingly received less in tax revenues than anticipated. Yet tax rates overall are higher than before. By this measure, U.S. economic production is not as robust as promoted.
There are several other complicating factors. A recent U.S. credit downgrade that increases our borrowing costs, for one. And a concerted global move away from the U.S. dollar as the world’s currency is another. Along with chaotic political conditions in Washington, D.C.
The national debt didn’t materialize overnight. Both political parties have contributed to it. When Barack Obama took office, the debt was at $10 trillion. Through the financial crisis (caused by his predecessor George Bush) and with Obama’s freewheeling spending, the debt doubled to $20 trillion.
Under four years of Donald Trump, the debt increased to $27 trillion (although some $5 trillion went to rebuild a depleted military). After three years of Joe Biden’s presidency, the national debt now stands at $33.5 trillion.
Much of this resulted from desperate measures to invigorate the U.S. economy during the pandemic. Nevertheless, spending under the Biden Administration has shot up like a Space-X rocket.
Bloated spending bills have accomplished little, other than to reward political supporters and prized causes (i.e., green energy). Take the inappropriately named $900 billion “Inflation Reduction Act.” Like gasoline poured on a fire, undisciplined spending fuels more inflation. Not less. And that’s sort of what the legislation does, according to the Congressional Budget Office.
As the financial forest burns, the national media keeps the attention on funding the U.S. government and averting a shutdown. This is a distraction. Without ever addressing the critical stuff – deficits and debts and undisciplined spending.
The federal government borrows money by issuing U.S. treasuries. With the credit downgrade and financial uncertainties, treasuries are now perceived less safe and sacred, however. This alone can push interest rates higher through financial-market forces.
Meanwhile, the Biden administration is running the spin cycle at full speed, touting the merits of so-called “Bidenomics.” Give the American public a break. According to polls, people aren’t buying it anymore. They are tired of excuses, blame, passing the buck.
Many people pretend to be oblivious. This is nothing more than willful ignorance. We are routinely reminded of higher interest rates in mortgages and borrowing and on our $1 trillion in credit card debt. Or there is the silent thief of inflation, with the unprecedented costs of groceries, or gas, or a meal at one of Amelia Island’s 100 fabulous restaurants.
There is plenty of blame to go around. However, Biden’s steadfast desire to follow the same over-indulgent path is downright scary. In addition, freely funneling money to Ukraine is another financial drain.
And this sullen news has nothing to do with the seasonal frights of Halloween. Or being unthankful at Thanksgiving. Let’s just hope we Americans don’t turn out to be the turkeys.
Steve Nicklas is the managing partner of Nicklas Wealth Management in Fernandina Beach. He is also an award-winning columnist. His columns also regularly appear in weekly newspapers in Northeast Florida and in Southeast Georgia, and on his website at www.SteveNicklasMarketplace.com. He has published a book, “All About Money,” of his favorite columns from the past 20 years. The book is available on Amazon. He has also done financial reports for area radio stations and for National Public Radio in Jacksonville. He can be reached by email at [email protected] or by phone at 904-753-0236.