Supposedly the economy is humming along, as recent GDP reports continue to show nominal strong growth, boosted of course by excessive federal and state government spending. Another good shorter term debt auction yesterday, but warning signs are piling up. PIMCO, the premier bond investing fund company, said it is avoiding US debt due to concerns about ever-increasing deficits and debt. And the Congressional Budget Office has once more warned that there will be consequences to our fiscal and debt disaster. The CBO is fairly neutral politically, but has typically underestimated debt growth. Just read this latest report if you want to get really depressed. (CBO Report)
Just a reminder, we now have $35 trillion in federal debt, which is currently costing over $1 trillion a year in interest payments, a number that also goes up with every auction. Soon it will be $2 trillion, meaning a lot less money for everything else. The leech economy will be ending soon, people will actually have to work instead of relying on handouts. So enjoy the fake strong economy reports while you can, irreversible damage ahead, as our debt-laden container ship heads for the Key Bridge.
The Healthy Skeptic is a website about the health care system, and is written by Kevin Roche, who has many years of experience working in the health industry. Mr. Roche is available to assist health care companies through consulting arrangements through Roche Consulting, LLC and may be reached at 
Apple Podcasts
Google Podcasts
Spotify
Overcast
PocketCasts
Radio Public
Stitcher
Anchor
RSS - Posts
And thus the bankrupt government is beginning to take aim at changing the definition of income to include unrealized gains/wealth so it can be taxed e.g. a house purchased 20 years ago for $100,000 is now worth $500,000. You own, live and plan to stay in that house as it’s your home. The government, Elizabeth Warren comes to mind, wants to tax the $400,000 equity in that home. Add to that the government is considering changing current trust and estate tax laws. If you die today and pass that house to your heirs, they will pay a tax on the original $100,000. Laws being consider that the transaction of passing that house to your heirs will be taxed at $400,000-500,000. So unrealized financial growth in stocks, I bought $100 worth of XYZ company 10 years ago is now worth $1,000. However that $1,000 stock is sitting in my brokers account, I haven’t cashed it in, sold, the stock and realized the gain. Now Democrats are consider taxing that unrealized gain. Same for real estate and other financial assets. It’s bad when the government is bankrupt.
That’s the thing. Nobody expects that the government will ever be able to repay the debt. $35 trillion divided by 320 million citizens equates to ~$109k per individual citizen if my math is correct. We all know that there’s no chance that the government is going to even slightly curtail spending, much less cut it by enough (to a level far below tax intakes) to actually make a dent in it. They’ll just keep “printing” (adding digits on a computer) until something (likely hyper-inflation) happens. To be honest, I’m surprised it hasn’t happened already. I’ve given up trying to predict when this will happen and am open to the possibility that it won’t actually happen (although not at all convinced either).
Another question is who is all of this money owed to? After researching, it appears less than $5 trillion of the national debt is actually owed to foreign countries (Japan being the largest holder at just over $1 trillion). The vast majority is held domestically, with a large portion of that being owed to Medicare and Social Security along with US banks and investors.
What can we do to actually make the debt go away? I’ve wondered that and what would happen under these scenarios (none of them will ever happen).
Scenario 1: Everyone who has a traditional IRA or 401(k) has to immediately take a haircut and will now make their IRA or 401(k) a Roth. Would all of these be taxed at ordinary income rates as high as 37%? Or would they all be taxed at the capital gains rate (20%)? If proceeds from this were used 100% to pay off government debt, it would pay off a good chunk of it, but not all by any means. This would help in the present, but would hurt in the future as taxes of these earnings won’t happen years in the future when these people are retired.
Scenario 2: We complete scenario 1, but also tell the countries that own our debt that they’re going to take a haircut and/or we’re not going to pay them back at all. With foreign governments only owning a small % of the debt, this wouldn’t make much of a difference.
There are a lot of other scenarios that could happen with a combo of the two above scenarios, cutting back on SS and Medicare benefits (yeah right), drastically cutting government spending (yeah right again), increasing useful economic activity (allow for significantly greater oil drilling and mining activity), etc.