Debt Deal Solves Nothing

Democrat spending policies + Republican taxing policies = Massive public debt

When you hear about compromise in Washington, too often that is the calculation. Democrats love to spend, while Republicans hate to tax. Combine those two lines in the sand and it explains where we are today, and why the trajectory is unlikely to change without some cataclysmic, black swan type event.

The current debt ceiling deal merely kicks the can down the road, again. Which begs the question - why even bother having a debt ceiling if it has to be raised every year and a half or so – which is how long it will be before we are back to the debt ceiling drama. January 2025.

Here are the main takeaways.

• The main drivers of the federal debt - Social Security and Medicare - are completely off the table for reform, yet they together comprise 37% of federal spending and are getting more expensive every year. Consider the generation shifts taking place. Currently seniors over age 65 make up 34% of the population. In 10 years the Congressional Budget Office estimates they will be 46%. Who is going to be paying in to the programs to support those seniors?
• We are on course to rack up $50 trillion in debt by 2033. That hasn't changed.
• The deal only touched non-defense discretionary spending, only 1/7^th of the federal budget. Just the tip of the iceburg.
• Meanwhile, debt servicing costs are increasing with rising interest rates. In a decade, debt servicing is projected to far surpass defense spending at $1.4 trillion per year.

Since Republicans won't raise taxes and Democrats won't cut spending, where do you think the money comes from?

Likely: Printing. Thin air. They just create more of it.

What does that do to the value of every dollar in your pocket? What do you get when you have more dollars chasing the same (or fewer!) goods in the economy?

Inflation. It is an insidious hidden tax they hope you don't notice.

How do you fight it?

You can certainly try to find politicians who have a grasp on economics and monetary policy and get them into office to do the hard work of fixing our looming financial train wreck.

However, if that doesn't work, in the meantime you might consider taking defensive financial action with solid assets like precious metals. Historically, precious metals have held their purchasing power and have never been worth zero. A truly balanced and diversified portfolio should have an allocation of gold and silver as an anchor of value according to many experts.

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