# U.S. deficit to soar to record $3.8 trillion



## Knight (May 4, 2020)

U.S. deficit to soar to record $3.8 trillion in 2020, budget watchdog group saysWASHINGTON (Reuters) - 

A steep economic downturn and massive coronavirus rescue spending will nearly quadruple the fiscal 2020 U.S. budget deficit to a record $3.8 trillion, a staggering 18.7% of U.S. economic output, a Washington-based watchdog group said on Monday.

Releasing new budget estimates based on spending mandated by law, the Committee for a Responsible Federal Budget (CRFB) also projected that the fiscal 2021 deficit would reach $2.1 trillion in 2021, and average $1.3 trillion through 2025 as the economy recovers from damage caused by coronavirus-related shutdowns.

“These projections almost certainly underestimate deficits, since they assume no further legislation is enacted to address the crisis and that policymakers stick to current law when it comes to other tax and spending policies,” the group said in a statement.

CRFB’s projections also assume the economy experiences a strong recovery in 2021 and fully returns to its pre-crisis trajectory by 2025.

https://www.reuters.com/article/us-...2020-budget-watchdog-group-says-idUSKCN21V1TA

It's going to be interesting to see what will happen in the form of taxes to reduce the deficit.

A VAT is proposed so that everyone will share in reduction. IMO that is the fairest solution. Only exception to that would be that congress removes the VAT  once the deficit is under control. Fat chance that would happen though.


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## Don M. (May 4, 2020)

At some point, in the not too distant future, our government is going to have to demonstrate some Fiscal Responsibility.  The increasing National Debt is going to have negative effects on the entire economy.  The Primary reason for the Fed keeping the funds rate nearly at zero is because of this debt....if the Fed was to allow the funds rates to go to a more normal 4 or 5%, virtually the entire budget would be going to paying just the Interest on this debt.  

The US faced similar circumstances in the aftermath of WWII, and the individual income tax rates were raised to as high as 92%....but the debt was paid down fairly quickly, and the economy began to flourish.  However, in today's world, raising the taxes would face massive resistance from everyone....especially the wealthy and the corporations...which have "induced" Washington to establish rules that benefit only those at the top of the income ladder. 

I suspect that Washington will continue to play "games" with the budget until Medicare begins to approach insolvency....presently estimated to be 2026.  If no action is taken before then, we will face another major financial crisis, resulting in a major "rewrite" of the entire funding process.  At that point, a national VAT may well become the option....raising the consumer costs of virtually everything by 15 or 20%....and impacting the working Middle Class the most.


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## Knight (May 5, 2020)

The big concern now is the stimulus check that probably won't do much to stimulate the economy. Helping with bills that were generated before the virus hit is more likely what is going to happen. 

The estimated 30 million out of work now plus their employers aren't paying into the Soc. Sec. system. That 2026 best guess date for politicians having to deal with funding along with the deficit will be something awesome to watch how they manage. 

I used to think late 60's was going to be when taxes & reduction in Soc. Sec. benefits would collide. With the impact of this virus on the economy IMO taxes & dealing with Soc. Sec. brings that burden on the middle class & those living on Soc. Sec. way sooner. It ain't going to be pretty.


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## Liberty (May 5, 2020)

And the stock market went up today...now just go figure.  How long will this craziness go before the buck stops somewhere. Its like everything is out of control.


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## Don M. (May 5, 2020)

Knight said:


> The big concern now is the stimulus check that probably won't do much to stimulate the economy.
> 
> When you consider the amount of debt most households have....mortgage, car payments, credit cards, etc., this stimulus won't last most of those people more than a couple of weeks.  If they remain unemployed for any length time, and have to try to survive on unemployment checks, they will find themselves in dire straits within a couple of months.  Given that it may be well into next year before we see any good treatment for this virus, our society may not return to anything resembling Normal for the next year, or more.
> 
> ...


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## mathjak107 (May 5, 2020)

The debt never has to be paid as long as the world buys our bonds and we can pay the interest ..wish we could do that


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## Aunt Bea (May 5, 2020)

mathjak107 said:


> The debt never has to be paid as long as the world buys our bonds and we can pay the interest ..wish we could do that


We can, they are called credit cards.


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## mathjak107 (May 5, 2020)

Aunt Bea said:


> We can, they are called credit cards.


Eventually our estate has to pay it..our cards are joint as well.


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## Knight (May 5, 2020)

mathjak107 said:


> The debt never has to be paid as long as the world buys our bonds and we can pay the interest ..wish we could do that


As the deficit increases & the GDP decreases paying looks like pain is going to be felt sooner than later.


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## Don M. (May 5, 2020)

Knight said:


> As the deficit increases & the GDP decreases paying looks like pain is going to be felt sooner than later.



In recent years, other nations....such as Greece and Argentina....have found that their debt exceeds their ability to pay.  Their solution?? They devalued their currency.  That cut their deficits substantially, But it left their citizens with the inability to afford many imported products, as it then cost them twice as much, or more, for items that were once affordable.  As usual, when a government fails to manage its finances properly, it is ultimately the average citizen that pays the biggest price.


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## terry123 (May 5, 2020)

Got my check for 1200.00 today.  Will be in bank tomorrow!


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## WhatInThe (May 5, 2020)

Austerity coming soon. Will be in the shadow of countries like Greece or the territory of Puerto Rico.

Also when discussing the debt and economy in general there are still half plus century old adultss that actually think it's ok to just print more money. Literally "What's the big deal they can just print more money"-ugh. Also seeing adult losers hoping for universal basic income. People don't get it. I think some complain about the millenials or kiddies just to deflect from their ignorance or beliefs.

As noted the US currency will be devalued or become non competitive if another currency is backed up. Printing money can propel inflation. The wheel barrows of money for a loaf of bread after WWI in Germany didn't end well leading to a huge poop storm.


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## Camper6 (May 6, 2020)

Your future is in the hands of the banks. How they respond will determine what happens next.

The pyramids are still standing. The country has a lot of assets.


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## mathjak107 (May 6, 2020)

Knight said:


> As the deficit increases & the GDP decreases paying looks like pain is going to be felt sooner than later.


why ????   

i have been hearing this story since i was a kid  ... the fear mongers have been calling for the deficit  to destroy our financial system since we first ran a deficit after world war II .

well we are still the best house in the worst neighborhood .

the world loves our bonds and if anything the dollar is still to strong .

likely much ado about nuttin for a long time to come .

but my portfolio holds gold , so   i always say  don't rule out uncertainty , plan and allow for it


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## Liberty (May 6, 2020)

We're still the best looking dog in the kennel.


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## Em in Ohio (May 6, 2020)

Liberty said:


> And the stock market went up today...now just go figure.  How long will this craziness go before the buck stops somewhere. Its like everything is out of control.


I just looked at the projections - I have a laughably small IRA from my last job.  I think that I would have been better off taking out the money and putting it under my mattress.  /-;


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## mathjak107 (May 6, 2020)

who's projections    ?     remember the projections after 2008 .... no one knows whats next but i will say this ..whatever we all see and think are the obvious , markets have away of  showing us we were wrong.

market performance is based on many years not  the short term .

this chart is worth no more then my tea leaves


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## Don M. (May 6, 2020)

This Corona virus, and the excessive unemployment numbers it is creating, will probably result in stagnant overall returns for the next several months....maybe even a couple of years.  If there is a resurgence of this illness, the markets may well take another major downturn.  However, if/when a vaccine is found, and is widely distributed, society may return to normal fairly quickly, and the markets may zoom to record heights.  

The trick, in the interim, is to remain conservatively invested, and monitor the news closely.  Those few who are lucky enough to figure out the timing of all this will make a nice profit.  For most, the next couple years will just be trying not to fret over the roller coaster ride.


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## Knight (May 6, 2020)

mathjak107 said:


> why ????
> 
> i have been hearing this story since i was a kid  ... the fear mongers have been calling for the deficit  to destroy our financial system since we first ran a deficit after world war II .
> 
> ...


My opinion not fact.
This is about deficits not debt.  Unlike after WWII the population has increased substantially with about 68 million drawing some form of Soc. Sec. plus medicare.
Even if starting to open up the economy begins soon it will take time for the quantity in the work force plus business owners to input money into those two entitlements. Add to that natural disasters and other factors we don't know about. America is strong  but paying  the deficit will take more as DonM pointed out  from the middle class than ever. 


The U.S. debt to China was $1.09 trillion through February 2020.1
U.S. Department of the Treasury. "Major Foreign Holders of Treasury Securities," Accessed April 18, 2020.
 That's more than 15% of the $7.06 trillion in Treasury bills, notes, and bonds held by foreign countries.

of course this could be ignored

By 





Full Bio Follow  Linkedin Follow  Twitter Kimberly Amadeo has 20 years of experience in economic analysis and business strategy. She writes about the U.S. Economy for The Balance.Read The Balance's  editorial policiesKimberly Amadeo
Updated August 19, 2019
China wants its currency, the yuan, to replace the U.S. dollar as the world's global currency. That would give it more control over its economy.

As China's economic might grows, it's taking steps to make that happen. A slim majority of institutional investors see it as inevitable, but don't say when. Could we see a switch from a greenback to a redback-dominated world? If so, how and when would that happen? What would be the consequences?
https://www.thebalance.com/yuan-reserve-currency-to-global-currency-3970465

Kind of odd that an economy killing virus originated in China.


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## Don M. (May 6, 2020)

Knight said:


> Kind of odd that an economy killing virus originated in China.



Personally, I wouldn't trust Anything being said by the Chinese government.  If/When we ever found out the full truth behind this virus, it will NOT be because some Chinese people were eating questionable animals from a local meat market....IMO.


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## mathjak107 (May 6, 2020)

Don M. said:


> This Corona virus, and the excessive unemployment numbers it is creating, will probably result in stagnant overall returns for the next several months....maybe even a couple of years.  If there is a resurgence of this illness, the markets may well take another major downturn.  However, if/when a vaccine is found, and is widely distributed, society may return to normal fairly quickly, and the markets may zoom to record heights.
> 
> The trick, in the interim, is to remain conservatively invested, and monitor the news closely.  Those few who are lucky enough to figure out the timing of all this will make a nice profit.  For most, the next couple years will just be trying not to fret over the roller coaster ride.


A simple portfolio of equities, long term treasuries,,gold and short term treasuries needs no timing ...no matter what the outcome you should be fine ..betting on prosperity only , may be tough

Over the one year , long term treasuries up 40% , gold up 30% ,equities flat and short term treasuries up 5%


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## Aneeda72 (May 6, 2020)

Knight said:


> The big concern now is the stimulus check that probably won't do much to stimulate the economy. Helping with bills that were generated before the virus hit is more likely what is going to happen.
> 
> The estimated 30 million out of work now plus their employers aren't paying into the Soc. Sec. system. That 2026 best guess date for politicians having to deal with funding along with the deficit will be something awesome to watch how they manage.
> 
> I used to think late 60's was going to be when taxes & reduction in Soc. Sec. benefits would collide. With the impact of this virus on the economy IMO taxes & dealing with Soc. Sec. brings that burden on the middle class & those living on Soc. Sec. way sooner. It ain't going to be pretty.


Well, I ain‘t going to be alive.


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## Aneeda72 (May 6, 2020)

Don M. said:


> Personally, I wouldn't trust Anything being said by the Chinese government.  If/When we ever found out the full truth behind this virus, it will NOT be because some Chinese people were eating questionable animals from a local meat market....IMO.


At this point, it just doesn’t matter.


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## Em in Ohio (May 6, 2020)

mathjak107 said:


> who's projections    ?     remember the projections after 2008 .... no one knows whats next but i will say this ..whatever we all see and think are the obvious , markets have away of  showing us we were wrong.
> 
> market performance is based on many years not  the short term .
> 
> this chart is worth no more then my tea leaves


Oops - sorry - I meant to include a link:  https://tradingeconomics.com/united-states/stock-market

Admittedly, I know nothing about the stock market.  I never even looked at my IRA from the job until I no longer had the job.  So, if this is totally useless, great!  My concern is that I probably  don't have 'many years' - which is why I thought that I should just bail.


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## mathjak107 (May 6, 2020)

no one can tell you what to do but if this is money you don't need for quite a few years you have to think this through


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## Em in Ohio (May 6, 2020)

mathjak107 said:


> no one can tell you what to do but if this is money you don't need for quite a few years you have to think this through


I will need it in less than two years and fear that it will lose all value by then.  Perhaps, for my peace of mind, I will just close it out.  Cash on hand does provide a sense of security.

I have read some of your other posts, but they are far beyond my level of comprehension.  Unfortunately, financial advice about investing was not taught in schools in my day and my parents would never take a risk of any sort.  They never even bought on credit.  They worked, they saved, they paid cash.


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## MarciKS (May 6, 2020)

Forgive my stupidity but, I really have no knowledge of this stuff. I do have a question though...

If the USA is in such horrible debt...where is the government getting the money to pay back any of this? I mean, seriously...how could they?


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## Knight (May 6, 2020)

MarciKS said:


> Forgive my stupidity but, I really have no knowledge of this stuff. I do have a question though...
> 
> If the USA is in such horrible debt...where is the government getting the money to pay back any of this? I mean, seriously...how could they?


1st. you have distinguish between debt & deficit. This is about the deficit.  

Quick explanation.

Debt is when you buy something and intend on paying for it.

Deficit is the amount between what you owe for & the ability to pay for it. 

Look at like this you buy a car on credit you expect to pay that debt but then you need a refrigerator that goes on your credit card, next you need braces for your child credit again, now you need a new roof credit again.  You & your husband both work so paying for the credit card charges isn't a problem. You lost your job, you can't pay on the high balance like you were doing the ability to pay is reduced increasing your deficit. 

To answer your question.
Unlike you the government has a way to get more money, they can tax you more or print more money. Either way what the government does can impact you negatively. 

Debt isn't a problem as long as your deficit doesn't cause you problems. Home fore closer is a great example of people building debt higher than the ability to pay.


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## MarciKS (May 6, 2020)

Ok.


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## MarciKS (May 6, 2020)

So is that why we pay all these taxes and crap?


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## Ladybj (May 6, 2020)

I do understand there is a process... however, I never understood how the US can be in debt and money is/can be printed daily.  I am sure I am missing a lot here.


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## MarciKS (May 6, 2020)

Ladybj said:


> I do understand there is a process... however, I never understood how the US can be in debt and money is/can be printed daily.  I am sure I am missing a lot here.



Me too


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## mathjak107 (May 7, 2020)

There really is no money that is actually printed ..there are changes that take place in the banking system that can expand or contract the money supply


t


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## Buckeye (May 7, 2020)

mathjak107 said:


> There really is no money that is actually printed ..there are changes that take place in the banking system that can expand or contract the money supply



The latest number I could find is that we print $541 million every day.  Mostly replacement, though.


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## mathjak107 (May 7, 2020)

Buckeye said:


> The latest number I could find is that we print $541 million every day.  Mostly replacement, though.


the money supply really does not have a lot monetary inflation ..as you said it is for replacement ... the money supply is actually controlled through the banks .


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## Buckeye (May 7, 2020)

mathjak107 said:


> the money supply really does not have a lot monetary inflation ..as you said it is for replacement ... the money supply is actually controlled through the banks .



I understand that, of course. I was just trying to clarify your statement that "no money that is actually printed".


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## mathjak107 (May 7, 2020)

the effect on the bond market will be interesting ...on one hand you have a ton of supply coming out which should command higher rates  to get it all bought ... but then you have a flight to safety going on too  lowering rates at the same time ...


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## Aneeda72 (May 15, 2020)

The US dollar used to be backed by silver.  Then we went to the gold standard, all those gold bricks kept in the treasury backed the US dollar.  Then, this is my understanding, we dropped the gold standard because we didn’t have enough gold.

The US dollar is now, not backed, by anything but our standing in the world and our good name.  You can decide what that means in the current world.  So the expression “this money isn’t worth the paper it’s printed on” comes to mind.

LIke when people had a lot of confederate dollars they became instantly worthless.  Are we headed there?  Haven’t a clue, as I don’t understand this much.  But, money, is just paper. The government can print as much as it likes.


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## mathjak107 (May 16, 2020)

as long as the supermarket takes those dollars and the world takes our dollars and bonds   , that is what counts ....


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## Aneeda72 (May 16, 2020)

mathjak107 said:


> as long as the supermarket takes those dollars and the world takes our dollars and bonds   , that is what counts ....


Depends  on how many dollars it takes


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## mathjak107 (May 16, 2020)

Aneeda72 said:


> Depends  on how many dollars it takes


So far inflation is below the fed target..deflation seems to be the more likely worry


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