But, What If All Of These ‘Experts’ Are Wrong?
Many point to the fact that 3%-4% U.S. (or even better) GDP growth may be just around the corner. Some wholeheartedly believe it while others may be somewhat skeptical. For them, however, having it occur would be beneficial to their clients and ultimately them.
But at the same time consider this quote from Yale economist Robert Shiller and expand it to include some, if not all, of the professions in the title of this article:
‘Since the global financial crisis and recession of 2007-2009, criticism of the economics profession has intensified. The failure of all but a few professional economists to forecast the episode – the aftereffects of which still linger – has led many to question whether the economics profession contributes anything significant to society.‘ (Source)
And while perhaps that economic growth may be hiding right around the next corner, consider the following and wonder what will happen if for some reason it’s not…
- Massive tax cuts,
- Consumers that may or may not be utilizing extra disposable income from said tax cuts on goods and services and instead may be saving or paying down debt,
- The U.S, facing huge federal borrowing needs in what may be a rising interest rate environment and,
- Potential trade war with China,
- An exploding federal budget deficit that will likely become even larger…
If said economic growth does not occur as expected, the U.S. will face the potential of becoming just another one of those countries around the world with Debt To GDP that will bring on even higher borrowing costs due to the risk-premium demanded by borrowers.
As it stands now the interest on the federal debt consumes 7.4% of the governments spending in the 2018 budget and is forecast to continue to rise! (Source)
This from a country that, when I was in business school, had debt that was considered to be the risk-free rate for anyone out there who remembers the Capital Asset Pricing Model – CAPM.
Historical Debt To GDP: United States and Greece (Charts) (Source)
Michael Haltman, President
Hallmark Abstract Service
Phone: (646) 741-6101