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Quinn ponders taxes, debt, interest payments and other minor issues we face

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AUTHOR: R Quinn on 1/11/2025

I am not an economist and even they often don’t agree, but shouldn’t we be concerned about the Country’s deficit and debt?  

Nobody I know likes taxes, but does debt and growing interest payments present a greater risk? Federal interest payments are over one trillion dollars a year – that is a million, million by the way. 

I sometimes think, can we get to the point where nobody, not even another country wants to invest in the US? I suppose that is far fetched, but a scary thought. What if the demand increases for a higher return on Treasure bonds?

Social Security is now redeeming the trusts treasury bonds to pay benefits, is that cash coming from more debt somewhere?

At what point, if there is a point, will debt and interest payments reach a limit?

I know the analogy is not totally accurate, but I think about a family in deep credit card debt using cash advances to make the next payment on another card or perhaps rationalizing charging a family vacation to get away from it all. 

Given the circumstances, I am flabbergasted that there is even talk of tax cuts. We have yet to have a serious discussion about fixing Social Security (or Medicare) and it’s over ten years since the trustees warned of the need for action. Some people are planning retirement assuming there won’t be Social Security. That’s not fair. 

What does the combination of all this mean to average investors, to Americans planning retirement or in retirement depending on investments, to the HD community? 

Is inflation back on the radar? Will higher interest rates be good or bad for retirees. Should higher taxes be part of retirement planning? Will working people pay more into Social Security or see benefits changed?

Needless to say I don’t have any answers and absent a crystal ball, I’m not sure anyone has. Nevertheless, none this is going away. 

How do we plan for more Inflation, higher interest rates, higher taxes or more do it yourself required in lieu of government safety nets – like subsides for health insurance that often support early retirement?

Do Americans think about this stuff? Do they see the huge numbers as a risk, as impacting their lives? I don’t think so.

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Ben Rodriguez
29 days ago

I’ve yet to read or hear any explanation of how the US can get out from under our debt. Even now we’re running several trillion dollar deficits each year, adding to the debt.

I don’t see anyway it ends other than through hyperinflation, then ultimately default and a new currency. Very unfortunate.

Dan Smith
29 days ago

Great post and great comments.
You don’t have to go too far back in history to find politicians that were actually economic pragmatists. Jerry Ford and Jimmy Carter were fiscal conservatives, believing that government services truly needed by the country should be paid for. George HW Bush saw the need for revenue and raised some taxes, losing his job as a result. Bill Clinton, with the help of republican legislators balanced the budget and had us on a path to zero debt. Then came a terrible decade requiring deficit spending to get us out of trouble. I am not placing blame on the president, but when those tax cuts were made permanent all hopes of being debt free vanished. Does anyone think that the Tax Cuts and Jobs Act won’t be extended or made permanent?
Now “chicken in every pot” politics has gone crazy with politicians of both stripes promising us the world with absolutely no plan pay for it. The recent extension of SS benefits never should have been signed into law without a way to pay for it.
And yes, those immigrants are a net plus. Not only do they pay billions in taxes, they’re also going to be necessary in rebuilding CA after the fires. 

Mike Xavier
29 days ago
Reply to  Dan Smith

Solid points made by all. What should our priorities be, we can’t be all things to everyone. I think the debt should be an urgent priority yet prioritizing the pain that comes with addressing said debt remains the most confounding problem. The consultants and experts will give you a ton of gimmicks, yet no amount of gimmicks will help without increasing taxes. I think the common man’s view is “why tax me when they are just going to waste it anyway?, a view I don’t disagree with either.” we might all feel better if the tax increases showed some positive impacts. Seems to me their is no free lunch after all ,and the case for Roth retirement plans as a hedge against future tax increases continue to be salient thinking.

John Yeigh
29 days ago

We’ve gotten to the point that politicians, regardless of affiliation, have no incentive to exhibit fiscal responsibility. They just shift monies on the margin. “Cuts” are nonsense and just a revisionist paper exercise for a reduction of someone’s already planned or budgeted rate of increase. I can’t see this changing anytime soon.

My guess is that this leads to continued inflation, solid interest rates, and a weakening dollar versus recent decades. Inflation helps stocks, real estate and maybe gold. The world seems less stable which also favors others to invest in US assets.

Someday a recession may temporarily pull the inflated asset valuations back a bit, but I’m not betting that elected officials will demonstrate fiscal responsibility.

Dan Wick
29 days ago

This is mostly Americans investing in America by way of IOUs. The problem will occur when we stop wanting to invest in our own country. We can complain all we want, but we continue to elect politicians that kick the can down the road.

Mike Xavier
29 days ago

I remember one of the books I read during some economics class was written by N Gregory Mankiw, who is a top economic advisor to many politicians and even to Bush ii. His premise was that the national debt could continue to grow infinity as long as the economic activity created enough dollars to support the debt payments, not pay of the debt mind you, just the payments. I said, well this guy must be nuts, this is a house of cards if this is the forever plan. I still think this thinking is grossly flawed as at some point, you must pay the piper and the great reckoning is coming!

Then not to make this political, but there is this great backlash against immigrants who actually help drive this economic activity. According to the politicians there are over 11 million illegal immigrants in the country now and there is some who believe deporting them is the way to ‘protect Americans’, Deport the criminals, I am all for that, but why not legalize those other 11 million so that they can work and pay into social security and the tax base to help handle this mess! (I am against unlawful immigration and think we should have border and immigration rules that make sense and porous so any one can come in)

Under Clinton, the country ran a surplus, so it can be done again, but when are these spineless politicians going to wise up and take real action against this deficit. I think this DOGE department under the incoming administration has some merit, albeit I think they are over promising what they might be able to deliver on. Defense spending is untouchable because the lobbyists and the defense contractors are plugged in deep and will not cut their nose to spite their faces. Spending on health care and the amount of fraud that happens there is another area that can be targeted, the issue is it just takes so much time, and effort and, oh by the way, we don’t need another department created to root out health care fraud. Finally, our taxes, it is too complicated, we need a simplified system where taxes are paid and collected in manner that make sense. Good luck with that.

Again, I didn’t want to make this post political in nature, but I think the views on immigration are so misguided when this is really an opportunity to add payers to the workforce so that we can tax them and it pains me to see how we are missing the boat there.

Last edited 29 days ago by Mike Xavier
Jack Hannam
29 days ago
Reply to  Mike Xavier

I don’t think there is a national strategy, so by default we are doing what Mankiw wrote about. Sort of like the cash-starved young family which tries to cope by going deeper into debt, as long as they can make the minimum monthly payments. And I agree with your comments concerning the illegal immigrants’ influence on the economy.

David Lancaster
29 days ago

I believe one effect of increased inflation is fixed annuities will be less attractive. Because of recent inflation someone who began receiving fixed annuity payments just before COVID has now lost 25% of their payments’ purchasing power,

Last edited 29 days ago by David Lancaster
mytimetotravel
29 days ago

Concern about inflation is why I don’t own a SPIA. I have enough inflation risk with my pension.

Dan Wick
29 days ago

But they will continue to be sold to those that can’t manage risk.

baldscreen
30 days ago

I don’t know much about this other than I have read that social security will not go away since people are still working and paying into it, but benefits might be cut by around 20% if nothing is done by Congress. Chris.

Brian Kowald
30 days ago

I think about it. The number one thing that all the financial guru’s preach is “get out of debt”. The country should too.

Patrick Brennan
30 days ago

Dick, I, for one, am very concerned. We are on an unsustainable path. We have so much debt we can’t pay it back, and we can’t default, so we must inflate it away. We are in a similar situation to just after WWII and to deal with that debt they used yield curve control to hold interest rates down while they inflated the debt away. We may be facing a similar future, but who knows? The Fed cut interest rates by 100 basis points and the 10 yr bond went up! That tells me the bond market expects higher inflation for longer. But more worrisome is how we are going to pay for all our nation’s expenses. The money printer has been in high gear and I believe the money supply will continue to grow at least 7-8% for the foreseeable future. So, the hurdle rate for us investors isn’t to beat inflation, but rather we need at least 8% to keep up. Maybe more. That means stocks, certain real estate, gold, and I will argue bitcoin, are assets that will help the investor hang in there.

Congress is not going to fix this. What I think could happen is one day, suddenly, we’ll wake and find that no one will buy our bonds. There will be a massive crisis, and the market will force a solution regardless. I am keeping dry powder and zero debt just in case. In the meantime, M2 is beginning to increase again. Buckle up, it’s going to be a bumpy one!

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