Contact Us
Firm Overview
Why Legend Is Different
Client Types
Professional Biographies
Frequently & Rarely Asked Questions
Risk Spectrum
Investment Strategies
Second Opinion
Global Investment Pulse
Event Calendar
Press Center
Legend News
Clients Only
Career Opportunities
Newsletter Sign-up
Site Search
Site Map
Tell A Friend About This Website
Financial Briefs


Phone: (412) 635-9210
  (888) 236-5960
Connect With Legend:
Subscribe to me on YouTube

The Long-Term Fiscal Status Of The United States

The good news is the fiscal outlook of the United States government is suddenly much brighter.  The bad news is things are so much better than just a couple of years ago that Congress might squander the opportunity because lawmakers no longer feel great urgency to address the long-term fiscal problems threatening the country. 

The Congressional Budget Office, the non-partisan research arm of Congress, released a 10-year projection on February 24, 2014 of the U.S. Government’s spending and revenue, showing that the federal budget deficit increases only slightly over the next 10 years.  This is an amazing turnaround.

In 2012, the fiscal condition of Greece, Italy, Portugal and Spain sent investors worldwide scrambling in search of safe havens because they feared the poorer countries of the EU would be unable to pay their debts.  At that time, some members of Congress publicly voiced fears that the U.S. was headed for the same fate as the poorer nations of southern Europe, which sent the U.S. stock market into a temporary tailspin. But the U.S. economy has proven resilient. 

Aggregate government spending as a percent of gross domestic product does not appreciably increase over the next decade, according to the latest CBO estimate.  In comparison, in the depths of the financial crisis in 2009, according to the CBO, the U.S. Government deficit was equal to 9.8% of the total U.S. economy.  That was when fears that the U.S. was headed the same direction as Greece and Portugal hit its peak.

Then the economy turned around.  Sequestration forced a 10% across the board cut to U.S. Government spending in 2013. Congress passed a new tax law that hiked income tax rates and raised new government revenue. According to CBO, the U.S. Government is on course to hit just 2.6% deficit as a percent of GDP in 2015, nearly a quarter of the ratio just a few years earlier. 

While on its face this is very good news, it could make it more difficult for Congress to find the political will to address the longer-term issues threatening the long-term financial stability of the U.S.  The long term financial picture of the U.S. – projections made by CBO in an annual report issued in December 2013, provided a 50-year projection of the U.S. fiscal position that shows that the long-term solvency of the U.S. remains under great pressure and deteriorates rapidly after 2024. 

According to data from CBO, spending by the federal government as a percent of GDP on Medicare, Medicaid, and Social Security remains stable over the decade ending 2024.  However, spending on these programs increases starting in 2024, CBO’s report shows.  In addition, the biggest expense that goes along with all this government spending is the interest expense.  To be clear, all of the government spending is paid for with borrowed money that is raised from the proceeds of U.S. Treasury Bond sales.  Interest expense on the Government debt to pay for Social Security, Medicare and Medicaid skyrockets over the next 50-years.

So here’s the problem:  Unless the U.S. Government does something to reduce government entitlement programs, the U.S. is headed for fiscal oblivion.  But the nearer-term picture – the outlook over the decade ending in 2024 — is good.  The fiscal condition of the U.S. looks strong for the next decade, which could be bad news if it means Congress can “kick the can” further down the road and delay addressing the real problem threatening the U.S. Government’s fiscal stability. 

  • Everything You've Learned About Interest Rates May Be Wrong
  • Inflation: A Portfolio Risk That Never Dies
  • Understanding Economic Fundamentals
  • A Bright Outlook For Consumer Spending
  • Six Tips To Avoid Phishing Scams
  • Seven Steps To Protect Yourself After Data Breach
  • Dynasty Trusts: The Gift That Just Keeps On Giving
  • Getting A High Tax Grade For Higher Education Credits
  • How Social Earnings Taxation Has Changed
  • Why Aren't More Millennials Moving On Up And Out?
  • Taking Socially Responsible Investing To The Next Level
  • Don't Be Caught Red-Handed By The Wash Sale Rule
  • Leading Economic Indicators Hit 10-Year High
  • Avoid These 6 Mistakes In Stretch IRA Planning
  • More Flexibility Allowed In Flex Spending Accounts
  • Individual Bonds-Ugh!
  • Set Aside The Funds One Might Need For A Rainy Day
  • Protect Against Possible Terrorist Attack
  • U.S. Leading Economic Indicators Rose Again
  • Fed Chair Strikes A More Cautious Tone, But Still Expects Moderate Growth
  • Count Off 3 Tax Breaks For Higher Education
  • Don't Be Victimized By These 10 Common Scams
  • Retirement Plan Choices For The Self-Employed
  • New Law Says Tax Debtors May Lose Their Passports
  • Compare Minor's Account To 529 Plan
  • Are You Being Socially Responsible?
  • 8 Smart Moves For College Grads
  • Seeking Financial Aid: Don't Fear The FAFSA
  • New Baby? Consider An Education Savings Plan
  • 3 Ways To Deduct Mortgage Interest
  • Understanding Deflation
  • Don't Play Up Super Bowl Outcome In Stock Decisions
  • When Should Millennials Start Retirement Saving?
  • Have Your Child Kick Into A Roth With A Reward To Boot
  • Sizing Up The Energy Boost To The Economy
  • A Stock Plunge Amid Strong Economic Data
  • 14 Top Year-End Tax Moves For Individuals In 2014
  • Drill Down For Three Key Oil And Gas Tax Breaks
  • When It Pays To ID Security Sales
  • GDP Growth Data Masks Strength Of The Recovery
  • Be On The Lookout For Crimes Involving An Elder Fraud
  • S&P 500's New All Time High Wednesday Will Probably Continue Over Upcoming Months, But Other Indexes Are Struggling
  • U.S. Stock valuations are within the top 10 valuations of all time but probably won't crash. Why?
  • Seven Steps To Digging Your Way Out Of Deep Debt
  • 5 Steps To Protect The Digital Assets You Own
  • The Long-Term Fiscal Status Of The United States
  • Margin Debt At Record Levels
  • What To Do When You're Suddenly Widowed
  • A Common Error In Powers Of Attorney
  • Should You Move To A Different State?
  • Tax Cost Of Being Your Own Landlord
  • Why Do GRATs Remain In Such High Demand?
  • Don't Wait To Harvest Your Losses
  • The Best States To Move To For Tax Purposes
  • 10 Reasons For The IRS To Flag Your Return
  • Many Women Face Special Challenges As Retirement Nears
  • Nine Reasons To Consolidate Debt
  • Straight Talk About Living Trusts
  • SEPPs From An IRA: Don't Change Horses Midstream
  • New Regulations Fill In Gaps On 3.8% Surtax
  • Do You Know Life Insurance Basics?
  • Top Income-Earners Drive U.S. Economic Growth
  • Give IRA Cash To Charity: Heads You Win, Tails You Win
  • Four Wash Sale Strategies To Help Clean Up Taxes
  • College Savings: How Much Do You Need Each Month?
  • Surprising New Research: Large Caps Top Small Caps
  • Newly Widowed Face 401(k), IRA Options
  • Retirement Saving Takes Time And Must Be A Priority
  • Divide-Conquer To Convert To Roth IRA
  • What Is Probate And What Does It Protect?
  • A Research Surprise On Bond Funds
  • After New Tax Law, Do You Still Need A Bypass Trust?
  • Start Estate Planning For Your Child Now
  • Seven Tax Ideas To Use Throughout The Year
  • A Comprehensive Way To Plan For College Savings
  • Bulletproofing Your Will Before Death
  • IRS Mercy on 60-Day IRA Rollover Error
  • Feds Warn Of Life Settlement Dangers
  • Know The Tax Rules On Charitable Gift Deductions
  • IRS Ruling Boosts IDTs as Estate Planning Technique
  • A Defined Benefit Plan Lets You Sock Away Large Amounts If You Can Overcome Some Obstacles
  • Economic Shifts Bring New Pitfalls And Prizes
  • Evaluating Great Companies
  • Inflation Versus Deflation
  • Jeremy Grantham And Lou Stanasolovich Discuss Market Valuations
  • Ramifications Of A Weakening Dollar
  • Secular Versus Cyclical Bear Markets
  • Small Business And Work Opportunity Tax Act
  • Time To Plan For Estates, Wills, & Trusts

  • ©2018 Legend Financial Advisors, Inc.®. All rights reserved.