- Musk eviscerates big, beautiful bill…
- A hard lesson in the meaning of negative compounding interest…
- The PASSIVE STREAM of income that could MAKE your retirement…
Dear Reader,
“I’m sorry,” begins a freshly liberated Elon Musk, “but I just can’t stand it anymore.”
What precisely cannot the South African industrial titan stand?
The answer is the big, beautiful bill presently under congressional consideration:
“This massive, outrageous, pork-filled Congressional spending bill is a disgusting abomination. Shame on those who voted for it: you know you did wrong. You know it.”
A disgusting abomination, he labels it!
Mr. Musk must certainly wonder why he endured endless slings, endless arrows as Department of Government Efficiency director… and lost multiple billions in business…
Merely to witness all his proposed government savings vanish in smoke.
Mr. Musk concludes, vituperously, vitriolically, venomously, that:
“Congress is making America bankrupt.”
$5 Trillion or More Added to the Debt
Indeed Congress is making America bankrupt. The big, beautiful bill will — by credible estimates — pile on an additional $3 trillion of national debt across the following decade.
Yet the $3 trillion figure may itself prove… conservative.
As reports The Kobeissis Letter:
- If you factor in the incremental interest expense on this debt (with rising rates), it will likely add close to $5 trillion by 2035.
- To make things worse, this forecast assumes no recession over the next 10 years, in which case the incredible deficit could DOUBLE expectations.
Here I nod my head, violently, in agreement. The United States economy will nearly certainly lapse into recession within the following decade — possibly several.
At which point the printing press will begin to whir with fantastic abandon.
The resulting “stimulus” will merely heap fresh debt upon existing debt.
Presently $36.9 trillion, the nation’s debt may well scale an intergalactic $50 trillion by 2035.
Making the Abstract Concrete
Yet large numbers dull the sober senses and befog the mind. They are mere abstractions lacking all tangible connection.
Yet the numerical crackerjacks at consulting firm EY have run the figures. Their researches reveal that the present United States debt trajectory will:
- Reduce the size of the economy by $340 billion in 2035, $1.1 trillion in 2055, and $1.8 trillion in 2075
- Reduce the number of U.S. jobs by 1.2 million in 2035, 2.7 million in 2055, and 3.6 million in 2075
- Reduce private investment by 13.6 percent in 2035, 17.1 percent in 2055, and 21.6 percent in 2075
- Decrease wages by 0.6 percent in 2035, 3.0 percent in 2055, and 5.3 percent in 2075 (“wages” refers to wage rates, the effective rate of pay per hour, even for salaried workers).
How do you like it?
The Good News, Maybe
Of course — the caveat is necessary — here we deal with projections.
They are etched not in granite but in plastic… perhaps even gossamer.
I concede the possibility that gallops in such fields as artificial intelligence, robotics, biotechnology and related wizardries will vastly enhance economic productivity.
Any such enhancements would improve the debt calculus.
Again, I concede the possibility. Yet I note that looming technological leaps often remain looming technological leaps.
And the promised dawn often proves a false dawn.
Consider, for example, artificial intelligence.
The thing had its origins in the 1950s. The ensuing decades were fantastic disappointments for its drummers.
As noted one German artificial intelligence specialist in 1994:
- This is an old game in AI. They say: in 10 years we will have this and that, and then after 10 years you ask the same question and they say: in 20 years we will have achieved it. After 20 years, you ask the same question again, and also 50 years from now we will be asking the same question.
Am I Being Overly Pessimistic?
Again, perhaps “this time is different.”
Yet I am skeptical by nature. I observe glasses that are half empty of liquid — not half full of liquid.
The silver lining is often a gray edge and the bright side is usually the wrong side.
Thus I incline towards the pessimistic outlook.
Yet like weeds gradually choking a garden, or a slowly metastasizing cancer… debt’s evils spread gradually, nearly imperceptibly.
One year or two years upon the hamster wheel, with little to no growth — even minus growth — are endurable.
Yet multiply the business by five years, 10 years, 20 years, 50 years.
Here you have a grim lesson in the meaning of negative compounding interest.
What Might Have Been?
Consider: United States real annual economic growth averaged 3.22% from 1980-2009.
From 2009-2023, real annual economic growth averaged 2.3%.
Freedom Financial News contributor Jim Rickards calculates the United States would be over $5 trillion wealthier across that space — had the 3.22% trend held.
Run your projections through 2035, through 2055, through 2075… and negative compounding interest assumes dimensions truly tragic.
A fellow can scarcely conceive of the possibilities, lost forever to time.
“For all sad words of tongue and pen,” wrote poet John Greenleaf Whittier, “the saddest are these, ‘It might have been.’”
One blue day the United States might reflect upon the trillions and trillions of wealth it lost to debt… and wonder…
What might have been?
Brian Maher
for Freedom Financial News
