The United States is facing a dire fiscal situation, with a federal debt that has exceeded $33.7 trillion as of November 11, 2023. This staggering number equates to over $100,000 of debt for every single person in America. The debt servicing is presently $1.8 Billion per day. (Note this is not taking into account state and local municipality debt, and there is plenty).
They say a picture is often to be worth a thousand words, so attached to this article are charts from non-partisan sources that vividly illustrate the unsustainable trajectory of our national debt. These visuals serve as a stark reminder of the urgency of addressing this critical issue.
As we’re entering election season, we’re hearing some responsible politicians about the debt issue. America’s growing debt can be boiled down to simple math—a mismatch between spending and revenues. When the federal government consistently spends more than it collects in revenue, it must borrow money to cover the annual deficit. This deficit accumulates year after year, contributing to our ever-increasing national debt. While constituents may desire more benefits, it’s crucial to understand that both taxes and benefits must be scrutinized to tackle this issue effectively.
One might wonder how the federal deficit affects everyday Americans. One significant way is through mortgage rates. All forms of debt, including federal, state, local, corporate, and international, compete for investors willing to purchase bonds or securities. This competition affects interest rates. When the government accumulates more debt, it must offer higher interest rates to entice investors to purchase their bonds over other securities. Unfortunately, this leads to higher mortgage rates, making homeownership more expensive for individuals and families.
The higher interest rates we are currently experiencing only exacerbate the debt servicing burden. As the government struggles to cover interest payments, it must divert funds from essential programs and discretionary spending, ultimately hindering economic growth. The cycle continues as the interest compounds, leading to more debt and even higher rates. This vicious cycle must be broken to ensure a stable fiscal future.
It is crucial to differentiate between monetary policy controlled by the Federal Reserve and fiscal policy governed by Congress. The Federal Reserve manages monetary policy, primarily influencing short-term interest rates. Their tools include adjusting the overnight Fed Funds Rate and buying/selling bonds to manipulate rates (Quantitative Easing and Tightening). Fiscal policy, on the other hand, encompasses government spending and revenue decisions, controlled by Congress. To address the debt crisis, it is imperative for elected officials to exercise responsible fiscal policy, as the Federal Reserve’s actions can only go so far.
Discretionary spending, which is determined on an annual basis by the Congress and the President through enactment of appropriations; Mandatory spending, which consists of programs that are governed by permanent laws; and Interest on the national debt.
The growing national debt is a pressing issue that cannot be ignored, especially as we approach election season. Responsible politicians must prioritize fiscal responsibility to avoid passing on this burden to future generations. Addressing the deficit issue requires a comprehensive approach, considering both revenue and spending, to create a sustainable fiscal future for America. It is our collective responsibility to ensure that our nation remains economically strong and that we do not leave a legacy of debt for generations to come.
If you are in the Los Angeles area, and have any questions or real estate sales or financing needs, feel free in contacting me
Ron Henderson GRI, SRES, SFR, RECS, CIAS
President/Broker
Multi Real Estate Services, Inc.
Gov’t Affairs Chair – California Association of Mortgage Professionals (2017-2018)
Chairman – OutWest Marketing Meeting (Real Estate Education)
BRE #00905793 NMLS #310358
www.mres.com
ronh@mres.com
Specialist in the Art of Real Estate Sales and Finance
Real Estate market, mortgage rates, Los Angeles, San Fernando Valley, Conejo Valley, Simi Valley, Woodland Hills, West Hills, Calabasas, Chatsworth
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