#37 | The US Debt Clock – And What It Can Tell You

Jon “Jag” Gay: Welcome to Protecting & Preserving Wealth. I am Jon “JAG” Gay. I’m joined as always by Bruce Hosler of Hosler Wealth Management. Welcome, Bruce.

Bruce Hosler: Thank you, Jon. I’m really excited about our topic today. I’m excited to introduce our listeners to the website, usdebtclock.org.

Jon: Okay, full disclosure. I got our notes before we started recording today. I took a look at this website. It is quite impressive. Specifically, Bruce, what’s so exciting about this website and what makes you want to introduce it to our listeners?

Bruce: Jon, this website is free to the public and it’s available for all of our listeners to review and use in order to learn about all of our national finances. There is a lot of amazing information that is provided on this website and all at no cost.

Jon: A lot of numbers when you go there. Listeners can go to usdebtclock.org and see the information you’re going to share with us today for themselves, right?

Bruce: That’s right, Jon. Let’s take a look at the website and start in the upper left-hand corner where we can see the running total of the US national debt. Today, the national debt is running just about $33.7 trillion. Now, that number by itself is just plain overwhelming. If I put it in context, it will help our listeners understand what is going on with the printing of money in our country. The debt clock website in the upper left-hand corner will allow you to look back at the national debt in a prior year.

If we look back to the national debt in the end of October of 2020, just three years ago, the national debt was only $27 trillion. With just a little Google search, I found that on January 1st of this year, 2023, our national debt was $31.4 trillion. Let me put that in context. Three years ago, we had $27 trillion in debt. In January of this year, that had grown to $31.4 trillion. $3 trillion more from 2020 to January of 2023.

Jon: Got it.

Bruce: Now, from January 1st of 2023, we have increased our national debt from $31.4 trillion to $33.7 trillion, adding $2.3 trillion to our national debt in just 10 months in 2023.

Jon: This is surprising as I do some quick napkin math here. You would have figured a bigger jump during the days of COVID. If I’m doing some quick math here, Bruce, that $2.3 trillion in 2023 as we record here on October 31st, that’s a 7.3% increase in the total amount of debt that our country incurred in just the first 10 months of 2023.

Bruce: Jon, when you say it like that, it sounds really scary. I think it should be scary to our listeners because the rate at which we’re adding debt right now is going to create a situation that may be next to impossible for us as a country to ever pay this debt off.

Jon: Now, important to mention. We don’t get political. We don’t take sides in this podcast, but I have to ask, is it possible that our politicians, maybe on both sides of the aisle, never really have any intention of paying the debt down?

Bruce: Not only is it possible. I think we have to surmise from their actions that they never intend to even attempt to pay the debt down.

Jon: Bruce, what does that mean, importantly, for our listeners now?

Bruce: Before I answer that question, Jon, let me add some additional color and context of what we can learn from the usdebtclock.org website. Returning again to the upper left-hand corner of the website, we can see the US debt-to-GDP ratio. Now, GDP stands for gross domestic product. It is the standard used to measure the value created by the production of goods and services in the country during a certain period of time. Usually, on an annual basis. The website compares four periods of time so they can demonstrate how this ratio compares at different periods of our history. Back in 1960, the year I was born, 63 years ago, the US debt-to-GDP ratio was 52.25%. In 1998, that ratio dropped down to 34.69%, so significantly 20% lower.

Jon: 1998 was the year I graduated high school for some context. [laughs]

Bruce: All right, there you go. In the year 2000, Y2K, right?

Jon: Yes.

Bruce: It jumped back up to 55.72%, so more than half of the debt was the debt-to-GDP ratio. Right now, the website is showing that the US debt compared to the GDP, the gross domestic product, is a whopping 124% ratio. In other words, our debt has bloomed 124% of the entire production of goods and services in the United States on an annual basis.

Jon: Okay, so some more quick math here. It looks like about 2.3 times higher than it’s ever been in either of the other high years that you mentioned of 1960 or 2000.

Bruce: That is the most dramatic increase that I want to bring to the attention of our listeners. If we stay in the area of the website, focusing on the national debt, you can see that the US federal spending is currently at $6.1 trillion a year. When I say “federal spending,” that’s how much we’re spending for everything that we spend money on in the federal government. It also shows that the US federal budget deficit, that is the amount of money we’re borrowing because we’re not bringing that much revenue in, is $1.7 trillion as the official number. The website also shows that the actual federal budget deficit should really be about $1.8 trillion so far in just this year, 2023, 10 months in.

Jon: All right, so I guess when we hear on the news that deficit spending is about $2 trillion a year, that number actually sounds accurate based on everything you’re describing from the website.

Bruce: It is accurate, but think about the implications of what that means. It means we’re spending $2 trillion more than we are bringing into the federal coffers of the government every year.

Jon: That’s a scary number. Where is the government getting all this extra money from?

Bruce: Jon, they are printing it. When they print so much excess dollars, they devalue the dollars that each of us are holding in our wallets and in our bank accounts.

Jon: Okay, but how do people know their money, those US dollars that they hold, they own, they save, is being devalued?

Bruce: Jon, it does not show up as the dollar being devalued. It shows up as inflation on everything else that they have to buy, from groceries to gas to the cost of your Netflix subscription or even a ticket to Disneyland. Everything that we buy appears to be going up in price when, in reality, it’s just that our dollars are being devalued due to all of the inflation caused by the excessive printing of money by our government.

Jon: All right, so when I look at that website, usdebtclock.org, it’s linked in our show notes, by the way, I can see that they’re providing a lot of other information as well, a lot of numbers when you first open that website. Can some of this other information help our listeners understand the context of what we’re talking about here today, Bruce?

Bruce: Let’s compare some of the other information on the website. I’m concerned about some of the largest budget items in the United States. Right below the US national debt, the website shows the budget items annually for Medicare and Medicaid, Social Security, defense spending, and the annual interest on the national debt.

Since our national debt has increased so dramatically the last three years, the interest on the national debt is currently around $673 billion per year, and our defense war spending is around $825 billion. Because inflation has caused the Fed to have to raise interest rates on the US debt instruments like the 10-year and the 2-year Treasury bills, it will not be very long before the interest on the debt is going to surpass the spending that the US requires to defend our country.

Jon: Wow.

Bruce: The website has the ability to project these budget items into the future. If we use the forward-looking time-machine feature on the website, it’s up in the upper left-hand corner, and project the numbers into 2027, just four years from now, they are projecting that defense spending in 2027 will be $920 billion per year. They’re also projecting that the interest on our national debt will be more than three times that amount at over $3 trillion per year in interest in just four years.

Jon: I’m just trying to get my head around those numbers. They’re quite scary. What does it mean to our listeners, Bruce? What should they take away from this episode of our podcast?

Bruce: Jon, this is a clear warning to our listeners. I am standing as a beacon in the night. I am trying to warn them that they need to prepare right now for budget and fiscal difficulties in our country that we will face in just the next five years.

Jon: Bruce, any reason you’re going with a five-year time frame?

Bruce: Yes, absolutely. In five years, the trustees of the Medicare trust fund have clearly articulated that the trust fund for Medicare will run out of money and become insolvent in 2028.

Jon: Yeesh.

Bruce: When that moment arrives, I believe there’s going to have to be some very difficult decisions made by our government. Imagine how difficult the decision will be when our government officials will have to consider whether they should cut Medicare benefits for our senior citizens. How popular will that be that whoever’s in political office at that time, whether it be a Democrat or Republican, will have to raise taxes dramatically to make up for the shortfall that will arrive as the Medicare trust fund becomes insolvent? Given the choice, do you think politicians will vote to cut Medicare benefits or do you think they’re going to vote to raise taxes across the board for almost all Americans in order to continue to support our social insurance programs like Medicare?

Jon: To me, I would think not only do older Americans historically vote in bigger numbers but the idea of cutting off somebody’s health insurance when they’re older and they need that health care, it certainly seems like a no-brainer to me, but is this whole situation really as bad as you’re making it sound, Bruce?

Bruce: Jon, I am afraid it is. That is why I’m sounding the alarm and letting our listeners look at the numbers for themselves. Just look at the Medicare enrollees on the website. The website reports that there are 70.5 million Medicare enrollees and 100 million Medicaid recipients. Now, our population is only 335 million. According to the US Census Bureau, population projections tell us that about 12,000 baby boomers will turn 65 every day next year in 2024. Think about that. 12,000 today, 12,000 tomorrow, 12,000 the day after that.

Jon: Jeez.

Bruce: That is about 4.4 million baby boomers that will turn 65 years old in 2024 and will be eligible to claim Medicare benefits. That is a lot of new healthcare costs that the Medicare insurance system will have to absorb and without any new or additional revenue to support all of those new Medicare enrollees. I believe this will be the beginning of a very difficult fiscal season for the United States.

Jon: That information Bruce just quoted from investors.com, we’ll link to that article in our show notes. All right, Bruce, let’s come back to the big question. Can you tell our listeners what all this means to them?

Bruce: It means that they need to work more diligently than ever right now to make sure they are moving to tax-free as quickly as they possibly can. We only have three years left until the Tax Cuts and Jobs Act sunsets in 2025. Now, some of you may think, “Well, three years, Bruce.” We’re in October of 2023. Folks, you have two months left in 2023 and you have all of ’24 and ’25, but those are the only three tax years that you have left. At that point, everyone will be subject to a 3% to 9% tax increase, depending on your tax bracket, unless Congress makes changes to the tax laws.

If they don’t take any action, the Tax Cuts and Jobs Act will sunset. Now, when the Medicare trust fund runs out of money in 2028, the government is going to have to come looking to find sources of revenue to replace the lost trust fund revenue. That will be a moment of truth in our country. I’m hoping to get our listeners ahead of that situation by taking action this year and every year going forward to shelter themselves from the dramatic tax increases that the government will almost certainly have to implement.

Jon: Kind of ironic that we’re recording this on Halloween. You’re telling our listeners how to avoid that potential tax boogeyman coming for them.

Bruce: Yes, it’s a scary thought.

Jon: Bruce, I’m sure that after today’s episode, many of our listeners are going to look at that website, usdebtclock.org. Again, it’s linked in our show notes. If they have questions they want to speak with you or your team at Hosler Wealth Management, what are the best ways for them to reach you?

Bruce: Jon, they can reach us at hoslerwm.com or on the phone in Scottsdale at 480-994-7342 or in Prescott at 928-778-7666. Folks, if you have questions, be sure to give us a call. We would love to discuss the options that are available to you and help point you in the right direction to protect you against certainly some scary things. Go look at the website. That will be very informative to each of you.

Jon: Very eye-opening indeed. There’s a reason that Bruce is so adamant about this stuff. Really important, crucial information. As always, today, Bruce, thanks. We’ll talk again in a couple of weeks.

Bruce: Thanks, Jon.

Jon: Securities and advisory services offered through Commonwealth Financial Network, member of FINRA/SIPC, a registered investment advisor. Forward-looking commentary should not be misconstrued as investment or financial advice. The advisor associated with this podcast is not monitored for comments and any comments should be given directly to the office at the contact information specified.

Any tax advice contained in this communication, including any attachments, is not intended or written to be used and cannot be used for the purpose of, 1) avoiding federal or state tax penalties or, 2) promoting marketing or recommending to another party any transaction or matter addressed herein. The accuracy, completeness, and timeliness of the information contained in this podcast cannot be guaranteed. Accordingly, Hosler Wealth Management LLC does not warranty, guarantee, or make any representations, or assume any liability with regard to financial results based on the use of the information in this podcast.