Kerby Anderson

Before the election, I would often do a feature on “problems the next administration will face no matter who is elected.” Now we know that it will be a Trump administration that will face these issues. One of the most difficult to resolve will be federal deficits.

Lyn Alden (author of Broken Money) has written about this and appeared on the Fox News program “Making Money with Charles Payne.” Federal deficits are hard to fix for many reasons.

First is the issue of Social Security. Put simply the math breaks down when population growth slows down. The ratio between those who pay into it and those who receive has steadily declined for decades. And the Social Security fund that was built up for decades is shrinking.

A second issue is healthcare spending. The US not only spends more per person on health care, but it also has the highest rate of people with multiple chronic conditions. The obesity rate is twice that of other developed countries.

The accumulated debt interest is a third major issue. For the past four decades, the US has had a rising debt/GDP ratio, while also having falling interest rates. Politicians aren’t likely to choose austerity, even if the government efficiency department recommends significant cuts. Therefore, increasing the money supply by printing more money becomes the only option.

This leads to a fourth issue: the financialization of tax receipts. Let’s assume the next administration could shrink the deficit through tax increases and spending cuts. It won’t have as much impact because asset prices in this country are more correlated to the performance of the stock market.

These are just a few reasons why the next administration will face significant obstacles in trying to reduce the size of federal deficits.