The national debt has continued to rise during the tenure of President Trump. The president campaigned partly on the promise to eliminate the debt within eight years, but unfortunately it has grown a not-insignificant 13% since he took office in January 2017. It went from $19.9 trillion then to the $22.5 trillion it is today. The president also apparently put a priority on seeing popular risk assets rise in value, and that has prompted him to go as far as pressuring the Federal Reserve to make additional rate cuts. It seems as though his interest in outright elimination of the debt has waned considerably.
I hate to say it, but there’s more. The president’s budgets are expected to add more than $9 trillion to the debt over the eight-year period, which eventually would put the amount at a stunning $29 trillion according to the White House’s own estimates. Add in what many expect to be the application of drastic loose monetary policy tactics in the years to come, and there’s no telling just how substantially the debt will grow over the next decade.
If you think you might find relief from the other side of the aisle, you can forget it. Anyone who has been paying even casual attention to the news is aware of the ultra-grandiose campaign promises being made by Democrats to do such things as provide “Medicare for all” and pay off all of outstanding student debt held by Americans.
This is the point: There is little reason to believe America’s annual budget deficits and overall debt are going anywhere but up, regardless of who is in the White House. Lately, I have been emphasizing the benefit of precious metals as stores of value. I believe this feature will be increasingly important, because it appears likely that some of the greatest challenges to Americans’ future financial security will come from much greater stresses on the dollar.
Democratic Candidates Refuse to Discuss America’s Debt
A recent article by Reuters made an interesting observation about the first Democratic debates on June 26 and 27: “In four hours of debate among Democratic contenders for the U.S. presidency, the word ‘deficit’ was never uttered and the government’s debt was mentioned only once.”
At one point, a moderator questioned candidate Kamala Harris about how Democrats would pay for the much-bigger bag of goodies they are planning to deliver to the public if they regain the presidency, and this was her answer:
“I hear that question, but where was that question when the Republicans and Donald Trump passed a tax bill that benefits the top 1% and the biggest corporations in this country?”
As the Reuters piece notes, in addition to Harris’ deflection, everyone else on the debate stage stayed completely silent on the subject.
Here is the real answer to the moderator’s question – the one no candidate wants to say out loud: The cash-printing presses will likely be sent into overdrive and the country driven much further into debt, because it is the only feasible way to pay for these initiatives. “Tax the rich” plans have been floated by some as possible ways to increase revenue, but it seems unlikely any will come close to offsetting anticipated costs. For example, analysis of a plan proposed by Democratic presidential candidate Elizabeth Warren suggests it would raise less than $3 trillion over 10 years. One estimate of the cost of Bernie Sanders’ “Medicare for all” promise puts the price tag at nearly $33 trillion over 10 years.
Even without the additional burden of new and thoroughly massive public programs, the cost of America’s “regular” obligations seems to have reached a point where they are practically unrestrainable, and much of the reason for that is rooted in good ol’ political expediency. As Kimberly Amadeo of The Balance succinctly notes about America’s debt and taking steps to minimizing it:
“The problem isn’t finding it. Both Presidents Bush and Obama did that. The problem is in cutting it. Each program has a constituency that lobbies Congress. Eliminating these benefits loses voters and contributors. Congress will agree to cut spending in someone else’s district, but not in their own.”
Amadeo feeds her readers the medicine no one – not politicians, and certainly not their constituents – want to take: “Any president must cut into the biggest programs to make an impact on the debt.” She reminds us that mandatory obligations account for two-thirds of all government spending, with the two biggest of those being Social Security and Medicare. And that’s without, of course, the addition of any generous expansions to the public dole courtesy of hopeful Democrats or anyone else.
So, as a long-term retirement saver, what do you take from this?
National Debt Could Be Trouble for Retirement Savers No Matter Who’s in Charge
The apparently deliberate refusal of Democrats to address the deficits and debt means, in my opinion, those obligations will positively soar if they regain the White House in 2020. It’s difficult to conclude anything else given the content and tenor of the policy discussions within that party. And, even if President Trump wins another term, there are ample reasons to believe the debt will continue to rise – though perhaps not as much.
I see these prevailing winds as more notice for savers to consider prioritizing the store-of-value benefit when it comes to selecting portfolio assets. As challenges to retirement savers mount – challenges that include various attacks on the dollar’s strength from both within and outside of the U.S. – I believe the future health of a portfolio ultimately could prove to be as dependent on its ability to thrive in the midst of economic weakness as on anything else.
If you’re ready to learn more about all the ways gold and silver can bring value to your savings portfolio, call Augusta Precious Metals at 800-700-1008 to speak with one of our knowledgeable and dedicated gold and silver professionals. And, if you’re interested in buying your metals inside of a tax-advantaged retirement account, ask the representative you speak with to explain how easy it is to purchase gold and silver from Augusta for your IRA.