Blom & Howell
  • Home
  • About Us
    • About Us
    • Our Team
  • Services
    • Financial Planning
    • Retirement Planning
    • Investment Management
    • Social Security Planning
    • Insurance Planning
    • College Planning
  • Insights
    • Blog
  • Contact Us
  • Account Access
    • Schwab Alliance
    • MoneyGuide Pro
  • Home
  • About Us
    • About Us
    • Our Team
  • Services
    • Financial Planning
    • Retirement Planning
    • Investment Management
    • Social Security Planning
    • Insurance Planning
    • College Planning
  • Insights
    • Blog
  • Contact Us
  • Account Access
    • Schwab Alliance
    • MoneyGuide Pro

INSIGHTS

CATEGORIES

All
College
Economy
Estate Planning
Financial Planning
Healthcare
Investing
Retirement
Social Security
Tax Strategy

Extraordinary Times Mean Extra Federal Debt

12/3/2020

 
Picture
Federal borrowing has increased due to the coronavirus pandemic.
 
America’s debt is now nearly as large as its economy. On September 2, the Congressional Budget Office announced that by the end of the 2020 fiscal year (September 30), the federal government is projected to owe debt equaling 98% of the nation’s gross domestic product.1
 
The CBO also projects that the country’s debt is expected to be greater than its GDP by 2023. Federal debt last exceeded GDP in 1946, the year after World War 2 ended.1
 
Some analysts thought federal debt would reach these levels by 2030. They did not see this happening now. Then again, who could have foreseen the sudden arrival of COVID-19, let alone its economic impact? This spring brought the nation’s worst quarterly GDP contraction in almost 75 years. The CBO says federal income tax revenues are expected to fall by $280 billion this fiscal year ended September 30, leading the federal government to borrow heavily as it launched its economic stimulus program for businesses and households.1,2
 
All this borrowing has also expanded the federal budget deficit. The CBO projects a deficit of $3.3 trillion for fiscal year 2020, more than tripling the deficit of fiscal year 2019.1,2
   
The deficit could stay near this level for some time. The rebound may be slow and gradual, and the economy might need additional stimulus, implying additional federal borrowing and spending.
 
What’s next? Economists have raised concerns about the high levels of debt but are quick to point out that interest rates are low and are projected to remain low for some time.
  
This year, the Federal Reserve cut the benchmark U.S. interest rate to 0-0.25%. Other central banks around the world followed the Fed’s lead. If interest rates remain low, that can help the federal government manage the deficit. Indeed, the CBO notes that the 2020 surge in spending has not significantly altered its 10-year deficit projection.2,3
     
Main Street may get more financial help, and that may mean much more spending in Washington. While taking all this in, it is worth remembering that federal debt levels, and federal deficits, can also shrink under different economic conditions. As recently as 2008, U.S. debt amounted to 39% of GDP.1
 
This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note - investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.
 
Citations.
1. New York Times, September 10, 2020
2. Washington Post, September 2, 2020
3. Federal Reserve Bank of Chicago, September 10, 2020

Comments are closed.

    Categories

    All
    College
    Economy
    Estate Planning
    Financial Planning
    Healthcare
    Investing
    Retirement
    Social Security
    Tax Strategy

    Archives

    May 2022
    April 2022
    February 2022
    August 2021
    July 2021
    June 2021
    February 2021
    January 2021
    December 2020
    November 2020
    October 2020
    September 2020
    August 2020
    July 2020
    June 2020
    May 2020
    April 2020
    March 2020
    February 2020
    January 2020
    December 2019
    November 2019
    October 2019
    September 2019
    August 2019
    July 2019
    June 2019
    May 2019
    April 2019
    March 2019
    February 2019
    January 2019
    December 2018
    November 2018
    October 2018
    June 2018
    April 2018
    January 2018
    December 2017
    October 2017
    August 2017
    July 2017
    May 2017
    April 2017
    February 2017
    January 2017
    December 2016
    November 2016
    October 2016
    September 2016
    July 2016
    June 2016
    March 2016
    December 2015
    September 2015
    August 2015
    May 2015
    November 2014
    October 2014
    August 2014
    June 2014
    March 2014
    February 2014
    January 2014
    December 2013
    November 2013
    June 2013

    RSS Feed

Company

About Us
Services

Insights
Contact Us

Connect With Us

SEARCH

Find Us On Facebook
Connect on LinkedIn

Blom & Howell Financial Planning, Inc. | 3340 Tully Road, Suite B-4, Modesto, CA 95350 | Phone: 209.857.5207 | Fax: 209.857.5098

Investment advisory services provided by Blom & Howell Financial Planning, Inc., an SEC registered investment adviser in Modesto, California. Advisory services are offered to clients or prospective clients where Blom & Howell Financial Planning, Inc. and its representatives are properly licensed or exempt from licensure. This website is solely for informational purposes. Past performance is no guarantee of future returns. Investing involves risk and possible loss of principal capital. 
Privacy Policy |  Form ADV Part 2A  |  Form ADV Part 2A Appendix 1​  |  ADV Part 2B | Form CRS - Client Relationship Summary