By Nick Massey
January 19, 2024

Budgets matter

Explore the trajectory of federal spending and its implications for our nation's fiscal future.

As I have often said, something that is unsustainable will, by definition, stop at some point. Trends continue until they can’t anymore. Deficits don’t matter until they do. It would then appear that the larger trend of a dysfunctional Congress and executive branch essentially depending on the Fed to clean up their collective mess is reaching the end of the road. Let’s look at those numbers.

In 1987, the totality of the federal budget – every cent that Uncle Sam spent that year – crossed $1 trillion for the first time. It’s never been under a trillion dollars since. In 2009, the federal budget deficit – or the amount that Uncle Sam borrowed to spend above what they received – crossed $1 trillion for the first time. That was a breathtaking moment. And now it’s not only normal, it’s actually expected.

2023 marks an even more unfortunate trillion-dollar milestone. In October 2023, the annual interest paid on our national debt was estimated to have crossed the $1 trillion mark for the first time. I say “estimated” because government accounting being government accounting, the official numbers won’t be known for a while.

And with the trillions of dollars of debt added to the pile during the pandemic spending spree soon being up for refinancing at what are now much higher interest rates, interest costs won’t be dipping below $1 trillion any time soon. If a miracle happened and we balanced the budget tomorrow (and we all know there’s not a snowball’s chance in you-know-where of that happening), the interest expense would still continue to rise as older, lower-interest bonds get rolled into newer, higher-interest ones.

Of course, we know Congress won’t be balancing the books any time soon. Their own in-house watchdog, the Congressional Budget Office, actually sees the budget deficit widening from $1.4 trillion in 2023 to $2.7 trillion by 2033, and most of that 53 percent widening will be due to interest paid on debts already incurred. Our “primary” budget deficit, or current spending over and above current revenues, will be “only” $1.3 trillion.

Our budget deficit will not be $2.7 trillion in 2033, and no, it isn’t because I believe that Congress will get sober and rein in spending. No, something will break long before that happens. When asked by my friends what it would take to eventually fix the problem, I think it will take a crisis to do so.

While most of our leaders like the idea of balancing the budget, that would mean either spending less, bringing in more revenue (i.e., taxes), or a combination of both. Actually doing that will be VERY painful and very unpopular. It would be political suicide to do what is necessary, and nobody could even agree on what would be cut because all the choices are bad. It will only finally happen, in my opinion, when there is a financial crisis so bad that there is no other choice and all the politicians have political cover. I hate to be so blunt, but I see no other way.

Even “Bond King” Jeff Gundlach, manager of the Double Line family of bond funds, says that a “crack of doom” moment is needed to make both democrats and republicans take the deficit seriously. A bona fide crisis.

What will that crisis be? Your guess is as good as mine. A rational person might have assumed that Fitch lowering Uncle Sam’s credit rating would have been it. It wasn’t. It made not one bit of difference to government spending plans. Will another downgrade matter? Maybe. Maybe not. But we’ll find out soon enough because there is no reality in this or any parallel universe where regular $2.7 trillion deficits year over year can be the norm in 2033. Something will break before then.

Alice O’Connor, better known by her pen name, Ayn Rand, was a Russian-American writer and philosopher. She was known for her fiction and for developing a philosophical system she named Objectivism. She is best known for her famous novel “Atlas Shrugged.” Born and educated in Russia, Rand moved to the United States in 1926. When asked once what we should do about the poor, Ayn Rand offered this sage advice: “Don’t be one of them.”

We have the same option when facing our country’s looming financial crisis and the economic and political chaos that will follow. Just don’t be one of them. If only it were that simple. Thanks for reading.

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About Nick Massey

Nick Massey is a retired financial advisor and CFP, and former President of Massey Financial Services. He can be reached at