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Goldman Sachs: Fiscal outlook for US ‘is NOT good’

Although the matter of the national deficit has faded from view during the Trump presidency, investors still worry about future effects on the US economy.

Seraphim Hanisch

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Goldman Sachs expressed its concern over the matter of the continuing huge budget overruns the United States Government amasses every year. CNBC reported that Jan Hatzius the chief economist at Goldman, predicted the annual budget deficit rising to over $2 TRILLION by 2018, an amount that is projected to be about seven percent of the Gross Domestic Product (GDP) for that year.

He further noted:

“An expanding deficit and debt level is likely to put upward pressure on interest rates, expanding the deficit further… While we do not believe that the U.S. faces a risk to its ability to borrow or repay, the rising debt level could nevertheless have three consequences long before debt sustainability becomes a major obstacle.”

And what are those three consequences? According to Thomas Franck at CNBC:

  1. Although economic growth should indeed jump above 3 percent in 2018 thanks to the stimuli of the tax cuts passed into law at the end of 2017, the Congressional Budget Office expressed the belief that the acceleration will likely prove brief, and debt held by the public will soar to $28.7 trillion by the end of fiscal 2028.That could create a difficult situation for Congress if the economy faces a downturn in the near future, which would hamper legislators’ ability to provide additional fiscal stimulus.”Lawmakers might hesitate to approve fiscal stimulus in the next downturn in light of the already substantial budget deficit,” the economist said. “While we would expect some additional loosening of fiscal policy during the next downturn, there is a good chance in our view that it would be less aggressive than it was in the last few recessions.”
  2. But even if the debt and deficit levels don’t prevent lawmakers from approving countercyclical fiscal stimulus during the next recession, a political desire to stabilize the debt level would likely arrest growth during the next recovery, the Goldman team explained.”The current fiscal expansion … must at some point give way not just to a neutral stance, which we expect by 2020, but to a tightening of fiscal policy that could restrict growth,” Hatzius wrote.

Finally, the economist explained that regardless of how much longer the current expansion persists, increasing deficits and debts naturally put upward pressure on interest rates, expanding the deficit further.Goldman Sachs estimates that a 1 percentage point increase in the budget deficit raises the 10-year Treasury yield by roughly 20 basis points when the economy is at or beyond full employment, as it appears to be currently.

Surprises are clearly possible in both directions, but we believe the risks are tilted in the direction of larger deficits than projected,” Hatzius concluded. “While we expect Congress will eventually address the widening budget gap, it also seems quite likely to take longer than most market participants might expect.”

One disturbing statistic that Hatzius and Goldman also noted was that the total US debt was likely to rise to an amount equivalent to the actual GDP by 2028. This comes from the Congresssional Budget Office’s (CBO) April 2018 study on the matter. The CBO is widely regarded as a non-partisan “watchdog” that gives accurate and non-politically motivated projections.

The further projection shown below shows how this takes place. Although the budget deficit from year to year does not exhibit a large percentage increase, it is already very large and the trend shows that it will only become larger over time.

Despite the conservative swan song of balancing the budget and lowering taxes, 2017 featured a budget deficit of $665 billion, and 2018 is expected to have an $804 billion deficit (partly due to the $1.3 T “omnibus” spending bill that angered the President, though he signed it so as to strengthen military funding and other matters he thought too important to lose.)

The Congressional Budget Office (CBO) has a slightly more optimistic view than Goldman Sachs does. However that optimism only goes so far as to say the growth in deficits and debt will be a bit slower than Goldman predicts. For example, according to the CBO report, by the time 2028 arrives, if the trends hold, the deficit projection is expected to $1.526 Trillion just for that year alone. This is astronomically high, but it comes in about 25% lower than the $2 Trillion that Goldman predicts for the same year.

At any rate, the total national debt is expected to reach parity with the GDP in that period of time. By 2028, the publicly held debt is expected to be at about 96% of GDP, a percentage level which has not been seen in the USA since WWII.

The general understanding of budget overruns is that these are very bad things. That being said, Goldman does not appear terribly concerned, nor does the CBO. Macroeconomics are sometimes held to follow a different set of rules than the personal-level economics shared in common by most individuals and small to rather large businesses. Further, speculation on the country’s (or the world’s) economic future has been proven over and over to be a very fuzzy science.

However, the notion of a national debt growing to nearly US $30 trillion is not a comforting thought, especially when contrasted with other great powers such as the Russian Federation which holds a rather low debt presently of $1,306 per person. China presently has a debt level of $3,709 per person. The US, as of May 21, 2018 carries a debt load of $64,996 per citizen. 

This is a situation which has not yet been resolved and it does not appear to be sustainable. And at this time, there appears to be no solution offered to fix the problem.

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It’s Back to the Iran-Contra Days Under Trump

Abrams and his cronies will not stop with Venezuela.

Strategic Culture Foundation

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Authored by Wayne Madsen, via The Strategic Culture Foundation:


Showing that he is adopting the neoconservative playbook every day he remains in office, Donald Trump handed the neocons a major win when he appointed Iran-contra scandal felon Elliott Abrams as his special envoy on Venezuela. Abrams pleaded guilty in 1991 to two counts of withholding information on the secret sale of US weapons for cash to help illegally supply weapons to the Nicaraguan right-wing contras, who were battling against the government of President Daniel Ortega. Abrams would have headed to a federal prison, but President George H. W. Bush, an unindicted co-conspirator in the scandal, issued pardons to Abrams and his five fellow conspirators – former Secretary of Defense Caspar Weinberger, former National Security Adviser Robert McFarlane, and former Central Intelligence Agency officials Alan Fiers, Duane “Dewey” Clarridge, and Clair George – on Christmas Eve 1991, during the final weeks of Bush’s lame duck administration.

Abrams escaped being charged with more serious crimes by Independent Counsel Lawrence Walsh because he cut a last-minute deal with federal prosecutors. Trump, who has made no secret of his disdain for cooperating federal witnesses, would have normally called Abrams a “rat,” a gangster term meaning informant. The man who helped engineer the pardons for Abrams and his five convicted friends was none other than Bush’s Attorney General, William Barr, who has just been sworn in as Trump’s Attorney General. Trump, who is always decrying the presence of the “deep state” that thwarts his very move, has become the chief guardian of that entity.

During a recent hearing of the US House of Representatives Foreign Affairs Committee, newly-minted congresswoman Ilhan Omar, Democrat of Minnesota, reminded her colleagues and the world about the sordid background of Abrams.

Omar zeroed in on Abrams’s criminal history:

“Mr. Abrams, in 1991 you pleaded guilty to two counts of withholding information from Congress regarding the Iran-Contra affair, for which you were later pardoned by President George H.W. Bush. I fail to understand why members of this committee or the American people should find any testimony you give today to be truthful.”

Abrams, as is the nature of neocons, refused to respond to Omar and cited her comments as “personal attacks.”

Abrams’s and his fellow criminals’ use of mercenaries and “death squads” to conduct secret wars in Nicaragua, Honduras, El Salvador, and Guatemala during the Ronald Reagan administration in the 1980s has made a re-entrance under Trump. Abrams was brought on board by neocons like National Security Adviser John Bolton, Vice President Mike Pence, and Secretary of State Mike Pompeo to oversee a US military build-up in Colombia, said to be 5000 US troops, to support Venezuelan paramilitary and military efforts to topple President Nicolas Maduro. Abrams and Bolton are also believed to have retained the services of another unindicted conspirator in the Iran-contra affair, Michael Ledeen, a colleague of the disgraced and convicted former Trump National Security Adviser, retired Lieutenant General Michael Flynn. Ledeen and Flynn co-authored a book titled, “The Field of Fight: How We Can Win the Global War Against Radical Islam and its Allies.” The book contains nothing more than the standard neocon tripe one might expect from the likes of Ledeen.

An official investigation of the Iran-contra scandal by the late Republican Senator John Tower of Texas concluded that Abrams’s and Ledeen’s friend, Iranian-Jewish middleman Manucher Ghorbanifar, a long-time Mossad asset and well-known prevaricator, was extremely instrumental in establishing the back-channel arms deals with Iran. Ghorbanifar has long been on the CIA “burn list” as an untrustworthy charlatan, along with others in the Middle East of similar sketchy credentials, including the Iraq’s Ahmad Chalabi, Syria’s Farid “Frank” Ghadry, and Lebanon’s Samir “Sami” Geagea. These individuals, however, were warmly embraced by neocons like Abrams and his associates.

Abrams, whose links with Israeli intelligence has always been a point of consternation with US counter-intelligence officials, is part of an old cabal of right-wing anti-Soviet Democrats who coalesced around Senator Henry Jackson in the 1970s. Along with Abrams, this group of war hawks included Richard Perle, Frank Gaffney, William Kristol, Douglas Feith, Lewis “Scooter” Libby, Abram Shulsky, and Paul Wolfowitz. Later, this group would have its fingerprints on major US foreign policy debacles, ranging from Nicaragua and Grenada to Lebanon, Iraq, and Libya. Later, in December 2000, these neocons managed to convince president-elect George W. Bush of the need to “democratize” the Middle East. That policy would later bring not democracy but disaster to the Arab Middle East and North Africa.

Abrams and his cronies will not stop with Venezuela. They have old scores to settle with Nicaraguan President Ortega. The initiation of “regime change” operations in Nicaragua, supported by the CIA and the US Southern Command (SOUTHCOM) in Miami, have been ongoing for more than a year.

The Trump administration has already achieved a regime change victory of sorts in El Salvador. Nayib Bukele, the former mayor of San Salvador, who was expelled from the formerly-ruling left-wing Farabundo Marti National Liberation (FMLN) party and joined the right-wing GANA party, was recently elected president of El Salvador. Bukele has quickly re-aligned his country’s policies with those of the Trump administration. Bukele has referred to President Maduro of Venezuela as a “dictator.” He has also criticized the former FMLN government’s recognition of China and severance of diplomatic ties with Taiwan. It will be interesting to see how a sycophant like Bukele will politically survive as Trump continues to call hapless asylum-seeking migrants from his country, who seek residency in the United States, “rapists, gang monsters, murderers, and drug smugglers.”

Another country heading for a US-installed “banana republic” dictator is Haiti. President Jovenal Moise has seen rioting in the streets of Port-au-Prince as the US State Department removed all “non-essential” personnel from the country. Moise, whose country has received $2 billion in oil relief from Venezuela, to help offset rising fuel prices, has continued to support the Maduro government. However, at the US-run and neo-colonial artifice, the Organization of American States (OAS), Moise’s envoys have been under tremendous pressure to cut ties with Venezuela and recognize the US puppet Juan Guaido as Venezuelan president. Moise’s refusal to do so resulted in armed gangs hitting the streets of Port-au-Prince demanding Moise’s resignation. It is the same neocon “regime change” playbook being used in Venezuela and Nicaragua.

There will be similar attempts to replace pro-Maduro governments in his remaining allies in the region. These include Suriname, Antigua and Barbuda, Dominica, and Saint Vincent and the Grenadines.

Abrams was also brought in as an adviser on Middle East policy in the George W. Bush administration. The carnage of Iraq is a stark testament to his record. In 2005, it was reported that two key Bush White House officials – Deputy Chief of Staff Karl Rove and Deputy National Security Adviser Elliot Abrams – gave a “wink and a nod” for the assassinations by Israeli-paid operatives of three key Lebanese political figures seeking a rapprochement with Syria and Lebanese Hezbollah – Member of Parliament Elie Hobeika, former Lebanese Communist Party chief George Hawi, and former Prime Minister Rafik Hariri.

In 2008, a United Nations panel headed by former Canadian prosecutor Daniel Bellemare later concluded Hariri was assassinated by a “criminal network” and not by either Syrian and Lebanese intelligence or Lebanese Hezbollah as proffered by Abrams and his friends in Washington.

Representative Omar was spot on in questioning why Abrams, whose name is as disgraced as his two fellow conspirators – Oliver North and John Poindexter – whose criminal convictions were overturned on appeal, is working for the Trump administration on Venezuela. The answer is that the neocons, who can sense, like raptors, Trump’s political weakness, have filled the vacuum left by top-level vacancies in the administration.

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Putin: If mid-range missiles deployed in Europe, Russia will station arms to strike decision centers

Putin: If US deploys mid-range missiles in Europe, Russia will be forced to respond.

RT

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Via RT…


If the US deploys intermediate-range missiles in Europe, Moscow will respond by stationing weapons aimed not only against missiles themselves, but also at command and control centers, from which a launch order would come.

The warning came from President Vladimir Putin, who announced Russia’s planned actions after the US withdraws from the INF Treaty – a Cold War-era agreement between Washington and Moscow which banned both sides form having ground-based cruise and ballistic missiles and developing relevant technology.

The US is set to unilaterally withdraw from the treaty in six months, which opens the possibility of once again deploying these missiles in Europe. Russia would see that as a major threat and respond with its own deployments, Putin said.

Intermediate-range missiles were banned and removed from Europe because they would leave a very short window of opportunity for the other side to decide whether to fire in retaliation after detecting a launch – mere minutes. This poses the threat of an accidental nuclear exchange triggered by a false launch warning, with the officer in charge having no time to double check.

“Russia will be forced to create and deploy weapon systems, which can be used not only against the territories from which this direct threat would be projected, but also against those territories where decision centers are located, from which an order to use those weapons against us may come.” The Russian president, who was delivering a keynote address to the Russian parliament on Wednesday, did not elaborate on whether any counter-deployment would only target US command-and-control sites in Europe or would also include targets on American soil.

He did say the Russian weapon system in terms of flight times and other specifications would “correspond” to those targeting Russia.

“We know how to do it and we will implement those plans without a delay once the relevant threats against us materialize,”he said.

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Labour MP split is a cheap and final ploy to derail BREXIT (Video)

The Duran – News in Review – Episode 179.

Alex Christoforou

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The Duran’s Alex Christoforou and Editor-in-Chief Alexander Mercouris discuss a small group of UK Labour MPs decision to quit the party and sit as Independent MPs in the house of commons.

Their excuse for leaving Labour was directed at leader Jeremy Corbyn for presiding over an “institutionally anti-Semitic” party. The real reason they are leaving Labour is because they are staunch remain MPs and are hoping to derail Brexit.

The seven Labour MPs quitting the party to become ‘The Independent Group’, are Chuka Umunna, Luciana Berger, Chris Leslie, Angela Smith, Mike Gapes, Gavin Shuker and Ann Coffey.

RT reports that Luciana Berger, the MP for Liverpool Wavertree took to the stage first, to claim that she could not stay in the party any more because it had become “institutionally anti-Semitic.”

Chuka Umunna, MP for Streatham, a prominent ‘People’s Vote’ advocate appealed to all MPs, not just Labour, to join their group, as the current parties are part of the problem, not the solution.

He argued that “It is time we dumped this country’s old fashioned politics.” Umunna claimed the UK needed a political party “fit for the hear and now” and the “first step in leaving the tribal politics behind.”

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Via RT

Twitter has been rocked by the sudden departure of seven Labour MPs to form their own Independent Group, with party supporters feverishly debating whether the move is better for the party, or a wake-up call to Jeremy Corbyn.

Former shadow cabinet minister Chuka Umunna along with MPs Luciana Berger, Gavin Shuker, Angela Smith, Chris Leslie, Mike Gapes and Ann Coffey have all jumped ship in the biggest Labour Party split since 1981, when the so-called “gang of four” left to form the Social Democratic Party (SDP).

In a press conference, Umunna stated that the established parties “cannot be the change because they have become the problem” arguing that it is “time we dumped this country’s old-fashioned politics.”

Jewish MP Luciana Berger said she was “embarrassed and ashamed” at what the Labour Party had become and criticized her former party for becoming “sickeningly institutionally racist.”

“I am leaving behind a culture of bullying, bigotry and intimidation. I look forward to a future serving with colleagues who respect each other,” she added.

Reaction to the news online has been a mixture of shock and dismay, to outright derision. Some Labour supporters were quick to delight in the departures, suggesting the party will be stronger without detractors undermining it from within.

Others though said it was time for Jeremy Corbyn to take the criticism seriously.

Meanwhile, some Twitter users commented on Young Labour’s somewhat barbed response to the situation.

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