Scary headlines aren’t necessarily wrong, but one mistake to avoid is not being prepared at all times. Spencer Jakab explains in The Wall Street Journal how the federal government has become a heavily indebted “insurance company with an army.” He writes:
Now, though, the government’s pile of debt has swelled following the War on Terror, the global financial crisis and the Covid-19 pandemic. Low interest rates and Fed bond buying masked the strain: Interest costs recently were no higher than in the early 1990s as a share of federal spending. But the Treasury barely seized the opportunity to lock in rock-bottom rates by issuing more long-term notes and bonds.
Now it is too late. The Congressional Budget Office regularly updates its long-term budget forecasts and says that U.S. debt held by the public will surpass gross domestic product this fiscal year and that interest on that debt will equal about three-quarters of discretionary, nondefense spending. By 2031, it will be as large.
Medicare, Social Security and, of course, interest are legally nonnegotiable. Military spending isn’t really optional either.No wonder the federal government is described as “an insurance company with an army.”
Action Line: Be prepared. When you want to talk about avoiding the big investing mistakes, I’m here.
Originally posted on Your Survival Guy.