The United States is currently facing a debt crisis that’s a bigger mess that the catch-all drawer in your kitchen. You know the one that gets every miscellaneous charging cable, sauce packet, random napkin, appliance manual, ruler, calculator, and a toy or two that need to be fixed someday in it? That drawer keeps accepting more and more stuff that you don’t know what else to do with. Similar to our least favorite but most accessed drawer in the house, the federal government has been borrowing money (aka deficit spending) to fund projects large and small for a very very long time. And now the drawer is too full to shut and more and more accumulating knick-knacks have created a junk pyramid.
It’s not just the bureaucrats that are the problem. Closer to home, we laypeople are amassing credit card debt at an alarming rate, and then failing to make payments on time. The latest data shows that payment delinquencies are up 50% this year to 1 in 10 cards being past due. Consumer late payments are now higher than they they’ve been in the last 14 years, which was the height of the Great Recession. How’s that for alarming? So where do you cut back?
We talk about higher interest rates being a problem, but current levels are historically completely average. It’s our spending that’s off the charts. We may still hope for lower rates coming up, but don’t expect a whole lot of love from Jerome Powell & Co. Of all the things that could help lower mortgage rates in 2025, the FOMC’s policy isn’t expected to do much more. Current market expectations are for the Fed to cut rates just two times this year. The bigger issue is how the legislative branch of government addresses our current debt payments and future spending trajectory. What do you take out of the drawer and discard? Social Security? The military? Foreign aid? Pretty tough decisions coming up.
