The Congressional Budget Office (CBO), the group that checks the numbers without taking sides, just dropped a bombshell report about America’s money problems. And folks, it doesn’t look good.
Here’s the lowdown: In 2024, the government plans to spend a whopping $6.5 trillion, which is about 23% of everything the country makes in a year. But it’s only going to bring in $4.9 trillion from things like taxes, which is about 17.5% of what the country makes. That leaves us short by $1.6 trillion for just one year, or 5.3% of everything we make.
And hold onto your hats, because the CBO says this is only going to get worse. They’re predicting that every year for the next 10 years, we’ll be short by about $2.6 trillion. That’s a lot of missing cash!
Historically, we’re in uncharted waters. Usually, deficits (the amount we’re short) hover around 3.7% of what the country makes. And there was even a time in the 1990s when we actually had extra money because the government brought in more than it spent. But those days are long gone.
The government’s spending can be split into three big pots: mandatory spending (like Social Security and Medicare), discretionary spending (like defense and education), and the interest we have to pay on all the money we’ve borrowed before.
The biggest pot is mandatory spending, which is about 60% of all spending. This has been getting bigger every year, especially with the aging population and the extra costs from the pandemic. Discretionary spending is about 27% of the budget, but this is expected to shrink as a percentage of what the country makes, even though the economy is growing.
But here’s the kicker: the interest on all the money we owe is the fastest-growing problem. If we keep going like this, we’re going to owe $48.3 trillion by 2034. That’s 116% of what the country makes in a year. And in 30 years? We could owe an eye-watering 172% of our yearly income.
Tax breaks and credits, like those for clean energy or making your home more energy-efficient, also make the situation trickier. They’re like spending money because they reduce the amount the government takes in. And these are expected to be more than $2.1 trillion in 2024, which is more than what we spend on all discretionary stuff combined.
Right after the CBO shared their predictions, Congress decided to keep some tax breaks from 2017 going, which probably means even less money coming in and bigger deficits.
What We’re Watching…
Trying to fix this mess is like herding cats. One side of Congress wants to spend less, while the other side says we need to bring in more money. Meanwhile, they can’t even agree on the budget for vital departments, risking another government shutdown.
The back-and-forth doesn’t help anyone, and with the debt piling up, it’s like watching a slow-motion train wreck. The big question is, how are we going to fix this? Right now, no one has an easy answer, and the clock is ticking.
How Does All This Debt Stuff Affect Buying a Home and What Your House is Worth?
Alright, let’s break down how this big pile of national debt and what the government might do about it could shake things up for anyone looking to buy a house or worrying about their home’s value.
- Paying More on Loans: If the folks in charge decide to raise interest rates to deal with the debt, borrowing money to buy a house gets pricier. Higher interest rates mean you’re shelling out more each month for a mortgage. If it gets too expensive, fewer people will buy houses, which could mean house prices might stop climbing so fast, or in some places, they might even drop.
- Tax Stuff Could Change: If the government tries to fix the debt by messing with taxes, things like being able to write off your mortgage interest from your taxes could get the axe. If owning a home gets less tax-friendly, it might cool off the housing market and affect how much homes are worth.
- Less Help from Uncle Sam: To cut back on spending, the government might trim down programs that help folks afford homes, like loans for first-time buyers. Fewer people able to buy homes could mean less demand, which might slow down how fast home prices are going up.
- Everything Feels Uncertain: Big debt and the unknowns about how it’ll be fixed can make people nervous. When folks are unsure, they might not want to make big moves like buying a house. This hesitation can mean fewer buyers and potentially lower home prices.
- Inflation Could Kick In: If debt keeps piling up and causes prices for everything to rise (that’s inflation), then the money you’ve got doesn’t go as far. This could make it tougher for people to afford homes at current prices, possibly cooling down the housing market.
- Investors Might Back Off: People who put money into real estate to make a profit watch these things closely. If they think the debt situation might make the economy wobbly, they might pull their money out of the housing market. Less investment can lead to a drop in home values, especially in places where a lot of homes are bought as investments.
So, in plain terms, this debt situation is like a domino setup. If one falls (like interest rates go up), it could start a chain reaction affecting everything from how much you pay for a mortgage, to tax breaks, to even how much your home is worth. It’s a big deal, and it’s something to keep an eye on, whether you’re looking to buy, sell, or just stay put in your home.