Q1 2018 Was A Fiscal Disaster For America

Econimica ^ | 04/01/2018 | Chris Hamilton

[SeekAndFind]

In the first quarter of 2018, the financial and investing industry went into overdrive detailing the upside of the 2018 tax cuts and the positive impacts of a "business friendly" executive and congressional branch on business in America. The stock market hit record highs and the Federal Reserve proclaimed such good times as to raise their economic outlook and increase the likelihood for interest rate hikes.

From January 1, 2018 through March 28, 2018 (Q1), real GDP likely grew $110 billion (a 2.5% rise on an annualized basis). However, the fly in the ointment...according to the Treasury, from Jan 1, 2018 through March 28, 2018 (Q1), federal debt rose by an astounding $621 billion dollars (a 13.1% increase on an annualized basis). The chart below shows the quarterly change in federal debt versus the quarterly change in real GDP since 2000. Q1 2018 was the second largest quarterly growth in federal debt, only surpassed by the massive free spending of Q4, 2008.

Or, if we just subtract the quarterly growth in federal debt from the growth in real GDP...chart below. Unfortunately, Q1 2018 is one of the worst quarters on record with the growth in federal debt doing laps around the "growth" in Gross Domestic Product (which of course counts all the federal debt fueled activity?!?). Incurring over $621 billion in new debt (to be serviced ad infinitum) to produce just over a $100 billion in new economic activity is something only government could achieve.

However, it gets downright miserable if you add in the massive $500 to $750 billion quarterly growth of unfunded liabilities alongside the growth in federal debt. Together, the UL's and federal debt are rising $3 to $4 trillion annually while GDP is rising around a half trillion.

[SeekAndFind]

The US can never grow it's way out of this hole...but the Fed and federal government is the best leadership money can buy. In real time they are choosing (and aligning themselves with) the minority who will end up winners and leaving everybody else to endure the losses as this all shakes out.

One last chart below, showing four critical variables.

1) annual change in 15-64yr/old US population (grew line)

2) Disposable personal income (green line...total dollars nationally available for spending after all taxation is accounted for)

3) Wilshire 5000 (yellow line, market cap or value of all publicly traded US stocks)

4) Federal Funds Rate (black line, short term interest rates set by Federal Reserve)

As population growth of the adult core has decelerated (and subsequent growth in demand), interest rates have been cut to incent the substitution of leverage and debt to maintain growth. However, the growth has primarily been in asset values instead of economic activity or wage growth.

[MNJohnnie]

Tax revenues set records in Q1. There was no decrease in federal income due to the tax cuts.

Where the problem lies is the Feds spend money faster then they take it in.

No matter was is going on, good economy/bad economy what ever the Govt spends spends spends. Until people stop voting for the spend aholics in Congress all this hand wringing about the Debt is just so much chicken little self gratification

[Arm_Bears]

All I know is that FEB and MAR wiped out the JAN gains in my stock portfolio.

[BlueStateRightist]

“All I know is that FEB and MAR wiped out the JAN gains in my stock portfolio.”

APR not off to a good start.

[Mr Ramsbotham]

All I know is that FEB and MAR wiped out the JAN gains in my stock portfolio.

Between tariff wars, talking down business and deficit spending, Trump is killing us. One step forward; three steps back.

[SeekAndFind]

RE: Tax revenues set records in Q1. There was no decrease in federal income due to the tax cuts.

Where the problem lies is the Feds spend money faster then they take it in.

_________________________

You hit the nail right on the head. It happened when Reagan was President as well.

The one time I remember that it did not happen was when Gingrich was the Speaker of Congress and Trent Lott was the Senate majority leader.

They were able to force Clinton to sign on to their budget. We had a budget surplus then.

GW Bush and the Congress he worked with SQUANDERED that and things have never been the same and only gotten worse.

[MNJohnnie]

The problem for “Movement Conservatives” is everyone talks about how worried they are about the Debt, until you start talking about what needs to be cut to balance the budget. Then they all run out and vote for the Dems.

[sheana]

Oh come on. The last Omnibus proves the Republicans are no better than the Dems.

[Scott from the Left Coast]

No surprise.

The Federal Debt is how all of the Members of Congress and all U.S. Senators have become multi-millionaires on a couple hundred thou a year.

[Louis Foxwell]

Churning on the market will continue to take hits until it is tied to GNP and not simply profit taking. Wall st or main st. Which do you want running the economy?

[central_va]

Between tariff wars, talking down business and deficit spending,

You are just plain wrong:

We are fighting back in a trade war that was started 2 decades ago. Trump is talking UP business, consumer confidence is at a very high level. The deficit is from spending and not from a lack of revenue.

So get out of here....

[central_va]

What we need is a spending FREEZE for 10 years.

[Chauncey Gardiner]

The chart showing real GDP goes thru 2016; last I heard we had early 3% growth in CY17 and same in Q1 2018. I’ll take that any day over the 1% doldrums of the past administration.

[Jane Long]

Between tariff wars, talking down business and deficit spending, Trump is killing us. One step forward; three steps back.

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Well, then!! Let’s bring back the ‘Roaring 0bammy Years’!!

Or, better yet, I suppose you’d prefer HELLary?!!

Please see post #3 for an explanation on what is actually causing this, Mr R.

[TheTimeOfMan]

“Between tariff wars, talking down business and deficit spending, Trump is killing us. One step forward; three steps back.”

Do not agree. We have been in a tariff war for 30 years even with most of our ‘good’ trading partners. Or, to put it another way, we have been getting raped for 30 years by the entire world.

I don’t know why so many on this forum cannot understand the difference between free trade on paper and free and fair trade in reality.

I worked for Uncle Sam overseas for many years and saw it and reported it constantly.

Our trading partners cheat. Almost all of them including Europe. Whether it is Japan letting goods rot on the dock because of ‘safety’ concerns or China running unofficial 500% tariffs on all US goods (and even US branded goods manufactured in China!) there is a huge disconnect between free trade theory and reality.

We have to deal with reality. We have to force countries to stop cheating and stealing - or we have to stop trading with them. Period. Anything less is naïve and suicidal.

We have a huge internal market and could do just fine with zero international trade. It will not come to that but have to stop pulling our pants down and bending over because we are enamored with an idea to the point we are blind to its real world practices and consequences.

[buckalfa]

Only our Lord in Heaven knows how the Trump economy will evolve. Unchartered waters. Massive tax cuts on top of a already strong economy, on top of massive public and private debt, coupled with uncertainty over international trade. Pass the popcorn please.

[SeekAndFind]

RE: Only our Lord in Heaven knows how the Trump economy will evolve. Unchartered waters. Massive tax cuts on top of a already strong economy, on top of massive public and private debt,

The good Lord did provide wisdom on this in the good book.

Jesus asked:

“For which one of you, when he wants to build a tower, does not first sit down and calculate the cost to see if he has enough to complete it? (Luke 14:28)

Did Congress calculate the cost of runaway spending and entitlements versus the revenue the US government takes in before it passed its bloated budget? (a rhetorical question ).

Proverbs 22:7 “The rich rules over the poor, and the borrower is the slave of the lender.”

As far as borrowing, the borrower is the slave of the lender so is it worth being enslaved by debt over a certain number of years, whatever it is you want to buy?

[logi_cal869]

Do tell.

Epic DUH.

[bIlluminati]

The last Omnibus proves the Republicans are no better than the Dems.

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False. More Dems voted for this than Republicans. Flipside, if the Repubs were united, they wouldn’t need any Demonrat votes.