US 2018 Cash Deficit: $958B

Deficit

$958B!! After bottoming out in 2015 at $539B…it has taken just 3 years to get back to the cusp of $1T again….which we will probably touch no later than this coming April with the TTM. Looking at the way back machine I had forecasted a $980B deficit… no too shabby right!! However… I did miss on the internals… guessing outlays at +4% and revenues down 3%. Revenues ended up flat, and outlays were up 6.4%… still… I’ll take it!!

2019 Forecast

First off…nothing here is rocket science…. with numbers this big... it’s really hard to see big swings… so I am going to go with outlays +4% and revenues +2%. Pencil that out and we should see the cash deficit grow $110B next year to $1.068T… growing at ~$125B a year beyond that… if we assume a nice steady state :)... not a bet I would take by the way… but a good reference point if you want it.

Default Near?

I asked this question last year… so we’ve made it another 365 days. Here is what I know…the debt is unpayable. Period. No combination of growth/tax increases could ever pay down this debt… much less pay it off… we are after all digging at a rate of $1T per year despite an economy that seems to be humming along ok with very low unemployment. What we can do… and what we have been doing for the last decade is continue to roll the debt at honestly… not so high-interest rates as long as the market will allow… until the day we can’t… in which case it could all get quite nasty over just a few months. Will that be 10 years from now as the debt closes in on $35T….or could it be this as soon as this year when it becomes clear Trump and Pelosi will not make nice? I don’t know… but I do know we are now 365 days closer to default day than we were last year… and our hand is getting worse by the day… penny by penny. Throw in even a mild recession and that $1T could turn into $2T nearly overnight as Republicans and Democrats unite to increase spending and lower taxes. So is 2019 the year?… It certainly feels a lot riskier than 2018, but to be honest... Hell if I know… stay tuned!!

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