In a recent article titled “Jamie Dimon believes U.S. debt is the ‘most predictable crisis’ in history—and experts say it could cost Americans their homes, spending power, and national security” by Eleanor Pringle, published in February 2024, several key points were highlighted that align closely with the challenges and concerns we face at East Franklin Capital. Although the article was published earlier this year, its relevance persists, particularly as we continue to navigate the complexities of national and personal debt, budget deficits, and their far-reaching impacts on our economy.
In our view, the staggering amount of U.S. government debt will eventually become a significant problem for citizens, investors, corporations, and the economy at large. As the article suggests, the issue with our national debt is not a question of “if,” but “when.” The amount of impact is certainly debatable but that there will be an impact is not. Our mountain of debt could, maybe should, lead to reduced public spending, investors could lose faith in the strength of our economy, which may lead to (or result from) worsening housing and jobs markets. Some economists even believe the enormous debt burden could threaten national security as the U.S. Gov’t could become entangled with or beholden to nations that hold those Treasuries.
I should also point out that household and personal debt is also a growing concern in the United States. By many metrics, Americans are consuming more and increasingly relying on debt to do so. However, this issue may pale in comparison to what is happening on a national level. It’s important to note that the failure to control our ever-growing national debt is a bipartisan problem. The ongoing debt ceiling discussions and brinkmanship, which have persisted for decades, show that the blame is widespread.
A final point I want to make is that, in addition to our growing national debt, we also face a growing annual budget deficit. While the article focuses on U.S. debt rather than the deficit, the two are certainly related. The deficit contributes to the debt—if we spend more than we bring in, we have to cover the shortfall with promises to pay in the future, which adds to the debt. Like many, I am hopeful that our annual deficits can be reduced, or even reversed, with new policies and commitments from both parties to put politics aside and focus on governing.
The purpose of this week’s “Weekly Whiteboard” is not to be negative but rather to be informative. The United States is a remarkably resilient country, and I believe we will find a way to solve our national debt problem. We chose this topic to remind our clients that we are constantly monitoring, considering, and planning for the unknown—unknowable—future that lies ahead. We remain committed to you, and we hope this gives you peace of mind, even when times get a little tough.
