This post is inspired by an article I recently read (I didn't save the link) that said that Social Security will run out on October 1, 2031. After this point, Social Security will either have to be cut or the shortfall will have to come out of the general budget. I think it will be the latter, since it will be politically impossible to cut Social Security payments.
Now review a blog post I published in 2023: https://aftermath2022.blogspot.com/2023/03/the-point-of-no-return-is-october-1-2028.html , laying out specific criteria for what I call the Point of No Return.
So I will revisit them and revise the date:
1. The debt held by the public will exceed 100% of GDP. This ratio will be hit as early as the end of this fiscal year when it may be at 100.6%. By the end of FY 2028, it should be 104.1%. By the end of FY 2031, the CBO projects it will be at 109.6%. So I am being very conservative. The reason why this matters, whichever date you chose, it that it is a multiplier. For example, if the Fed rates are at 4% and the ratio is 110%, this means that interest will consume 4.4% of GPD. The percent of GDP it consumes is greater than the rate.
2. Interest will exceed $1 trillion per year. I think we are already there. Push that up to $1.5 trillion per year. If it ever exceeds that number we are in serious trouble. This should occur in FY 2031.
3. Net Interest paid exceeds the primary deficit. We are already there.
4. The Debt/GDP ratio increases at least 2% per year. This hasn't happened yet, since GDP continues to increase. But the increase from FY 2027 to FY 2028 will be about 2%. And the big danger is FY 2032 to FY 2033 when it will increase from 111.5% to 114.0%, according to the last CBO report.
So what is my conclusion? That we can pretty much ignore this issue on a practical basis until 2031. After that, the country is certainly doomed. Probably we are facing hyperinflation, which is inflation over 40% per year, at which point prices double every 2 years.
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