The theme this week on the One Minute Retirement Tip is 2021 Economic Predictions. I’m sharing with you 5 key takeaways from our virtual client event with economist, John Mitchell. 

Today, let’s talk about the “grand experiment”. 

The $6 trillion of likely Covid-related spending is a “grand experiment”, according to John Mitchell. 

We’ve never thrown this much money at an economic problem before and we’re just figuring it out as we go. The blind leading the blind over there in Washington. But that’s nothing new I guess, right? 

I am deeply concerned about our national debt. As a % of our GDP, our national debt has never been higher. Did you know that 20 years ago in 2021, our national debt was only 55% of GDP. Still a lot, but peanuts compared to today. Then during and after the financial crisis, our national debt ballooned, and our lawmakers in Washington have been on a spending spree ever since. Even pre-Covid, our national debt had been above 100% of GDP for years, and with the additional stimulus bills during Covid, as of the end of 2020 our debt was 136% of GDP. 

That doesn’t even count the additional $2 trillion of additional stimulus.

The wheels have fallen off, people. Now we could sit here and debate about how the economy today would be much worse without this additional spending. I’m not arguing that. I’m looking at the long-term problems with carrying this much debt. 

The highest we came to this current state was after World War 2. In 1946, Debt as a % of GDP was 118%. But we quickly reversed course, and 10 years later it was halved. 

I don’t see that happening this time around. Lawmakers on both sides are being very short-sighted with spending decisions, and it will be absolutely essential that economic growth is robust in the coming years  in order to solve the current national debt problem. Otherwise we could have some serious issues in the coming years ahead - debt downgrades, higher interest rates, higher inflation, stagnant growth, etc. 

It’s a real problem and we haven’t been down this road before, which is why John Mitchell called this a “grand experiment”.

That’s it for today. Thanks for listening. My name is Ashley Micciche and this is the One Minute Retirement Tip. 

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