by Gary Alexander

February 21, 2024

Pickwick Quote

In my weekly radio program on music history, I offered a song for each special day last week, starting with the Chinese New Year (February10), then Super Bowl Sunday, Lincoln’s Birthday, Mardi Gras, Ash Wednesday, and Valentine’s Day, ending on Presidents’ Day weekend, with “If I Ruled the World.”

That song debuted in the 1963 West End (London) musical, Pickwick, based on Dickens’ “Pickwick Papers.” When asked for his political manifesto, Sam Pickwick began his long list of impossible dreams with this line about manipulating the weather into a permanent March 21st, but in the best tradition of noble central planning turning into well-intended failures, if every day were truly the first day of spring, we would never enjoy the Green Leaves of Summer, Autumn Leaves, a White Christmas, or corn as high as an elephant’s eye, since the typical March 21 in the middle of America is 47 degrees with a brisk wind.

Pickwick’s wish, if fulfilled, could solve global warming, but it might eventually kill most people by destroying crop growth – but then, we’re not supposed to think logically during political speeches. (“If I Ruled the World”), sung on the first day of spring, 1965 by Tony Bennett, backed by Bobby Hacket, cornet, and Woody Herman’s orchestra on Ed Sullivan’s Sunday night TV show, March 21, 1965.

…and If “Every day were the first day of Spring,” this would be your constant frigid day in U.S. cities on March 21:

WeatherSpark Table 2

OK, what does all this have to do with stocks and the economy? Two major things: Growth and Deficits.

#1: Growth Could Slow to Under 2% Under Current Conditions

On growth, the Federal Reserve’s projection for GDP growth in 2024 (as of year-end-2023) was an anemic +1.4% for 2024 and +1.8% for 2025. After that, we face bigger challenges. Unless Congress and the next president can agree to extend some expiring provisions of the 2017 Tax Cuts and Jobs Act, those business tax breaks will automatically expire in 2026, potentially slowing growth even further in 2026.

David Malpass, President of the World Bank from 2019 to 2023, wrote in The Wall Street Journal last Thursday (and I said the same last Tuesday) that last year’s 3%+ GDP growth “Isn’t as good as it sounds. Government spending and the surge in national debt boosted the consumption side of U.S. gross domestic product, but business investment was muted.” Malpass explains that last point later in the article:

“That part of the U.S. growth engine is broken, in part, because Washington controls so much of the economy through regulation, subsidies and redistribution. Record government borrowing has been crowding out the financing and confidence needed for small businesses to invest and expand” (from “Slow Growth is Ahead Unless Government Gets Out of the Way,” David Malpass, February 15, 2024).

Furthermore, a new CBO report sees GDP growth averaging 2% or less over the next decade:

#2: Deficits: CBO Director Says, “The Current Fiscal Trajectory is Unsustainable.”

Last week, the non-partisan Congressional Budget Office came out with a 10-year projection based on current policies, called “The Budget and Economic Outlook, 2024-2034.” Their deficit picture calls for a slight reduction in red ink this year, even though the real numbers are not co-operating with them so far.

In the first four months of Fiscal Year 2024 (beginning October 1, 2023), the federal government has run up $603 billion in red ink so far – that’s $77 billion more than in the same period in FY’2023 (a 14.6% gain). Much of this is beyond the control of Congress, a result of higher interest rates and higher inflation:

For instance, in the first four months of Fiscal 2024 (October 1, 2023 to January 31, 2024), there was a
• $93 billion (+47%) gain in net interest payments on public debt from rising interest rates and higher debt.
• $80 billion (+9%) increase in the largest mandatory spending programs, due to cost-of-living adjustments.
• $31 billion (+12%) increase in spending by the Department of Defense, mostly for personnel benefits.

The CBO’s long-term deficit projection is chilling: “After 2028, deficits climb as a percentage of GDP, returning to 6.1 percent in 2034. Since the Great Depression, deficits have exceeded that level only during and shortly after World War II, the 2007–2009 financial crisis, and the corona-virus pandemic.”

The CBO says debt held by the public will reach an all-time record 116 percent of GDP in 2034, and “In the two decades that follow, growing deficits will cause debt to soar to 172 percent of GDP by 2054.”


Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.

Unfortunately, past experience shows that these forecasts may be too optimistic. The 2010, the CBO projected that the federal debt-to-GDP ratio would reach 80 percent by…wait for it…2049!  We actually reached that milestone in 2019. Revenues were far lower than CBO had expected in 2010, while spending was higher than expected, sending deficits soaring, even before COVID struck. (See Peter G. Peterson Foundation, “Decade in Review: Looking Back at CBO Projections Then and Now,” January 7, 2020).

In bringing this new (February 2024) report to Capitol Hill, CBO director Phillip Swagel said, “I can tell you that I am very confident that the fiscal trajectory is unsustainable under current law.” Interest payments on the national debt, now around $800 billion, are projected to double to $1.6 trillion in 2034. Annual spending will rise from the current $6 trillion to $10 trillion in 2034, and the cumulative national debt will almost double, from $26 trillion when Biden took office in 2021 to $48.3 trillion in 2034.

If those trillions make your head spin, a deficit of “only” $1.6 trillion per year translates to $50,000 each second, or $3 million in red ink per minute, more than most Americans make after taxes in a lifetime.

Despite these dire warnings, hardly any politician works to cut spending. The Biden Administration keeps drafting spending bills with no apparent thought to the mounting debt, higher interest rates on that debt, or the possibility that foreign and domestic bond buyers may balk at buying more of new debt each quarter.

According to the U.S. Treasury, bond issuance reached a record $2.3 trillion last year, hitting a record $776 billion in the fourth quarter. The Treasury also announced its plan to borrow $776 billion this quarter and $816 billion next quarter – an annual rate of over $3 trillion – at a time when new bond yields are 4%-5%. This year interest costs are on pace to surpass defense spending in a year of record bond issues.

Each week, we hear of new spending bills, like $95+ billion in foreign aid for foreign wars, or a $1.7 trillion new omnibus spending bill taking shape for a March vote, or clever new ways to skirt court review to fund college debt relief to millions of students who, in my opinion, took out too many loans to fund studies in their favorite feel-good unmarketable majors at indoctrination centers masquerading as universities.

As a result of profligate over-spending by Congress for several years under both Parties, U.S. debt has already been downgraded twice in the last year, first by Fitch in August and Moody’s in November, so a third downgrade could send investors out of the dollar and into other currencies or gold as a crisis hedge.

In their report, the CBO failed to estimate future inflation rates. In all fairness, there’s no way to predict long-term inflation. Although the rate of inflation has decreased, the Bureau of Labor Statistics says the change of prices from January 2021 to January 2024 are +33% for gasoline, +24% for electricity, and +21% for groceries, while the real median middle-class household income is down by $4,000 since 2021.

If I ruled the world – or won the Presidency – I would ban new spending and start repealing old spending plans while terminating five or six Cabinet Departments that spend $40 to $50 billion a year, then resign.

All content above represents the opinion of Gary Alexander of Navellier & Associates, Inc.

Please see important disclosures below.

About The Author

Gary Alexander

Gary Alexander has been Senior Writer at Navellier since 2009.  He edits Navellier’s weekly Marketmail and writes a weekly Growth Mail column, in which he uses market history to support the case for growth stocks.  For the previous 20 years before joining Navellier, he was Senior Executive Editor at InvestorPlace Media (formerly Phillips Publishing), where he worked with several leading investment analysts, including Louis Navellier (since 1997), helping launch Louis Navellier’s Blue Chip Growth and Global Growth newsletters.

Prior to that, Gary edited Wealth Magazine and Gold Newsletter and wrote various investment research reports for Jefferson Financial in New Orleans in the 1980s.  He began his financial newsletter career with KCI Communications in 1980, where he served as consulting editor for Personal Finance newsletter while serving as general manager of KCI’s Alexandria House book division.  Before that, he covered the economics beat for news magazines. All content of “Growth Mail” represents the opinion of Gary Alexander

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