Oracle Karl is going to peer into his magical crystal ball to see what the future effects of all this economic stimulus will have on your retirement.
He sees current US National Debt at $26 trillion. At the start of 2017 it was $17 trillion dollars.
If a fourth stimulus package is passed, it could very easily be at $30 trillion. The amount of debt that this country has taken on in such a short amount of time is unprecedented.
Why is this important? Because once we get to $50 trillion in debt, every single tax dollar that comes in is going to be used to pay the interest on the debt.
Nothing will be left for Medicare/Medicaid, Social Security and defense, our largest three expenditures.
What can the U.S. do?
We could cut expenses like every day people do when faced with a budget deficit.
Oracle Karl sees the possibility of this happening as non-existent.
The other option is that the U.S. could default on its debt.
If the U.S. did that interest rates would shoot up right away. Cost of doing business would go up, things would get more expensive.
The cost of mortgages would go up and the housing market would collapse.
The value of the dollar would nose dive.
We would no longer be the reserve currency of the world.
Disaster would ensue. Maybe even a global depression.
Oracle Karl thinks this is also not a possibility.
The last option is for the government to increase income taxes.
Oracle Karl sees this as the easiest fix that the politicians have.
The only question is “How much higher?”
To answer that question, take a look at the historical chart of income tax rates (below).
The horizontal red line is our current top marginal tax rate of 37%.
What’s the old saying, “history tends to repeat itself.”
Historically speaking, we are at a pretty low point for tax rates. The highest this country was ever at was in 1945 at 94%.
All during the ‘70’s, we were at 70%. During the 1982-1986 we were at 50%.
If a fourth stimulus package is passed, it could very easily be at $30 trillion. The amount of debt that this country has taken on in such a short amount of time is unprecedented.
Why is this important? Because once we get to $50 trillion in debt, every single tax dollar that comes in is going to be used to pay the interest on the debt.
Nothing will be left for Medicare/Medicaid, Social Security and defense, our largest three expenditures.
What can the U.S. do?
We could cut expenses like every day people do when faced with a budget deficit.
Oracle Karl sees the possibility of this happening as non-existent.
The other option is that the U.S. could default on its debt.
If the U.S. did that interest rates would shoot up right away. Cost of doing business would go up, things would get more expensive.
The cost of mortgages would go up and the housing market would collapse.
The value of the dollar would nose dive.
We would no longer be the reserve currency of the world.
Disaster would ensue. Maybe even a global depression.
Oracle Karl thinks this is also not a possibility.
The last option is for the government to increase income taxes.
Oracle Karl sees this as the easiest fix that the politicians have.
The only question is “How much higher?”
To answer that question, take a look at the historical chart of income tax rates (below).
The horizontal red line is our current top marginal tax rate of 37%.
What’s the old saying, “history tends to repeat itself.”
Historically speaking, we are at a pretty low point for tax rates. The highest this country was ever at was in 1945 at 94%.
All during the ‘70’s, we were at 70%. During the 1982-1986 we were at 50%.
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