Economic growth is not turning out to be as robust as originally estimated so 2019 appears to be primed for a massive federal budget shortfall. This is concerning for several reasons…. 1) We are currently in an economic expansion. This is the time for fiscal restraint to have a rainy day fund set aside for future recessions. 2) The current 2019 projections could get revised much lower if the economy slows down at all in the next couple of quarters. 3) Some cures for budget shortfalls are either to cut spending or increase taxes… both of which are going to be a headwind for future economic growth.
If one estimates equity returns of 7-9% for the next 10-20 years, I would imagine this news would dampen that enthusiasm. Maybe 5-7% is more likely with a real return of 2-3%. Unfortunately fixed income and real estate both appear to be priced dearly at the moment so where does one look for decent inflation adjusted returns over the next 10-20 years? Diversification across all asset classes including lots of international appears to be prudent at the moment IMHO.
Apparently people are somewhat confused about the difference between that US national debt and the federal deficit. The national debt is the total debt owed by the federal government (I believe it is around $20 trillion). The annual deficit, is the amount we are adding to the national debt each year (tax revenue minus federal spending). Starting in 2009-2010 the deficit was gradually declining each year until this year. It appears to be back on an increasing trajectory.