Is U.S. Debt On Course to Explode in the Next 30 Years?
A recently released report from the Congressional Budget Office (CBO) looking at the long-term U.S. budget outlook forecasts that both government debt and deficits are expected to soar in the coming 30 years, with the debt-to-GDP expected to hit 150% by 2047 if the current government spending picture remains unchanged. This far exceeds the record level just after World War II.
The new projections show steeper 30-year debt growth than last year’s long-term forecast by the nonpartisan budget analysis agency and could make it harder for some members of Congress to support a tax reform plan that is partly financed with higher deficits. Last year, the CBO estimated U.S. public debt would grow to 141% of gross domestic product by 2046, while the record was 106% of GDP in 1946. That level would be reached in 2035, the CBO said.
Under this year’s projection, CBO predicts public debt for 2017 to be about 77% of GDP, growing to 89% in 2027 and 113% in 2037. The new forecasts assume that the Affordable Care Act, the healthcare law known as Obamacare that House Republicans failed to replace last week, stays in place for the long term.
The projected debt growth reflects CBO’s estimates of the rising costs of caring for a growing population of people over 65, growth in interest costs, and assumptions of slower economic growth due to reduced assumptions about productivity gains.
Annual deficits are expected to average 8.6% of GDP in the 2038-2047 period versus 2.9% expected for 2017 and 4.0% for the 2018-2027 period. The long-term projections extend CBO’s assumptions made in its 10-year budget outlook in January, which showed falling deficits for the next two years, but growth thereafter. Net interest costs in 2047 are expected to be 6.2% of GDP, compared with 1.4% in 2017 and about 1.2% in 1967, the CBO said.
But the wild card in the CBO 30-year projections is real interest rates. Real interest yields on 10-year Treasury notes are assumed to average 1.5% over 30 years, rising to 2.3% in 2047. Much higher interest rates, coupled with different assumptions in productivity and healthcare cost growth, could produce significantly different outcomes, the CBO indicated. It said that its debt-to-GDP ratio could range from 85% with low rates and strong growth, to 244% with weaker growth and higher rates.
There is a great deal at stake in these forecasts. A large and continuously growing federal debt would increase the chance of a fiscal crisis in the United States. Specifically, investors might become less willing to finance federal borrowing unless they were compensated with high returns. If so, interest rates on federal debt would rise abruptly, dramatically increasing the cost of government borrowing. That increase would reduce the market value of outstanding government securities, and investors could lose money.
Citations
- http://reut.rs/2nB7Ul1 Reuters
- http://bit.ly/2of3inA – ZeroHedge.com
Hasbro Markets Animatronic Therapy Pets to an Aging Population
The toy company Hasbro’s Joy for All brand recently launched a new life-like robotic dog, a companion pet pup to accompany the its companion pet cat already on the market. Both products are designed to bring companionship and comfort to aging adults. The robotic cat is equipped with a soft fur that gently vibrates when it purrs, while the pup barks and cocks its head in your direction when you speak. But Hasbro’s adorable animatronics are not the only pet robots on the market. The company Hansa Creations markets their collection of interactive cats and dogs of various breeds. And Paro, the cuddly seal robot developed by Japan’s National Institute of Advanced Industrial Science and Technology, is used as an interactive therapeutic tool in hospitals and senior living facilities across the United States. Paro soared to fame after being featured in Aziz Ansari’s Netflix series Master of None.
The U.S. Centers for Disease Control and Prevention has long described the health benefits of having a real pet—the possibility of decreasing blood pressure and cholesterol levels, while increasing opportunities for exercise and socialization—but more recent studies show that robot companions can yield comparable therapeutic effects.
According to a 2013 study published in the Journal of Post-Acute and Long-Term Care Medicine, researchers at the University of Auckland in New Zealand found that residents who interacted with Paro, a robotic seal developed by a Japanese company, experienced a significant decrease in loneliness after a 12-week period. Those who did not, however, experienced an increase in loneliness. A real dog that was also introduced into the experiment had a similar impact to the robot, but according to the study, residents touched and talked to and about the robot more than the dog.
Ted Fischer, vice president of business development Hasbro, said he saw powerful reactions among groups when doing initial research for the company’s Joy for All Companion Pets line. “We’d go into a community, and there would be folks sitting around a table. Some may have been sleeping, but then we’d open up a box and put one of the companion dogs or cats on the table and their faces changed,” Fischer said. “They can’t believe they’re barking and meowing, and we’d witness the conversations start to change.” Fischer said the choice to begin producing the animals in 2015 was in response to the lack of focus on “the joy, happiness and play in the aging space” and the realization that at least 15% of online reviewers were purchasing Hasbro’s previous versions of animatronic toys for aging loved ones, not children.
Alec Ross, Baltimore author of the best-selling book Industries of the Future, said the Companion Pets and other robotics are the future. Places like Japan, which has robots “that will literally take grandparents out of the bathtub and entertain them by playing the violin,” are already far ahead of the curve, he said. “It’s really within the last year or two that robotic pets have come into the United States. Because they are very expensive, they have typically been used as a part of therapy, memory recovery or other things,” he said. But the robots will become more sophisticated over the next five years.
The cost will go substantially down, too. Ross believes that by 2022, you will have a robotic pet, 15 to 100 times more sophisticated than those available today that will cost 10% as much. And with the growth of artificial intelligence, he predicts a more vital application of robot companions. For example, robots that can sense if an elderly person has fallen and call 911, or send a distress signal if an elderly person is not waking up.
Juliet Holt Klinger, senior director of dementia care and programs of Brookdale Senior Living in Baltimore, said the company plans to roll out companion pets to more of its retirement communities. Currently, more than 100 of its 1,055 retirement locations around the country, including locations in Towson, Hagerstown and Olney, Maryland have the companion cats and dogs, which Holt Klinger said have been a soothing and calming addition, especially for those with anxiety, she said. “They really help our residents to access those nurturing emotions and feelings that perhaps they had for a past pet,” she said, but they do not replace regular pets. “We see it as an adjunct,” she said. “Live pets are still a big part of what I do. These robots don’t necessarily replace live pets, but we’ve seen that it’s been helpful for those residents that are a little more advanced in their dementia or have found difficulty in taking care of live pets.”
Citations
- http://bsun.md/2nk5CEQ – Baltimore Sun
- http://cnn.it/2cR583Q – CNN
The Good News Is . . .
- U.S. economic growth slowed less than previously reported in the fourth quarter amid robust consumer spending. Gross domestic product increased at a 2.1% percent annualized rate instead of the previously reported 1.9% pace, the Commerce Department said. Growth in consumer spending, which accounts for more than two-thirds of U.S. economic activity, was revised to a 3.5% rate in the fourth quarter. It was previously reported to have risen at a 3.0% rate.
- Darden Restaurants, Inc., which owns and operates more than 1,500 restaurants, reported earnings of $1.32 per share, an increase of 57.1% over year-earlier earnings of $0.84 per share. The firm’s earnings topped the consensus estimate of analysts by $0.05. The company reported revenues of $1.9 billion, an increase of 1.7%. Management attributed the results to increased market share among its restaurant chains, as well as above industry average same store sales.
- CEFC China Energy, a Chinese conglomerate with big investments in oil in Central Africa, agreed to buy a stake in a century-old New York boutique investment bank, the Cowen Group. For Cowen, the deal brings an injection of cash and debt financing and the promise of better access to the Chinese market. CEFC gets a ready-made springboard into high finance in the United States. Cowen, a small but growing investment bank founded in 1918, said that it had agreed to sell a 19.9% stake in itself to CEFC. The two companies want to use complementary areas of expertise and geographical focus to expand Cowen’s core equity, research and investment banking businesses
Citations
- http://reut.rs/2obXyL9 – Reuters
- http://cnb.cx/2lwnm3s – CNBC
- http://bit.ly/2nQpBPx – Darden Restaurants, Inc.
- http://nyti.ms/2nBgkJ0 – NY Times Deal
Planning Tips
Tips for Getting Cheaper Flights This Travel Season
It is no secret that air travel can get expensive. Nowadays costs for flights can change several times throughout the day when carriers set prices low to fill seats and then suddenly spike them to maximize profits. Even though fuel prices are at some of the lowest levels they have been in years, this has not been reflected in the cost of flights. Below are some ways, using a little strategy and some technology, to help you book a flight for less.
Look Beyond Just Going from Point A to B – We would all love to be able to fly nonstop to our destination, but that does not happen very often. It also tends to be quite a bit more expensive to fly nonstop. When you are looking to book a flight, do not just search for the quickest way to get someplace. It probably is not going to be the cheapest. Instead, look at all the different routes that you could take to get from point A to point B. There is a travel website available called TripDelta.com, that uses a special algorithm and artificial intelligence to find up to 500 more flight combinations compared to other travel websites. They look at routes that might use multiple carriers or even multiple airports to get you to your final destination. The result is they could save you as much as 80% on your flight.
Take Advantage of Positioning Flights – Every day, you can find flight deals that pop up to places all over the world. The only problem is that a lot of them may originate from a city you do not live close to. However, do not discard these deals because they could still be very valuable to you. This is where positioning flights will come into the picture. Positioning flights will take you from your home airport to the location where a flight deal is originating. For instance, assume that there is a great fare from Los Angeles to Hong Kong. It is a price that you cannot pass up, but you live in Denver. You would take a positioning flight, preferably using airline miles, to be able to take advantage of this deal. The cost of the flight deal and the positioning flight would need to be less than what a flight from Denver to Hong Kong would cost.
Sign-up for Flight Alerts – Unless you have a lot of extra time on your hands, it’s near impossible to find all of the different flight deals that come available. To help solve this problem, you can sign up for fare alerts. There are websites like The Flight Deal or Airfare Watchdog that will search for the deals so that you do not need to. With Airfare Watchdog, you can set up email alerts on flights from a city that you want to depart from or even deals that could take you to a specific location but might originate anywhere in the United States. This is a pretty handy way to get a great deal, and not put in all the time finding it.
The Hopper App – Some of the best flight deals come when you do not have restrictions on the days you can travel. However, for some people, this is not an option, and they need to take their vacations on specific days. You can try using a new app called The Hopper. If you have set travel dates in mind, you can tell The Hopper, and they will track price fluctuations. Then when prices have reached a bottom, they will send you a notification that it is time to make your purchase.
Take Advantage of Travel Reward Cards – Credit card issuers have become extremely generous over the past several years. Many of them offer travel rewards credit cards that have a high enough sign-up bonus that you can travel much of the world for practically nothing. Before you sign up for a credit card, make sure you know where you are hoping to travel. Then you can strategically pick out the card that works best for you.
Citations
- http://usat.ly/1KVRmsu – USA Today
- https://yhoo.it/2ogOJzM – Yahoo!
- http://bit.ly/2omV4GO – Investopedia
- http://bit.ly/2on3iPd – Cheatsheet.com
- http://bit.ly/2nBcsHK – AndysTravelBlog.com
