So much for deficit reduction… we are now witnessing the birth of a new era for deficit spending across the entire Western world – nowhere more reflective than in America.
The non-partisan Congressional Budget Office just announced that it expects the Obama Administration to run a $544 billion budget deficit in 2016. Despite the glowing reviews from Obama last week pertaining to the American economy in his SOTU address, the US simply can’t create nearly enough revenue to fund its entitlement programs, military expenditures and government agencies. For those counting, that’s a $105 billion increase to the deficit from last year.
This is the biggest deficit America will have run since 2009, the peak of the financial crisis.
What’s the Cause of America’s Deficit?
Key drivers of this massive deficit is the forced increased spending on Social Security, Medicare, the Affordable Care Act and Medicaid, according to The Hill.
We are starting to see it now, folks. Increased spending on entitlement programs for Baby Boomers is going to steadily rise for the next 15 to 20 years, at least. We’ve been warning about this for years. The day of reckoning has arrived. This is what we call a super-cycle – gold investors would kill for a market like this.
The Hill reported that the cost of Medicaid and Social Security (a program for retirees and low income people) will rise an incredible $168 billion year over year! It also reported that “Spending on federal health programs alone — including Medicare, Medicaid and subsidies from the Affordable Care Act — will increase 11 percent compared to 2015 levels.”
The fuse to the demographic dynamite in the US, and much of the Western world for that matter, has been lit. We are just now starting to see it in America’s spending – soon to be followed by Canada, the UK, France, Italy and much of the West.
While national debt will skyrocket for the next 20 years to support this aging population that once was our economic engine, the clear opportunity for investors will be in healthcare. We know for fact that governments will be looking for ways to lower costs to support Baby Boomers. In the small cap world that means you should be looking for healthcare innovation. Look for companies with healthy cash positions that are creating innovative, self-monitoring products, technologies that make patient record keeping more efficient, old-age care providers, and other concepts along those lines.
While the deficits will be daunting, they will create a bull market for years to come in the healthcare sector. Apply your due diligence to where the ground is fertile…
Aaron
