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Total U.S. debt could exceed $30 trillion by the middle of the decade: Strategist

Greg Valliere, AGF Investments Chief U.S. Policy Strategist joins the On the Move panel to discuss the U.S. debt crisis.

Video Transcript

JULIE HYMAN: Let's talk to Greg Valliere about all of this, AGF Investments chief US policy strategist. He's joining us from Washington. Greg, I do want to get into some recent topics you've written about as well.

But first, I want to ask about this strategy that President Trump seems to be employing, that he employed the last time around, which is sort of attacking the incumbent, the establishment. But how is that going to work when he's the incumbent and the current establishment? How effective will that strategy be? Oh, Greg, you're muted.

GREG VALLIERE: Yeah, well, it's a pretty neat trick saying that he expects Biden to do these things. I think Donald Trump is president. So running as an outsider is one thing. But you can't totally run as an outsider if you're the president of the United States.

ADAM SHAPIRO: Hey, Greg, Adam Shapiro here. Good to have you back.


ADAM SHAPIRO: I've got friends who are Democrats who were all poppin' Xanax over this election. I got friends who are Trump supporters who are Colonel Klink, who-- I see nothing, I see-- or Shultz, I see nothing, from "Hogan's Heroes." For investors, when they pay attention to this thing, you've written recently about the dissent that is growing on Capitol Hill with Democrats over the issues that hit everybody, and that's stimulus. What do you think's going to happen in the next week or two? Will we see movement there?

GREG VALLIERE: I think we're going to hear Jerome Powell today say we need more stimulus. We've heard virtually every economist in the country saying we need more stimulus. And now members of the House who have been out for five or six weeks are coming back to town saying that their constituents want more stimulus. So I think it's one thing for Nancy Pelosi to dig in her heels and have a principled fight over a political issue. But at some point, she's got to compromise.

MELODY HAHM: Greg, as Julie alluded to, you are hot on talking about the deficit issue, or lack thereof, perhaps, as perhaps it's not top of mind for a lot of investors and even politicians as we head into the election. But you do point out that annual deficits of over a trillion dollars were pretty much certain, right, guaranteed, even prior to the pandemic. As we anticipate, perhaps, a Biden presidency, where he does invest in more social programs, in health care, how do we anticipate sort of the long-term effects a couple of years down the road when it does become an issue?

GREG VALLIERE: Well, right now-- and I know Bill Hogeland is the expert-- but I would just make a comment that right now, neither Biden nor Trump to me seems to be all that concerned about deficits. If Trump wins, he wants to make his tax cuts permanent. He wants to spend more money on things like infrastructure.

If Biden wins, he'll-- yeah, he might raise taxes, but not to reduce the deficit. He'll raise taxes because he has programs he wants to spend for. So I don't see either party really being that serious right now about deficits. And I would come up with a bottom line that by the middle of this decade, total US debt will exceed $30 trillion.

EMILY MCCORMICK: Hi, Greg, it's Emily. Taking a look at what some market participants, political analysts have been saying, just heading into this election, how credible a risk do you see there being a contested election, having some uncertainty for a period of days or weeks following, actually, the general election?

GREG VALLIERE: Well, I tell you, Emily, you hear it more and more in Washington and in the markets that we could have a disputed election. Three scenarios very quickly-- could we delay the election? I don't see that. Congress controls the logistics.

Could we wait several days before knowing who won? Yeah, absolutely. I mean, look at New York state this summer. It took them six weeks to decide who won the primaries.

And then finally, the most ominous of all scenarios, if Trump looks like he lost narrowly in the election, lost Pennsylvania by half a point, you know he's going to say that mail-in ballots were fraudulent, that the election was rigged against him. And I think he would go to Attorney General Barr and say take this to the courts. And just as we had to wait until December 12 of 2000 to find out for sure that, I guess, George W. Bush beat Al Gore, the Supreme Court didn't rule until then, I think this could get tied up in the courts right up until Christmas.

ADAM SHAPIRO: Greg, I want to get back to just about debt, because a lot of us have for decades been very concerned about the debt, the deficit. You just mentioned, by the middle of this decade, $30 trillion. And yet the concern we've all had has never materialized with the things we've been taught to believe would be negative for our country. Is that going to change? Or are we on the wrong path when we worry about the debt?

GREG VALLIERE: I don't think it's going to change, Adam. I think that with a promise virtually from Jerome Powell that race will be close to zero for another at least two or three years, debt servicing costs will be tolerable. In fact, the Treasury announced a few days ago that debt servicing costs will actually go down in the next couple of years. So for the average American who sees rock-bottom rates for cars, for houses, I don't think there's any correlation between the deficit and anything bad happening to people. So I think this will persist for a while.

JULIE HYMAN: I mean, at this rate, Greg, perhaps we're more at risk of the globe being on fire before deficits become more of a problem, right?


JULIE HYMAN: Convince me that deficits are a problem. There are a lot of folks who come on the show and talk about it. You, of course, also alluded in your piece on this, too, talking about modern monetary theory that says that they're not a problem, right, that the US can just keep on printing money. So when are we going to have to pay the piper?

GREG VALLIERE: Well, it's not a problem until it will be. And at some point, I think you'd have to look at Japan, where they haven't had a big inflation surge, but they are now precluded from spending on many programs because debt servicing costs are so high. So at some point, it will have a negative impact on our economy. But right now, again, with rates close to zero, I mean, if you're going to have a deficit, this is the time to do it. And you've got two candidates running for president who both will not be shy about spending even more.

JULIE HYMAN: It looks that way. Greg, always good to talk to you. Greg Valliere is AGF Investments chief US policy strategist.