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Not So Fast: The Path to Faster Growth Won't Be Easy

Originally published Nov. 21 at 7:40 a.m. EDT

" Dougie, there is many a slip 'twixt the cup and the lip."
--Grandma Koufax

A surprising amount of spontaneous optimism has spread over the markets following the Trump election victory.

Specifically, interest rates have climbed swiftly and economic and profit forecasts have been lifted based on the expectation of successful pro-growth policies to be implemented by the Trump administration.

However, one of the most pressing headwinds as described in Friday's opening missive will be those higher interest rates. It is a headwind that will be compounded by the size of the federal government's debt, which will be close to $20 trillion in January 2017. And that does not include another $3.5 trillion of local and state debt.

The Debt and Deficits Are Now Out of Control

"Deficits don't matter."
--Vice President Dick Cheney

Back in the Reagan administration, tax cuts increased the deficit, but when combined with the Clinton/Gingrich budget controls, debt was falling and economic growth accelerated. Debt as a percentage of GDP fell. But the abandonment of budgetary controls (tax cuts rose at the same time spending programs grew) in the Bush administration put us back into deficits The Great Recession led to an explosion in the deficit, growing by nearly $10 trillion in eight years.

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