Citadel founder and CEO Ken Griffin sounded the alarm about the growing U.S. national debt in his annual letter to investors in his hedge fund that was published Monday.
Griffin pointed to recent projections by the nonpartisan Congressional Budget Office (CBO) that show the national debt rising to historic levels due to higher spending on interest to service the debt, while annual budget deficits are forecast to grow despite a strong labor market.
"As we have cautioned over the past year, the surging U.S. public debt is a growing concern that cannot be overlooked," Griffin wrote. "For example, the Congressional Budget Office estimates that net interest spending will reach 3.1 percent of GDP in 2023, which is a full percentage point higher than the average from 1974-2023."
"It is irresponsible for the U.S. government to incur a deficit of 6.4 percent when unemployment is hovering around 3.75 percent. We must stop borrowing at the expense of future generations. The Western world urgently needs a significant increase in productivity growth as the burden of rising government debt and entitlement spending strains almost every major economy," Griffin added.
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The CBO released its long-term budget outlook last month that estimated interest payments will rise from 3.1% of GDP in 2023 to 6.3% of GDP in 2054.
It also projected that spending on Medicare and other major health care programs would rise from 5.8% to 8.3% in that period, while Social Security expenditures would increase from 5.0% to 5.9%.
Federal budget deficits were projected to widen from 5.6% of GDP in 2024 to 8.5% in 2054, with growth in spending outpacing increases in tax revenue relative to the size of the economy.
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Griffin's letter also offered a glimpse into his view of current economic conditions, as well as what he sees emerging in the years ahead.
He wrote that 2023 was a "tumultuous year for investors and central bankers around the world" as efforts by the Federal Reserve to tamp down inflation yielded what at times was a muddled picture of economic indicators.
He explained that "investors navigated erratic data that alternated between signaling higher inflation, a potential soft landing, or a recession."
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"As we look to the future, we anticipate a medium-term economic landscape that will remain challenging due to both structural and cyclical factors," Griffin wrote. "Focusing on the United States, we expect a more favorable climate for fixed-income markets as inflation eases."
"Economic growth is likely to be modest, staying below potential in the upcoming quarters, with the central bank persisting in its fight against inflationary pressures," he added. "Consumers should benefit from an increase in real income due to declining inflation and continued wage growth."
