CBO Warns of Soaring Debt

FINANCE
CBO Warns of Soaring Debt

The Congressional Budget Office (CBO) has issued a stark warning about the long-term impact of making former President Trump’s Tax Cuts and Jobs Act permanent. If extended without other fiscal adjustments, U.S. debt held by the public could reach 214% of GDP by 2054—and over 250% if borrowing costs rise due to deteriorating fiscal conditions. Currently, total U.S. debt is $36 trillion, with $29 trillion held by the public. Servicing this debt already costs over $1 trillion a year, surpassing the Pentagon’s budget.

Trump and key Senate Republicans want to make the tax cuts permanent, but some fiscal conservatives are concerned. In response to a Republican lawmaker’s request, the CBO provided projections showing explosive debt growth. Even under its baseline forecast—where the tax cuts expire—debt would still hit 166% of GDP by 2054, breaking World War II-era records.

Critics like the Peter G. Peterson Foundation and Penn Wharton Budget Model say debt above 200% is unsustainable. A 2023 Penn Wharton report noted that even with favorable conditions, sustainable debt levels likely cap at 175% of GDP. Surpassing that could trigger market instability.

Supporters of the tax cuts argue they’ll spur growth through deregulation, energy expansion, and tariffs. But investor Ray Dalio warned of an impending debt crisis, saying global demand for U.S. debt may fall short, potentially leading to restructurings or political fallout. As fiscal concerns mount, the debate over making Trump’s tax cuts permanent could shape America’s economic trajectory for decades.

TECH
Apple TV+ Burns Billions, Gains Viewers

Apple has spent over $5 billion on Apple TV+ since its 2019 launch, aiming to compete with streaming giants like Netflix. The platform, with around 45 million users, remains unprofitable—reportedly losing over $1 billion annually—despite critical successes like Severance and Ted Lasso. Apple TV+ stands out from competitors like Disney+ and Max by offering nearly all-original content, avoiding licensed shows and movies.

Ben Stiller’s Severance recently concluded its second season as Apple TV+’s most-watched series, surpassing Ted Lasso. CEO Tim Cook has pledged to renew the series, signaling his ongoing support. However, the future of Apple TV+ seems dependent on Cook’s commitment rather than commercial viability.

While Apple can afford the losses—thanks to its $100 billion annual profits from iPhones and App Store commissions—other companies struggle. The Information noted that only a few firms, like Amazon, which spent $1 billion on The Rings of Power, have the financial power to compete in streaming. Legacy players like Paramount face much steeper challenges.

Meanwhile, consumers are increasingly cost-conscious. With inflation and rising living expenses, fewer are willing to pay full price for multiple streaming platforms or expensive theater tickets. This trend has sparked demand for discounted “super bundles” that combine services. Options like Comcast’s StreamSaver (bundling Apple TV+, Netflix, and Peacock) and Disney’s package with Hulu and Max are gaining traction.

Amid industry shake-ups and shifting consumer habits, Apple’s deep pockets may give it an edge—but profitability still seems far off for Apple TV+.

DISCLAIMER: None of this is financial advice. This newsletter is strictly educational and is not investment advice or a solicitation to buy or sell any assets or to make any financial decisions. Please be careful and do your own research.