One after another has lapsed from surplus into deficit. Our intent is not to depress you, nor to write an obituary for the U.S. economy. These deficits are serious but not fatal. They can and will be cured by spending cuts and tax increases, though both cures will slow the economy in the short term. The most obvious sacrificial lambs for spending cuts are defense and entitlement programs, with defense being the lamb of choice.
Many congressmen have voting constituents employed by defense contractors.
Tax increases are highly probable. Increased tax revenue will help to reduce the deficits, but it will also leave consumers less money with which to consume. While the broader market indexes have not fared as well, the stock market as a whole is getting expensive. The rise in the market results partly from investors having fewer attractive investment alternatives. As the savings rate has increased and pension funds have swelled, the luster of junk bonds, limited partnerships and real estate has faded, leaving stocks as the growth investment of choice.