Skip to comments.Plunging America Into a Sea of Debt
Posted on 02/14/2020 6:50:16 AM PST by Kaslin
WASHINGTON - The governments debt is rising faster than one can say bankruptcy, default, delinquency, insolvency and ruin.
If you dont believe me, heres what Phillip Swagel, the director of the Congressional Budget Office, told the House Budget Committee last month:
As a result of the persistently large deficits, federal debt held by the public is projected to rise to $31.4 trillion at the end of 2030, an amount equal to 98 percent of our nations entire GDP. That means our entire economy.
At that point, debt would be higher as a percentage of GDP than at any point since just after World War II and more than double what it has averaged over the past 50 years, he told members of Congress.
But he wasnt done. We project that the gap between spending and revenues would continue to widen over the following two decades and that debt would reach 180 percent of GDP by 2050, well above the highest percentage ever recorded in the United States. And it would be headed still higher, he added.
I know all this sounds kind of crazy. I mean, we send our representatives and senators to Washington to run our government and handle the money we give them each year when we send in our checks to pay our taxes. Yet the government owes more money than it did the year before.
The only person I know who made any sense of all this was the famed humorist Will Rogers.
We owe more money than any Nation in the World, and we are LOWERING TAXES, he once said. When is the time to pay off a debt if it is not when you are doing well? You let a Politician return home from Washington and announce, Boys we lowered your taxes. We had to borrow the money to do it, but we did it. Say, they would elect him for life.
But the CBO report makes it clear that this debt path would dampen economic output over time.
Rising interest costs associated with the debt would increase interest payments to foreign debt holders and thus reduce the income of U.S. households by increasing amounts, it continued.
Such a significant increase in federal borrowing would also elevate the risk of a fiscal crisis, CBO Director Phillip Swagel told the committee.
In addition, it could limit lawmakers ability to adopt deficit-financed fiscal policies to respond to unforeseen events or for other purposes, he warned.
Sure, the U.S. economy is doing well, with low unemployment and rising wages that have drawn people off the sidelines and back into the labor force. But the economys performance makes the large and growing deficit all the more noteworthy, he cautioned.
To be sure, interest rates remain low today, suggesting that there is time to address our fiscal challenges and that fiscal policy could be used as a tool to address other challenges facing the nation, if the Congress chose to do so, Swagel added.
But our projections also suggest that over the long term, changes in fiscal policy must be made to address the budget situation, because our debt is growing on an unsustainable path, he warned.
CBO has presented Congress with similar warnings over the years and decades, urging it to restrain spending, reduce its debts and find new ways to make government more efficient and effective.
But that advice has fallen on deaf ears in the House and Senate. And Will Rogers has offered some comical advice as well over his long career as Americas humorist.
Alexander Hamilton originated the put and take system in our national treasury, he often said. The taxpayers put it in and the politicians take it out.
America has had much worse debt problems in its history and still did great.
Keep the economy growing and all will be good. Inflation and interest rates are low.
Stop whining and bitching all the time.
Obama added almost $8 trillion to the national debt....and no one said boo.
For those of us that understand hoe the Federal reserve Corporation functions and how our fiat based monetary system operates, this article is ridiculous.
Under our Current System it is Virtually Impossible to have a Balanced Budget, let alone actually pay down any Public Debt.
They hand out cash to their constituent whores knowing the day of reckoning is someplace in the future.
Your share (as a taxpayer) of the national debt is $188,000.
But wait...there’s more. Your share (as a citizen) of the nation’s unfunded liabilities is $389,000.
That’s a whopping $577,000. With politicians like we have in the DC Swamp you can be certain that number is sure to rise substantially. After all, that’s how they make THEIR money — putting us in debt.
Let the good times roll.
Obama added almost $8 trillion to the national debt....and no one said boo.
worse than that, now those same commie pukes complain about PDJT and claim this great economy is due to Obama.
I have heard about the “debt” and “deficit” problem for 50 years. The closest we came to having an “issue” was not debt caused but was caused by overregulation and high energy costs of the early 1970s.
Not one of the “traditional” markers for debt-induced hyperinflation are present:
*high and rapidly rising prices of gold, silver, or other commodities.
*rapidly rising energy costs (quite the opposite, energy costs are flat or even falling) and portend to fall faster as the US continues to expand shale and other domestic production.
*high velocity of money
*ultra-high interest rates
As some of you know, for a long time I’ve had a theory of why this isn’t happening, and it involves the computer revolution and the total failure, so far, to properly value and price the new tech-heavy products by using pre-tech valuations. A smart phone, for what it does, should cost THOUSANDS, but doesn’t. That’s just one example.
But there is another factor of the “debt” that is distorted by American law. Apparently years ago Congress thought it wise to value ALL American assets at “purchase price”. So, say, Uncle Sam bought prime real estate in San Francisco to build “the Presidio,” in, say, 1910, that land and all the assets purchased at the time like buildings would be valued as what was paid in 1910, regardless of the fact that by 2000 (or whenever the Presidio was sold) the land and some of the buildings were astronomically higher. Same with gold prices. If gold was bought at $35 an ounce, that’s what it’s valued at today.
In the early 1980s, economist Robert Eisner calculated the value of American assets at MARKET value, and found that a national debt of hundreds of billions of dollars then was closer to one-tenth that in real valuations.
This always brings up the “What, Schweikart, you gonna sell the Washington Memorial?” No, but we might do what Donald Trump is already doing: move people out of DC, and sell off some of those office buildings for huge profits. We can unload massive amounts of federal land at reasonable prices that would bring massive profits; and so on.
I think these two factors-—utterly horrible current pricing/valuation and the legally required “old valuation” of US assets explain much of why the debt “doesn’t seem important.” Maybe cuz it isn’t.
When I saw it was you that posted I thought here we goo again, look for Schlichtermeister to start ranting about the coming Katrina Debt Sh*tfest.
But it’s just some nobody trying to fill dead cyber space with old news.
The fact is we want to run the debt up into the stratosphere, we want that, yes yes we want it because then we WIN!
We crash the Federal Reserve, we burn their carcasses on the Mall, then we replace their phony Federal Reserve Notes dollar for dollar with Treasury issued US Notes backed by a solid index like gold once the manipulators are in jail. Hear that JP Morgan Chase? JP’s gold riggers are facing the prosecutor and the rest of the Wall St casino will be finding a rock to hide under.
So just like before in our American history we are going to have US Notes issued by Treasury. In fact, right now Judy Shelton is writing a Trump manifesto to bring that globalist piece of dung known as the Fed into the Treasury Dept where it will be flushed down the sewer of fiat history.
And Treasury will issue Cybergold crypto so we can continue our purchases using convenient payment cards.
It’s going to be fantastic unless of course one is tuned to Schlichter-like nobodies jumping up and down ranting the sky is falling!
Excellent post and I pretty much agree with all you said.
Technological progress and economic growth in general are keys to keeping inflation and interest rates low.
Look at the hyperinflations in Zimbabwe and Venezuela. They followed economic collapse.
Actually, so-called conservatives said boo every day. Just look back over the FR archives.
Today those same folks don't seem to be as concerned about $1T annual deficits.
Not to say that the hyper-inflation argument is right, but the debt levels are not nothing.
The low interest rates mask the effect of the debt levels we have.
A return to “normal” interest rates will add roughly a Trillion per year to the debt servicing.
We had to get growth going first, but we do have to get at least some handle on spending. Not only for this, but also because a good deal of the loose spending is actually bad for us.
I’ve paid $38000 to $70000 in FIT every year since 1996. I’m tired of this “my share” crap.
"As a result of the persistently large deficits, federal debt held by the public is projected to rise to $31.4 trillion at the end of 2030, an amount equal to 98 percent of" our nation's entire GDP. That means our entire economy.
Y'know, because there will be NO GROWTH in the economy in the next TEN YEARS. /s Get the hook.
What LS and Moonman62 said.
Thank you LS for your comment!
You are, IMHO, simply and clearly describing some of the deflationary pressure that has prevented the predicted hyper-inflation. There are others you could mention.
The biggest one is worldwide demand for the US dollar. Everyone needs to convert his currency to USD in order to buy oil creating the opportunity for the US to run unprecedented deficits and debt. Check out the “petrodollars system” on investopedia.com, if anyone would like to read more. And there is a lot of foolishness written about the subject, so keep your thinkin’ cap on, but it is worth looking into.
Don’t forget, LS, and I would appreciate your instruction on this, that there are two aspects to the crash, the systemic underlying weakness of the currency, the financial system which makes the crash inevitable, and the specific triggering event which might bring it down.
In other words, we are rocking the baby in the treetops, and when the bough breaks, the whole thing comes down cradle and all. If you are saying we are not all the way to the top of the tree, that is interesting. If you are saying the branch cannot break, that is also interesting.
American financial policy seems to include attacking any nation, Iraq etc., that tries to market oil using another currency, hence the Democrat, Rino, and Neocon pressure to start a war with Russia. China is also moving to do this and in other ways threaten the USD as the currency of global trade.
Also we have instituted stops, preventive measures, against all conceivable bough-breaking events, like that from 2008 with the crash caused by the derivatives market. So when the debt burden is too great for these stops or if some completely unforeseen bough-breaking event occurs, then the baby will come down at that time.
We have duct-taped all the boughs, so rock on, Baby!
“....what it has averaged over the past 50 years, he told members of Congress.”
It was congress during the 60’s that actually started this slide by borrowing money from one program to pay off the immediate bills of another at an increased rate. And each time the debt was ignored as, “well, it’s all one fund anyway,” and became the practice. Then when the government raised the taxes to pay back the debt, a new program soaked it up. And when that program got out of hand, it needed a slush fund from another program. So in actuality, all the money in the governments became a slush fund, some hidden and some right out in the open.
This is the way the government, at all levels, keeps justifying more tax money to use to wangle voters and keep them in power to get more money. Perpetual machine.
But they have finally reached a point due to the massive increase during the Obama years that they can’t pay for any program and taxes can’t be raised fast enough to keep them solvent. And if anyone tries to dissolve programs due to impossibility of paying for it, to include old or new programs, they will be publicly hammered into non-existence. So they sit back and blame the market while the public is told to. The 1929 type bailout for dishonest politicians over the last 60+ years.
The USA will never go bankrupt because it prints the money. The manifestation of too much debt will be when inflation hits us all. That is what happens to other countries with reckless spending- their currency becomes worthless and they need wheelbarrows of it to buy a loaf of bread. We are FAR away from that.
That works as long as the US dollar is the reserve currency of choice. That tune will not play forever. There will come a time when other nations will not be so willing to lend to the US. We are far from Weimar levels of inflation but even so now is the time to start paying down our deficit while the economy is still good.
Couldn’t have said it better myself. A deficit is a deficit, regardless of what letter comes after the President’s name. Mortgaging the future for the here and now is always a sin in my book.
The taxpayers put it in and the politicians take it out.
Any count on the number of democrat programs that turned out to be rat holes?.
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