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Gradually — Then Suddenly |
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Dear reader, |
The national debt of the United States national debt has scaled $39 trillion. |
Just yesterday it seems — and I exaggerate only slightly — the clock read $38 trillion. |
The figure came in at $37 trillion a mere 7.5 months ago. |
Thus the United States government is packing on $1 trillion of debt in 3.75 months. |
United States debt first scaled $1 trillion 205 years after its inception. And today? |
The work of 205 years presently reduces to 114 days. |
And so what was once the work of 205 years… is presently the work of 114 days. |
Impossible — but there you have it. |
Exponential Growth in Debt |
I hazard the underway conflict with Iran will accelerate the sprint to $40 trillion. |
How long until the dreaded $50 trillion mile marker? |
Under present acceleration $50 trillion debt is some 3.5 years distant. |
And so today a pearl of sorrow courses down my cheek… a mournful tear upon the ashes of the nation's finances. |
I fear its debt is assuming the hellacious form of a parabola. |
That is, the business begins to assume an exponential aspect. |
If only the nation's gross domestic product could maintain pace with its parabolic and exponential debt. |
It cannot… alas. |
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Debt Far Outpaces Growth |
The United States economy is an overburdened and swaybacked draft horse guttering along. |
The Federal Reserve's Atlanta outpost presently forecasts a 1.6% first-quarter economic expansion. |
In comparison — and as demonstrated — debt expansion is lightning itself. It is an unbridled quarter horse under full steam. |
This racer presently runs laps and laps ahead of the laggard. And its lead expands with each harrowing tick of the nation's debt clock. |
I noted that the nation's debt is scheduled to scale $50 trillion in 3.5 years — in 2029's second half. |
What figure will the gross domestic product register in 2029? |
Headed for the Cliff |
The Federal Reserve informs us that the gross domestic product presently ranges between $30.5 trillion and $31.4 trillion. |
I distrust, greatly, the Federal Reserve's economic calculations. Yet let us assume the figure is correct. |
Goldman Sachs projects 2.1% annual economic expansion through 2029. |
Let us assume — again, against all superior judgement — that the Federal Reserve's generous $31.4 figure is correct. |
2.1% annual economic expansion through 2029's second half would leave us with a gross domestic product of $33.7 trillion. |
Recall, the nation's debt is projected to scale $50 trillion by 2029's second half. |
Thus the nation's debt-to-GDP ratio would register 148% in 2029's second half. |
The figure presently comes in at 124%. |
The Grim Calculus of Debt |
Economists Carmen Reinhart and Kenneth Rogoff have indicated that annual economic growth recedes 2% per year when the debt-to-GDP ratio exceeds 60%. |
At 90%, growth is "roughly cut in half." |
What — then — are we to make of a 148% debt-to-GDP ratio? |
And so the nation's finances will attain an even greater rate of decay — should the divinations prove accurate. |
I realize of course that they may not prove accurate. They may prove excessively pessimistic, it is true. |
Yet you must concede they may also prove optimistic. |
As a fellow conditioned by hard experience to assume the worst… I incline towards option no.2. |
The trend is inexorable. Growth crawls, debt gallops. |
And so, as I have argued before: The Keynesian "multiplier" — the holy miracle of water into wine — has taken up division. |
It presently performs the anti-miracle of wine into water. |
Not Where We Need to Be as a Nation |
A certain Maya MacGuineas, presides over the Committee for a Responsible Federal Budget (do not laugh!). From whom: |
Though our level of debt is dangerous for both our economy and for national security, America just cannot stop borrowing… This is a moment of consequence and continuing to refuse to pay our own bills will not lead us to where we need to be as a nation. |
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Where do we need to be as a nation? I confess that I do not know the answer. |
Yet where are we heading as a nation? Bankruptcy court perhaps? The gutter? |
The United States government — the United States taxpayers, that is — presently shovels out $2.8-$3 billion each day to service the nation's debt. |
How much more must they shovel out as the nation's debt takes its exponential leaps? |
I do not know. Yet I do know the figure will be plenty handsome. |
Reports the above-cited Committee for a Responsible Federal Budget: |
Net interest on the national debt, the fastest growing part of the budget, is projected to more than double from $970 billion in Fiscal Year (FY) 2025 to $2.1 trillion by FY 2036 under the Congressional Budget Office's (CBO) latest baseline. That's after already having doubled from 2022 levels and having nearly tripled from 2020 levels. |
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Gradually, Then Suddenly |
What will be left for Social Security, Medicare, Medicaid, national offense? |
How will the United States afford its bread — and its circuses? |
It is a question we will likely confront sooner than later. |
How does a man descend into bankruptcy? |
Gradually — then suddenly — in Mr. Hemingway's famous telling. |
The United States government has passed beyond bankruptcy's gradual phase. |
I fear it is entering bankruptcy's sudden phase. |
Brian Maher |
for Freedom Financial News |
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