Even the U.S. economy, the best in the world, cannot support this much government debt, let alone what is projected for the next ten years. The numbers are frightening.
most everything you say in this article is correct except for the prospect of default...most definitely unless we do something very fast some sort of economic catastrophe will ensue....the currency may be worthless and the money people get back may be worthless but theire will be no default...the printing press will go into overdrive...now in terms of state govt's things might be different
You are right to suggest that inflation is the most likely scenario. The three options for debt default are repudiation, renegotiation, and inflation. I believe that we will get all three because of the destruction the inflation would do. It would push up interest rates and tank the economy and thus greatly diminish tax receipts, and the inflation would never be able to overcome that. That's how these destructive debt spirals work, as I imagine you know quite well. Thanks for the excellent comment.
I read this book in the 90s. “The Coming Economic Earthquake” by Larry Burkett. I believed Larry had the facts right then. I believe you have the facts right now. But given my experience with Larry’s projections, I’m a bit skeptical about your projections. And, since I think we are likely to have a little more time than you project, I hold out hope for the wisdom of the common American voter to finally drag our government in a better direction.
Thanks for your comment. I don't think that we have more time than the official projections state, which are the debt numbers I cite above, if we stay on the current course. I have written regularly about the debt projections, and I have always pointed out that very serious spending cuts can avert this scenario, and that only such cuts can do that. Unfortunately, recent events suggest that it is unlikely that we will get anything like the needed reforms in time to prevent a fiscal and economic meltdown. I have changed the tenor of my remarks recently, to align with that changed reality. In the presently unlikely event that those cuts become implemented, I will revisit my projections accordingly. In the meantime, the only recourse we have is what I mention in the last sentence of the article, alas.
In early 2001 Alan Greenspan testified before Congress that, if George Dubya's tax cuts weren't enacted, we were in danger of paying off the national debt too fast. Ahhh, the good old days.
Given these projections, what specific policies or reforms do you think could realistically gain bipartisan support to start addressing the debt issue before it reaches a crisis point?
Great question. The problem is that there cannot be any bipartisan deal to step back from the edge. The opposition party does not want the president and his party to solve problems, including existential ones such as this. The Democrats perceive trouble while they are out of power as being in their political interest. They will fight to the death against any attempt to cut spending, because it does them no good and causes them much harm politically.
Democrats also believe in Modern Monetary Theory--as it is convenient to their political interests--which argues that the U.S. government can spend as much as it wants without harm to economy, because it has the power to print more money (which it must do to cover the deficits). If that sounds like a recipe for inflation and ultimately hyperinflation, that is because it is exactly that.
Finally, the Democrats believe that higher spending always benefits them politically, except for defense spending when Republicans are in office. (They approve of defense bloat when they are in control of the government and can use it to benefit their interest groups.)
Hence, Trump and the congressional Republicans are on their own if they want to cut spending significantly and save the country. Most of the Republicans probably view that as political suicide, as the opposition (including the entire media complex) would trot out every possible real or imaginary "victim" of their "draconian cuts" that "benefit the rich at the expense of hardworking middle-class Americans."
The Republicans are certainly right about the likely political fallout, and they have convinced themselves that things are not as dire as the numbers show, to salve their consciences as they tinker with the silverware in the dining car while the train roars out of control down the mountain. In this way they too are acting on their perceived political interests instead of what is good for the country, and in the present case what is absolutely necessary to avert a disaster.
Both parties are to blame, though the Democrats' position is decisive in itself. If even a few of them were to support spending cuts, the nation and its economy could be saved. They will not do that.
That leaves small moves such as the current recission bill which would reduce annual federal spending by around 0.02 percent, according to what I've read about it. Such a minute change would be symbolic only, yet it could be an important symbol were it to pass and embolden Republicans to make real spending cuts.
Unfortunately, I cannot see that happening. It seems that this dynamic cannot change until the crisis arrives. At that point, it will be too late to save the current system as Trump is trying to do.
The current system is not a free-market order by any means, but what would arrive in the wake of an economic catastrophe and collapse of the federal government's authority and capability to protect the nation from invasion and internal civil chaos is anybody's guess. I would much rather not find out. I would prefer to see the government implement necessary fiscal, regulatory, and governance reforms in an orderly way. That, as I have argued, is Trump's approach. It probably has to happen this year or it will not work.
Unfortunately, given all these observations, a sensible and peaceful resolution seems extremely unlikely.
most everything you say in this article is correct except for the prospect of default...most definitely unless we do something very fast some sort of economic catastrophe will ensue....the currency may be worthless and the money people get back may be worthless but theire will be no default...the printing press will go into overdrive...now in terms of state govt's things might be different
You are right to suggest that inflation is the most likely scenario. The three options for debt default are repudiation, renegotiation, and inflation. I believe that we will get all three because of the destruction the inflation would do. It would push up interest rates and tank the economy and thus greatly diminish tax receipts, and the inflation would never be able to overcome that. That's how these destructive debt spirals work, as I imagine you know quite well. Thanks for the excellent comment.
Ugh, we're doomed.
I fear it's true....
I reposted at Facebook and on Twitter. Restacked, too.
Thank you so much!
On which of those celestial media do you suppose the granter of miracles listens?
I read this book in the 90s. “The Coming Economic Earthquake” by Larry Burkett. I believed Larry had the facts right then. I believe you have the facts right now. But given my experience with Larry’s projections, I’m a bit skeptical about your projections. And, since I think we are likely to have a little more time than you project, I hold out hope for the wisdom of the common American voter to finally drag our government in a better direction.
Thanks for your comment. I don't think that we have more time than the official projections state, which are the debt numbers I cite above, if we stay on the current course. I have written regularly about the debt projections, and I have always pointed out that very serious spending cuts can avert this scenario, and that only such cuts can do that. Unfortunately, recent events suggest that it is unlikely that we will get anything like the needed reforms in time to prevent a fiscal and economic meltdown. I have changed the tenor of my remarks recently, to align with that changed reality. In the presently unlikely event that those cuts become implemented, I will revisit my projections accordingly. In the meantime, the only recourse we have is what I mention in the last sentence of the article, alas.
In early 2001 Alan Greenspan testified before Congress that, if George Dubya's tax cuts weren't enacted, we were in danger of paying off the national debt too fast. Ahhh, the good old days.
Oh, boy, yes, what a great point. That was pure Keynesianism on Greenspan's part.
Given these projections, what specific policies or reforms do you think could realistically gain bipartisan support to start addressing the debt issue before it reaches a crisis point?
Great question. The problem is that there cannot be any bipartisan deal to step back from the edge. The opposition party does not want the president and his party to solve problems, including existential ones such as this. The Democrats perceive trouble while they are out of power as being in their political interest. They will fight to the death against any attempt to cut spending, because it does them no good and causes them much harm politically.
Democrats also believe in Modern Monetary Theory--as it is convenient to their political interests--which argues that the U.S. government can spend as much as it wants without harm to economy, because it has the power to print more money (which it must do to cover the deficits). If that sounds like a recipe for inflation and ultimately hyperinflation, that is because it is exactly that.
Finally, the Democrats believe that higher spending always benefits them politically, except for defense spending when Republicans are in office. (They approve of defense bloat when they are in control of the government and can use it to benefit their interest groups.)
Hence, Trump and the congressional Republicans are on their own if they want to cut spending significantly and save the country. Most of the Republicans probably view that as political suicide, as the opposition (including the entire media complex) would trot out every possible real or imaginary "victim" of their "draconian cuts" that "benefit the rich at the expense of hardworking middle-class Americans."
The Republicans are certainly right about the likely political fallout, and they have convinced themselves that things are not as dire as the numbers show, to salve their consciences as they tinker with the silverware in the dining car while the train roars out of control down the mountain. In this way they too are acting on their perceived political interests instead of what is good for the country, and in the present case what is absolutely necessary to avert a disaster.
Both parties are to blame, though the Democrats' position is decisive in itself. If even a few of them were to support spending cuts, the nation and its economy could be saved. They will not do that.
That leaves small moves such as the current recission bill which would reduce annual federal spending by around 0.02 percent, according to what I've read about it. Such a minute change would be symbolic only, yet it could be an important symbol were it to pass and embolden Republicans to make real spending cuts.
Unfortunately, I cannot see that happening. It seems that this dynamic cannot change until the crisis arrives. At that point, it will be too late to save the current system as Trump is trying to do.
The current system is not a free-market order by any means, but what would arrive in the wake of an economic catastrophe and collapse of the federal government's authority and capability to protect the nation from invasion and internal civil chaos is anybody's guess. I would much rather not find out. I would prefer to see the government implement necessary fiscal, regulatory, and governance reforms in an orderly way. That, as I have argued, is Trump's approach. It probably has to happen this year or it will not work.
Unfortunately, given all these observations, a sensible and peaceful resolution seems extremely unlikely.