"Slowly. Then Rapidly"
by Brian Maher
"In 1981 - 205 years after the nation’s birth - its debt first scaled $1 trillion. That is, the business was the work of 205 years. Today the work of 205 years reduces not to centuries… not to decades… not to years… but to months.
Consider: The nation’s debt attained an existingly delirious $33 trillion in September 2023. In January 2024 - a mere four months following the calamity - the national debt gallops to $34 trillion. Four months! No - under four months. The $33 trillion embarrassment was not attained until mid-September. The $34 trillion enormity was attained the opening week of January. Impossible. But there it is.
Five Years Ahead of Schedule: In January 2020 the Congressional Budget Office divined the nation’s debt would scale $34 trillion in 2029. A five-year misunderestimation! Yet that divination preceded the fantastic fiscal deluges attending the pandemic. In 2024 the torrents have scarcely relented. Mr. Eric Boehm of Reason magazine: "The debt has grown faster due to the unprecedented levels of fiscal stimulus unleashed during the pandemic and because baseline federal spending has failed to return to pre-pandemic levels. In the fiscal year that ended in September, the federal government spent $6.1 trillion, up from $4.4 trillion in fiscal year 2019 (the last one before the pandemic). Federal revenue has climbed in recent years as well - $4.4 trillion last year, up from $3.5 trillion in 2019 - but those increases haven’t been large enough to keep up with the surge in new spending."
Has the pandemic not ended? Have not its savage lockdowns likewise ended? Both have ended, yes. Why - then - cannot the government of the United States revert to pre-pandemic spending? That 2019 spending was already lunatic. Why must the government of the United States sustain pandemic levels of fiscal lunacy in the post-pandemic period? In neither law nor equity can we discern an explanation. That is, in neither law nor equity can we discern a compelling explanation.
The business nonetheless proceeds - without let, without hindrance. Mr. Michael Peterson of the Peterson Foundation: "Looking ahead, debt will continue to skyrocket as the Treasury expects to borrow nearly $1 trillion more by the end of March." Slowly. Then rapidly.
Entering the Exponential Phase: The business begins to assume an exponential aspect. That is, it begins to increase at an increasing gait. Two hundred and five years to attain a $1 trillion debt, 10 years to attain a $3 trillion in debt, 10 additional years to attain a $6 trillion debt, 10 years after that to attain a $15 trillion debt, 10 additional years to attain a $27 trillion debt, three years to attain a $33 trillion debt, under four months to attain a $34 trillion debt.
Here is progress - of a very peculiar sort. How long until the nation’s debt surpasses $35 trillion? Three months - or less? How about $36 trillion after that? Then $40 trillion? Then $50 trillion? A $50 trillion economy can withstand a $36 trillion debt burden. It can likely withstand a $40 trillion burden. If the gods are kind… it may even withstand a $50 trillion debt burden.
But the United States economy is not a $50 trillion economy. It is - perhaps - a $27 trillion economy. Is economic expansion maintaining pace with this mushrooming debt? Alas… it is not.
Galloping Debt, Crawling Growth: Set to one side the rebound year of 2021. Not since 2005 has the gross domestic product exceeded 3% annual expansion. Meantime, the Congressional Budget Office projects average 1.8% annual growth through 2033. That is: Debt gallops, growth crawls.
Thus, as we have argued before: The Keynesian “multiplier” - the miracle of water into wine - has taken up division. It remains a multiplier only within the economics departments of ivied institutions and castles very high in the sky. As we have likewise noted before: "Economists Carmen Reinhart and Kenneth Rogoff have indicated that annual economic growth slips 2% per year when the debt-to-GDP ratio reaches 60%. At 90%, growth is “roughly cut in half.” An outfit labeled the Committee for Economic Development argues a “responsible” ratio for a nation the size of the United States is 70%. What is America’s current debt-to-GDP ratio? Some 124%.
Democracy Dies in Debt: 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." Where do we need to be as a nation? We do not know. Perhaps the gutter?
The United States government - the taxpayers of the United States, that is - presently shovel out $2 billion each day to service existing debt. How much more must they shovel out as the nation’s debt takes its exponential leaps? We do not know. Yet the figure will be plenty handsome. Reports Mr. Bezos and his Washington Post: "Interest costs are already the fastest-growing part of the budget. Net interest costs - a nonnegotiable expense - nearly doubled as a share of federal outlays between 2020 and 2023, going from $345 billion, or 5%, to $660 billion, or 10%. (Defense, by comparison, cost $815 billion, or 13% of spending in 2023.)"
Perhaps democracy dies not in darkness as Mr. Bezos claims - but in debt. What will be left for Social Security, Medicare, Medicaid, national offense and the rest of it? How will the United States afford its bread and its circuses? At the going rate… only with fantastic and herculean exertions. Uh-oh...
Meantime, some 30% of United States government debt is poised to mature this year. Much of this debt was taken on in a regime of drastically lower interest rates. Upon maturation it must be refinanced at today’s elevated rates. Consider for example the 3-month Treasury bill. The thing yielded nearly nothing in 2021. It presently yields over 5%. Meantime, the 10-year Treasury note yielded 0.50% in the hell-sent summer of 2020. It presently yields 4%.
For years and years the boy has yelled wolf. At $1 trillion of debt, at $2 trillion of debt, at every other trillion - now at $34 trillion. But the wolf has yet to appear. It has merely cast phantom shadows. We do not know when the snarling wolf will ultimately appear upon the stoop. Yet as noted above, the exponential function begins to apply. With it, the cascading effect - the spiraling effect. Slowly. Then rapidly…"
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