A tax milestone


The economy has rebounded from last year’s shutdowns. The unemployment rate is so low that economists call it “frictional” in the sense that anything below 5% simply shows people leaving or leaving the workforce for family reasons. Anyone who wants a job can have a job. And tax revenue is flowing into the federal bank account, breaking all records.

Always . . . .

Yet the government is spending. And spend. And those who speak for the White House cannot imagine why inflation is out of control.

Last week, the United States government announced that, for all the money coming in, the country’s gross national debt exceeded $30 trillion for the first time. Focus on the raw. Newspapers called it a “tax milestone”. That’s one way of saying it. Another way would be a “tax grindstone”, like around our necks.

From the New York Times story: “The breach of that threshold, which was revealed in new Treasury Department figures, came years earlier than expected because of the trillions in federal spending that the states deployed to fight the pandemic. That $5 trillion, which funded expanded unemployment benefits, financial support for small businesses and stimulus payments, was funded with borrowed money.”

Yes, but it’s only $5 trillion. (Only in editorials about government can a writer use the phrase “just $5 trillion.”) Surely government could not have just watched the economy crash and people were laid off with no way to buy groceries or keep the lights on. to. But $5 trillion in emergency spending doesn’t explain $30 trillion in debt.

Are you old enough to remember the first year of Ronald Reagan’s presidency? In 1981, the national debt exceeded $1 trillion for the first time. In the first Gulf War under George Bush I, it hit $3 trillion (and that was after outspending the Soviets to win the Cold War, the S&L crisis, and the stock market crash of 1987). Yet by the time the terrorists struck us on September 11, 2001, the debt had fallen to less than $6 trillion.

Then wars and rumors of wars, a recession and a housing crisis, then the Great Recession and a pandemic – and in a relatively short period of time, we are at $30 trillion.

Experts in the dismal science — economics — say real dollar numbers don’t matter as much as comparing previous deficit spending to today “as a percentage of gross domestic product.” Fine. According to reports, the national debt is larger than the entire economy, surpassing levels not seen since World War II.

It’s not a partisan issue. Both parties in Washington are responsible. Democrats happen to be in charge of government these days, and they’re always trying to push the numbers up.

Again, according to the Times article: “The nonpartisan Congressional Budget Office warned last year that rising interest costs and rising health care spending as the population ages would increase the risk of a ‘fiscal crisis’ and higher inflation, a situation that could undermine confidence in the US dollar.”

If the dollar ever goes into crisis, and the world doesn’t want it (as much), it won’t become worthless, but will be worth less. And exchanging more dollars for the same goods or services is the key to runaway inflation.

As someone once said, “The theory is that the US government can keep borrowing indefinitely and keep passing the debt on to the next generation. But that only happens if investors keep buying the debt.” .

“When do they stop? What if later on investors in China, Japan and Europe, and even right here in the good old United States of America, decide that Could their money be in better places? Will there be a day of reckoning for the United States? And when? When the national debt reaches $20 trillion? $30 trillion? Will we come to a point where investors will stop investing in US Treasury securities?Meanwhile, interest will have to be paid on all that debt even if it means borrowing more to pay the extra interest.

“The housing bubble and the mortgage crisis started this whole mess. Banks gave out a bunch of bad loans to people who wanted to live in $200,000 houses without having the income to make the payments on houses. $200,000 The root cause of this financial crisis could be that people are living just beyond their means.

“And not just people. But entire nations.” It was taken from an editorial on these pages, in this same column.

In 2008.

What will debt look like in 15 years? What will the country look like? And what will the future of our grandchildren look like?


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