Debt

The Next Pandemic Will Be Caused by the National Debt. It Will Crater the Economy.

Debt held by the public equals about 100 percent of GDP. That's hurting growth and will fuel a major crisis.

|

One of the most frustrating aspects of the novel coronavirus pandemic is how many early warning signs and response plans for just such an event were waved away by public health officials, the president, governors, and just about everyone else who could have made a difference. Microsoft co-founder Bill Gates warned about a pandemic in a 2015 TED talk that's been viewed over 29 million times. The George W. Bush administration nearly put in place a pandemic preparedness plan in 2005 before letting it drop. So when President Donald Trump said on March 6 that the coronavirus "came out of nowhere," it wasn't quite accurate.

It's important to underscore that all the death and economic wreckage COVID-19 has caused didn't just "come out of nowhere" because there's another totally predictable crisis that promises to be even more damaging to our way of life: The national debt—the amount of money the federal government owes—is already choking down economic growth, but in the future, it could lead to "sudden inflation," and "a loss of confidence in the federal government's ability or commitment to repay its debts in full." "Such a crisis could spread globally" causing some "financial institutions to fail." That's all according to the nonpartisan Congressional Budget Office (CBO), which has been warning Americans about the long-term consequence of the ballooning debt for years.

Like the coronavirus, the debt problem has the potential to seemingly appear out of the blue and turn our world upside down in a matter of weeks. There's plenty we can and should do to avoid or minimize the potential shock to our system, but Congress and presidents from both major parties have accepted Dick Cheney's false maxim that "deficits don't matter." Instead, they just keep spending more than we take in during good times and bad, even though being so deeply in hock will make us less able to deal with a future crisis.

The amount of money the government owed to the public was 79 percent of gross domestic product at the end of 2019, up from 31 percent in 2001. The COVID-19 lockdowns and subsequent emergency spending will push the curve above 100 percent of GDP by the end of 2020, and it's expected to keep rising.

Emergency spending and plunging tax revenues are making a bad situation worse. CBO forecasts that the budget deficit this year will be 17.9 percent of GDP, meaning that the government is running much larger deficits, racking up significantly more debt, than it did even at the height of the financial crisis of 2007-2008.

Economists such as Nobel Prize-winner Paul Krugman and proponents of modern monetary theory (MMT) look at the absence of inflation and higher interest rates so far as justification for ever-more spending and borrowing. While it's true that the cost of paying interest on the debt is still dwarfed by other expenditures, that's because historically low interest rates have made government borrowing cheap.

But there's no reason to believe that interest rates won't rise over time. According to conservative estimates from the CBO, as the total budget grows as a percentage of GDP, the cost of paying interest on the debt will increase faster until, by 2050, it accounts for about 24 cents of every dollar spent. And these estimates don't take into account emergency spending for COVID-19, which will make servicing the debt even more costly over time. Like a monthly credit card payment that eats into a household budget, federal debt means less money to buy other things.

And when governments run large, persistent deficits, it also has a devastating impact on economic growth over time. Our current debt levels could reduce GDP by about one-quarter over 23 years, according to research by Harvard economists Carmen Reinhart and Kenneth Rogoff. It's a case of what French economist Frédéric Bastiat referred to as "the unseen" because we'll never get to experience how much wealthier we otherwise would have been had the federal government practiced fiscal prudence. Anemic growth will impact the poorest Americans most of all, causing their material progress to slow considerably. It means less leisure time, smaller homes, older cars, and less health care.

In the short-term, there's no question that the government can and will be able to borrow massively, and interest rates are likely to stay low for the time being as the world shifts into recession. But there's also the specter of investors here and abroad refusing to buy U.S.-issued debt as our economy flattens, China flexes its economic and political might, and alternative instruments such as bitcoin and gold offer safe refuge. Like a global pandemic, a debt crisis seems impossibly off in the distance until it's the only thing you can seeEven the most hubristic economist or president would have to admit that there will come a time when the U.S. dollar is no longer the world's reserve currency. That change won't necessarily be as dramatic as when German paper marks became worthless after World War I, but it will massively reduce purchasing power even as it increases the cost of everything.

Spending proponents sometimes cite World War II when talking about battling COVID-19; the analogy is apt for reasons they may not intend. Between 1940 and 1945, federal spending increased tenfold from $10 billion to over $100 billion to pay for the war effort. But when victory was won, the government immediately cut military spending. Once peacetime growth resumed, the debt-to-GDP ratio fell quickly. Then, starting in the 1970s, with the exception of a five-year dip during the economic boom of the 1990s, the federal government has been growing the size of the debt in relation to GDP.

Instead of a foreign enemy, our out-of-control spending has been driven by the persistent rise in the cost of entitlements like Medicare and Social Security. Even as total tax revenues increase, we keep spending more and more, adding to a national debt that costs more to service even as it reduces economic growth.

Despite seemingly just showing up in America without notice, the coronavirus pandemic and all that has happened over the past two months didn't exactly "just come out of nowhere." When the debt crisis materializes and our options are severely limited because of decades of profligate spending, politicians sitting in the Oval Office and Congress will claim that it all just came out of nowhere, like that crazy virus back in 2020.

But nothing could be further from the truth: Budget wonks are already sounding the alarm. We need to heed these warnings now or suffer an economic lockdown later from which there may be no escape.

Written by Nick Gillespie; motion graphics by Lex Villena and Isaac Reese; sound by Isaac Reese; Production support by Regan Taylor; thumbnail by Lex Villena. 

Music credits: "High Flight" by Michele Nobler; "Believe" by Maya Pacziga; "Unplanned Run" by Stanley Gurvich; "Fall" by Stanley Gurvich. Licensed through Artlist.

Photo credits: Printer, ID 53590495 © Lacha31; Uncle Same, ID 10259835 © Lisa F. Young; Credit Card, ID 10259835 © Lisa F. Young; Credit Card 2, ID 5128072 © Tilo; Credit Card 3, ID 21289749 © Zedcreations; Credit card 4; ID 49941266 © Ensuper; Credit 5, ID 165961488 © Sergey Ishkov; Credit 6, ID 165961488 © Sergey Ishkov; COVID, Illustration 177266831 © Павло Ванжула; Xi Jin Ping, Cancillería del Ecuador; Flag Guy, ID 154258414 © Bangkok Click Studio; NYC Footage, Streetfilms; Gold, ID 33756425 © Rangizzz | Dreamstime.com; Senate, Ron Cogswell; Bitcoin, Photo 107944878 © Razvan Nitoi—Dreamstime.com; Wall Street, JOHN ANGELILLO/UPI/Newscom; Classic Sail Boat, Photo 21486687 © Sfbay77—Dreamstime.com; Tall Ship, Photo 58275192 © Daniel Thornberg—Dreamstime.com; Federal Reserve, www.Futureatlas.com; Senate Building, Ron Cogswell

NEXT: Is the COVID-19 Pandemic Self-Flattening, or Will It Grind Relentlessly on?

Editor's Note: We invite comments and request that they be civil and on-topic. We do not moderate or assume any responsibility for comments, which are owned by the readers who post them. Comments do not represent the views of Reason.com or Reason Foundation. We reserve the right to delete any comment for any reason at any time. Report abuses.

  1. I was already expecting a return of stagflation before it all collapses.

    Already got my leisure suit picked out with collars that can barely conceal my enormous pecs.

    1. The DEBT is not the DEFICIT. And the DEFICIT is not the DEBT. They are separate problems.

      Government BORROWING drives up the debt, not government SPENDING.

      The solution to our debt problem is simple: STOP ISSUING DEBT-BASED MONEY! Begin issuing pure “unbacked” fiat money to fund the deficit, rather than going further into debt. The inflationary impact of unbacked dollars is no worse than the inflationary impact of the same amount of debt-backed dollars. Issuing unbacked dollars will halt the increase in the national debt and its crushing $479 billion in annual interest. Paying off part of the maturing debt each year and rolling over the rest will eventually bring the national debt (and its taxpayer-financed interest payments) down to zero. See http://www.fixourmoney.com .

      1. And yet Government spending drives up government borrowing. Printing money instead of borrowing will have the same effect in the long run. Inflation, hyper-inflation, and economic collapse. Either way the US citizens will be screwed, and the politicians will walk away without consequences or learning anything.

        1. Printing money will *not* have the same effect in the long run, because there won’t be any crushing national debt to pay down, repudiate, or leave to our grandchildren. Big difference. See http://www.fixourmoney.com .

          1. Your idea has been tried before. And every government that’s tried it has failed catastrophically.

            1. So you think uncontrolled spending accompanied by a huge and growing national debt is better than uncontrolled spending by itself? Please explain.

              1. No, better would be to get spending under control.

                Uncontrolled spending on pure fiat money is not better than uncontrolled spending on debt. Again, look up hyper inflation. Look up the Weimar Republic.

                Uncontrolled spending on pure fiat money ends in triple and quadruple digit inflation rates.

                How long do you think the government will last when annual inflation hits 1,500%

                They won’t be able to print money fast enough.

                1. From http://www.fixourmoney.com :
                  “The German (1921-23) and Hungarian (1945-46) hyperinflations were the products of special circumstances and were not triggered by a political desire to spend recklessly. Each country was on the losing side of a world war and found itself weighed down by a huge and unpayable war debt imposed by the victors (the Soviet Union, in the case of Hungary). Reparations had to be delivered in the form of gold, goods and hard currency. In an attempt to pay off these debts, each country printed massive amounts of its official currency to purchase the assets required to pay these reparations. Neither country had any alternative. This practice directly triggered both ruinous hyperinflations.

                  “The more recent bout of unrestrained money printing in Zimbabwe, which led to hyperinflation, was facilitated by massive government corruption, draconian political and economic controls, and widespread expropriation and destruction of farms and other productive enterprises. These preconditions for hyperinflation do not exist in any advanced market-based economy. If such circumstances do arise someday in the U.S., backing our fiat money with government bonds will not save the country from a financial meltdown; it will likely make matters worse.

                  “It’s worth noting that the U.S. today has one thing in common with postwar Germany and Hungary: the presence of a government debt that we are increasingly unable to pay back. We can continue ‘kicking the can down the road’ as our national debt continues to become more unmanageable, or we can begin to gradually pay it down. Given our present political and economic circumstances, the only way we can accomplish this is by breaking the link between the federal deficit and the national debt.”

                  1. I quit working at shoprite to work online and with a little effort I easily bring in around $45 to 85 per/h. Without a doubt, this is the easiest and most financially rewarding job I’ve ever had. I actually started 6 months ago and this has totally changed my life.

                    For more details………………Home Profit System

                2. I quit working at shoprite and now I make $30h – $72h…how? I’m working online! My work didn’t exactly make me happy so I decided to take a chance on something new… after 4 years it was so hard to quit my day job but now I couldn’t be happier.
                  Heres what I’ve been doing…  ,,, ONLINE WORK

                  1. Home based job to make every month more than $19k by doing very easy work on laptop or Mobile just in part time. Last month i have received $18643 from this job by giving this 2 hrs maximum a day online. Very easy work to do and earning from this are just crazy. Everybody can now makes more cash online by joining this job from the website given below excellent luck…….. Read More

          2. Sounds like the trillion-dollar coin to me. Funny money is funny money.

            1. You mean fiat money with no debt is “funny money”, but fiat money plus a huge national debt is not?

              1. No one said that. The solution is to quit adding to the debt.

                1. Exactly! And for now, the only way to quit adding to the debt is to quit issuing bonds to “back” our fiat money. See http://www.fixourmoney.com .

                  1. No, the Solution is to cut back on spending and build the enemy so we eliminate the annual deficit. Then we can look at actually retiring the existing debt.

                    1. We passed the point of no return for that solution long ago. As http://www.fixourmoney.com points out, “There is no politically viable means of making the numbers work. The only possible way we can pay down the national debt in a debt-based fiat currency is to arrange for tax revenue to exceed government outlays, applying excess tax receipts to the debt. This process would entail a massive, decades-long austerity program requiring significant tax increases along with extensive cuts to Social Security and Medicare spending. Voters have clearly shown that they will not support such draconian measures.

                      “If a federal budget surplus is not an option for the foreseeable future, then there is no way that today’s monetary system can be employed to roll back the national debt. Debt-based money is simply not an appropriate tool for the job.

                      “In today’s U.S. economy, high levels of deficit spending are ‘locked in’ for the foreseeable future. Despite this circumstance, we can use debt-free fiat money to limit price inflation and other harmful consequences of this deficit in two ways: (1) Support a federal budget that fully funds essential services, along with the minimum amount of “entitlements” that the voting public is willing to accept. And (2) reduce taxes to the point where the advantages of allowing taxpayers to keep more of their own money are offset by the disadvantages of further money creation.”

          3. No, printing money without issuing debt will be much worse, because you’ll just get the inflation. With debt, at least some people are benefiting (the ones who loan the government the money by buying the debt).

            1. Those who loan the government money are “benefiting” at the expense of the taxpayers and their descendants who are forced to pay the interest, so that’s a zero-sum game. We need to stop adding to the national debt altogether. See http://www.fixourmoney.com .

        2. This is nonsense. It ignores the entire right hand side of the equation: The supply side. A key is that issuing currency and spending will not cause inflation as long as there are underutilized resources in the economy (unemployed folk) since business people go wakey wakey and produce more goods and services to offset the money issued.

          1. Not just unemployed folks, but also raw materials. The problem is that too much money (because interest rates are too low, or because there’s too much unbacked injected money) destroys the market’s ability to communicate information, and people overbid productive resources, some of which fail to deliver. Inflation shoots up (too much money relative to stuff), and the economy crashes because investments fail.

            Backing new currency with debt slows down the disaster, because people invest in government debt rather than (non-existent) productive resources. Without government debt to attract capital, inflation of productive resources would skyrocket as the government injected cash into the economy.

      2. Gosh you’re stupid – “pure “unbacked” fiat money”

        Here’s some monopoly money to pay the debt.. What do you mean it has no value??? Oh yeah; The government cannot print value even though it thinks it can.

        1. From http://www.fixourmoney.com :

          “If unbacked fiat money has no ‘real value’, then fiat money backed by a bond redeemable only in that same fiat money can have no ‘real value’ either. How can a promise to pay in a currency that has no ‘real value’ realistically serve as backing for the currency itself?

          “Although inferior to a gold-based currency, fiat money does in fact have real value. The U.S. dollar’s value derives from the fact that it is the official medium of exchange and unit of account within a large, productive and reasonably stable economy. It does not derive from the fact that $20 trillion in U.S. government IOU’s are ‘backing’ the nation’s currency.”

          1. “large, productive and reasonably stable economy”
            Of which none exists and will more-so not exist by playing monopoly money games. The USD has already lost 92% of its value in 50-years. We’re already on the verge of hyperinflation.

            You can’t print value…

            1. The government CAN print purchasing power, with or without bonds to “back” it. Is it better to “back” the currency with bonds denominated in that same currency, or to just print the currency by itself? Hint: national debt vs. no national debt. See http://www.fixourmoney.com .

              1. Me too then; Here’s my “printed” $50/hr… Now get to work…

                Oh, everyone is telling you your $50 can’t even buy their garbage can?? Go figure; I’ll just print some more until its *value* is worth a garbage can – yet the more I print the less it’s worth BECAUSE you cannot print labor. You cannot print Value.. It has to be *earned*.

                But you — well you did *earn* that worthless $50 didn’t you??? But because I freely “printed” enough to buy a garbage can and only gave you $50; you just got robbed now didn’t you.

                It all goes back to the fundamentals. You cannot print value; but you can turn a citizenry into the poorest slave laborers that ever existed by ROBBING them (their labors) through inflation…

                1. What is a USD anyways???? If you cannot trade it for *labor* (unbacked) what are you going to use it for? A fire? Toilet paper?

                  Somebody has to *earn* that USD for it to be worth anything. This isn’t a complicated subject. There’s no avoidance of the reality of it except to create a mental delusion and brick-walled ignorance of the basic reality.

                2. So it’s better to turn the citizenry into “tax slaves” by forcing them to pay interest on a crushing national debt? The only thing that “backs” our money is the government’s power to confiscate its citizens’ wealth. As long as the government continues to issue fiat money, it’s better for it to be unbacked rather than backed by adding further to our forced tax burden. See http://www.fixourmoney.com .

                  1. Now you’re getting it… You’re right it’s exactly the same as “tax slaving”. The only difference is printing fiat money is the deceitful way of doing it which causes carelessness as well as the surprise, surprise — big boom of an economy in ruins. As proven by countless examples in history.

                    At least with a tax bill the theft/slavery isn’t blind and that is exactly why it is FAR better than printing fiat money.

                    Also, just to note; When the USD was backed by gold (non-fiat backed) the government didn’t have to enslave it’s citizens. That’s something many should take far more notice of. The government has no intrinsic value.

                    The growing flirtation with being a communist-nation driven by ‘slave’ ownership be it by tax/printing fiat – isn’t a good thing for the USA and I’d predict an utter collapse at some point.

                    1. Printing fiat money is not “deceitful” – everybody knows the dollar is not backed by anything tangible. Piling on a huge national debt burden just adds insult to the taxpayers’ injury. The worst outcome of pure fiat money is a worthless currency. The worst outcome of “backed” fiat money is an unbearable tax burden, followed by a massive debt repudiation and a worthless currency. See http://www.fixourmoney.com .

                    2. “insult to injury” lol… Your basically trying to sell the idea that ignorance is bliss.

                      I’d stick with the foundation of the USA. That of individual freedom/responsibility and justice for all. The nation doesn’t have to be thought of as a lose-or-lose situation of which we have to be ‘tax slaves’ or worthless currency ‘slaves’. Maybe we can elect politicians who know how to cut government our of the slavery plantation business all together. A government that exists for justice and justice alone.

      3. “The solution to our debt problem…” There is no debt problem! Interest payments on the debt are stimulative. Fed govt DOES NOT borrow its own sovereign currency. Why would it? The debt could be reduced to ZERO immediately by transferring debt dollars to each holder’s reserve account. Taxpayers DO NOT pay for federal debt. The Fed, by authority of the Fed govt, simply credits accounts on a computer-neither taxes nor borrowing involved.

        Monetary Sovereignty describes money creation and destruction.

        1. If the Fed govt DOES NOT borrow its own sovereign currency, then why does it issue bonds denominated in dollars, and pay interest on those bonds?

          (I agree that the government SHOULD NOT borrow its own sovereign currency. See http://www.fixourmoney.com .)

      4. Full faith and credit backs the US dollar. Backing a currency via metal, tulip bulbs, sea shells or whatever, is also by fiat. Halting the national debt is nonsensical. It is simply savings accounts at the Fed. Growing account balances at this bank burden no one- especially not a burden on the Fed Govt (Monetarily Sovereign). GDP does not pay for debt. The Fed simply credits account holders.

        1. Interest payments on the debt are part of the federal budget. Those interest payments go to people and nations worldwide, not just to the Fed. They are funded by tax collections and by the issuance of additional bonds, neither of which would be necessary if the national debt did not exist.

    2. You gotta have a bunch of chest hair showing too.

      1. Don’t forget your Italian Horn pendant on a very large gold chain!

    3. Start generating extra cash online from hom emore than $22k by doing very easy work just in spare time. Last month i have got paid $22745 from this easy home job. Join this job right now and makes more cash every month online. Just follow web link here to get starte….. Read more

    4. Hi……Start generating extra cash online from hom emore than $22k by doing very easy work just in spare time. Last month i have got paid $22745 from this easy home job. Join this job right now and makes more cash every month online. Just follow web link here to get starte….. Read more

    5. hy my friend you can earn a lot of money by click on that link
      …………………………www.money34.com
      you can earn a lot from your home in just few hours

  2. I do not blame a mindless virus; I blame the fascist actions taken by all levels of government in panicked response to the virus.

    1. Too logic for Americans? It has been the reaction that has driven the non-essential to consider suicide. Gold may be a place of wealth refuge, but it doesn’t do much work.

    2. If you believed the hysterical predictions of 2 million deaths in the USA, it made sense to shut down a 17 trillion dollar economy (GDP net of government spending). For insurance and legal purposes, the value of a human life is generally estimated around 10 million dollars. If you’re going to lose 20 trillion dollars in value (2 million times 10 million), you take the economic hit to try to stop it, even if it’s going to cost you 6.8 trillion (40% of the productive economy).

      But if total deaths are closer to 200,000, you’re giving up 6.8 trillion in lost productivity to save 2 trillion dollars in lost lives, and many of them would die anyway, even with the shutdown.

      1. And the same goes for the bailouts. Adding a trillion or two to future taxpayer obligations makes sense in the short run if you need to keep your economy going. But if the economic impact of the virus is “only” a trillion or two by itself, why make the economic damage worse by burdening future taxpayers?

      2. We’ll be at 200,000 by the end of the month, and it will be far from over.

  3. Uh oh. Nick is gonna be in trouble with the rabble here that doesn’t like to acknowledge that debt and deficits are worse under Trump than any admin since ww2. It’s tough trying to hide your tribalistic and culture war priorities when your party throws your old fig leaf of financial conservatism to the wayside.

    1. It’s tough trying to hide your tribalistic and culture war priorities

      You said it!

      Nick is gonna be in trouble with the rabble here

      And then you proved it!

    2. We just haven’t yet had the massive economic boost that happens when government restricts freedom of trade and freedom of movement.

      1. That’s correct! The Mexicans are gonna PAY for that wall, any day now! And then we (REAL Americans, that is) are gonna be RICH-RICH-RICH!!!

        1. Hahahah just couldn’t stay away Á àß äẞç ãþÇđ âÞ¢Đæ ǎB€Ðëf ảhf

          lol why do you even bother

      2. seemed to be working just fine until the D governors decided to forcibly shut down their entire economies. But of course that had nothing to do with it did it.

        1. Ultimately, the only way to save the republic is to get rid of the progressives. As long as we have progressives nothing can get done.

    3. It’s true: thanks to the first 100% government/media created economic depression in American history, the debt is now increasing at a rate that makes the 9 trillion in 8 years of Block Yomomma look like mere child’s play. This current debt escalation is way more frightening than the minuscule chance of dying of complications from the Wuhan Flu.

      At least the Goth Fonzie Wop is no longer pushing that old laughable horseshit that these are the best days ever because the supermarket has four different varieties of eggplant on the shelf.

      1. that old laughable horseshit that these are the best days ever because the supermarket has four different varieties of eggplant on the shelf

        Why is that laughable? You really want to go back to the days when frozen dinners sucked and air conditioning was a luxury?

        1. Hey remember when you made a fool of yourself by not knowing there were differences between civil and criminal law?

          We do.

          1. From the frequency with which you change your handles, I doubt you remember much of anything. The “we” is a nice reminder of all those handles, though; props for injecting a bit of humor into your rants.

            1. “From the frequency with which you change your handles”

              AWW twiddle SQLSRY wants to be the only one to change handles.

              You gonna cry more SQLSRY?

              ” I doubt you remember much of anything”

              I remember you told us you want to eat shit and babies. And that you think it’s spelled “dalai llama” lolololol

            2. Would you idiots stop responding to him?

        2. Well, it would make people leave the sunbelt and re-inhabit the northern states.

      2. It’s all liberals, the media, and the chinamen. Definitely not the guy in charge who’s been acting like an erratic baboon.
        My guys twist yourselves into jokes trying to defend (R)s.

        1. I know you don’t like people pointing out that it was scumbags like you who decided to cause the freakout of the century and wreck the entire global economy.

          Too fucking bad. You better get used to it, because I’m going to continue reminding everyone of that again and again and again.

        2. and state governors and county health board apparatchiks

    4. “”Nick is gonna be in trouble with the rabble here that doesn’t like to acknowledge that debt and deficits are worse under Trump than any admin since ww2.””

      Thanks to Pelosi and the House.

      “”House Passes $3 Trillion Aid Bill Over Republican Opposition””
      https://www.nytimes.com/2020/05/15/us/politics/house-simulus-vote.html

    5. Fuck off.

    6. “…doesn’t like to acknowledge that debt and deficits are worse under Trump than any admin since ww2…”

      Yeah, that darn Trump started the ‘rona and then shut down the economy and then authored the giveaways!
      That darn Trump.
      Are you posting here to prove how stupid a lefty can be?

      1. There are a few here to choose from for that proof.

    7. There’s no question about it. Deficit spending under Bush was obscene. Obama made Bush look thrifty, and Trump makes Obama look responsible.

      Trump’s far from perfect. He’s no libertarian, and not really a conservative either. There’s a lot I dislike about him. It’s just that everyone the Democrats offer is at least an order of magnitude worse.

    8. It’s a case of what French economist Frédéric Bastiat referred to as “the unseen” because we’ll never get to experience how much wealthier we otherwise would have been had the federal government practiced fiscal prudence.

      Imagine how much more financial wealth we would have if the Govt spent the next 20 years net-confiscating Dollars, instead of what it has been doing, net creating Dollars.

      WHAT? We will have more money by having LESS money?

      If they really made “tough decisions”, they could completely eliminate the existence of U.S. Dollar Assets … by reversing deficits and eliminating federal Liabilities.

      Well, Mao and Stalin net confiscated food, so we can be much more modern by net confiscating Dollars.

    9. We are absolutely sorry you dont understand who controls the House and Senate nor how the budget making process works.

      Are you blaming Trump for the 500 million Minnesota just requested for fixing the protests?

      1. Jesse, Tony and the other progtards here will never hold a democrat accountable for anything as democrats have no accountability.

  4. Uh oh. Nick is gonna be in trouble with the rabble here

    What a stupid thing for you to obsess about.

    1. You obsessing about me obsessing seems obsessive.

      1. What’s really obsessive is you obsessing over his obsessing about your obsessing.

        1. Now he just has to post whinging obsessive complaints 400 times a day and he’ll be just like both of you.

          1. Your what hurts?

            1. 401, slow down so he can catch up

  5. there is no way to stop it unless the public actually just stops voting for D and R puts in real small government, fiscally responsible libertarian types.

    That’s not gonna happen.

    1. That’s the honest truth, and it makes for fun trying to think what will happen.

      China is 4-5 times the US population, so has the potential for being the economic leader in a few decades. But planned economies are only good at leeching off other economies, and China won’t get too much bigger before it either stagnates or has a democratic revolution. India is only 3-4 times the US population, and is sort of a democracy, but has so much inbuilt penchant for bureaucracy and central planning that they will soon face the same decision.

      How much US bonds does China hold? I can imagine some US administration wanting to shed a few trillion in debt by starting some small scale war with China and repudiating their bonds, but that war would just incur enough debt to replace the repudiated bonds.

      Gonna be interesting in a decade or three.

      1. Hey remember when you told us you want to eat shit?

        We do.

    2. The US govt debt is a total nothingburger. It can be safely ignored. It is not a problem in any way shape or form. In fact, it can be repaid tomorrow without a negative repercussion. That would simply involve replacing government bonds with deposits at the Federal Reserve Bank with similar interest and maturities. The similar or even better risk/reward terms assure no change in investor savings/spending preference or desire to hold dollars. Not recommending this course of action, just pointing out that it is possible.

  6. So…buy gold?

    1. More like TP and bullets.

      1. Or cookies in your case.

        1. More like child porn where he’s concerned. He’s maybe one step away from Buttplug on that

  7. Old news, the pandemic may hasten the economic collapse, but it has been known to be coming for a while now. The question is how long can the politicians kick it down the road before it actually happens?
    US Federal Government is over $25 trillion in debt.
    US Federal government net worth more than MINUS $75 trillion when unfunded future obligations are figure in.
    And the politicians in Washington DC want another round of stimulus!

  8. Pretty sure I read this article in 1980.

  9. No argument with the article or its premise, but when Dick Cheney said “Deficits don’t matter,” he was speaking not in economic terms, but purely in political terms. He believed neither a president’s nor a presidential candidate’s electability would be affected by the size of the deficit.

    1. and he was right…. sadly

  10. No real problem here.
    Just print more money.
    That idea worked out real well for the Soviet Union back in the early 1990’s, and I’m sure it will work out real well for the US today.
    You just have to have a little faith.

  11. the next pandemic will be caused by the people with the levers.

  12. Economists … look at … higher interest rates so far as justification for ever-more spending and borrowing.

    “Higher” meaning “negative”?

  13. Long ago when I was young and became aware of the negative impact deficits have on our economy and growth, I assumed others would also care and something could be done. Decades later I have given up caring because it’s a dead issue. And no change in administration or Congress will fix it. It’s not a matter of when we go over the cliff, it’s a matter of when we hit the canyon floor.

    The Krugmans of the world won and neither party is interested. The media would destroy any politician who demanded it.

  14. Terrific article and video Nick, bravo.

    Why does it seem like Gillespie is the last Reason editor who takes the debt seriously?

    1. Because he disguises his leftism slightly, as opposed to all the other writers?

      1. I don’t see a lot of difference in concern for deficits for leftists and non-leftists. They all spend like drunken sailors.

        1. Get rid of the progressives and the problem can be fixed. Until enough people nut up to rid our country of them it will all be downhill. Recent events are just the latest proof of that.

  15. *If* the lockdowns were lifted full stop earlier, there was a fighting chance.

    But the longer they push this, the more they ruin people’s psyche and the more they drive the economy under ground speakeasy style.

    Ladies and gentlemen, thoughtless losers rule the continent.

    One way to stop this, is to stop voting Democrat (and Liberal here). I’m serious. They tilt too far left and engage in ridiculous identity politics rhetoric poisoning the country with ideas of ‘systemic racism’. Voting GOP/conservative can help restore some sanity. Because, tell you what Bobby, I don’t see ANY sane Democrat/Liberal at the moment. They side with the Marxist SJW clan and BLM.

    An ‘awakening’ is needed and you start by voting the bums out.

  16. I just hope this doesn’t eventually lead to the Fed getting printing powers.

    1. Ha ha…you really think the Fed has any independency? maybe under Volker but not since

  17. I fucking hate the animated graphs.

  18. Repeat after me… the Republican Party is the party of fiscal discipline.

    1. Repeat after me… Commie kid is an infantile dead-beat.
      Fuck off and die; you family will be proud and the woprld will be a better place.

    2. There is no such party.

      1. Yeah, the blocks of people who don’t understand economics vastly outnumber the blocks of people who do. So we don’t count much in the eyes of politicians.

      2. yes waiting for party and more more parties

  19. I used to worry about the debt, but, well, that was a long time ago. Things would be a lot scarier if Japan was obviously suffering from having a public debt equal to 230% of GDP, but they don’t seem to be particularly worse off today than they were in 1995 (when their ratio was 66%, in the middle of their Lost Decade) or in 2010 (when it was 162%).

    1. They’ve just been stuck in endless economic stagnation? Nope, no effect whatsoever.

  20. When you have the worlds reserve currency the temptation is just too much to run deficits and buy votes…the hidden impact is the only way to outsource the “inflation” is to give in to other nations who are willing to “eat” it like China for their own interests and building up sectors that are not really profitable and when then crash cause pain for millions (2008). Old Ron Paul the most hated man in wokeville Reasonworld pretty much hit this one out of the park decades ago. There will be no change until “interest” payments crowd out the entitlements or defense then the shi$ will hit the fan..and the “experts” and media will say it is all because of liberty and we need a centrally planned economy run by..experts with much higher taxes. And yes Reason it is all about public virtue and integrity and traditional values of thrift, hard work, economic liberty, and good old protestant work ethic versus cosmo liberalism

    1. I’m late to this party but you’re 100% right. Other nations are going to be PISSED, but there won’t be anything they can do except not repeat their mistake.

  21. Doesn’t matter as long as America doesn’t collapse, at which point it won’t matter for another reason.

    1. Tony as ever displays his lack of moral conviction. It’s fine until it’s too late to do anything about it.

  22. “…Microsoft co-founder Bill Gates warned about a pandemic in a 2015 TED talk that’s been viewed over 29 million times…”

    Well, yeah. If you put no time dimension on it, EVERY prediction is correct.
    Oh, and hind-sight is a really good determinant of pretty much nothing.

    1. And yet he didn’t do much about it. Consider that there were smaller pandemics with SARS and MERS, both corona viruses, why didn’t he finance a cure/vaccine?

  23. I just get 10k dollar today from home work, its very easy for anyone…. Read More.

  24. How much of the federal debt is inter-agency? Just have the Fed buy it all.

  25. World wasn’t really ready for this disaster. Hope we will find a vaccination sooner. Thanks for this article.
    certifate attestation

  26. Very efficiently written information. It will be beneficial to anybody who utilizes it, including me. Keep up the good work. For sure i will check out more posts. This site seems to get a good amount of visitors.

  27. Remember back then when Democrats proposed reductions int he rate of growth of entitlement spending (not cuts, just reductions in rates of growth), and Republicans accused them of wanting to starve the poor and old people, and the Democrats subsequently caved?

    1. hmmmmm… I see what you did there.

  28. it could lead to “sudden inflation,”

    Yeesh. No it is not going to lead to inflation as you know it unless you are willing to admit that asset (housing, stocks, etc) price increases are inflation. The money that is created upfront is entirely offset by a repayment schedule created at that exact same moment. That debt repayment creates DEFLATION unless the initial money was invested productively (and money has not and really cannot be invested productively at this point absent a long long period of high interest rates to restore an ROI ‘hurdle).

    We are in a multi-decade Japan scenario. Rentier heaven. This debt will strangle future growth because any future growth will also result in higher interest rates and therefore higher repayments which will only be paid by either tax revenues being diverted to interest (from defense, SS, Medicare, etc) or current income being diverted to same.

    Yeah there may come a day when some generation of Americans will say Fuck this. This ain’t my debt. I ain’t gonna keep paying for it. But that ain’t gonna be ‘sudden’ at all – and it will result in repudiation of the debt and the current money system not ‘inflation’.

  29. There is no doubt that the national debt is a big problem and big problems require big solutions with everyone pulling together. In the current state of division, one stoked by President Trump, no solution is possible. We need to get rid of this President and remove from power his supporter in Congress. Rebuild the Republican Party and get both parties working together. That a tall order, but we can start in November.

    1. I am not a fan of Trump, but I believe he is more of a symptom than a cause, not to say he didn’t stoke up division. This divisive politics is getting worse, partially due to media and all of our own confirmation bias. We need to unite, agree on a few principals and cut spending. Stop getting but hurt over perceived slights and focus on the big picture.

      1. We need to unite, agree on a few principals and cut spending.

        So what, A Constitution or something? Where could one find that?

  30. Drumpf is German but he’s Made America Greece, Anew.

  31. Fuck this anti-cuntry. Collapse…collapse…collapse. The sooner the better!

  32. I am not worried. We will borrow our way to prosperity when this event comes.

  33. Who is the debt owed to, and why do they keep lending money when it’s increasingly improbable that it will be repaid? We might be better off stiffing these improvident lenders.

  34. its a bad debt and very close to our economy

  35. I have earned $18394 last month by working online from home. I am a full time college student and just doing this job in my part time for maximum 2 hrs a day using my laptop. This job is just awesome and regular earning from this easy home job is much times better than other regular 9 to 5 office jobs. I suggest you all to join this right now and start earning easily by just follow details on the given website……..www.cashbarr.com

  36. You know how you can tell if Conservatives think that a Democrat will be the next president – The debt all of a sudden becomes important.

    Maybe you Conservative should have though of the debt before pissing the nation’s collective wealth away on tax cuts for the Conservative Donor/Parasite class.

    Reverse the tax cuts, retroactively all the way back to Ronald, destroyer of the middle class and shared prosperity, Reagan and if the Conservative Donor/Parasite class has already spent it – Cut their organs out and put them on E-Bay to help recoup some of the costs.

    Money is now digital anyways – Designate every penny the Conservative Donor/Parasite class has as the proceeds of economic terrorism/crime and transfer the bits to the Treasury’s account.

    While the what passes for a brain in Conservatives is familiar with the term “Dynamic Scoring” what it lacks is the higher cognitive abilities to comprehend is that, yes, ‘once you take all their money they won’t have any money next year to pay taxes’ is that once their ability to wage their jihad on the middle class and shared prosperity is destroyed, the economy booms and shared prosperity allows for everyone to be able to afford to “pay federal income tax” resulting in higher revenues in the future.

    Congressional Research Service – Tax Rates and Economic Growth
    • 1950-1970 – Average Top Marginal Income Tax Rate: 84.8%, Rate of Growth in Real GDP: 3.86%, Rate of Growth in Real Net Fixed Investment: 0.93%

    • 1971-1986 – Average Top Marginal Income Tax Rate: 51.8%, Rate of Growth in Real GDP: 2.94%, Rate of Growth in Real Net Fixed Investment: 0.32%

    • 1987-2010 – Average Top Marginal Income Tax Rate: 36.4%, Rate of Growth in Real GDP: 2.5%, Rate of Growth in Real Net Fixed Investment: 0.23%

  37. I basically earn Easily at home 10,000$ par month .just do work few hours . last 3 year i was free but now i am happy with this website so i advise u ………HERE IS DETAIL

  38. This may be a matter of time frames and amplitude. In the short ter (next several years to decades) Japan says this analysis is either wrong or too early to be significant. From a practical point of view, ass long as the USD remains the only reserve currency, there is no limit to debt. If anything,as we saw in February/March, there are not enough dollars in the world.

    1. The reserve status is totally irrelevant. In fact its a bit of a hindrance to the US.

  39. The entire premise of this article is profoundly flawed. The truth is The US government debt is not a problem in any way shape or form. In fact, it can be repaid tomorrow without a negative repercussion. That would simply involve replacing government bonds with deposits at the Federal Reserve Bank with similar interest and maturities. The similar or even better risk/reward terms assure no change in investor savings/spending preference or desire to hold dollars. Not recommending this course of action, just pointing out that it is possible.

  40. Every month start earning more cash from $20,000 to $24,000 by working very simple j0b 0nline from home. I have earned last month $23159 from this by just doing this 0nline w0rk for maximum 3 to 4 hrs a day using my laptop. This home j0b is just awesome and regular earning from this are much times better than other regular 9 to 5 desk j0b. Now every person on this earth can get this j0b and start making dollars 0nline just by follow instructions on the given web page.Click For Full Details.

  41. The national debt—the amount of money the federal government owes—is already choking down economic growth

    No, it’s not. What’s hurting economic growth is government taxing people to pay interest on the debt.

    but in the future, it could lead to “sudden inflation,”

    And now that you realize that, it’s not a problem, since you can hedge against inflation.

    and “a loss of confidence in the federal government’s ability or commitment to repay its debts in full.”

    And that’s a bad thing… how? It simply means the US government can’t borrow anymore, which is a good thing.

    And if the US defaults on its debts, it will hurt people holding US government debt, again something you can easily avoid.

    1. >No, it’s not. What’s hurting economic growth is government taxing people to pay interest on the debt.

      Well, that’s a necessary consequence of the debt. You owe money, you pay interest. The alternatives are not paying the interest on the debt (resulting in default), or printing money to pay the interest on the debt.

      >And now that you realize that, it’s not a problem, since you can hedge against inflation.

      Um, it’s still a problem. You hedge against inflation by… buying assets. If everyone does that, what do you think happens to the inflation?

  42. I quit working at shoprite to work online and with a little effort I easily bring in around $45 to 85 per/h. Without a doubt, this is the easiest and most financially rewarding job I’ve ever had.ZAs I actually started 6 months ago and this has totally changed my life.

    For more details………………Click For Full Details.

  43. Expect municipal defaults first. Tax revenue shrinking due to closing businesses due to Covid, permanent damage from riots, emmigration out of cities. Unfunded liabilities for pensions in a number of cities and states. No doubt some of this will be passed on to the Federal Govt that is already headed for a crisis for the same reason, unfunded liabilities.

  44. The calculations, as bleak as they are, paint too rosy a picture.
    It doesn’t matter if the debt is held by the public, or held by some other government agency — it all has to be paid back by the taxpayers at some point. The government has no money, unless they start selling off federal land and buildings (not a bad idea).

    And the formula for GDP (GDP = C + I +G + (X – M)) includes government spending (the G), which can’t be used to pay back the debt.

    So if the federal debt is 26.489 trillion dollars (I just checked) and GDP is 21.43 trillion dollars (in 2019, and much lower this year) and government spending is 4.45 trillion dollars (in 2019, and much, much higher this year), the federal debt is 26.489 / (21.43 – 4.45) = 156% of available GDP.

    1. My Boy pal makes $seventy five/hour on net. he has been job less for six months.QSa However he earns$16453 genuinely working at the internet for some hours.

      Immediately join from the source……► Click Here

  45. I have just received my 3rd paycheck which said that $16285 that i have made just in one month by working online over my laptop. This job is amazing and its regular earnings are much better than my regular office job. Join this job now and start making money online easily by just Read More.

  46. Nick, explain exactly how GDP has anything at all to do with the Federal govt paying for its debt? GDP is spending/output for one year. The federal debt is cumulative, going back centuries. There is ZERO correlation between the two. Sometimes the ratio increases, sometimes it decreases. No matter, the Monetarily Sovereign fed govt can still easily pay ALL its debts.

  47. Bottom line: Decreases in borrowing to spend by the private sector are the driving force behind federal deficit spending. A growing economy requires a growing supply of money. Recessions are caused when the money supply does not increase sufficiently.

    Gross Domestic Product = Federal Spending + Non-federal Spending and Investment – Net Imports

    Federal debt DOES NOT cause inflation, much less “sudden inflation.” All inflations in world history have been caused by shortages of vital goods or services, most often food or energy.

    And bitcoin offers “safe refuge”?? Fucking ridiculous.

  48. Unfortunately, quarantine measures have already led to many companies closing their offices. Many people were left without a job

Please to post comments