$34 Trillion National Debt? You Ain’t Seen Nothin’ Yet

It would seem that even the major writers of liberal outlets are starting to realize that national debt is out of control and there is no one who will be able to stop it.  Cutting spending when we need more money is out of the question.  Cutting the military is out of the question.  Cutting social security is out of the question.  Cutting Medicare is out of the question.  Raising taxes on everyone is out of the question.  So we will all just stay on this run away train until it crashes into the station.  We continue to hope and pray that the rapture will be the key that collapses the US Dollar, which in turn would collapse the global financial system.  If Jesus tarries and we are around to witness the collapse, I guarantee you it will not be just another ordinary day.

********************

$34 trillion? Unimpressive.

Every time the gargantuan national debt trips a round number, there’s a flurry of attention before we get back to borrowing and spending more. The national debt recently hit $34 trillion for the first time ever, prompting concerned Americans to look at each other with arched eyebrows and say, really?

But $34 trillion, honestly, is nothing. By Election Day, 10 months from now, the US national debt will be at least $35 trillion, which is a rounder number than $34 trillion since it’s halfway between $30 trillion and $40 trillion. After that, it will rise by a couple trillion dollars per year, unless somebody does anything about it (hahaha).

By the time the next president leaves office in 2029, the national debt will almost certainly be more than $40 trillion, and approaching $50 trillion if there’s a recession along the way or anything else that cuts into revenue or requires fiscal stimulus.

How much is too much? Nobody really knows when the national debt will get so large that it suffocates the US economy, but it’s probably a safe bet than the current $34 trillion in debt is too much, and that $50 trillion will definitely be too much.

Some economists think the debt crisis budget hawks have been predicting for years has finally arrived. Moody's Analytics chief economist Mark Zandi recently told Yahoo Finance “we’re here” when asked if the public debt crisis has finally arrived. “I worry at some point we may see a freezing up of the Treasury market,” Zandi said.

Between last summer and fall, long-term interest rates rose by more than expected given market conditions, including the end of the Federal Reserve’s short-term rate-hiking cycle last July. One likely explanation was an excessive supply of US Treasury securities entering the market as needed to finance government spending. The Treasury Department has since modified the mix of securities it auctions to address what it thinks were market concerns.

But nobody should assume the problem is fixed and there won’t be future disruptions in which there simply isn’t enough market demand for the massive amount of US government debt flooding into markets. If demand for debt falls short, lenders have to pay more via a higher interest rate, and the rate on US government bonds broadly determines the rates of every other type of consumer and business loan. So a real debt crisis would involve rising rates for mortgages, car loans, and everything else, plus the growth slowdown or contraction that normally comes with it.

There’s a double whammy for US taxpayers: Rising interest costs make the debt problem even worse, since the government would have to pay more to borrow on an ever-expanding pool of debt. The United States now pays about as much in interest on the debt every year as it pays to fund the entire Pentagon, and that will gradually get worse.

So who is doing something about this? Precisely nobody. As a rule of thumb, reducing deficits and getting the overall debt down to more manageable levels is doable, given two things: spending cuts and tax increases that will end the free ride many taxpayers have been getting from a government that is much more generous than its revenue would ordinarily allow.

Spending cuts don’t have to be draconian, but there will need to be changes to Medicare, Medicaid, and Social Security involving benefits cuts for wealthier people, higher retirement ages, paradigm changes for younger taxpayers, and other limits. Taxes will have to go up, first on wealthy Americans and then perhaps on lower earners. A federal value-added tax, similar to a national sales tax, would raise a lot of revenue quickly. Voters are not going to like it and politicians know it.

 https://finance.yahoo.com/news/a-34-trillion-national-debt-you-aint-seen-nothing-yet-174004899.html