The US Is Broke. No One In the US Seems to Care - But the World Does
My high school senior year (Class of 1989) history teacher asked us what we thought was the single largest problem facing the United States.
We were to write down our answers - and anonymously submit them. Our teacher ran the numbers. And then ran down the list from most to least mentioned.
I said the federal government’s debt. I was the only one who did so. The teacher rolled his eyes when he read mine aloud - as if it was the dumbest of all possible submissions.
I said the debt not just because I think debt of any kind is bad. I said it because everyone in DC was pretending the deficit spending adding to the debt wasn’t a problem. And because no one in the US was holding DC accountable for this titanic idiocy.
Almost forty years later? NOTHING has changed.
Well, except for the problem is now orders-of-magnitude worse. Which is exactly what happens when you ignore a problem - it gets worse.
1989’s budget deficit was $153 billion - the total debt $2.86 trillion.
2024’s budget deficit was $1.8 trillion - the total debt $35 trillion.
Oh: And interest payments on US debt are now 3% of GDP. And you know that’s only skyrocketing upwards going forward.
Oh: And the US faces $210 trillion in future unfunded liabilities (Social Security and Medicare predominant amongst them).
The US is broke. And no one in the US seems to care.
Meanwhile….
Right now - even as I type? The Idiots in DC have shut down the government. Because the Republicans want to continue spending at current ridiculous levels. And the Democrats want to spend even more than that.
Except the US is broke. And no one in the US seems to care.
How ridiculous are current spending levels? The Idiots in DC haven’t even passed a budget since 1996. Which means they have spent the last three decades spending via Continuing Resolution (CR).
Which means each year spending EVERYTHING they’re already spending - plus 5% here, 8% there, 19% over there, plus….
And it means every “temporary” bump in spending - becomes permanent.
2009’s “one-time” $831 billion “Stimulus?” Has been CR’d into de facto permanence. Because DC has never subsequently un-budgeted it - by passing an actual budget.
The same is true of the $4.6 trillion DC spent on Covid “response.” Never un-budgeted. So CR’d over and over again ever since.
There are likely tens of thousands of other such “one time” expenditures since DC last passed a budget. Each and every one of them built into each and every subsequent CR.
And now the US is broke. But no one in the US seems to care.
The US’s 2024 Gross Domestic Product (GDP) was $29.2 trillion. Again, the US’s 2024 standing debt was $35 trillion. Which means the US’s 2024 debt-to-GDP was 123%. And DC is continuing to spend - at the very least - at existing levels.
Except no in the US seems to care.
But the world does.
The US Treasury holds bond auctions - to sell (monetize) US debt. The US sells interest-paying bonds - and use that money to fund its deficits and debt.
Except the US is having a harder and harder time selling bonds.
Treasury Auctions Are Becoming Hard Sales:
“Given the poor state of the American fiscal situation, auctions will likely remain large for the foreseeable future. The risk that markets will push back is rising. No amount of fast talk from politicians will hide the fact that we may be selling a lot of bull.”
Who Buys the Debt? The Vanishing Bid for US Treasuries in a Fractured World:
“Solvency concerns are also mounting as the US continues to run persistent and protracted deficits of $2 trillion annually.
“This staggering amount of red ink is occurring during times of relative peace and economic prosperity, raising important questions about what might happen during a recession or war.
“While some Pollyannas argue that the Federal Reserve could always intervene and replace free market demand for Treasuries, the reality is that inflation has now become a significant and potentially insurmountable obstacle.”
Get that? When no one else buys US bonds? The US Federal Reserve prints additional money to buy them. Which is a bit of an inflation problem.
Except we already have a massive inflation problem. The US dollar is down in value 87% since we abandoned the gold standard in 1971.
The worse US bond auctions are? The more the Fed will print. Which will make the bond auctions even worse. Which means the Fed will have to print even more. Which means….
At this point, about the only thing still propping up the US dollar? It is the world’s “reserve” currency:
“A reserve currency, primarily held by central banks worldwide, is used to facilitate international trade and stabilize economies….Since 1944, the U.S. dollar has been the primary reserve currency used by other countries.”
But this is a real-time reenactment of The Emperor’s New Clothes. The US dollar is naked. As long as everyone pretends it’s not naked - our dance on the head of a pin continues.
But the dance may soon be ending….
US Dollar Vs. BRICS in Reserve Currency Showdown:
“The BRICS nations - which include Brazil, Russia, India, China, and South Africa - are cooperating to push the king of currencies off its throne….
“Last year, Ethiopia, Egypt, Iran, and the United Arab Emirates joined BRICS, and Saudi Arabia - the world’s second-largest oil producer - has been invited to join.
“With at least 40 other countries lining up to join, BRICS is consolidating its global power and influence.
“‘This,’ says Business Insider, ‘should be a key cause of concern for the US, as new members along with countries who want to join could amplify de-dollarization.’”
The US’s response to all of this? Was it to massively cut spending, tighten the money supply and get back on much stronger financial footing?
Heavens no….
Except BRICS+ isn’t undermining the US dollar. They are simply reacting to the US undermining the US dollar.
While Trump and the rest of DC continue to emit shrill, high-pitched sounds as they shuffle past the cemetery.
And where are the American people during all of this?
Sleepwalking. As they have been for so many decades…..
Sobering, but accurate. Certainly no one in Congress cares.
Good take, but according to the US Debt Clock, the deficit is shrinking and the interest cost is dropping.