It Comes Down to One Word: Debt
The United States is more than $31 trillion in debt. Its entire economy is only worth about $26.9 trillion. For those of you who are not math-inclined, that means that we owe way more than we make. In the ineffable words of Logan Roy from HBO’s Succession, “There’s this fancy new business theory: make more than you spend and you’re King C-word.”
While the United States is certainly not a business, some of the same laws and logic apply.
Put another way, as China’s finance minister reminded then-Treasury Secretary Hank Paulsen at the height of the 2008 Great Recession: America’s debt is a grave national security threat.
The only reason we’ve been allowed to spend and print money with wanton abandon is largely due to the US dollar being the primary reserve currency in the world.
But those days are ending.
De-Dollarization is Underway
China’s currency is being looked at by much of the Developing World as a potential alternative (along with a handful of other options). This will dilute the potency of the US dollar over time if the de-dollarization movement gains traction.
Given the reckless spending (and devaluation of the US dollar) that American politicians have engaged in, along with the weaponization of the dollar, there is now real incentive for the rest of the world to move on and diversify. Once that happens, those seemingly made-up numbers in the many trillions of dollars that represent America’s debt become real to every American.
For the United States to pay down its debt, it will need to take a series of actions that its people—and politicians—find unacceptable.
The first thing is that they’d need to do is hike taxes to extraordinary levels. At the same time, though, they’d need to stimulate growth. One suggestion (that is completely untenable from a political perspective) would be to encourage mass migration into the United States since immigrants open more businesses in America than native-born Americans.
Meanwhile, the government would have to cut most of its spending overnight drastically. This is like trying to turn a massive ocean liner on a dime. Even if it could be accomplished, critical programs that keep our society going and that many Americans rely upon, such as welfare programs, would be shut down. Whatever government spending there was would have to go toward debt repayment.
This process, by the way, would take decades. That means that most Americans would be living in hopeless poverty, with the US economy contracting at historic levels, and generational poverty created as the government spent its time and resources paying down our onerous debt. That’s an extreme scenario.
America’s Debt Crisis is a Gray Rhino Event
One thing is clear, though, the country’s debt is a massive burden that makes our country vulnerable. If left unchecked, it could destroy our national economy, which, in turn, would remove America as the dominant world power. This crisis is not something that came out of nowhere. It isn’t what Nassim Taleb dubbed a “black swan” event.
Instead, it is an emergency we saw coming for decades, a catastrophe of our own making. It is a “gray rhino” event.
There were even attempts in the recent past to avert this crisis. During the Obama Administration, there was the Simpson-Bowles Commission (a.k.a. the “Gang of Six”) who attempted to impose a healthy combination of tax increases and spending cuts over a decade that, by now, would have lowered our national debt by trillions of dollars.
During this time, former Speaker of the House John Boehner (R-OH) fought to do his “Grand Bargain” with then-President Barack Obama. Just when it looked like the Grand Bargain would occur, Obama blew up the talks—with a little help from fanatical Tea Party types in the GOP.
These plans were dramatic and controversial.
Yet, both the Gang of Six and the potential Boehner-Obama Grand Bargain merely saved us a few trillion dollars over a decade. It did not ultimately stop the crisis. These plans would have merely bought America time.
So, we blundered ahead, acting as if nothing was wrong.
Today, we have completely unmanageable debt levels that risk the safety and threaten the prosperity of the United States. Ignoring it is not a realistic plan at this point. Unfortunately, engaging in the most logical policies would be as destructive in the near-term as ignoring the problem would be in the long-term.
Can We Out-Grow Our Massive Debt?
One thing to do would be to try to stimulate growth on a massive scale.
Massive infrastructure programs coupled with an expansive investment into high-tech research and development that would make the United States, not China, the capital of the Fourth Industrial Revolution might be the key forward.
What’s more, building the space economy (specifically the space mining economy), where it is believed that the world’s first trillionaire will come from, might be just what’s needed to save America from insolvency in the long-run without harming ordinary Americans.
What Happens Now?
This is where ignoring our debt and continuing to spend as if there were no tomorrow has gotten us. My plan is radical, and it’d require a significant upfront investment. Given how much we’re blowing through money presently, though, a little more won’t matter.
As it relates to infrastructure, many reading this are probably skeptical because the Biden Administration has committed an immense amount of resources to their infrastructure program. The problem with the Biden Administration’s plan, though, is that it is far too wasteful. It spends far more on Liberal pet projects than it does on realistic ways for enhancing America’s ailing infrastructure.
Nevertheless, if the US is serious about being able to pay its debt down without making the current population poor, a program of radical, long-term growth is the only answer. It is unlikely that Washington will adopt this outlook. So, Americans can either expect total economic collapse or painful belt tightening that leads to a national financial breakdown over many years.
A 19FortyFive Senior Editor, Brandon J. Weichert is a former Congressional staffer and geopolitical analyst who is a contributor at The Washington Times, as well as at American Greatness and the Asia Times. He is the author of Winning Space: How America Remains a Superpower (Republic Book Publishers), Biohacked: China’s Race to Control Life (May 16), and The Shadow War: Iran’s Quest for Supremacy (July 23). Weichert can be followed via Twitter @WeTheBrandon.