I’m turning Japanese
I think I’m turning Japanese
I really think so….
–The Vapors (1980)
It is generally acknowledged that when national debt surpasses 100% of Gross Domestic Product (GDP) any nation, except under the most exceptional of circumstances, will likely be on a very slippery slope to major economic problems. The official U.S. government debt has now ticked over this threshold (let us not speak at this time of our unfunded federal, state, and municipal obligations), and the major financial take-away of the Obama presidency—and likely its most lasting legacy—has been has been a stupendous rise in this federal debt load, which nearly doubled during his “take what you want” administration that paid not the least attention to the basic laws of addition and subtraction.
Today we are rapidly approaching $20 trillion dollars in federal debt (never mind what we have promised and have no hope of ever delivering in the form of future entitlement spending), and dramas over raising the federal debt ceiling to accommodate our continued profligacy have become a regular feature of D.C. politics, so we can expect that discussions about just how deep a hole we are now in are going to dominate our national dialogue as we slowly become painfully aware that the rules of the game have changed. Politics will no longer be “the art of the possible”, a notion that has driven roughly a half century of American governmental thought. We will instead soon be discussing politics as the art of managing a jarring contraction of the progressive fever dream of never-ending benefits magically paid for by ever-increasing taxes on the “rich”, which often translates into ruthlessly extracting money from the paychecks of anyone who has a relatively decent job.
Japan has long been the acknowledged international leader in accumulating government debt. At the present time, their total government debt totals roughly 250% of their GDP, which is a frightening total that many brilliant individuals explain away as not that much of a problem for a variety of ridiculous reasons that make sense only to credentialed economists and central bankers. We are, by comparison, supposed to feel pretty good that our “official” debt is far below that of Japan—which is a perhaps a telling sign of how delusional and disingenuous our political leaders have become when it comes to speaking to us about our economic futures.
Imagine, if you will, what will happen when we can no longer borrow to pay our nation’s bills—and the fear of precisely this happening is why the national debt limit will always be raised despite the harrumphing and hollering by all involved. Were the national debt limit not raised this summer—and every summer, spring, winter, and fall to come—the collision of available funds and daily financial obligations would be catastrophic and prompt a fairly ugly political choice: stark reductions in government programs and benefits versus instantaneous insolvency and a collapse of the market for U.S. Treasury bonds. No elected official will ever allow that to happen because the peasants would revolt—and hold them accountable. Unless the Congress and Senate can find a way to meet on another planet, there would no place to hide from angry taxpayers, businesses, and bondholders. Therefore, for both political and practical reasons, we’re going to borrow and borrow—or print and print—money until our financial system collapses.
There is, to be sure, another option available: Implement an immediate plan to dramatically shrink the scope and size of the federal government and its many, many programs and obligations to match available tax revenue while also beginning to pay down our debts. However, the problem with this is obvious to all. The uproar—driven by partisan politics and an equally partisan national media—about “heartless” cuts to programs that would harm our “most vulnerable” citizens (you all know the script, folks!) is always deafening when the least suggestion is made to better reconcile tax revenues and government outlays.
Of course, no one in Washington or the Washington media bubble is ever able to explain the supposed compassion behind strapping generations of Americans to terrifying levels of debt—according to the National Debt Clock, every citizen is now on the hook for over $61,000 exclusive of state and municipal debt obligations—but that is the unfortunate nature of these discussions. We can’t talk about what really needs to be resolved because politics is also the art of avoiding difficult choices for as long as humanly possible.
Oh, by the way, if you take into account the total U.S. Debt, which includes state, local, and household debt among other factors, every citizen now owes over $212,000 dollars—and that is exclusive of student, automobile, credit card, and mortgages debts, which tack over $56,000 dollars on to the debt for each citizen.