U.S. Public Debt Exceeds $35 Trillion
National Debt Now Exceeds $35 Trillion, But Nobody in Government Cares
America’s national debt has now surpassed $35 trillion, while interest on it will exceed $1.14 trillion by the end of the year. Interest per day is $2.4 billion which, based on Federal Reserve numbers, “was equal to 76% of all personal income taxes collected in June.” Servicing the debt has increased 33% in a single year, with no abatement in sight. Since President Joe Biden has been in office, the national debt has exploded some $7.7 trillion, while the Trump administration added $7.8 trillion to it. At the current pace, Biden should easily surpass the former president’s record-setting performance by the end of his term. Despite these incomprehensible numbers, no one—Congress, Biden, the presumptive Democratic Party nominee Kamala Harris, former President Donald Trump, or the financial press—seems alarmed. The few that are speaking out, such as Ron Paul, are mostly hard-money advocates. Chairman of the Federal Reserve Jerome Powell, who is in actuality facilitating the profligate federal spending, has voiced concerns about the national debt, but sees it as a “longterm” problem. In February 2024, Powell said: The U.S. federal government is on an unsustainable fiscal path. And that just means that the debt is growing faster than the economy. So, it is unsustainable. I don’t think that’s all controversial. As recently as July, Powell added: “Effectively, we are borrowing from future generations.” While previous Federal Reserve chairmen, such as Paul Volcker, would admonish Congress for its deficits, Powell has refrained from such criticism, believing that it’s not the Fed’s role to comment on federal spending since that would involve delving into politics, which would compromise the central bank’s independence. This is nonsense. The Fed has had a role in the ballooning national debt since it has been the primary purchaser of government bonds. Moreover, it has suppressed interest rates below market levels, which has enabled the country to borrow more than it could have under normal circumstances. Despite Jerome Powell’s tepid statements, and the fact that the debt has now exceeded $35 trillion, why has there been little national outcry? At one time, there was a wing of the Republican Party and the conservative movement in general that was composed of “deficit hawks” who opposed Washington’s profligate ways. This contingent died, for all intents and purposes, with the presidency of Ronald Reagan who became, at the time, the biggest spender in U.S history after campaigning to balance the budget. Ever since, both parties battle not over the amount of spending but over how much each representative can get for his or her constituency. More important than any political opposition to the Uniparty’s insatiable appetite for bigger government has been the relative strength of the dollar. As long as the greenback has maintained its status as the world’s reserve currency, Washington can continue to spend with little restraint. This, coupled with the Federal Reserve’s interest rate policy, has enabled the federal government to spend beyond its means. It appears, therefore, that former Vice President Dick Cheney’s comment that “deficits don’t matter” has been proven to be correct. While there has yet to be a significant financial crisis over the debt, that does not mean that one could not happen in the near future. It must be remembered that America, like ancient Rome (whose republic much of the U.S. Constitution is based upon), lasted a lot longer than many would have thought despite severe financial, social, and military problems. One of Rome’s advantages was that, while its coins depreciated in purchasing power to almost nothing, it was still on a metallic standard. Like the rest of the world, the United States has long ago abandoned gold and silver backing of its money leaving it free to create it ad infinitum. While a dollar crisis does not appear imminent, one could be ignited if the Fed has to make an emergency rate cut to interest rates due to a market sell off, a spike in unemployment, or a geo-political incident. Such a scenario would shatter the BidenHarris administration’s myth of a strong economy despite the major economic indices pointing negative. A cut in interest rates and the likely restarting of “Quantitative Easing” (QE)—money printing—would cause a currency crisis. With little incentive for reform from the political class, and no significant public opinion-molding group or institution clamoring for accountability, it will take a dollar crisis before anything will be done with American debt. By that time, it will be too late. Then the national debt “will matter” to the economic and social detriment of all Americans.
U.S. Reaches a Tragic Milestone: National debt rises another trillion dollars in just one year
In early August, the national debt reached $35 trillion, a mere seven months after the debt reached $34 trillion. To put this in perspective, the national debt first reached $1 trillion dollars in October 1981, almost 200 years after the Constitution’s ratification. The fact that the government has added $1 trillion in debt in little over half a year was not deemed worthy of comment by President Joe Biden, Vice President Kamala Harris, and most other U.S. politicians. This is not surprising since the national debt has not been a central issue in D.C. since the days of the Tea Party. The Tea Party’s efforts to focus attention on the debt resulted in a bipartisan deal that made minuscule spending cuts. In fact, most of the cuts were not real cuts. They were just reductions in the “projected rate of spending increase,” meaning the spending still increased but just by not as much as originally planned. This was not the first time that apparent spending limits consisted of smoke and mirrors. For example, the budget “surpluses” of the 1990s were due to the government’s practice of counting the social security trust fund as both a liability and an asset, not because of bipartisan budget deals. The Donald Trump-inspired rise of “populist nationalist conservatism” that does not emphasize the national debt means Republicans have less incentive to even talk about the debt—aside from making justifiable, though hypocritical, attacks on Biden and congressional Democrats’ excessive spending. Similarly, the rise of a Bernie Sanders-influenced “new left” has led even centrist Democrats to stop giving lip service to the cause of deficit reduction. Many Democrats, including those who have embraced Modern Monetary Theory, agree with former Vice President Dick Cheney that “deficits don’t matter.” Modern Monetary Theory asserts that, as long as the central bank can monetize federal debt and keep interest rates low, the government can endlessly increase the amount of debt. This is not really modern, as the Federal Reserve has long been acting as the “great enabler” of the federal debt. Those who pretend deficits don’t matter ignore the fact that interest on the national debt will soon be the largest item in the federal budget, consuming as much as 40% of federal revenue. This is unsustainable. The devaluation of the dollar resulting from the Federal Reserve’s efforts to stimulate the economy and monetize federal debt, combined with increasing resistance to U.S. hyper-interventionist foreign policy, will lead to a rejection of the dollar’s world reserve currency status. When that occurs, there will be a major economic crisis unlike anything this country has seen since the Great Depression. This crisis could lead to increased support for authoritarianism in both the left and the right. The result will be even greater restrictions on economic and civil liberties and even more belligerent foreign policy, scapegoating those who reject the dollar’s reserve currency status for the country’s economic problems. However, the economic crisis also can be followed by a society with minimal government and more liberty. The liberty movement is still growing. Those who understand the philosophy of liberty and sound economics must continue to spread the truth about the dangers of fiat money and the growth of government power and government debt. They must also communicate the benefits of the free market, personal liberty, sound money, and peace.
U.S. Reaches a Tragic Milestone: National debt rises another trillion dollars in just one year
In early August, the national debt reached $35 trillion, a mere seven months after the debt reached $34 trillion. To put this in perspective, the national debt first reached $1 trillion dollars in October 1981, almost 200 years after the Constitution’s ratification. The fact that the government has added $1 trillion in debt in little over half a year was not deemed worthy of comment by President Joe Biden, Vice President Kamala Harris, and most other U.S. politicians. This is not surprising since the national debt has not been a central issue in D.C. since the days of the Tea Party. The Tea Party’s efforts to focus attention on the debt resulted in a bipartisan deal that made minuscule spending cuts. In fact, most of the cuts were not real cuts. They were just reductions in the “projected rate of spending increase,” meaning the spending still increased but just by not as much as originally planned. This was not the first time that apparent spending limits consisted of smoke and mirrors. For example, the budget “surpluses” of the 1990s were due to the government’s practice of counting the social security trust fund as both a liability and an asset, not because of bipartisan budget deals. The Donald Trump-inspired rise of “populist nationalist conservatism” that does not emphasize the national debt means Republicans have less incentive to even talk about the debt—aside from making justifiable, though hypocritical, attacks on Biden and congressional Democrats’ excessive spending. Similarly, the rise of a Bernie Sanders-influenced “new left” has led even centrist Democrats to stop giving lip service to the cause of deficit reduction. Many Democrats, including those who have embraced Modern Monetary Theory, agree with former Vice President Dick Cheney that “deficits don’t matter.” Modern Monetary Theory asserts that, as long as the central bank can monetize federal debt and keep interest rates low, the government can endlessly increase the amount of debt. This is not really modern, as the Federal Reserve has long been acting as the “great enabler” of the federal debt. Those who pretend deficits don’t matter ignore the fact that interest on the national debt will soon be the largest item in the federal budget, consuming as much as 40% of federal revenue. This is unsustainable. The devaluation of the dollar resulting from the Federal Reserve’s efforts to stimulate the economy and monetize federal debt, combined with increasing resistance to U.S. hyper-interventionist foreign policy, will lead to a rejection of the dollar’s world reserve currency status. When that occurs, there will be a major economic crisis unlike anything this country has seen since the Great Depression. This crisis could lead to increased support for authoritarianism in both the left and the right. The result will be even greater restrictions on economic and civil liberties and even more belligerent foreign policy, scapegoating those who reject the dollar’s reserve currency status for the country’s economic problems. However, the economic crisis also can be followed by a society with minimal government and more liberty. The liberty movement is still growing. Those who understand the philosophy of liberty and sound economics must continue to spread the truth about the dangers of fiat money and the growth of government power and government debt. They must also communicate the benefits of the free market, personal liberty, sound money, and peace.
By: Joan Diamond
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