The national debt eclipsed $34 trillion several years sooner than pre-pandemic projections. The Congressional Budget Office’s January 2020 projections had gross federal debt eclipsing $34 trillion in fiscal year 2029.
But the debt grew faster than expected because of a multi-year pandemic starting in 2020 that shut down much of the U.S. economy. The government borrowed heavily under then President Donald Trump and current President Joe Biden to stabilize the economy and support a recovery. But the rebound came with a surge of inflation that pushed up interest rates and made it more expensive for the government to service its debts.
“So far, Washington has been spending money as if we had unlimited resources,” said Sung Won Sohn, an economics professor at Loyola Marymount University. “But the bottom line is there is no free lunch,” he said, “and I think the outlook is pretty grim.”
The gross debt includes money that the government owes itself, so most policymakers rely on the total debt held by the public in assessing the government’s finances. This lower figure — $26.9 trillion — is roughly equal in size to the U.S. gross domestic product.
Last June, the Congressional Budget Office estimated in its 30-year outlook that publicly held debt will be equal to a record 181% of American economic activity by 2053.
History has shown that there are only three ways out of massive debt – and none of them are pleasant.
- Drastically reduce spending by slashing entitlements. By lowering spending below tax collections, it would free up cash flow to service the debt while stopping adding to the debt. The result will be mass riots by all of the people getting cut off and general societal instability.
- Print money like crazy to pay the debt. This will crash the currency and spin into hyperinflation. Again… mass riots, instability, nation falls.
- Default on the debt. Once again, it would crash the economy… mass riots, instability, nation falls.
#1 is the best option, but it takes political courage. That is severely lacking in America.