financial crisis facing the United States, you are not paying attention. We are rolling downhill like a snowball headed for hell, and it is hard to see any way to stop it.
In American politics, there are no longer any, or almost no, serious players. There are no adults in the room. It used to be that Republicans were the deficit hawks and the party of small government. That is not so anymore. Republicans were often at a disadvantage because Republicans talked about the need for austerity, balanced budgets, and spending cuts, while Democrats talked about more free stuff. People like free stuff.
Also, of course, the Republicans became the party of tax cuts. While it is indisputable that some strategic tax cuts can spur growth and pay for themselves, many Republicans have adopted the view that all tax cuts are good. People like tax cuts. With a competing free-stuff party and a tax-cut party, it is hard to find solutions to real-world tax and spend issues.
Despite the differences between the two parties, for a long time there were still enough adults and responsible people in both parties for Congress to pass a budget. The parties would hash out something that could get passed. The last time Congress passed a full budget on time was 1997, and only four times in nearly 50 years has it completed the appropriations process by the deadline. This persistent pattern underscores long‑standing dysfunction in the federal budget process. To fund the government now, Congress relies on large omnibus spending bills and the frequent use of continuing resolutions.
At this time, neither party is serious about the pending crisis. There are no leaders who will correct misconceptions about the issue of government spending, the debt, and government finances. Instead, they encourage lazy thinking and misinformation. Here are several things people believe about government spending and financing that are simply not true.
- We can balance the budget by cutting waste, fraud, and abuse.
- We can solve all of our financing issues and even expand government with programs like "Medicare for all" or universal childcare if we would just tax the billionaires.
- Military spending is the cause of our financial problems.
- Social Security is going broke due to the government raiding the trust fund or because of illegal immigration.
However, if you believe any of these things, I encourage you to become better informed.
The Washington Post today published an editorial board article titled, When America’s budget will break, disastrously. It is well worth reading.
The editorial says that "the federal government budget is the largest of any organization in human history, and it's larger than the entire economy of every foreign country except China. In the past, the huge surges in the national debt were largely caused by wars or recessions and were temporary. When the war concluded, or economic growth resumed, debt as a share of the economy would fall. That is not the case anymore." Now, the debt increases primarily due to demographic trends as the bulk of spending goes to programs that serve an aging population. "The budget deficit as a share of the economy in 2025, during a peacetime expansion, was larger than any year of the 1930s, the decade of the Great Depression." Think about that last sentence: "The budget deficit as a share of the economy in 2025, during a peacetime expansion, was larger than any year of the 1930s, the decade of the Great Depression."
The article points out that we are approaching three milestones. One, 2030 is the year when federal debt held by the public as a share of the economy will exceed the record set by World War II. The article doesn't elaborate on why that is so alarming, but this is why. At the end of World War II, the US had years of pent-up demand due to a war economy and a shift to military production. Also, at the end of World War II, we really were the "hottest" economy in the world. Much of the rest of the industrial world lay in ruins. We were in a good position to get back on a sound economic footing and reduce the deficit; now we are not.
A second milestone is that non-working older people are making up a larger percentage of the population. "The year 2030 is also roughly when the ratio of seniors to the total population will reach 1 in 5. As recently as 2008, the ratio was around 1 in 8. Seniors’ rising share of the population mechanically raises Social Security and Medicare costs and pushes them onto a proportionally smaller working population." A third milestone is that 2030 is also the year when the CBO projects that deaths will begin to exceed births.
All of this paints a picture of doom and gloom, and unfortunately, it is factual. And even this is based on an optimism that there will be no major costly war, or major recession, or major inflation. I do not think that optimistic assumption is justified. I think as the US retreats from the world stage, we will witness nuclear proliferation, and a nuclear exchange will become more likely.
Interest payments on the U.S. national debt have become the second-largest budget category after Social Security, and are projected to surpass Medicare and even Social Security in the coming years. Also, with Social Security running dry, there will be a greater and greater push to monetize the debt. I think inflation is in our future.
Also, with the rise of ill-informed conspiracy-minded social media influencers and a public ready to believe wild things, and a distrust of experts, and a contempt for "elites," it is easy to see an electorate more and more inclined to believe nonsense, either of the Democratic Socialist of America variety or the neo-mercantilist and blame-others Trumpian variety. It is easier for many to believe fantasy and crazy explanations than accept hard truths.
With all of the above being said, I still think we can make a course correction and avoid a fiscal Armageddon. Someday Trump will pass from the scene, and we will again have people who listen to experts and people who are more thoughtful, and we may elect people who are responsible stewards of our economy. We may again elect sensible people who really want to solve problems. A course correction will not be easy. Hard choices will have to be made, and we will have to accept some hardships. If this does not happen, we are doomed.
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