That Didn’t Take Long: U.S. National Debt Exceeds $24 Trillion

by | Apr 13, 2020

That Didn’t Take Long: U.S. National Debt Exceeds $24 Trillion

by | Apr 13, 2020

Screen Shot 2020 04 13 At 2.20.47 Pm

The U.S. national debt pushed above $24 trillion on Tuesday.

The U.S. government was already running massive budget deficits long before the coronavirus pandemic and the debt was piling up at a dizzying pace. Response to the outbreak has put spending and debt in hyperdrive.

The Trump administration has added $1 trillion to the national debt in just six months.

It’s easy to just brush off the spending spree. Virtually everybody agrees the stimulus is necessary to deal with the economic impacts of coronavirus. But the Trump administration was stimulating long before this emergency. Uncle Sam was already on pace for a trillion-dollar shortfall long before the pandemic. That’s the kind of budget deficit one would expect to see during a major economic downturn.

The federal government has only run deficits over $1 trillion in four fiscal years, all during the Great Recession. The fifth trillion-dollar deficit was coming down the pike in fiscal 2020, despite what Trump kept calling “the greatest economy in the history of America.”

To put the growth of the national debt into perspective, the debt was at $19.95 trillion when President Trump took office in January 2017. It topped $22 trillion in February 2019.  That represented a $2.06 trillion increase in the debt in just over two years. By November 2019, the debt had eclipsed $23 trillion. Now, less than six months later, we’re at $24 trillion, with much of the coronavirus stimulus still in the pipeline. That’s a $4 trillion increase in the debt since Trump took office.

As Peter Schiff pointed out in a tweet, the president will add more debt in four years than President George W. Bush did in eight. If re-elected, he will add more debt in eight years than Bush and Obama did in 16.

Instead of draining the swamp, he is draining the nation.”

Ironically, there is bipartisan support for the massive coronavirus spending-spree and virtually no concern about the increasing debt. I say ironically because Republicans had a much different response when Obama pushed his stimulus plan through in response to the 2008 financial crisis. The GOP grassroots pitched a fit and the Tea Party was born. Today, many of the people who marched in those Tea Party rallies against the Obama spending are eagerly planning how to spend their MAGA-Bucks.

Trump supporters often claim the debt isn’t the president’s fault and the blame should fall on Congress. The legislative branch does bear its share of responsibility, but the White House has significant input into the budgeting process and the president has never once submitted a budget that cut overall spending.

In reality, the borrow and spend policies today are every bit as problematic as they were in the Tea Party days. In effect, we have the world’s biggest debtor trying to guarantee everybody else’s debt.

The massive debt raises a number of questions few people seem to be asking. For instance, how will all of this government borrowing impact the bond market?

Investors poured into U.S. Treasuries as a safe-haven as the coronavirus crisis grew. Interest rates plunged, with the yield on the 10-year Treasury dipping to record lows below 0.5 percent. At some point, the demand for bonds will ebb, but the supply certainly won’t. The  U.S. Treasury Department is going to have to sell a massive amount of bonds to fund all of this deficit spending.

The Federal Reserve has stepped in to backstop the borrowing. The central bank is set up and primed to monetize all of this debt through QE Infinity.

Through quantitative easing programs, the Fed buys U.S. Treasury bonds on the open market with money it creates out of thin air. Ostensibly, by creating artificial demand for Treasuries, the Fed can soak up excess supply and hold interest rates down. It has no choice but to intervene in the market because rising interest rates would be the death knell for this debt-riddled, overleveraged economy.

But the central bank will create trillions of dollars out of thin air and inject it into the economy in order to run this debt monetization scheme. That raises the specter of inflation. This is one reason Schiff recently said hyperinflation has gone from the worst-case scenario to the most likely scenario.

The Fed got away with this once. We didn’t see the type of price inflation one would expect with the three rounds of QE in the wake of the 2008 financial crisis. The inflation went into the stock market and other asset bubbles. That could conceivably happen again. But the last time around, then-Federal Reserve Chairman Ben Bernanke swore the QE wasn’t debt monetization. He promised it was a temporary expansion of the balance sheet. He insisted there was an exit strategy.

There was no exit.

And today, nobody is even talking about an exit strategy. Will investors actually believe this is going to be temporary? It seems unlikely.

I also see little concern about how all of this government debt will impact economic growth.

The CBO warned before the coronavirus pandemic that the growing “debt would dampen economic output over time.” In fact, studies have shown that GDP growth decreases by an average of about 30 percent when government debt exceeds 90 percent of an economy. U.S. debt already stood at around 106.9 percent of GDP before coronavirus. Ever since the U.S. national debt exceeded 90 percent of GDP in 2010, inflation-adjusted average GDP growth has been 33 percent below the average from 1960–2009, a period that included eight recessions.

Europe’s spending binge serves as a prime example of the impact of debt on economic growth.

Most people seem to believe the president will snap his fingers in the near future and the economy will snap back to normal. But the economy was broken before coronavirus. Now the government and the central banks are doubling down on the policies that broke it to begin with. There aren’t a lot of scenarios where this ends well.

Reprinted from The Tenth Amendment Center.

Michael Maharrey

Michael Maharrey

Michael Maharrey [send him email] is the communications director for the Tenth Amendment Center. He also runs GodArchy.org, a site exploring the intersection of Christianity and politics. Michael is the author of the book, Constitution Owner's Manual: The Real Constitution the Politicians Don't Want You to Know About. You can visit his personal website at MichaelMaharrey.com, like him on Facebook HERE and follow him on Twitter @MMaharrey10th.

View all posts

Our Books

libertarian inst books

Related Articles

Related

Rights for the Synthetic

Rights for the Synthetic

"The future of human-AI coexistence depends on acknowledging the potential for sentient machines and reevaluating responsibilities towards them. It's crucial to consider the ethical implications of creating beings that may possess their own interests, desires, and...

read more
A Critique of Pure Hasbara

A Critique of Pure Hasbara

Hasbara is a central feature of genocidal Zionism: “Since its establishment in 1948, Israel has successfully created a new illogic of its own; an illogic that has made the illegal seem legal, the immoral appear moral and the undemocratic sound democratic. It has...

read more
On Wealth Inequality, the Left Has a Point

On Wealth Inequality, the Left Has a Point

The federal government has been waging a war against the middle class and working poor since at least 1970. Wealth inequality has steadily increased since the early 1970s, and it’s not a coincidence. It’s a result of a series of policies. The government wants the...

read more
Joe Biden’s Time Interview Should Set Off Alarms

Joe Biden’s Time Interview Should Set Off Alarms

On May 28, U.S. President Joe Biden gave an interview to Time. His delivery and content were concerning for a number of reasons. Biden, at times, seemed misinformed and detached from reality. Sometimes, he seemed off message; other times, he seemed convinced by his...

read more
DOJ, Lay Off Live Nation!

DOJ, Lay Off Live Nation!

Last month, the U.S. Department of Justice (DOJ) finally came out with their long anticipated antitrust lawsuit against Live Nation Entertainment. Alleging anti-competitive practices which “suffocates its competition,” everyone’s least favorite Attorney General (since...

read more
Why Libertarians Loathe Tariffs

Why Libertarians Loathe Tariffs

Former president and current Republican presidential candidate Donald Trump loves tariffs. In his 2011 book Time to Get Tough: Making America #1 Again, Trump included as part of his five-part tax policy “a 20 percent tax for importing goods.” During his first campaign...

read more

Pin It on Pinterest

Share This