We cannot help but notice that the news is dominated by dire forecasts of increasing economic difficulties. Reflecting on that, and the fact of a crucial election to be held that will determine who is going to be president and what political party will dominate Congress, we notice that more newspapers are mentioning the increasing U.S. debt that will, by next year, equal or exceed the gross domestic product of the U.S.
This puts the United States into the same fiscal category that other nations, such as Italy and Greece, who face the dim prospect of dealing with levels of debt that exceed the total of their GDP. For the U.S. to match this dismal fiscal record, one would have to go back to 1946, when the U.S. Congress approved countless expenditures to cover the cost of military operations that helped win World War II.
Increased expenditures now include massive outlays for medical testing and huge spending to help business and vaccine research.
Kate Davidson, a columnist of the Wall Street Journal, comments on the steeply increasing levels of debt in a recent article in that newspaper: “By the end of June, total debt has swelled to $20.5 trillion from $17.7 trillion at the end of March, a 16 percent increase over just three months according to Treasury Department data. Meanwhile, the economy shrank 9.5 percent in the second quarter, bringing debt as a share of GDP to 105.5 percent compared with 82 percent in the first quarter.”
An editorial in the Journal clearly shows that debt will explode in the next few years. “Then the pandemic hit. On present trend – that is, without a trillion-dollar bonanza – debt will exceed 100 percent of GDP 2021 and reach 107 percent of GDP in 2023. That would be the highest in U.S. history, exceeding the previous peak in 1947 at the end of the war to save western civilization. To put it another way, the U.S. government will soon owe more than the US economy produces in a year.”
Various economic analysts have pointed out that these increasing levels of public debt will not incline the government to become more aggressive in the present pursuit of monetary and fiscal policies that will require increased spending. The longer the U.S. debt lasts, the more resistant the U.S. government will become to requests for increases in investments in programs that historically have required large sums, such as the space program.
The Congressional Budget Office has reported that the deficit will not grow as quickly as it might grow because interest rates continue to remain low and are projected to remain low over the next 10 years.
Still, the debt held by the public is meaningful because that debt must be paid back with interest. It should be noted that entitlements such as, for example, Social Security, are not included in the amounts that have to be paid back; however, any administration of either party, that went back on the promises to pay Social Security will face the wrath of the American public.
One of the worrisome elements of these increases in public debt is the rapidity with which they have happened. The increases have been both rapid and large in the past 12 years. It does not take an economic pundit to conclude that the next years will be taxing for any government that is in control in Washington, D.C.
Author and educator Dave Kaplan writes from his home in Santa Barbara, Calif.