A New National Debt Milestone

I wasn't watching closely enough to tell you day, hour and minute this happened, but within the last month, the national debt of the US exceeded $30 trillion for the first time.  The number as I write is the upper left box in the biggest font; for those who think seeing all the numbers conveys the size better than just saying "the T word." From our friends at US Debt Clock.

When I saw the headline, I thought, "Gee, didn't I post on the debt going over $20 trillion in the blog?"  Yes, I did and quite a bit more recently than I thought: it was in September of 2017.  That feels recent to me because it's since I retired, on last working day of 2015.  We went from $20 to $30 trillion in around four years and four months.  Another way of looking at that is it took from the founding of the country in 1789 until 2017 - 228 years - to build up $20 trillion in debt and only four years and four months to build up 50% more debt.  

Does that seem overwhelming?  We hit $15 trillion on November 17, 2011, which says the first $15 trillion in debt took 222 years and the second $15 trillion took 11 years.  Yeah, I'm leaving out details on the months here.  I don't know about you but that makes me feel worse, not better. 

Getting back to the current $30 trillion number, The Peter G. Peterson Foundation points out that the total debt is bigger than the economies of China, Japan, Germany and the United Kingdom added together.  When people talk about the Chinese funding our national debt, there's a little bit of truth there; I mean they have some amount of US bonds but no nation can buy more debt than their own entire GDP, they can only buy a few percent of it as bonds.  In fact, China, Japan and the European Union are the biggest holders of our treasury bonds except for one buyer.  

The biggest buyer of the bonds to fund our government is ... us.  More precisely, the Federal Reserve Bank, which creates the money to finance our debt out of (thin air, unicorn farts, whatever words you'd like).  This would be like you writing yourself a check to double your pay and putting it in your checking account every payday.  Except for the part about that one you wrote would bounce to the moon and you'd end up in deep trouble.  And if you listen to the economic geniuses running the country, like AOC or Dr. Stephanie Kelton, it's perfectly fine for a government to print all the money it wants. 

Listen, I've posted on this topic many, many times, and I'm as tired of writing about it as I'm sure most people are of hearing about it.  Let me just put some brief highlights here:

• Yes, deficits and debts as commitments matter.  We borrowed real money from real people both here and in foreign countries, and we promised to pay it back.  They expect and deserve to be paid back with real money that's worth something.  If the Fed inflates the dollar to worthlessness, don't you think the Chinese, Japanese and the rest of the world would be mad at us?  Perhaps they'll abandon use of the dollar?  Perhaps they'll just never buy another US bond?  What if they demand something of value for their worthless currency, like maybe a national park?
  
• The government can't tax their way out of this.  To heck with taxing the "richest 1%", if they confiscated, not taxed, the entire net worth of the 20 richest billionaires in America, they'd get $1.08 trillion.  With spending at $6.9 trillion, the money would be gone in less than two months.  In my opinion, the talk about "taxing the rich" they float is just to inflame class hatred and envy. 
• Hauser's Law may be a really counter-intuitive thing, but it has been true for a long time.  No matter what tax rates are, the tax revenues are roughly 19% of GDP.  We just can't spend more than that consistently. 
• No country with a Debt to GDP ratio much beyond ours has ever survived it as anything other than a walking corpse.  Most have undergone economic collapse.  
• If we truly intend to reduce that national debt, we not only need to cut out deficit spending, we need to run surpluses as far as the eye can see.  Our great-grandchildren can think about deficit spending.
• No one in government has proposed spending cuts like we really need.  Candidates in primaries have: Ron Paul proposed shutting down whole departments of the fed.gov hydra.  Candidate Rick Perry proposed capping spending at Hauser's Law, which is more definitive about cutting spending.   
• It truly is the spending. 

Most people don't understand exponentials.  We are in a phase that is exploding toward infinity.  It simply can't continue, that's mathematically impossible.  Worse yet, large segments of society howl like they're being fed into a wood chipper if the fed.gov simply doesn't give them more every year, let alone actually cutting their free sh*t. 

And this is why I think an economic collapse is inescapable.