Politicians continue to pledge trillions of dollars in free education, housing subsidies, universal health care, and other programs. Recently, BET founder Robert Johnson alone asked for $ 14 trillion in redress. Kamala Harris has a $ 10 trillion climate plan. On the Republican side, President Trump has shown little reluctance to spend throughout his tenure while cutting revenue (and borrowing at a record rate). It is therefore not surprising that the United States crossed the long-debated red line for economists last month. Our debts are now greater than our gross domestic product. We took on $ 25.5 trillion in debt in June, and that figure may be too conservative. It's about $ 27 trillion now. Still, neither party seems a bit concerned as this political ship of fools is heading for a collision with economic reality.
National debt has skyrocketed with pandemic spending, but Congress and the White House were already spending with devotion before anyone heard of Covit-19 or the Wuhan wet market.
Just look at this simple fact. As of December 2019, we had $ 17 trillion in debt (an alarming number discussed on this blog as 80 percent of GDP. Government analysts' fear was that the debt would approach 100 percent of GDP by around 2030 We hit that point at the end of June at $ 20.53 trillion, or 106 percent of GDP.
Still, politicians are still tossing trillions of dollars around as if negotiating with chips like spokeswoman Nancy Pelosi, who recently expressed frustration that the White House won't simply reach an agreement that the next stimulus package will be $ 1 trillion and the house is sinking a trillion.
We have a new mindset that makes Senator Everett Dirksen look positively thrifty when he famously said, "A billion here, a billion there, pretty soon that adds up to real money." Now it's a trillion here, a trillion there, and it still doesn't seem like real money.
It is certainly true that large economies like the United States can hold large debts without scaring investors and triggering spike in interest rates on debt. We have passed the 90 percent mark a few times in history, such as World War II. However, there is every reason to be concerned. World War II was also followed by an expanded industrial base and booming economy. That doesn't seem to be in the works to the same extent. In addition, we will consider increasing the annual deficit funding to meet these commitments without significant tax increases affecting investment and employment rates. Debt and deficit are often confused, but the ledger is not good at either category.
No one is suggesting clarity on how such trends will play out, but it would be comforting if there were signs that either party is taking this debt seriously.