Economic Climate Change: There's a Train Wreck A-Comin'

Economics historian Niall Ferguson, while talking about his book Doom a few years ago, noted that the U.S. was in serious trouble because its politicians perpetually avoid doing anything that was unpopular. To be specific, he was referring to raising taxes. Our national debt can not keep increasing like it has. And yet nowhere do I see protests about this fiscal irresponsibility.

This notion came mind during this year's State of the Union address in which the president vowed that he would not raise taxes on anyone making less than $400,000 a year.

President Biden's declaration, when juxtaposed against the facts, shows how out of touch Americans are with regard to our nation's financial situation. The reality is that taxes will have to be raised for all of us because the government refuses to cap spending. Year after year our legislators raise the debt ceiling, sometimes even more than once a year. The government perpetually spends more than taxpayers are paying. 

Every time the government needs more money, they squawk about the need to raise the debt ceiling. And voila! The debt ceiling is raised so we can keep the government running and maintain the illusion that all is well. As of February 2024, the U.S. national debt was $34.37 trillion.

You would think that with the national debt being so massive our government leaders would be discussing a responsible plan for reducing this economic noose, but no. The forecast going forward is continuous bloat. Or rather, an ever deeper hole. In ten years the federal debt is projected to be a mind-boggling $54 trillion.

Individuals who get in a bind because they've maxed out their credit cards can end up in the untenable situation where all the money they make is used to pay off the interest on their debt, while never having hope of getting free. 

Eventually our nation will be in that same scenario. At some point in time the entire U.S. economy will be devoted to making interest payments on the debt, a debt which will never decrease. There will be no money left to fix failing infrastructure and at some point no money left to keep the lights on.  

This is not to suggest that Republicans will do what's necessary if they regain the reins of power. Neither party seems to have the stomach for doing what is needful. This is the Achilles heel of democracy. Politicians pander to please an uninformed public. As a result, everyone has their hand out for their share of government largesse. And neither party has the courage to be forthright or honest about the consequences.

*

To reiterate, President Biden affirmed his commitment to not raise taxes for families making less than $400 thousand. What strikes me about the $400,000 number is that the president acts as if people making less than that amount are living in poverty. Some day, when electric grid goes down and our economy collapses, we'll find out first hand what poverty really feels like.

* * * 

Originally published on the Op-Ed page of the Duluth News Tribune, March 2024.