In today’s hyper-partisan environment, much hysteria is created around the issues immersing our political system—and how the current course of action will lead to our nation’s demise.
Luckily for us, a brief analysis of history will quickly reveal that most matters tied to such apocalyptic sentiments turn out to be nowhere near such, perhaps being one of the motivations of the general electorate’s disdain of the political process as a whole. It will be, then, perhaps a surprise to you that even with this primer, the discourse before you today is to contend one issue—our national debt—can bring about the aforesaid.
Nearly two decades ago, then-President Bill Clinton ushered our country into what seemed like a new era of fiscal responsibility, the idea that government should spend and tax properly, as our federal deficit transformed into our federal surplus.
For many, this was a sigh of relief—an assurance that at least a vestige of hope that our nation could recover from the ever-increasing debt. Unfortunately, by 2001, the budget once again included deficits and has ever since.
Now, in the time frame surrounding this very brief surplus, the national debt was 5.7 trillion dollars (FY 2000)—only 55% of our nation’s Gross Domestic Product (GDP) (Amadeo, 2019). Yet, at the time leading up to the “Clinton miracle,” as many at the time put it, experts and pundits alike were raising the alarm bells, claiming, as the Economic Policy Institute warned in 1999, that our nation was sitting on a “ticking debt clock” (Blecker, 1999).
Attitudes like this are what, arguably, set off the lynchpin in the “Great Debt Debate of the ‘90s,” as it shall now be called, what consequently led to the previously explained 1998 surplus.
All of this, once put into the context of the modern-day, paints a rather cryptic picture since, as it stands at conception of this piece, the debt stands at roughly 22 trillion dollars or a whopping 106% of the GDP—the first time our debt was greater than or equal to our GDP since the Second World War.
This astronomical increase objectively makes the “catastrophe” of the 1990s seem like the people then were trying to create a big deal over some pocket change, however I would contend that the greater point of astonishment is the fact that seemingly no one from Washington to our local town assemblies appear to have any concern given the potential ramifications of our country defaulting on the debt we have accrued.
The only thing preventing our country from default, or officially declaring we cannot repay the debt along with interest, is the extension of the debt ceiling, the maximum amount of debt our country can accumulate when needed.
On that note we almost did, in the 2011 United States Debt Ceiling Crisis, when some legislators in Congress decided to break precedent and vote against one, reinvigorating some buzz around the debt (Kenton, 2018).
Here is where the quite dystopian reality sets in. The Committee for a Responsible Federal Budget reported in their 2018 study that by 2050, only 31 years from now, the national debt will be 160% given a freeze on current law, around 240% with projected changes accounted for (CRFB, 2018). It does not take an expert to deduce that the current path we are on is unsustainable.
At the beginning of this commentary, I implicitly asserted that it would be proven how such a bold claim—the national debt, specifically the default thereof—will prove detrimental to life in this country as we know it—would materialize.
As much as I hope it would never do so, if it were to, as Timothy Geithner, a former Treasury Secretary, echoed in a letter to Congress, a chain of events would likely ensue (Hendricks, 2018).
At a domestic level, the nearly spotless credit rating of the government would immediately vanish—and given the market’s bearish reaction to the aforementioned 2011 Debt Ceiling Crisis, that, note, never came to pass, it would be an understatement to say the United States financial system would breakdown overnight.
With the effects of that being fairly obvious, another result would be the evaporation of all federal aid programs—notably Medicare, Medicaid, and Social Security—putting several tens of thousands of America’s elderly and less-fortunate in jeopardy.
The more eccentric would also note that the legitimacy of the United States government would be severely limited, however, the argument behind this notion is vague at most.
As for the rest of the world, the effects would be quite similar in many regions, as the United States dollar is so relied upon in countless places.
These descriptions are not here to scare you, nor are they here to perpetuate a sense of a soon-coming Armageddon. Believe me, Julius Caesar’s famous, but petrifying, phrase—alea iacta est (there’s no turning back)—does not yet apply to our nation. I also do not contend a complete elimination of the debt, as there is plenty of principled evidence pointing to the contrary.
No, rather we should be filled with a feeling of hope—that our generation can, and I believe will turn around the mess that prior has facilitated.