The National Deficit: Does Anyone Care Any Longer?
Way back in the early days of 2019, a zillion years ago in these hectic “Breaking News on the Hour” Trump Administration years, I wrote a blog entitled “Does Anyone Care About the National Debt?”
https://authorjkgeorge.com/does-anyone-care-about-the-national-debt/
In my un-humble and probably biased opinion, that was a good commentary, but based on the thunderous vacuum of much of my blog feedback, it landed in the “Land of Nod,” so to speak.
Reviewing those blog comments, along with recent articles in The Wall Street Journal along with AP articles in the Austin newspaper, the situation has gotten much more dire. A Journal story of August 22 includes a graph projecting the National Debt will grow by at least $1 Trillion a year over the next decade. In the year 2029 alone, the deficit will reach a staggering annual increase of $1.4 Trillion at the current pace, with current tax rates and spending. These additional annual deficits will have added another $12 Trillion to the existing $21 Trillion, which is up from $13 Trillion in 2010. Thirty-three Trillion dollars! Is your head spinning?
The last time the US had a budget surplus was the four years of the Clinton presidency, from 1998 through 2001. It’s not rocket science to explain the numbers. After the worldwide real-estate bubble meltdown and credit freeze in the final year of the George W. Bush administration in 2008, the economy was so fragile that the US Fed injected huge amounts of credit to shore up the banking systems -- not only this country, but of major international economies as well. These decisions were bipartisan. During the ensuing recovery, the US ran a significant deficit during the eight year Obama administration. This would have happened no matter which administration would have been in office, but it has been pointed out by biased right-wing comments as some sort of Democratic malfeasance. It is correct that the Obama administration coincided with a significant increase in fiscal deficits. That much is true. But after the credit freeze in 2008, massive injections of stimulus spending were required. Following the severe recession, the economy was extremely weak; tax revenues were the lowest in years.
Figure 1: US Debt by Presidential Term
(Please disregard the text at the bottom of Figure 1.)
The economy then grew each year, and has continued to grow now for ten straight years. Instead of gradually tightening spending, the Trump administration promised, and then delivered on a significant tax cut, consisting nearly entirely for wealthy US citizens and US corporations. As expected, this stimulated the economy – at least in the short term. Along with reduced revenues, spending for the military and also social benefits such as Social Security and Medicare has increased. The combination of these main four factors has resulted in the sharpest increase in national deficits in the nation’s history. This has come during a strong economy, the first time ever.
Figure 2: Projected US Budget Deficits for the Trump Administration
This situation is a recipe for disaster at some point in time. At present, a strong US dollar buys plenty of imported goods cost effectively. This keeps the cost of living low, but hurts our export sector and thus manufacturing jobs. If and when interest rates tip back up to normal historic levels, and if and when the economy goes into a dip, the situation will be dangerous. These will happen; economies do not grow forever. Rome was not built in a day, but it did not last forever.
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Enjoy life; it's the only one we will get.
Jim George
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