Rudy Barnes, Jr.
The Great Depression lasted from 1929 until WWII, and there are few survivors of that time of fiscal austerity and economic hardships that led up to WWII. Today America has the strongest economy in the world, and its people are indifferent to a massive national debt and spending their money with wild abandon in their materialistic and hedonistic culture.
There are two major indications of difficult times ahead. First, America’s massive and growing national debt of over $34 trillion that Jerome Powell has asserted is not sustainable. Second, the threat of Russia and China seeking to wrest global dominance from the West. Those factors have ominous consequences, especially in an election year.
Both President Joe Biden and former president Donald Trump, who lead America’s two-party duopoly, have ignored those economic threats to domestic and foreign policy. They know that voters will reject the economic burdens needed to control the spiraling national debt while countering the aggression of Russia in Ukraine, and of China in Taiwan.
Trump has been outspoken on that issue, saying “he’d encourage Russia to attack those NATO allies who don’t pay their bills;” and “once critical GOP officials now stand by Trump after his NATO comments.” Jamie Dimon “believes U.S.debt is the most predictable crisis in history, and experts say it could cost Americans their homes, spending power and national security.”
Over the years, liberal Keynesian economists have insisted that Americans need not be concerned about the national debt, but the warnings of Jerome Powell and Jamie Dimon have shattered that illusion. And Trump’s reckless invitation that Russia attack NATO members if they don’t pay their bills has obviously weakened NATO. What can be done?
The problem of the debt is the cost of maintaining it indefinitely, with neither party expressing a willingness to promote austerity measures. Dimon has observed: “If the government is issuing debt to pay for high-return projects, then it’s good.” But our national debt doesn’t produce high returns; and the interest cost for one year could equal the defense budget.
William G. Gale has observed that “If government creates debt, it has to be financed with taxes or money creation. If debt get’s out of hand [as it is now], “higher government debt increases interest rates. [And] Money creation has historically been the (false) solution, as it is easier to issue money than to raise taxes, but it’s often more disastrous in the long term.”
In our perilous times, there are no easy options to strengthen America’s unsustainable economy without worsening its fiscal and political mess with more taxes. Dimon has noted that “this is about the security of the world. We need a stronger military and a stronger America, and we need it now.” Holman W. Jenkins considers both Biden and Trump “can-kicking politicians” who will avoid the unpleasant truths needed to strengthen America’s “unsustainable” economy.
Notes:
Jerome Powell, Chair of the Federal Reserve, has said “the U.S. is on an unsustainable fiscal path. That means that the U.S. national debt that now tops $34 Trillion is growing faster than the economy.” While some Senate Democrats urged Powell to cut interest rates, Powell “pushed back on any implication that politics would play a role in the Fed’s decision on interest rates.” https://thehill.com/homenews/4447860-powell-the-us-is-on-an-unsustainable-fiscal-path/.
See also, After Jamie Dimon warns of a market rebellion against $34 trillion national debt, Fed’s Jerome Powell says It’s past time for “an adult conversation” about sustainable fiscal policy. See htttps://finance.yahoo.com/news/jamie-dimon-warns-market-rebellion-184434799.html.
Jamie Dimon of J.P. Morgan Chase believes the U.S. debt is “the most predictable crisis in history” and experts say it could cost Americans their homes,spending power and national security. “More than a decade ago when national debt sat at a measly $19 trillion, America's former joint chiefs of staff chairman Admiral Michael Mullen said debt was the top threat to national security. Fourteen years on, former Speaker Ryan told the Bipartisan Policy Centre in January that before long the government will be spending more on servicing its debt than it is on investing in the Pentagon. Dimon added: “This is about the security of the world. We need a stronger military, we need a stronger America. We need it now. It’s a risky thing for all of us.”
See https://finance.yahoo.com/news/jamie-dimon-believes-u-debt-093000484.html.
A surge in credit card debt has made consumers complicit in America’s debt crisis. “According to a new WalletHub report, Americans are spending like they never have before — and are showing little signs of slowing down. The United States as a whole has over $1.1 trillion in credit card debt, over $1.6 trillion in auto loan debt and a few hundred billion dollars in personal-loan debt,” per WalletHub. High levels of debt can have profound effects on the economy, influencing everything from individual financial stability to national economic growth and stability. A country burdened by debt will have fewer resources to create a prosperous future. “Rising debt reduces business investment and slows economic growth,” per the Peter G. Peterson Foundation. “It also increases expectations of higher rates of inflation and erosion of confidence in the U.S. dollar.” See https://www.deseret.com/2024/2/12/24070887/.
Biden has not mentioned reducing the national debt under his Bidenomics, nor has Trump suggested any reduced public spending, or aid to Ukraine. Instead, Trump criticized NATO nations for failing to pay enough to NATO, and on February 13 Trump told cheering supporters that “he would not support any NATO nation attacked by Russia if “they did not pay enough to NATO, and that he would 'encourage' Russia to 'do whatever the hell they want.' https://www.usatoday.com/story/news/politics/elections/2024/02/11/donald-trump-threatens-nato-russia/72556515007/. See also, GOP Officials, Once Critical, Stand by Trump After his NATO Comments at https://www.nytimes.com/2024/02/12/us/politics/trump-nato-republicans.html.
On Biden and Trump as two politicians who are “kicking the debt can down the road and not owning up to the prospect of a global war,” see America is having the wrong election at https://www.google.com/search?q=america+is+having+the+wrong+election+wsj+article&rlz=1
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