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When Does U.S. National Debt Become Too Much
US dollars

China flying spy balloons over America isn’t a threat to the United States’ hegemony (although it’s obviously brazen for geopolitical reasons). The country’s grotesque national debt, a problem it has created all by itself, is the greatest threat to its superpower status.

Looking back through history, particularly in the most capitalistic society of all time, America (although it’s not as free market as it once was), you’d conclude that garnering credit/debt provides leverage. And leverage can expedite growth. However, like everything in life, finding a balance is critical… too much of anything isn’t good.

U.S. National Debt is Not a Partisan Issue

Obama added trillions to the deficit during his eight years (at the time, more than all U.S. presidents combined). Before Covid, Trump ran massive annual deficits despite GDP growth of around 3%. When he left office, Trump had added roughly $6.7 trillion to the national debt. And Biden just chalked up a $1.4 trillion deficit in the fiscal year 2022, down from $2.6 trillion the year before!

And these presidents had near-record-low interest rates to borrow against. But, Biden now has to deal with rapidly increased rates, making servicing the nation’s $31 trillion+ debt much more challenging.

The U.S. government (spanning multiple administrations — this isn’t intended to be partisan) has lost all sense of fiscal prudence, and the country’s financials are upside down. There could be many reasons for America’s poor fiscal health, including 4-year term durations and the constant campaign cycles. Would 6-year terms encourage presidents to take a longer view regarding spending?

Something needs to change in the U.S. so governments are incentivized to balance budgets.

Over the last twenty consecutive years, no matter how good or bad the American economy was doing, annual deficits occurred, and the national debt grew by tens of trillions of dollars. The last surplus in America was in 2001… imagine running your household this way.

U.S. National Debt Will Make Inflation a Constant Threat

We see inflation coming down substantially from last year, and many assume the worst is behind us. I’m not convinced.

The coming 9-12 months will tell the tale of how America’s debt will impact the country for years. In 2021, America paid roughly $350 billion in interest. Last year it was close to half a trillion dollars. This year, who knows — likely close to $600 billion in interest.

For more on this looming debt crisis, watch my video below on what I think are possible scenarios over the coming years in the United States.