Serving the High Plains
Serving the High Plains
Between headlines about back-and-forth name-calling and arguments over which party is engaging in “cancel culture” or “conspiracy mongering,” there has been little attention paid to acknowledging that our national debt is now 28 percent higher than our gross domestic product -- all the stuff we make and the services that we sell.
The national debt totaled around $28.3 trillion (that is, thousands of billions, which are thousands of millions) on Sunday, compared with our gross domestic product of $22.1 trillion.
In other words, if we put up our GDP as collateral, it wouldn’t cover the debt by a long shot.
So why aren’t people jumping and screaming over what appears to be a shocking excess of debt?
It’s not time yet for the GOP to lay the blame squarely on President Joe Biden. They would have to acknowledge that a very large portion of our current debt accumulated under President Donald Trump.
The consensus, but by no means universally believed, is that he did that mainly by decreasing taxes on corporations without decreasing government spending.
Another key factor is the COVID-19 pandemic, which has made wartime recovery spending necessary. In fact, the debt-to-GDP ratio due to COVID-19 emergency spending has been as high as 136%, far surpassing World War II’s maximum excess of debt over GDP of 114%.
I would submit that war-time spending created goods, services and jobs, while the pandemic has caused elimination of all three. It is reasonable that pandemic-related spending is higher in relation to GDP.
There is a third key factor at work in today’s massive debt and its overshadowing of GDP. That is the fact that, as conservative columnist Kevin Williamson notes, the interest rate on the debt “is approximately squat.”
For April, the “fed rate,” the best borrowing rate available from the U.S. government, was seven hundredths of 1 percent. That’s very close to free.
Even before COVID-19, the Federal Reserve had kept “the fed rate” below 2 percent and it had been less than 1 percent most of the time since 2010. Federal debt is, therefore, almost free.
After COVID-19, the economy is expected to roar back, but almost no one expects economic recovery alone to start reducing the debt. In fact, many are saying the debt will continue to rise until it is nearly double GDP by 2050, due to “existing laws, programs and promises,” according to Newsweek.
Now, Biden wants to stimulate the dragging economy with a $1.9-trillion infrastructure plan and pay for it by taxing the rich.
I don’t think that’s going to happen. The very rich and corporations can hire armies of attorneys, financial wizards and lobbyists who can find and create new loopholes faster than the government can close existing ones.
Williamson, the conservative, is afraid that eventually the debt will be perceived as risky. Interest rates will rise with the perception of risk and bring on inflation with inadequate growth.
Liberal columnist Paul Krugman, however, thinks that indebtedness that spurs growth, especially at low interest rates, “is OK – indeed, desirable.”
In fact, he says, “To act responsibly, we must stop worrying and learn to love debt.”
Steve Hansen writes
for Clovis Media Inc.
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