What is Unsustainable?

I’m taking a few moments to depart from my nearly singular focus on preserving DB plans for the masses to comment on something that I read this morning.  The following came across my desk, and it echoes a claim that I hear frequently, but one that isn’t based on fact.

“We basically have gone from $8 Trillion to $20 Trillion in Government Debt since 2008, and it is the rate of change of this debt spending that is the real elephant in the room, and we are just coming up on the entitlement’s impact curve on our government debt obligations.

I feel for Trump because he has inherited a boxed in economic situation here. He actually wants to stimulate the economy through growth projects; but the previous wars, financial crisis, bailouts, and unwise and inefficient spending programs have made borrowing any more money at these levels impossible, and Congress knows this fact!

They may try to go down this borrow and spending road, but it will backfire bigtime on the Republicans. By my calculation, the Democrats are going to benefit immensely from the fact that the s*t is going to hit the fan during the Trump presidency and Republican-controlled Congress from past bad governmental practices of what I call “Can-Kicking” and “Short-Termism.””

This constant chatter about unsustainable levels of U.S. debt has been occurring since at least the 1930’s.  My friend and former colleague, Charles DuBois, shared the following quote with me:

“Everyone knows if we continue the present financial program of borrowing billions upon billions of dollars, with an unbalanced budget, piling up debt upon debt, sooner or later, the day of reckoning will come. None of us are prophets. We cannot predict when that time will be. All we know is that if we continue on this road, with no financial policy and an unbalanced Budget we are going down the road to bankruptcy, repudiation and financial chaos.” Rep. Hamilton Fish III (R- NY) on the floor of the House of Representatives – November 1937

Those words were uttered 80 years ago, and we are still waiting for the great bankruptcy to occur.  What we do know is the U.S. will always be able to pay its bills.  Why? Because we possess a fiat currency, and a country with its own free-floating currency and no foreign debt can always meet all of its obligations – including Social Security, so please stop worrying about that political football!

One of the potential consequences of printing money is the possibility that it creates excess demand that exceeds our economies ability to produce the goods and services to meet that increased demand, which will lead to inflation. However, we have tremendous slack in our economy currently, and our ability to meet increased demand should not be an issue in the near-future.

Let’s hope that President Trump’s goal of increasing infrastructure spending to spur economic growth, job creation and enhanced wages is successful.  The last time the US produced an annual GDP growth rate in excess of 3% was 2005.  That is just not acceptable.

2 thoughts on “What is Unsustainable?

  1. Russ thanks for the advertisement! I should have been more precise. “A country with its own free-floating currency and no foreign debt can always pay its bills”

    That is, a sharp reader might say “well, Argentina has its own currency and they had problems”.

    Argentina’s problem was that much of its debt was not denominated in its own currency.



  2. Thanks, Chuck. I’ll amend.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s