On September 30th, A.D. 2016, the U.S. government closed out the 2016 fiscal year with an “official” National Debt of $19,573,444,713,936.79.
Makes me laugh.
Government can calculate the U.S. National Debt to the penny. How responsible!
And yet, government has no idea what happened to $6.5 trillion that was given to the Pentagon and subsequently disappeared.
In any case, the National Debt grew by $1,422,827,047,452.46 ($1.4 trillion) in fiscal 2016. That averaged out to over $100 billion in deficit spending per month.
That annual deficit spending increase has been a de facto $12,000 subsidy for every American household.
The fiscal 2016 deficit spending (debt) amounts to roughly 7.5% of the entire US economy. Without that 7.5% in debt-based “stimulation,” where do you suppose the economy would be right now?
• In fact, fiscal 2016 had the third largest yearly increase in government debt in US history. The only two previous years in which the debt increased even more were during the financial crisis of the Great Recession. (The top three deficit spending years occurred during the Obama administration.)
There was no reported financial crisis in 2016—but there is an upcoming presidential election.
The enormous increase in national debt has subsidized the U.S. economy.
• The official total National Debt (almost $20 trillion) amounts to a $165,000 subsidy per American household. Where would your household be if it had to pay your $165,000 “fair share” of the National Debt? Where would your household be if you hadn’t received that $165,000 “subsidy”?
• How much longer can government continue to keep the U.S. economy on life support with $100 billion/month subsidies?
Where will the economy go if that subsidy is reduced or even stopped? Recession? Depression?
• Was the $1.4 trillion deficit-spending subsidy for fiscal 2016 largely based on government’s determination to prevent a depressed economy that might adversely affect the election of Hillary Clinton and/or the reelection incumbent, “establishment” politicians?
If so, what do you suppose will happen to that subsidy once the November election is over? How soon might we expect government to cut its appetite for more deficit spending?
First quarter of next year? Second?
Q: What happens to the economy if/when government stops borrowing to subsidize the economy?
A: The economy tanks.
The U.S. economy is not running on its own strength. It is, instead, on life support provided by currency that government has borrowed and injected into the economy. If the borrowing falls, so will government’s deficit spending. If deficit spending falls, so will the U.S. economy.
• Note that for the past year, the Federal Reserve and other central banks have repeatedly declared that they can do no more with their monetary policies (interest rates and currency supply) to stimulate the economy—and therefore, the burden of economic stimulation must now be shifted to government’s fiscal policy (tax rates and government spending).
Do you believe that the central banks have exhausted their monetary resources in a vain attempt to stimulate the U.S. and global economies? Do you believe that it’s now strictly up to government(s) to stimulate economies with fiscal policies of reduced taxation and increased spending?
Do you believe that while the Federal Reserve has been working mightily to stimulate the U.S. economy with monetary policies, the U.S. government has been sitting on the sidelines and offering little assistance by way of fiscal policies? If so, what the heck do you suppose government’s deficit spending of $1.4 trillion during fiscal 2016 has been if not evidence of an active fiscal policy of increased government spending?
My point is that, while the Fed says it’s done all it can and it’s now up to government fiscal policy to save the economy, the Fed has implied that the government has been doing nothing and it’s time for government to step up. But, au contraire, mon ami.
The government’s fiscal policy of deficit spending has been pumping billions per year into the U.S. economy at record rates ever since the onset of the Great Recession. Thus, the Fed is lying or mistaken insofar as it implies that government has, so far, neglected to adjust fiscal policy to end the recession.
If government has already been busting its hump to borrow and spend more (in the form of deficit spending) to stimulate the U.S. economy, how much more “fiscal policy” can we expect from the government? I’d say, Not much. In fact, there’s a good chance that government’s deficit spending will be cut in A.D. 2017 and therefore we may see significant’s less “fiscal policy” intended to stimulate our economy.
If it’s true that: 1) the Fed’s ability to stimulate the U.S. economy with monetary policy has been exhausted; and 2) the government’s ability to stimulate with fiscal policy is diminished or perhaps even exhausted–then it follows that, so far, all of the Fed’s horsemen (monetary policies) and all of the government’s men (fiscal policies) have proved insufficient to put our Humpty-Dumpty economy back together again.
Given that government has already and repeatedly engaged in record-setting deficit spending over the past seven years, odds are that deficit spending (based on borrowing) will be less in fiscal 2017 than it was in fiscal 2016.
How is the economy likely to react if it gets no further stimulus from monetary policy (the Fed claims they’ve already done all they can) and suffers an actual loss of government’s fiscal policy stimulus (less deficit spending) in fiscal 2017 (which, incidentally, is not an election year)?
Will the economy most likely go up or down?
• If government borrowing and deficit spending decline, what parts of the U.S. government budget are most likely to suffer cutbacks?
So-So Security and Medicare now comprise the largest parts of annual deficit. They consume the majority of US tax revenue and force government to borrow unsustainable sums of currency, even in good times. Worse, their costs are rising.
Neither program is properly funded. Some analysts claim that government will ultimately need to borrow $42 trillion to make these programs solvent.
$42 trillion more debt?!
On top of the current $20 trillion in National Debt?!
To fully fund So-So Security and Medicare we have to triple the National Debt?
There’s no way that’s going to happen.
Therefore, So-So Security and Medicare can’t (and therefore, won’t) keep government’s promises.
It follows that if/when government’s access to credit is reduced and government spending is cut, So-So Security and Medicare will be among the first casualties.
The only question is When.
• If you’re hoping government will provide you with full So-So Security or Medicare payments even five years from now, your hope may be vain.
If you’re hoping government will continue to indirectly subsidize your household with another $12,000 in deficit spending in fiscal 2017, that hope will almost certainly be dashed.
Government is broke. Insolvent. Bankrupt. That’s been true since at least A.D. 1971 when Nixon closed the gold window and refused to redeem foreign-held dollars with gold. Arguably, it’s been true since A.D. 1933 when Roosevelt seized the gold and refused to redeem domestic dollars with gold. Government has successfully danced around and evaded that truth for decades. But it’s been bankrupt, just the same.
Sooner or later, it will become impossible to ignore government’s bankruptcy, the National Debt will hit the fan, and the U.S. and world economies will suffer a catastrophic failure.
The U.S. and global economies are houses of cards. Their destiny is to fall. That destiny is inevitable.
The only question is When.