The real economic catastrophe will be caused by the U.S. debt

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Should we blame Biden and the politicians applauding him for their unwillingness to address our looming fiscal disaster? A video essay by Brian Riedl.

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The U.S. is headed for "the most predictable economic crisis in history," as Bill Clinton's former White House chief of staff once put it. Why? Because of the mountain of federal debt that we keep making bigger and bigger.

For the first time since the wartime economy of the late 1940s, U.S. debt is roughly equal to the value of all the goods and services our economy produces in a year. When World War II ended, all that spending on tanks and aircraft came to a quick end. But the major drivers of today's debt crisis are Medicare and Social Security, and their price tags are set to keep rising. So what does President Joe Biden promise to do about this looming crisis? Absolutely nothing. And Republican lawmakers have cheered him on.

"Tonight, let's all agree," Biden said in his 2023 State of the Union address, "we will not touch social security. We will not cut Medicare. Those benefits belong to the American people…I'm not gonna allow them to be taken away—not today, not tomorrow, not ever. But apparently it's not going to be a problem."

Doing nothing might not be a political problem today, but it will become one as the debt wreaks havoc on the U.S. economy.

We already spend more on paying interest on the federal debt than we do on Medicaid and defense. Even if rates remain at 4 percent for the next few decades, annual interest payments are projected to surpass what we spend on Medicare and Social Security.

Interest rates are like a time bomb. If they rise to 5, 6, or 7 percent, the cost of borrowing will increase so much that federal debt would be on track to surpass 300 percent of gross domestic product—or three times higher than World War II levels. Eventually, interest costs would consume nearly all of annual U.S. tax revenues.

The cause is no mystery. The combination of rising health care costs and 74 million retiring baby boomers is causing annual Social Security and Medicare costs to explode.

Social Security and Medicare have special revenue sources, but if nothing changes by 2034, these two programs will be collecting $2.6 trillion annually in payroll taxes and related revenues while spending $4.8 trillion in benefits and associated interest costs.

Republicans blame all the spending on Democrats. But former President George W. Bush signed legislation that collectively added $6.9 trillion in debt. And former President Donald Trump approved $7.8 trillion in new legislation in just one term. For both presidents, this includes both huge new spending bills and trillion-dollar tax cuts.

Republicans like to talk about slashing social spending, but to balance the budget we'd need to completely eliminate all funding for veterans' benefits, child credit payments, the earned income tax credit, school lunches, disability benefits, K-12 schooling, health research, unemployment benefits, food stamps, homeland security, infrastructure, embassy security, federal prisons, border security, and much more.

There's not much appetite for that.

The most basic progressive narrative is that deficits don't matter and that taxing the rich can eliminate the deficit. But approximately 70 percent of the 2001 and 2017 tax cut costs and subsequent extensions went to the middle and lower classes. If you size up their fiscal impact, only a tiny sliver can be attributed to "tax cuts for the rich."

Seizing every home, yacht, business, and investment from America's 800 billionaires would fund the federal government for just nine months. And then the money would be gone. So would your 401(k), given that most of this wealth would be seized from the stock market, causing the S&P 500 to crater.

There simply aren't enough millionaires, billionaires, and undertaxed corporations to close Social Security and Medicare's projected $124 trillion cash shortfall over three decades or—as some Democrats propose—to finance a generous social democracy for 330 million Americans.

There's no way to protect current retirees from the impact. And there is no way to tweak our way out of it. Social Security's eligibility age will need to rise and its payout to above-average earners must be curtailed. Medicare will have to become cheaper, and wealthier people are going to have to pay more for it.

Should we blame Biden and the politicians applauding him for their unwillingness to risk addressing our looming fiscal insolvency?

Actually, voters are mostly to blame.

We simultaneously call for a balanced budget, higher spending, and no more taxes. We vote for Santa Claus candidates from both parties. We're the ones who selected those craven politicians. And eventually, we'll pay the price.
Комментарии
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As President of the European Council, Jean-Claude Juncker once said: "We know what we have to do - we just don't know how to get re-elected if we do it."

IslandForestPlains
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I like how most of the comments blame the politicians, but ignore the video's point at the end that the politicians are just pandering to the voters. Voters want a balanced budget without any realistic cuts to massive programs.

chrimony
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We all focus on the President, but it's Congress's fault.

bbgun
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Finally, someone with the balls to blame the electorate.

Jamesaepp
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Given the persisting global economic crisis, it's essential for individuals to focus on diversifying their income streams independent of governmental reliance. This involves exploring options such as stocks, gold, silver, and digital currencies. Despite the adversity in the economy, now is an opportune moment to contemplate these investment avenues.

debra.lucas-jruh
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The damage is caused by excessive government spending and central planning causing distortions in the market. Debt is just one of the consequences.

Meton
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It looks like hyperinflation is inevitable

DavidReilly
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You know what makes it easier to service the debt?
Devaluing currency. Are you paying attention yet?

nmuskier
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One problem with "eventually we will pay the price" is that the older generations might not live long enough to face the consequences of their selfish actions. It's easy to borrow if you have no intention of paying it back.

petersmybro
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monsters
every politicians over printing money above the value of the country are monsters

heretic_
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The US government debt is on an exponential free fall and the only way to pay that debt is to keep printing . Hyper inflation is coming, housing crash, a recession and a possible depression too. i think is time investors redirected their focus to the equities market cause despite the severe bear market, I am aware of certain investors that have earned over $365, 000.

LizaPhilips
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A perfect storm is brewing in the United States. Inflation, bank collapse, severe drought in the agricultural belt, recession, food shortages, diesel fuel and heating oil shortages, baby formula shortages, available automobile shortages and prices, the price of living place. It's all coming together and it could lead to a real disaster towards the end of this year (or sooner). With inflation currently at about 6%, my primary concern is how to maximize my savings/retirement fund of about $300k which has been sitting duck since forever with zero to no gains.

ElizabethMoore-kh
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"Actually, voters are mostly to blame."
I would argue the media are mostly to blame. The voters cannot make informed decisions at the ballot box when there are almost no non-partisan, objective, impartial journalists in the country.

ballybunion
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The Americans have squeezed too much profit from the world over the decades, which allowed Americans to consume 25% of the world's resources by just 5% of the world's population. Such welfare has been sustained by the US dollar hegemony which is currently under great challenge, explaining the struggling insolvency... But the unsustainability of the dollar hegemony is a sure thing, in other words, Americans have always been deficit-spending at the cost of other's sufferings, and it's a fair thing that they reap what they sow as they really had it coming.

isakusann
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Yeah, I've said this for a long time: Many people do everything in their power to avoid any personal responsibility, which is why a paternalistic government has been allowed to continue for almost a century at this point.

From President Wilson to Emperor Franklin Roosevelt, the foundation was laid to build the house we're in now and, at any point since then, we could have reversed course with far more minimal impact. But especially baby boomers felt entitled to handouts from the government and propped up the sinking ship for decades. And they happened to get lucky that they didn't get stuck holding the grenade.

Mortiel
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Very little of the budget is discretionary spending. Congress has tied its own hands to avoid having to even consider fiscal responsibility. Presidential nominees don’t even pretend to have any interest in curbing the deficit enough to slow the bleeding. We won’t take our medicine until we’re forced to. We want low taxes, robust welfare state, strong military, cheap gas, a soaring stock market, low interest rates, and we don’t care how much debt it takes to make it happen.

DreamConundrum
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Democracy is the idea that the people know what they want and that they should get it...good and hard.

ManuelBTC
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RFK Jr is the only candidate talking about this.

roryoconnor
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Your US tax dollars at work ladies and gentlemen. While your kids get a substandard education, the streets are filled with homeless people, and you can't afford your groceries ..but hey at least we can fund a proxy war that has ZERO to do with us, isn't our problem, and isn't our conflict. That extra money they just got from congress is of course on top of the 10 mil we already give them DAILY. We give them more money then any other country on the planet. Have for decades. Remember that the next time you drive on a busted up street or pay 4$ a gallon at the pump and wonder what it is congress does with all that money we give them.

hichemlalaoui
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“We” did not select the craven politicians at the end. The Uniparty did.

Stolat