The US national debt now tops $123 trillion, including unfunded Social Security and Medicare promises, far surpassing the official figure of $28 trillion, Truth in Accounting (TIA), a non-partisan American think tank, reported on 15 April. This mammoth debt means a $796,000 burden for every federal taxpayer, TIA underscores.
The think tank published its new findings having examined the recently released Financial Report of the US Government (FRUSG) for the fiscal year ended 30 September 2020. Due to COVID-related borrowing, the American government’s overall financial condition "worsened by $9.84 trillion in 2020," TIA notes, stressing that if Washington "was properly prepared for a crisis with a true rainy day fund, it would not have had to borrow."
"The estimate cited above is likely overblown in that payments to retirees are offset, to a substantial degree, by contributions made by employers and by employees," suggests Wall Street analyst and investigative journalist Charles Ortel. "At some point, politicians will be forced to raise contributed amounts or the social security system will collapse, endangering and infuriating the powerful group of engaged voters who are retired or who are soon to retire."
Still, the analyst expresses concerns that "participants in the United States' economy have embraced borrowing at levels and in ways that are quite dangerous for our country, for countries who emulate this risky behaviour, and indeed for the entire world."
Ortel explains that borrowing can be prudent if the borrowed sums are invested in projects that actually deliver cash flows sufficient to pay interest and principal sums as they're due.
"But, borrowing to finance schemes or projects that cannot be controlled or managed properly opens doors wider to corruption, influence peddling, and eventually to bankruptcy as has happened too many times already in modern as well as more ancient history," he warns.
While the US national debt continues to grow, neither GOP nor Democrat leaders have outlined any plans so far to solve the borrowing dilemma.
"Politicians across the spectrum continue to embrace the false notion that we may grow our way out of our debt burden, painlessly," notes Ortel, adding that the country "must reduce its debt load, and not simply slow its rate of increase."
The Wall Street analyst forecasts that accelerating advances in technology and the high and rising cost of human labour "may trigger abrupt and enduring declines in wages from a much smaller pool of workers in the private sector, which is the engine of any economy."
Meanwhile, the Biden administration is continuing to ramp up federal spending, including the $1.9 trillion COVID relief package and his multi-trillion infrastructure and climate proposal which is still under congressional consideration.
"Until you run out of it, it is always easy to spend someone else's money," remarks Ortel, commenting on the federal government's spending spree.
The president insists that the $2 trillion infrastructure plan will be funded by tax hikes, however, this approach could slow the economy down, warns American conservatives and tax experts: "The Biden administration has yet to make that case, and economic studies – including those by the Congressional Budget Office (CBO) – indicate that the benefits of the Biden infrastructure plan won’t outweigh the cost to the economy of the tax increases," highlighted the Tax Foundation's president, Scott A. Hodge, on 31 March.
Treasury Secretary Janet Yellen's attempts to convince other countries to adopt a global minimum corporate tax rate indicates that the Biden administration isn't sure that its plan will work and that US businesses wouldn't flee abroad, to tax havens.
"Since 1989, America and other allied nations have practiced a form of 'capitalism' that is too reliant on debt and not fairly generating enough equity (common or preferred shares)," says Ortel. "This practice, while technically 'capitalism', is better called 'debtism.' Compounding the dangerous process of over-borrowing, America is not investing borrowed sums on smart projects but, instead, is chiefly letting these increased debts fund living costs and/or financial interest."