Currently, the United States faces a substantial fiscal deficit amounting to $34 trillion, impacting the future income of every American citizen through taxation. It’s essential to note that this tax burden does not directly affect American corporations, as they do not bear the tax burden themselves. Instead, corporations pass on their accumulated taxes to consumers, resulting in higher prices that ultimately affect citizens. The federal government is projected to expend $6.3 trillion in the current fiscal year, constituting 24.2% of the nation’s GDP. This trajectory suggests a potential escalation of the national debt to $40 trillion in the near future.
The National Debt
Encouraging public awareness, consumers may draw attention to the U.S. Debt Clock, which currently records a federal debt exceeding $33.88 trillion, constituting 122% of the GDP. Morgan Stanley’s recent analysis underscores the urgency, noting that interest payments on the debt reached $659 billion in the last fiscal year, a 39% increase from the previous period. Projections from the Congressional Budget Office suggest a potential doubling of this interest expense in the next decade, potentially surpassing other critical budget allocations like defense.
The treasury lost about $1.5 trillion to the George W. Bush tax cuts during his term, $2.1 trillion by the most generous estimate of the cost of the wars in Iraq and Afghanistan, plus another $465 billion to care for veterans of those war, and roughly $2 trillion to the Tax Cuts and Jobs Act. George H.W. Bush and Bill Clinton each presided over bipartisan deficit deals, worth about half a trillion dollars apiece, that contained stiff tax hikes. By 1996, the share of GDP collected in taxes was higher than it had been in 1981, and the debt was on a glide path to roughly a third of GDP, which is where it remained, despite tax cuts and wars, until 2008.
A Weakening Dollar
The present acceptance of the U.S. dollar comes at a diminishing value compared to historical standards. Since 1933, the domestic purchasing power of the U.S. dollar has experienced a notable decline of 92%. The current extensive monetary expansion in the United States raises concerns of a potential fallout, similar to the occurrences in 1934 and 1971. Notably, the scale of the present crisis surpasses all preceding currency challenges.
The persistent depreciation of the U.S. dollar, primarily attributed to overprinting, raises uncertainties among foreign nations regarding the dollar’s role as a reliable reserve currency. The initial signs of this concern manifest through foreign central bank sales, marking the initial ripples of an impending ‘dollar storm.’ Notably, the U.S. dollar has witnessed a depreciation of approximately 16% since President Biden assumed office.
As foreign central banks continue to divest from the U.S. dollar, the erosion of investor confidence intensifies, posing significant implications for the future stability of the currency
Where is the Money Going?
Thomas A. Schatz, President of Citizens Against Government Waste, has proposed a list of cuts that could serve as a starting point. For instance, he suggests considering the reduction or elimination of $196 million allocated to the International Fund for Ireland, citing expenditures on projects like pony ride centers and golf videos.
Further instances of questionable spending include the Pentagon’s decision to allocate $5.1 million for a new golf course at Joint Base Andrews, despite the presence of 19 military golf courses in the Washington area. Prudent cuts have been made, such as the elimination of a $440,000 expense for attendants to push buttons of automated elevators in the Capitol Hill complex.
Criticism is also directed towards the National Endowment for the Humanities for misusing $4.2 million on a “National Conversation on Pluralism and Identity.” Additionally, the Pentagon and CIA’s hiring of psychics for insights into foreign threats incurred a cost of $11 million. A study assessing the quality of life in Hawaii amounted to $187,042.
Instances of fraud, such as $40 million in fabricated food stamp claims and $20 million stolen from Medicare by five individuals in Florida, highlight the need for vigilant oversight. The cumulative impact of these extremes, though relatively small in comparison to the overall debt, could provide Republicans with a strategic starting point for addressing the substantial spending associated with Social Security and Medicare.
Highlighting the serious implications, Morgan Stanley warns that growing national debt not only elevates borrowing costs for everyone but also risks diverting funds from essential priorities. Drawing parallels to historical instances of nations facing decline or collapse due to excessive debt, the narrative questions the sustainability of ignoring fundamental economic principles and the potential consequences for the United States.
An ideal situation would involve removing these questionable expenditures which consist of relatively small amounts of money against the debt, then the government might be better positioned to trim the spending on monsters such as Social Security and Medicare. So, what does our future hold? What makes our country think we can ignore basic economic rules and not suffer dreadful consequences?
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