It took around two hundred years for US government debt to reach one trillion dollars. By contrast, in less than half a year a trillion was added to bring the debt total to the 40 trillion dollars it reached last week. According to the Peterson Foundation, US government debt is on a path to reach 50 trillion dollars within the next six years.
Despite promising to reduce government spending in all three of his presidential campaigns, President Trump, with the assistance of congressional Republicans and Democrats, has continued to grow the government debt.
Concerns over all but a handful of politicians in Washington, DC supporting adding to the government’s debt, along with worries over the effects of the ongoing Iran war, caused the interest rate on long term Treasury bonds (referred to as the yield) to increase. They reached their highest level since June of 2007 — a little over a year before the beginning of the great recession.
Following the yield increase, the Treasury Department announced on Wednesday that it would start purchasing at least twice the amount of long-term bonds that it had previously planned to purchase, reducing the supply of long-term bonds in an effort to reduce the yield. The Treasury’s intervention initially lowered yields. However, the next day the yield on Treasury bonds rose again.
The Treasury and the Federal Reserve will feel continued pressure to keep interest rates low. This is because a small percentage increase in interest rates can cause a big increase in US debt payments.
By keeping interstate rates artificially low, the Federal Reserve and the Treasury weaken the value of the dollar. This, along with the skyrocketing fuel prices as a result of the Iran war, is why wages are not keeping pace with the rising cost of living. Even many of the Americans whose paychecks are increasing are falling behind.
This erosion of the dollar’s value is why 29 percent of Americans have used buy now, pay later loans in the last year to pay for expenses such as rent and groceries. Another consequence of the dollar’s shrinking value is that, according to a survey by digital finance company Achieve, 53 percent of Americans are carrying credit card balances for necessary expenses.
British historian Niall Ferguson has argued that empires are at risk when government spends more on servicing its debt than on so-called national security. It seems as if the Trump administration is responding to this argument with the worst possible solution. It is proposing a huge increase in already bloated military spending, ensuring “national security” spending can keep ahead of yearly interest payments on the national debt. Instead of paying more for the military-industrial complex and foreign intervention, the US government should be focused on reducing spending that causes the continuing growth in debt.
America’s welfare-warfare state appears to be in its final days. The economic crisis that will lead to the end of the current system will likely involve the rejection of the dollar’s reserve currency status. This will cause a collapse in the dollar’s value. In this situation, Americans will have an opportunity to replace the authoritarianism of both the left and right wing of the ruling uniparty with volunteerism in our economic lives, our personal lives, and our dealings with other countries.
