For all the noise that the current administration generated, one news item stood out with bipartisan consensus. For the first time ever, the U.S. national debt soared to an unbelievable $22 trillion. Virtually all Americans believe this metric to be unacceptable. The division, of course, rests on what to do about it.
Due to generations of ignoring this issue as a high-profile, macro concern, individual citizens dismayingly shrug. Some of us remember when the national debt first hit $1 trillion, and the resultant Congressional circus that has aroused. Yet no administration has truly taken this dilemma seriously. If they had, we wouldn’t suffer this present crisis.
And make no mistake about it: incurring a debt load of $22 trillion represents a serious, if not existential crisis. While the mainstream media justifies the debt using granular arguments – it’s not the nominal debt that matters, but rather, the debt-to-GDP ratio – these remarks obfuscate a simple reality: debt is always a liability.
From a business perspective, I can appreciate debt-fueled endeavors, to a degree. For instance, startups with high growth potential may want to address their monetary limitations with financing. Indeed, not doing so could represent an opportunity cost (ie. losing an important client due to a lack of funding).
But underscoring such decisions is the necessity for sustainable debt. Dipping too deeply into the other side of the balance sheet creates longer-term problems.
National Debt Spiraling Out of Control
Unfortunately, with years of the political ruling class merely negotiating annual budgets, Americans have grown immune to the crisis. As I mentioned earlier, they view the debate surrounding the national debt as a pedantic topic above their paygrade.
In so many ways, this sentiment is incredibly tragic. Primarily, we just suffered, and will continue to suffer the steep and tangible consequences of the spiraling national debt. Partially, the last government shutdown resulted not just from the border wall, but on budgetary constraints.
Those budgetary constraints would not have materialized had we not incurred an unsustainable national debt. Moreover, fiscal policies such as the Trump tax cut must feed from somewhere. Here, the administration tapped the money-growing tree known as unfunded liabilities.
This act of kicking the can down the road is an oft-repeated, and seemingly celebrated practice. We conflate debt funding’s efficacy as policy because it has worked marvelously in the past. But as so many others have said, at some point, you run out of road.
The mainstream media is partially correct: it’s not about the nominal national debt. Where they’re wrong is in their hubris towards it. As leaders of the free world, we lose credibility if we cannot sustainably pay back our obligations.
It’s not a meltdown we should fear. Rather, it’s the steady unwinding of a hegemony losing its grip.