Does no one in Washington understand the wise saying make hay while the sun shines?

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America’s fiscal course is unsustainable, and we all know it. Year after year our spending has increased while our revenues have fallen short. But instead of tackling this shortfall head-on and jeopardizing their re-election bids, our leaders have chosen to borrow enormous amounts of money to cover it.

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In July 2019, the U.S. economic expansion that started right after the 2007-2009 Financial Crisis peaked entered its 10th year, making it the longest on record. According to The Wall Street Journal, “more than 20 million jobs had been created so far in the expansion that started in mid-2009, and the net worth of American households – the value of assets such as stocks and housing minus debts such as mortgages and credit cards – had increased by $47 trillion.”

 

Unemployment was low and job creation seemed solid. In fact, the labor market had experienced an astonishing recovery from the 2007-2009 Financial Crisis. In July 2019, the seasonally adjusted official unemployment rate was 3.7 percent. Although there is debate among economists about the magic unemployment target, this is a great number. Some would even say that America had reached its full productive capacity – meaning we were finally at a point where almost everyone who wanted a job had one and that our workforce was producing at near to full speed. By many measures, the U.S. economy looked strong.

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Obviously, while we were fortunate enough to be in an expansion, the smart, responsible course of action would have been to keep it going for as long as possible, using those critical years to solidify our financial stability; spend money on investment in our future through intelligent infrastructure projects and cutting-edge research and development; and finally tackle the root causes of the financial Apocalypse that has been bearing down on us for years (a.k.a. Social Security, Medicare, and Medicaid).

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This would have been a smart move in any case, but particularly since we didn’t know how long the economic expansion was going to last. After all, the American economy looked great before the financial crisis also, to the point where practically no one saw it coming. Meaning, everything was great – until it wasn’t.

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But typically, that’s not what happened. Although the yearly budget deficit fell under President Obama – largely because of the spikes caused by the stimulus measures taken in response to the 2007-2009 Financial Crisis – deficits would have fallen even more without the expensive legislative initiatives he enacted. In the end, Obama added roughly $5 trillion in deficits over the 2009-19 period (it’s important to note that $4 trillion of this was a tax-cut extension that had wide bipartisan support).

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Then came Donald Trump. The first Trump administration and its enablers in Congress drowned us in debt, passed extremely expensive tax cuts, started trade wars, restricted legal immigration, and allowed our workforce to remain in denial and ill-prepared for the harsh realities of the 21st century workplace. Then, to follow that up, the Biden administration continued to spend money like drunken sailors (click on each bomb above for more details on all this).

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The actions taken by the administrations of both President Trump and President Biden were incredibly reckless and devastating for our long-term economic outlook… and we're going to prove it to you with facts, not just from the media, but straight from the United States government.

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After you check out the three bombs (see above), you will see that we basically went from the longest economic expansion in history to a $1.8 trillion deficit and so much debt that it exceeds 100% of our entire gross domestic product (GDP). How does that wise saying make hay while the sun shines sound right about now?

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This has gotten completely out of control.

 

My fellow Americans, we CANNOT allow the White House and U.S. Congress to conduct OUR business this way. Our level of debt – now almost $39 trillion – is more than the economic output of China and the entire European Union combined. The national debt is growing almost five times faster than it was two decades ago. We are basically adding $1 trillion to the U.S. debt every five months.

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Eight months before the One Big Beautiful Bill passed, Larry Fink, the chairman and CEO of BlackRock – the world’s largest asset manager, with over $13 trillion under management – sent up a warning flare in a Wall Street Journal guest essay:

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“From 1789 to 1989, the U.S. government amassed $2.9 trillion in debt. Coincidentally, the infamous ‘debt clock’ was installed near New York’s Times Square in 1989. In the 35 years since, the country has added another $33 trillion. In nominal terms, that’s more than 10 times the debt in one-sixth the time. The more crucial measure is how fast debt has risen relative to the economy. It has grown nearly three times faster than gross domestic product.”

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And it’s not just the dollar amounts that make this incredibly risky. Take the spending in the first Trump administration, which essentially acted as another fiscal stimulus when we didn’t need one. In an economy that was already humming, that level of spending amounted to taking lighter fluid and pouring it over an already roaring fire.

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But here’s the most dangerous part about doing that: Thanks to the lingering effects of the 2007-2009 Financial Crisis, we already had far fewer financial weapons in our arsenal to combat a new financial crisis than we had in the past.

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What if we needed the boost of that lighter fluid down the road, like, say, if a scary worldwide virus started to spread and shut down a large part of our economy, or if war broke out in Eastern Europe?!? Did anyone in Washington even consider that possibility? Of course not.

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…. which, of course, IS EXACTLY WHAT HAPPENED! The United States allocated $4.64 trillion in total budgetary resources to respond to Covid-19 and its economic fallout.

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It would be one thing if we borrowed all this money to buy ourselves state-of-the-art airports, subways, railways and ports; sophisticated fiber-optic lines, bandwidth and wireless networks; modern schools, roads, bridges, levees, dams and water systems; hi-tech electricity-distribution grids; or extensive high-speed rail systems.

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But that’s not what we have spent our money on. Except for President Biden’s Infrastructure Investment and Jobs Act – which has its own set of issues, like tons of waste and a severe lack of oversight and accountability – we have borrowed for consumption, not investment. As a result, we don’t have squat to show for our 38 trillion dollars of debt. Nothing. Nada.

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We don’t have to be Nobel Prize-winning economists to understand that continued borrowing for consumption rather than investment is not good. We don’t need a Ph.D. in economics to understand that there is a significantly negative relationship between crushing debt and economic growth.

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As you know, we hate being buzz kills, but it would be irresponsible to not paint a true picture of our predicament, even if the picture ain’t pretty. 

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If we allow this recklessness to continue, our government will eventually become paralyzed. The United States of America will be unable to borrow money to respond to short-term financial emergencies such as wars, recessions, or economic calamities like the 2007-2009 Financial Crisis (when we desperately needed our public balance sheets to offset the enormous de-leveraging of private ones) or things like the economic fallout caused by the Covid-19 pandemic (when American families were in dire straits).

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If we keep borrowing, we will eventually be unable to find financing for our long-term productive capacity, where borrowed money can be repaid with actual income. Interest rates will likely increase, which will exponentially increase the pain of our indebtedness and make it more expensive, if not impossible, to raise capital, invest in innovation, and create jobs.

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We will be at the mercy of foreign countries who already own 9 trillion – or 32 percent – of our public debt (Japan holds $1.148 trillion, the United Kingdom $858 billion, and China $756 billion). At some point, investors will lose confidence that we can repay our debts or have the political will to, which could initiate a debt crisis and worldwide panic. Next comes a run on the dollar.

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Inflation will come in even hotter which, as we already well know, causes serious pain for most American households. And this will do nothing but get more painful. Longer-term, high inflation strikes at the very heart of the financial security of the Middle Class, affecting savings accounts, pensions, and home ownership even more.

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Not to mention that, thanks to years of financial irresponsibility, inflation is more dangerous than ever since both federal and corporate debt is so high, and the balance sheet of the Federal Reserve is so bloated. These factors alone could greatly diminish the effectiveness of a reduction in bond purchases or higher interest rates – tools the Fed uses to address inflation. < Sidebar: In 2008, right before the financial crisis, the Fed’s balance sheet was $900 billion. By 2015 it had ballooned to $4.5 trillion. During the pandemic it hit nearly $9 trillion. Today, it is $6.5 trillion. >

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Fear should not dictate policymaking, but this is not unjustified fear. This could very well be our future if we don’t do something fast. The time has come where there is really no choice:

 

This has got to stop. We must be more fiscally responsible.