Photo above – screen cap from the Apple TV series "For all mankind". NASA reaches the moon second, after the Soviet Union. A Saturn 5 rocket explodes on the launchpad killing dozens.
This year, interest payments alone on the national debt will reach $1 trillion. Payments to foreigners, institutions, and private citizens who hold treasury bills now exceed what we spend on national defense. (see links below). The only thing America spends more on is monthly Social Security checks. The SS trust fund is so insolvent that politicians are scrambling to figure out how to increase taxes, decrease benefits, and raise the retirement age without killing their own re-election chances.
Yes, Trump’s war on Iran is costing $2 billion a day. Nearly a trillion a year, added to the national debt at this rate. But our military spending was out of control before he got here. America has 800+ military bases worldwide, 11 aircraft carrier task forces, bombers that cost $2 billion each – and cannot subdue a nation like Iran with no navy, no tanks, and no air force. Heaven help us if North Korea springs a sneak attack on America.
I’m binge watching the Apple TV series “For all Mankind”. It’s an alternative timeline story about what happens to NASA if the Soviet Union gets to the moon first. A particularly jarring episode features the explosion of a giant Saturn V rocket on the launch pad, incinerating several key characters instantly. An investigation discloses that the explosion was caused by a single faulty valve, whose production was switched from one reliable supplier to a sketchy one. This was done as a political concession to some governor. In real life, this is exactly how US military procurement works too. The components for those $2 Billion (each) B21 bombers and the $150 Million (each) F22 jet fighters come from suppliers in nearly all of the 50 states. This is the reason those programs cannot be cancelled – political fallout from congress. And why these weapons are so god-awful expensive.
Back to the national debt. If you think defaulting on the national debt is an option, understand that more than the treasury bills are owned by the public individuals, the social security trust fund, the mutual funds in your 401K/IRA, your pension fund (if you have one), and various federal, state, and local agencies. Defaulting on the treasury bills would cause the value of everyone's retirement accounts and social security benefits to plummet at supersonic speed. Nations like China, Saudi Arabia, and India are only on the hook for about 25% of the total national debt. We – the public – are on the hook for all the rest, one way or another.
The Federal Reserve gives every indication it’s about to raise interest rates again. This will immediately increase interest expense on the trillions in treasury bills which need to be renewed this year when they mature. Higher fed funds rates will increase the cost of mortgage borrowing. Car loans too. Higher interest rates will make it harder to build affordable housing, and offices/factories for new jobs. Unemployment rates will rise. That’s how Fed rate hikes work: throw people out of work, so they buy less. I recently learned this sort of thing is called “Maslows Hammer”. Abraham Maslow, a famed psychologist, famously theorized that “to someone whose only tool is a hammer, the whole world looks like a nail.”
Interest on the US national debt is projected to double in the next 10 years, but only if the current annual budget deficits don’t get any worse than. Of course, there’s always the possibility that a miracle could occur – government spending is reduced. But cutting back spending on military and entitlements would be an existential threat to DC politicians’ re-election chances, so I don’t consider budget reform likely.
I’m just sayin’ . . .
We have arrived! The national debt now exceeds the earnings of every US worker, corporation, hospital, university, and farm in America. What’s next?
byu/baltimore-aureole ineconomy
Posted by baltimore-aureole
2 Comments
Who knows, if I were giving a realistic prediction – we can probably monetize the debt and have worse inflation for a while – depends upon the rest of the world dropping the dollar – at which point things would move fast, but I also wouldn’t be surprised if we could limp along for a few decades without full collapse but a more general social malaise. The trend though, we know how that plays out on a long enough timeline.
Tax cuts for the rich.