It don't know how to accumulate the hard data to support this, but it seems to me that we have now long since crossed some kind of a point of no return with regard to the cost of servicing the national debt. It feels like there are only two ways that the current trajectory can now shake out, now that debt-to-GDP is at an all-time-high and growing quickly.
1) Congress can take major action to reduce non-discretionary spending by doing something drastic like freezing social security inflation adjustments. In my view this is extremely unlikely to happen, since we know congress will never ever ever do anything that would force Americans to eat their vegetables like that, especially when they can easily kick the can through inaction, and probably avoid blame for the fallout anyway since no one understands macroeconomics (especially me). Their track record suggests that Congress will always choose the more cowardly of two options, which in this case means doing nothing.
OR
2) We will have to inflate our way out of the debt to continue paying the interest payments, sometime in the 2030s-2050s. Inflation will be much higher than US historical rates and will be sustained for a long time. It feels like this will also risk triggering an inflationary spiral and….idk after that. The end of the global USD-run economy as we know it? No idea what we would use instead since all other options are way worse and probably still will be then.
Is there a door number 3 here? Or are one of these two options less fraught than I am thinking?
Thanks for any help!
Is significantly increased USD inflation locked in over the next few decades due to the expected increases in US debt-to-GDP?
byu/deadcarl inAskEconomics
Posted by deadcarl