Those who continue to celebrate the out-of-control spending, debt, and inflation spree on which U.S. officials have embarked should continue focusing on Argentina, a country whose government is now in the throes of an economic and financial crisis owing to an unsustainable debt burden.
Take a look at the website usdebtclock.org to get a sense of the magnitude of the U.S. government’s debt problem. The U.S. government’s debt now exceeds $25 trillion. At the end of all the federal government’s “nation-saving” coronavirus spending spree, the total debt will likely reach $27 trillion. The financial situation will be aggravated by the fact that federal expenditures are not being reduced during the coronavirus crisis while income tax revenues will be dropping owing to the vast numbers of unemployed people not earning income during the crisis.
At the current $25 trillion debt level, that amounts to $204,000 per taxpayer. A married couple’s share is $408,000. How many American families can afford to fork over that amount of money to pay their share of the government’s debt?
Yet, ultimately American taxpayers are on the hook for the taxes that will need to be collected to pay off the government’s debt. Most people don’t think about that. They don’t list their federal debt liability on their personal financial statements. They just assume that the problem of repayment will just never arise, at least not before they die.
On top of the federal debt are the federal government’s so-called unfunded liabilities. These encompass America’s welfare-state programs, which are headed up by the two crown jewels of American welfare-state socialism, Social Security and Medicare. The unfunded liabilities add up to $150 trillion, with Social Security and Medicare adding up to $50 trillion.
The reason the unfunded liabilities are not part of the federal government’s debt is that they are not contracts or promises to pay. They are all simply welfare-state programs. But as long as they remain in existence, it is American taxpayers who must pay the taxes that fund them.
Let’s not forget the America’s national-security state, including the CIA, the NSA, the Pentagon, and the vast military-industrial complex. Its annual expenditures exceed $1 trillion and are always increasing. There is no possibility that the national-security state part of the federal government would ever consent to any significant reduction in its tax-funded largess.
Now, read this article in today’s New York Times entitled “Lives Depend on Argentina’s Debt Talks” by Mark Weisbrot, an expert on economies and politics of Latin America. Weisbrot writes, “Argentina is currently engaged in intense negotiations with its creditors over at least $65 billion in government debt.”
You read that right — $65 billion with a b, not $65 trillion with a t.
The government can’t make its interest payments, much less pay the principal. Oh sure, they could go out and tax the Argentine citizenry even more, but there is that old saying about squeezing blood out of a turnip. Collecting more taxes from Argentinians will only send more people and more businesses into bankruptcy, which will only aggravate the problem.
So far, creditors are not willing to accept Argentina’s offer to pay them less than what they are owed. If they refuse to settle, it is a virtual certainty that Argentina will be sent into default, which will most likely lead to economic and financial chaos in the country.
Weisbrot describes what happened in Argentina in 2018, when the regime resolved a similar debt crisis through a IMF loan agreement that entailed tighter budget and monetary policies: “The result was exorbitantly high interest rates, a sharp depreciation of the peso and high inflation as well as increasing foreign indebtedness, and the deep recession that continues to this day.”
Interestingly, in an aside Weisbrot candidly makes a point that is not often found in the mainstream press: “Even in the United States, a high-income country whose central bank is currently printing trillions of dollars….”
Out-of-control federal spending on both welfare and warfare, massive “stimulus” packages, trillions of dollars in “free” stimulus money for Americans, soaring federal debt, $150 trillion in unfunded liabilities, including $50 trillion for Social Security and Medicare,, millions of unemployed people, low savings rates, and an unprecedented printing of paper currency.
Brace yourself. This cannot end nicely.