The American public debt is expected to reach $30 trillion
by the end of January 2022, the equivalent of 130 percent of the GDP.
Meanwhile, the budget deficit has exceeded $3 trillion and growing. Considering
President Joe Biden’s plans, the public debt could reach $35 trillion by the
end of 2022. But to find out if the US can repay its debt any time in the
future, we need to look at the history of the national debt.
اضافة اعلان
In 1966, the American debt began to accelerate. Between 1965
and 1978, two issues profoundly changed America’s finances. In 1966, President
Lyndon Johnson signed the Medicare program into law, creating the most
expensive and enduring social program in US history. And from 1965 to 1975,
America fought the Vietnam War, for which it paid a high human and financial
price.
Without an official declaration of war, the US had to borrow
to pay for the war, causing the debt to increase from $317 billion in 1965 to
$620 billion in 1976. The debt grew even faster in the 1980s; President Ronald
Reagan accelerated the arms race, and by the time the Berlin Wall fell in 1989,
the US debt had reached 2.85 trillion.
Between 1980 and 1990, the debt more than trebled; its size
to the GDP increased by almost 70 percent. As the 21st century started,
President George W. Bush cut the tax rates, and launched two wars. He invaded
Afghanistan in 2001 and Iraq in 2003. While the tax cuts reduced government
revenues, the wars increased spending. Consequently, the budget deficit grew,
and the debt increased accordingly, causing its size to GDP to increase from 55
percent in 2000 to 91 percent in 2010. Meanwhile, the Great Recession of 2008
caused economic growth rates to decline, spending to rise, and the national
debt to skyrocket.
By the time President Barack Obama was inaugurated, the
annual deficit had reached $1 trillion. When Donald Trump became president in
2017, the debt had reached some $20.5 trillion. And though Trump promised to
cut the deficit and reduce the debt, he cut the tax rates instead, causing both
the deficit and the debt to increase. By the end of 2021, the debt had
approached $28 trillion.
Economic recessions increase the national debt because they
lower economic growth rates and reduce tax revenues. In 2020, spending to
offset the economic effects of the COVID-19 pandemic added to the debt about $2
trillion. And as the debt increases, interest payments on the debt increase as
will. For example, from 1962 to 2019, interest payments on the national debt
averaged about 17 percent of the annual federal revenues. In 2018, interest on
the debt reached 18 percent of the federal revenues, causing the debt and
interest payments to rise.
Today, the US national debt is about $29.9 trillion, the
equivalent of 128 percent of the GDP. In the meantime, the actual budget
deficit exceeds $3 trillion. In the light of these facts, can America repay its
national debt anytime in the future? Can it reduce the debt ratio to GDP? Can
it even service its debt without borrowing more?
The answers to all questions are no. America cannot repay
its debt in thousands of years. The only way to get rid of its debt is to
implement the Ramo Plan that calls for the liberation of all rich and poor
nations from the debt burden at one time. (The plan is published on
Researchgat.net; Liberating all Nations from the Debt Burden; it was also
published by the Federal Reserve Bank of St. Louis on its website). This plan
requires no state, taxpayer, or bank to pay a penny, and does not increase
money liquidity by one dollar.
Nevertheless, America can reduce the severity of the debt
problem and limit its negative impact on the economy. But to do so, the
president and Congress need to acknowledge the magnitude of the problem and its
negative impact on the economy and America’s credibility; they also need to
realize that the traditional fiscal and monetary tools of economic and
financial management are no longer workable. Therefore, following the mostly
outdated policies will cause the debt problem to worsen.
The recurring congressional fight over raising the debt
limit proves that politics in America comes before policy, special interests
before the national interest, and ideology before the nation. When Democrats
control the government, the Republicans become warriors whose job is to ensure
that the Democrats fail; and when the Republicans are in power, the Democrats
become warriors whose job is to ensure that the Republicans fail.
For the US to gradually reduce the debt as a percentage of
GDP, the annual increase in the GDP must exceed the annual budget deficit.
Thus, for America to repay its debt over the long run, it must have an annual
budget surplus that exceeds the debt interest payments.
According to the Congressional Budget Office, from 2001 to
2020 spending had continued to increase, while revenues had failed to close the
growing deficit gap. Spending in 2020 reached $6.55 trillion, or 31 percent of
GDP, while revenues were $3.71 trillion, or 17.66 percent of GDP. This means
that the system needs to be fundamentally restructured.
The writer is a retired professor of international political
economy who taught at 10 universities on four continents and published 52
books. This article was first printed in Newslooks.
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