(Guest article by Paul Gilbert) By almost all metrics the U.S is enjoying a time of unprecedented economic prosperity. Yet this is against a backdrop of potential external threats, particularly the drumbeats of war emanating from Iran and North Korea, as well as the never-ending economic and cyber wars on the Chinese and Russian fronts.
As bad as these external threats are, there is an internal one … one of our own making … that will, at some point, devastate the U.S.: the massive debt that our leaders have allowed to accumulate! And it doesn’t appear that its (projected) upward path will reverse any time soon.
Some pundits have suggested reneging on repaying the holders of our debt. While walking away from, say, 30% of the debt owned by foreign entities would have enormous negative impacts globally, “stiffing” the owners of the remaining 70% is unthinkable because that would be us … in the form of inter-governmental debt, the Federal Reserve’s holdings, pension funds, individual IRA’s, treasuries, bonds, etc.
So, how would an attempt to pay off the current debt work … or not? Let’s look at the magnitude of such a daunting task: Assume the debt at $22 trillion … and no more is added! (*I’ll come back to this*). Acknowledge, arguably, that the source of all tax revenues is the U.S. taxpayer, either directly or indirectly (through the costs of goods and services). Usapopulation.com estimates the (2018) U.S. population at 328 million persons … or 128 million households. The U.S. Census Bureau estimates that 45% of households pay no income taxes, primarily as a result of low/modest incomes, above average exemptions and tax credits; therefore, only 55% of U.S. households, or 70 million, could (even remotely) be expected to shoulder additional taxation to retire the debt. This means that each of the 70 million households would be burdened with about $314,000 in new taxes. If this were treated as a mortgage, say for a term of 15 years at 3% (the time-value of money), each household would have to pay $2,168 per month. Contrast this with the U.S. Census Bureau’s estimate of the average monthly mortgage payment of $853 (P&I, only). So, in order to retire the national debt, the burden on the average household (that actually pays federal income taxes) would be the equivalent of paying a monthly mortgage on at least two (2), if not three (3), additional houses.
With all due respect, no right-thinking person can expect this to occur … because it cannot! Sure! There would be a percentage of upper income households that could afford more than the minimum additional burden, which would offset some of the households that could not, but there are simply not enough of them. (*And re-visiting an earlier assumption that no new debt be added, even if the $22 trillion were actually re-paid in 15 years, at the current rate, we would have accumulated another $16 trillion in new debt by that time*).
Looking at the impossibility of paying down our debt under another scenario, even if the entire (2018) U.S. Gross Domestic Product (GDP) could somehow magically be applied to repaying the debt … and all 128 million households, as well as all U.S.
business interests, could sustain themselves for a year with no income … we would still fall more than $2 trillion short.
When, “The debt cannot be paid off” becomes an official Democrat “talking point,” the U.S. economy will surely go into a death spiral. It is not unreasonable to expect that such a “newsflash” will surface prior to November, 2020 … and, although the massive debt is a decades-long bi-partisan effort, the Trump tax cut will be falsely identified by the partisan “experts” and promoted by their media allies as the singular event that made the debt insurmountable. With that, the collapse of the U.S. economy will be laid entirely at Trump’s feet!
This will be the Democrats’ “Hail, Mary!” Mark it down!