(Official Washington Examiner editorial, Sept. 6) The U.S. government’s spending deficit of roughly $2 trillion for the fiscal year ending Sept. 30 is an atrocity perpetrated by President Joe Biden and congressional Democrats. It is a grave threat to America’s future.
Former Presidents Barack Obama and Donald Trump also had terrible records of spending unnecessarily and massively beyond what is prudent, but it took Biden and the Nancy Pelosi Democrats to make those terrible records look good in comparison. Biden and the Democrats have engineered a fiscal wreck.
Let’s be clear about just how bad it is and why. Most nations, like families with mortgages, can afford a considerable debt, but when it equals or exceeds the entire annual economy, as it has for the past few years, it has entered a danger zone.
Because the dollar is the “reserve currency” for most of the world, the U.S. can push a bit further into the danger zone without worrying that its debt will suddenly be called in. That leeway, though, isn’t infinite. When debt substantially exceeds the government’s ability to pay it off, investors and lenders naturally doubt the “full faith and credit” of the federal government. These worries will, at some point, reach critical mass, and this could produce sudden panic and economic devastation as bad as or worse than the Great Depression.
We experienced a relatively small taste of such panic during the financial crisis of 2008-09, and it was ugly. It was, moreover, panic about the collapse of private sector financial institutions. Imagine how bad it could be if the federal government backstop were seen as unreliable.
A major warning sign of nascent disaster arising from today’s debt-financed spending came on Aug. 1 when Fitch Ratings downgraded Washington’s credit rating, citing “a steady deteriorating in standards of governance” and “a vulnerability of the U.S. fiscal position to future economic shocks.”…. [The full editorial is at this link.]
