Posted on | December 3, 2013 | 32 Comments
Riots, massive unemployment, hyperinflation, savings accounts wiped out, financial markets in chaos — these are potential scenarios for America’s future, but exactly when and how the nation’s debt crisis will unravel is still a matter of speculation. Most economists doubt that the United States will soon experience the kind of catastrophic meltdown that struck Greece in recent years, but the U.S. national debt is now more than $17 trillion and growing, with no plans to pay it back. The national debt, which was about $11 trillion when President Obama took office, is now larger than America’s annual gross domestic product (GDP), and is expected to increase by about $700 billion in the next year.
Even though budget sequestration has slowed the rate of deficit spending, the federal government continues hemorrhaging red ink, and the national debt will be nearly $20 trillion by the time Obama leaves office in January 2017. America already has the ninth worst debt-to-GDP ratio in the world, and the piling up of unpaid debt cannot continue forever, says Murray Holland.
“The laws of economics are like the laws of physics — they can’t be changed by government action,” says Holland, a Texas business executive who has just published A Nation in the Red: The Government Debt Crisis and What We Can Do About It.
Attempts to defy the laws of economics have only made the nation’s fiscal problems worse, according to Holland. Even with White House forecasts that Murray considers “unrealistic” in their optimism — projecting annual economic growth rates at 5 percent or higher — the annual interest payments on the national debt would reach more than $1 trillion a year by 2022. Interest payments would then be the largest category in the federal budget, and that’s an optimistic scenario, which not only assumes robust economic growth, but also assumes that the government will continue to be able to borrow money at low interest rates. Both of those assumptions are almost certainly wrong, for reasons that Holland explains at length in A Nation in the Red. . . .