The Folly of Empire And The Albatross of Debt, Part 1

Like the case of Rome before it, Empire is bankrupting America. The true fiscal cost of the national security budget is now upwards of $1.3 trillion per year (counting veterans expense and international operations and aid), but there is no way to pay for it.

That’s because the 78-million strong Baby Boomers are in the driver’s seat of American politics. They plainly will not permit the $3.5 trillion per year retirement and health care entitlements-driven Welfare State to be curtailed. At the same time, Washington has become the War Capital of the World where the ruling UniParty insists that the massive fiscal claims of the Warfare State are non-negotiable.

Indeed, during 2017-2020 the Trumpite/GOP already sealed the deal. Trump massively increased the Warfare State budget, even as the Congressional GOP refused to reform Social Security and Medicare and proved to be utterly incapable of even laying a glove politically on Obamacare/Medicaid, Food Stamps or any of the other Welfare State entitlements. Meanwhile, the GOP remained all-in for its anti-tax allergy, thereby refusing to tax the American public to close Washington’s yawning deficits.

Accordingly, the Federal budget is now simply on a doomsday track. With interest rates finally normalizing and the debt compounding at rates far higher than the growth of nominal GDP, interest costs on the public debt is headed into the fiscal stratosphere.

Indeed, the outlook is now so dire that the CBO doesn’t even dare print the long-term debt numbers. Instead, it attempts to camouflage the catastrophe ahead by expressing the data in more cosmetic “% of GDP” terms without actually printing the underlying GDP figures.

Yet the data to derive those figures are all there in the fine print. It turns out that in its latest long-term outlook CBO projected that nominal GDP would grow by the modest figure of 3.8% per annum for the next 30 years. In whole numbers that puts the nominal GDP at $85 trillion by 2054; and applying the 172% of GDP figure for the public debt results in a sum of $146 trillion!

That’s not a typo. Under the CBO’s Rosy Scenario for the next three decades the embedded fiscal policy will result in a debt so gargantuan that the figure cannot even be printed in official government documents. That is to say, America is racing toward a debt Armageddon at $146 trillion—implying interest expense of $7.5 trillion per year even at the current weighted average yield on the US Treasury debt curve.

CBO Projects The Public Debt Will Reach $146 Trillion By Mid-Century