It has become a speculative game in the blogosphere to predict what black swan calamities could lead to a breakdown in civil order and the imposition of some form of martial law. Wars and rumors of war abound. We have already seen a container ship mysteriously knocking down a bridge and closing a key port. Other such scenarios include massive cyber-attacks that shut down the grid and block communication and transportation networks nationwide. The speculation on the variations of such events is virtually endless.
However, one crisis is no black swan and is entirely expected, already happening, and growing in scale by the day. That would be the ballooning debt crisis. If Washington does not change its free-spending ways, the debt will become a catastrophe of devastating proportions that will tear the nation apart. So long as Congress continues its multi-trillion-dollar deficit spending, we will have a financial death spiral, similar to events a century ago in the Weimar Republic of Germany.
The total discretionary spending for the U.S. government in Fiscal Year 2024 is approximately $1.70 trillion. This amount is split between $886 billion for defense and $688 billion for non-defense programs. In the fiscal year, the U.S. government is also projected to spend approximately $4.19 trillion on mandatory programs. These programs include interest on the debt, Social Security, Medicare, Medicaid, VA, and other programs. We have an annual structural deficit in excess of $2 trillion that will soon grow exponentially.
Congress needs to get serious about reducing spending. For starters, they should outright eliminate the Departments of Commerce, Education, and Energy. All other departments will need cuts as well. But that is not happening, and instead, they waste money on frivolous services benefiting illegal immigrants and abortion facilities. Notable allocations include funds for an LGBTQ+ community facility, scholarships for Egyptian students, educational programs for elementary school children by an LGBTQ+ activist group, diversity initiatives at a zoo, and an organization providing clothing and counseling services to teenagers without parental consent. Not surprisingly, they do not allocate funds to the truly essential need of building a southern border wall.
As a result of their incompetence, the debt is now growing at an accelerating rate. The $1 trillion move from $31 to $32 trillion took about eight months, and the increase from $33 trillion to $34 trillion took about 100 days. While these numbers are bad enough, it becomes alarming knowing that another trillion dollars of debt will be added every 90 days, then 80, then 70, and in ever smaller time frames into the future.
Currently, gross interest on the debt is roughly $1 trillion annually. But in three years, annual interest could surpass $2 trillion. In 10 years, interest on the debt could reach $5 trillion yearly.
Ten years ago, the U.S. government issued $264 billion in 10-year Treasury notes, which means that $264 billion worth of 10-year notes are due and payable this year. Altogether, the Treasury will have to settle $6 trillion of existing debt this year, which includes financing new debt for this year and the rollover of old debt from prior years. The Treasury financing debt this way is similar to using one credit card to pay off another.
The problem with rolling over old debt is compounded by borrowing at vastly higher interest rates than when those Treasuries were first issued. So, the old debt will be rolled over this year at about 4.2% to 5.5%, depending on the term. That’s troubling when most of the debt being rolled over was issued around 2%. They are doubling the cost to service that debt. As more of this old, cheap debt comes due and is reissued at higher rates, the cost of servicing the debt will grow exponentially. That additional expense adds to the deficit, and the vicious cycle feeds on itself.
We are already at historic debt levels while spending frivolously and shoveling money overseas. The business cycle has not been repealed, and a recession is coming, probably sooner than later. And when it happens, unemployment expenses will rise, increasing debt while revenues decline. There is no good way out of this mess, and no one in Washington wants to give it any serious attention.
What follows is an ugly pattern of the debt crises fueling accelerating inflation. As jobs dry up, the goods on store shelves skyrocket, followed by social unrest and increased centralization from the extreme left or right. This pattern is as old as history itself.
Look back to the Weimar Republic of Germany in the years following the First World War. Faced with budgetary deficits due to war reparations, the German government printed money wildly to meet its expenses. The result was hyperinflation. The runaway inflation caused the cost of a loaf of bread to rise from 3 Marks in 1922 to 80 billion Marks in November 1923. Prices were rising so fast that people hurried to spend their pay during lunch hour before it lost any more of its value. Foreign trade and the German ability to pay reparations became impossible, while personal savings were wiped out. Commercial dealings in Germany were replaced by barter, and food riots broke out. The drop in the value of their wages devastated the working class. This instability, coupled with the Depression a few years later, undermined the republic’s foundations, leading to the rise of Adolf Hitler.
Left unchecked, this Weimar-style hyperinflation trend could happen in the United States as an accelerating debt load causes financial collapse and civil upheaval. Congress has a spending problem and must get serious about reducing it. As painful as spending cuts will be, inaction will be far more painful in the long run. Driven by spending growth, deficits will balloon even in years without a recession or a major war. If Congress fails to discipline its spending habits, rising interest costs will snowball and collapse the economy. With Washington’s culture of easy money, a new direction toward frugality will take a lot of work. However, it is indispensable for America’s long-term economic prosperity.
Every day, we are getting closer to the point of no return. We know that we’re headed in the wrong direction, and if we stay on this path, we’ll go full Weimar, carrying our cash not in wallets but in wheelbarrows.
Jeff Lukens is a West Point graduate, U.S. Army veteran, and conservative activist. He can be reached at jplukens@hotmail.com.
American Thinker
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