We saw this first at Legal Insurrection, and it’s terrifying. We could crash at any time. There is no one to bail us out. On top of our terrible situation, Biden, or his handlers really, plan to pile on trillions in debt that will do nothing for the USA except destroy our dollar.
His policies will also destroy our energy sector and cause a rapid rise in inflation.
Jon Miltimore writes at the Foundation for Economic Education:
The US Government’s Debt-to-GDP Ratio Is Worse Than Greece’s Before the 2008 Crash (And It’s About to Get Worse)
President Biden on Wednesday pitched a new plan to Americans before a joint session of Congress: more spending.
The just-released $1.8 trillion plan, presented just weeks after Biden signed a $1.9 trillion in COVID relief spending into law, includes “free” community college as well as universal preschool for all three and four-year-olds.
“Mr. Biden could usher in a new era that fundamentally expands the size and role of the federal government,” The New York Times reported.
How Much Debt Is Bearable?
The announcement comes months after the Congressional Budget Office released a report projecting a $2.3 trillion deficit in 2021.
Biden’s plan will almost certainly make the deficit worse. Though the plan contains various tax increases to fund its programs, the taxes are likely to fall well short of government outlays, economists say.
“The laws of economics are more rigid than the laws of the federal government, and these tax hikes are unlikely to yield the windfall Biden expects,” Joshua Jahani, the managing director of Jahani and Associates, noted in a recent NBC News article.
Uh, oh, the market, not the government, will decide how much debt is bearable:
There is a school of thought that suggests these debts pose no serious risk. After all, in theory, a government can roll over its debt indefinitely. However, in a recent article for the Federal Reserve Bank of St. Louis, economist David Andolfatto noted that ultimately the government doesn’t decide how much debt is bearable. The market does.
“There is presumably a limit to how much the market is willing or able to absorb in the way of Treasury securities, for a given price level (or inflation rate) and a given structure of interest rates,” Andolfatto wrote. “However, no one really knows how high the debt-to-GDP ratio can get. We can only know once we get there.”
A Dangerous Level of Debt?
Andolfatto is right that no one really knows the debt tipping point. But it’s worth noting that the US debt-to-GDP ratio—essentially a country’s debt compared to its annual economic output—was 129 percent at the end of 2020. In other words, the official US debt was nearly a third larger than the entire US economy.
That is considerably higher than Greece’s debt-to-GDP ratio in 2010, when it received a bailout from the International Monetary Fund to avoid defaulting on its obligations.
As recently as 2016, Greece was experiencing riots due to pension cuts and other forms of austerity.
The market will decide and we don’t know when that will happen.
It can happen here it will. It’s just a matter of when. We probably don’t have the two years we need to stop the Democrats.
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