Holding a $22 trillion pile of debt is not cheap. Although the United States benefits from ludicrously cheap interest rates on its treasury bills, in 2019 it will spend $383 billion just to service its debt. By 2023, interest payments are expected to be larger even than the U.S. defence budget. Even now, $383 billion dwarfs the entire federal budget of Canada. Even at a time of its own unprecedented government spending,
Ottawa will burn through the equivalent of only US $254.35 billion in 2019. This means that, merely with the money it uses to service the debt, the United States could run the entire Canadian government and still have enough left over to run most provinces. And if the Americans don’t feel like running Canada with their debt servicing money, they could also run Mexico. Their southern neighbour has a federal budget of only $291.5 billion for 2019.
There’s a lot of talk lately about how rich people should pay more taxes. However, given the sheer scale of U.S. spending right now it would take an awful lot of these extra taxes to come close to running a balanced budget. For example, consider Amazon founder Jeff Bezos, the richest man in the world. His net worth is roughly $136 billion. Right now, the U.S. adds another $4 billion to its debt every day.
Thus, if Bezos gave his entire fortune to the U.S. government, it would only cover 34 days of debt accumulation. And this is just new debt. If Bezos’ fortune was used to cover all U.S. federal spending, it would run out in only 11 days. Bezos is one among 26 billionaires who collectively control $1.4 trillion – a wealth equivalent to that owned by nearly four billion of the world’s poorest. Still, even that $1.4 trillion would only cover a year’s worth of U.S. debt accumulation and about four months’ worth of federal spending overall.
The USS Gerald R. Ford, an aircraft carrier commissioned in 2017, is the largest and most expensive warship ever built. For context, HMS Dreadnought, the super-powerful 1906 battleship that revolutionized naval warfare, only cost the modern equivalent of about $273 million. For 2019, the U.S. budget deficit is expected to be $897 billion. This means that only five days’ worth of deficit would be enough to fully cover the cost of the USS Gerald Ford. And the deficit merely represents new instances of the government spending money it doesn’t have. Total debt accumulation is even higher, since the existing debt continues to balloon on its own if it’s not being paid off (and the Americans haven’t even tried to pay down their debt since 2000).
It would be tempting to assume that the United States is piling up all this debt because of big, tangible budget items: Battleships, fighter jets, highways, disaster relief, etc. But the majority of U.S. spending is eaten up by cheques: Millions of relatively small-denomination cheques handed out as entitlement spending. The U.S. government will spend $4.4 trillion in 2019, of which only $3.5 trillion will be covered by tax revenues. Of that $4.4 trillion, $2.7 trillion is spent on what is known as “mandatory spending”: Social security, Medicare, Medicaid and the like.
Throughout U.S. history, periods of massive debt accumulation have usually coincided with bad times: The Great Depression, the Civil War, etc. By any economic measure, however, the United States is currently doing fantastic. Major foreign wars have been stepped down. The jobless rate is at a 49-year low. Economic growth has been topping four per cent.
The last time the U.S. economy was this good, the federal government was running budget surpluses to pay down the debt, rather than piling up debt faster than ever. The implication is that when the boom inevitably ends, U.S. deficits are set to explode even faster. “The economy is going well and we are looking at deficits that are four per cent of GDP going forward,” Congressional Budget Office director Keith Hall said in late January. “That is an unusual thing.”