The news that the US national debt has now topped 35 trillion dollars is not easy to digest. For starters, what is a trillion anyway? And what is the national debt? If it’s so big already, will another trillion or so make things any different?
In a homely analogy, the US treasury department helpfully invites us to view the US national debt as “similar to a person using a credit card for purchases and not paying off the full balance each month. The cost of purchases exceeding the amount paid off represents a deficit, while accumulated deficits over time represents a person’s overall debt.” (Is the Federal Reserve printing money in order to buy Treasury securities?, Federal Reserve FAQs, 25 August 2016)
This folksy way of explaining the crazy reality of the USA’s national debt, firmly locating the phenomenon of indebtedness on the familiar domestic ground of shopping lists, maxed out credit cards and wobbly household budgets, has the advantage for capitalism of seeming to tame what are in fact the uncontrollable forces of the market, normalising what in any sane view would be recognised as dangerous nonsense.
You just can’t keep borrowing money year after year without paying any of it back.
Bankruptcy and meltdown loom large
The individual consequences of accumulating too much personal debt on the domestic scale can be horrendous enough, but the consequences for a country of the national debt/GDP ratio getting so far out of hand, exposing the impossibility of generating sufficient growth to pay off the creditors, is something else again.
This is the fate that the USA faced when its debt to GDP ratio surpassed 100 percent in 2013, at which time both its debt and its GDP were approximately $16.7tn. More recent figures suggest that the debt/GDP ratio has further outstripped the country’s ability to pay down its debt.
The Congressional Budget Office recently reported: “The deficit for 2024 is $400bn (or 27 percent) larger than it was in the agency’s February 2024 projections, and the cumulative deficit over the 2025–34 period is larger by $2.1tn (10 percent).”
How is it possible for otherwise sensible people to be persuaded that it is sustainable for the most wealthy country on earth to keep adding a new annual budgetary deficit onto the previously incurred national debt, with no realistic prospect of ever paying any of it off? To the capitalist mentality the notion of the US economy going into full meltdown is literally unthinkable, conditioned as it is by the ideological constraints of the bourgeois class perspective.
Even the stunts pulled by congressmen, refusing to vote through further accumulations to the national debt unless the government makes political concessions, are mostly staged affairs, concluded by some shabby backdoor deal which always ends up incurring further unrepayable debts. But these shadow boxing clowns do not really have a clue about the true dimensions of the disaster they are courting as US imperialism sleepwalks its way through the minefield of unserviceable (let alone unrepayable) debt.
Creditors looking increasingly nervous
Sensitive to charges that it is stoking inflation by printing money, the federal reserve shifts its ground, claiming that “although Federal Reserve purchases of Treasury securities do not involve printing money, the increase in the Federal Reserve’s holdings of Treasury securities is matched by a corresponding increase in reserve balances held by the banking system. The banking system must hold the quantity of reserve balances that the Federal Reserve creates.”
But whether the increase in the money supply and corresponding cheapening of the debt is effected simply by the fraudulent production of dollar bills or by some more subtle fiscal smoke-and-mirrors exercise, the end result can only be runaway inflation.
Since involvement in WWI left the USA with a national debt of about $22bn, its expansion has been continuous, with no apparent reverse gear. Wars have been accelerants (notably in Vietnam, Afghanistan, Iraq and Syria) as have economic crises (in 2008 and 2020, in the latter case partially masked by the Covid health emergency). From 2019 to 2021, spending increased by about 50 percent.
None of this would necessarily be so bad if the USA could demonstrate a healthy enough growth rate (debt to GDP ratio) to persuade creditors to keep on buying government securities and the like.
But increasingly, potential creditors are becoming wary of propping up the flagging economy of a country that starts wars it cannot end, and which threatens even ‘friendly’ countries with economic sanctions. One which tears up the United Nations charter and imposes in its place a ‘rules-based order’ answerable to the US alone, and which conducts a policy of coups, coercion, assassination and blackmail against whomsoever it chooses.
The USA should not be surprised to see a flight from the dollar as countries opt to expand and deepen commercial and political relations elsewhere.
As US geopolitical analyst Brandon J Weichert wrote recently in the National Interest magazine: “With a $1.5tn deficit this year (just this year!), $35tn in overall debt, and $1tn in interest payments this year (for one year alone!!), if the US dollar is no longer the primary global reserve currency and there is suddenly a true rival to the US currency, then the entire American financial system comes crashing down.” (America’s greatest enemy isn’t China or Russia: it’s $35tn in debt, 4 June 2024)
And with the US financial system would come the whole imperialist-centred world capitalist economy. No wonder Senator Lindsay Graham is keen to underline the importance of getting hold of the Donbass’s considerable resources (which he described as “a $12tn goldmine”!) via Nato’s proxy war against Russia in Ukraine.
US imperialist strategists are clearly banking on this prospective Ukrainian payday, and considering it as a mere down payment on the bonanza they hope to enjoy when their dream of Russian regime change finally turns into reality. All (!) they have to do is to instal a pliant comprador government in place of the anti-imperialist administration of President Vladimir Putin, break the resistance of the Russian people, break the country into pieces and let the orgy begin.
What happens if (when!) these dreamers are finally forced to wake up to the harsh reality of Nato’s defeat and Russia’s victory, no one in the imperialist camp seems prepared to consider.
