Rising US Debt Crisis: How Reckless Borrowing Threatens Stability
Today, the U.S. federal debt has skyrocketed to $35.3 trillion, with a staggering increase of $1.9 trillion in just under a year—despite a period of strong economic growth and record tax revenues. The Treasury projects an additional $16 trillion in debt by 2034 if current policies continue, not even factoring in a potential economic slowdown. Meanwhile, the Congressional Budget Office (CBO) estimates that Kamala Harris' economic proposals would add another $1.9 to $2.2 trillion to the national debt.
Disturbingly, the Harris campaign has not outlined any strategy to balance the budget, instead vaguely suggesting that "efficiency" and taxing the rich would cover increased spending—neither of which has proven effective in curbing the escalating deficit, which now stands at an unsustainable $2 trillion annually.
This alarming debt accumulation is occurring during a time of growth. But when adjusted for the rapid increase in government borrowing, the years 2021 to 2024 represent the worst growth rate relative to debt since the 1930s. Yet, some economists, like Claudia Sahm, argue that debt isn't something to worry about. She claims that the key issue isn't the level of debt, but what it's being used for, and believes the government can always service its debt due to its unlimited power to tax and issue new securities.
However, this outlook is dangerously complacent. When we examine the U.S., it becomes clear that the economic returns on government borrowing are disappointingly low. Entitlement spending has done little to boost economic growth, while debt has continued to grow faster than GDP. The problem isn't debt per se, but unproductive borrowing—essentially wealth redistribution from the productive sectors to a bloated bureaucracy. Societal goals, while important, cannot be limitless, and governments must be held accountable for spending effectively rather than endlessly increasing expenditures without assessing their success.
The idea that the government has "unlimited" power to tax and issue debt is misleading. There are clear limits—economic, fiscal, and inflationary. Raising taxes indefinitely leads to stagnation and more debt; fiscal constraints arise because spending tends to outstrip tax revenues; and inflationary pressures build as more debt leads to currency devaluation. If Sahm's view were accurate, we would see high growth in places like Japan and the Eurozone, yet they struggle with stagnation, debt, and social unrest.
Taxes should reflect the economic realities of a country, not serve as a bottomless pit for government spending. The myth that taxing the wealthy and corporations will solve the deficit is misguided—it hampers growth and discourages productive investment. When someone tells you not to worry about soaring debt, you should be alarmed. When they say the government has unlimited resources, they mean you will bear the cost through higher taxes, inflation, and slower growth.
Some argue that $35 trillion in debt is trivial compared to America's total wealth of $142 trillion. This suggests the government sees the economy's wealth as theirs to tap into. Tax cuts, contrary to some opinions, don't deplete revenue—they help align the tax base with the real economy, fostering investment and growth. The belief that the government can manage money better than the private sector is flawed. Private capital is consistently reinvested into productive activities, while government spending often leads to inefficiency and administrative bloat.
Inflation acts as a hidden tax, disproportionately affecting the poor by eroding their purchasing power. As governments ignore the real demand for their currency, confidence wanes, leading to devaluation. Economists like Sahm assume the U.S. dollar will always have global demand, but this is far from certain. Foreign central banks are reducing their U.S. dollar holdings, and the U.S. is already showing economic limits—evidenced by a slowing economy, a growing deficit, and rising interest payments. Inflation has surged by 20% over the last four years, and essential goods have become significantly more expensive.
Kamala Harris' policies, both as vice president and potential future president, risk testing the public's tolerance for a continuously weakening dollar. Claiming that increasing debt and deficits won't have consequences is akin to telling an alcoholic to keep drinking because the liver damage hasn't killed them yet.
The U.S. dollar is backed by the credibility of the U.S. economy, and if the government loses this credibility, both domestic and international confidence in the currency will falter. Believing the dollar will forever remain the world's reserve currency is naive. Harris' policies threaten the stability of the U.S. dollar, and when someone suggests the government has unlimited resources, they are really saying there are unlimited ways for the public to become poorer.