Image source: Visual China
阿尔瓦罗·巴尔加斯·略萨（Alvaro Vargas Llosa）是位于加州奥克兰的独立研究所（Independent Institute）的高级研究员。 他的最新著作是《跨越全球：移民、文明和美国》（Global Crossings: Immigration, Civilization and America）。
If anyone living in the United States in the decades after World War II predicted the financial woes that the government would impose on them today, no one would have bought it.
For most of American history, until the mid-70s of the 20th century, federal spending and revenues remained largely balanced each year, except in wartime. By comparison, the federal deficit in fiscal year 2023 is $1.7 trillion, more than Mexico's economy (the 12th largest in the world). According to the latest projections released by the Congressional Budget Office on June 18, the federal deficit once again exceeded $1 trillion in the first eight months of the fiscal year, and by the end of fiscal year 2024, that figure will be close to $2 trillion.
This has led to a significant increase in federal debt, which now totals $34 trillion, about $6 trillion more than the U.S. gross domestic product (i.e., the value of all goods and services produced by the 330 million inhabitants of the United States in a year). If social security and health insurance debts are included, the total debt is several times the gross domestic product.
The consequences are sobering. Politicians like to use euphemisms to describe what they're doing. According to what is now said, government spending is called "investment". However, government spending crowds out investment, which explains why private investment, equivalent to 4.8 per cent of GDP, was 30 per cent lower than in 2000.
At the same time, the purchasing power of the dollar, which reflects the state of the federal government's finances and the size of the Fed's money printing, is declining: by more than 50% since 2000.
As a result of economic mismanagement, the U.S. government will pay nearly $900 billion in interest on national debt alone this year. According to the Congressional Budget Office's projections, which assume an idyllic scenario without major wars, recessions, and financial crises, debt servicing will steadily increase to about $5.3 trillion by 2054. During World War II, when the U.S. savings rate was 24 percent, it was already difficult to maintain a level of debt at 106 percent of GDP, so it is inconceivable to maintain a higher level of debt at today's 3 percent savings rate.
This disaster has been going on for a long time. In 1993, for example, the annual deficit was 3.8 percent of GDP and the debt was "only" $4.4 trillion (which seemed astronomical at the time), but by today's standards, it was child's play.
This trend goes back much further. The development of the U.S. government in modern times is the story of the United States after World War II. President Dwight Eisenhower appears to have been the last post-World War II president to understand the principle that the welfare state, the war state, and the adoption of tax cuts without being backed by draconian spending cuts are incompatible with fiscally responsible government, or at least government of reasonable size. His predecessor, President Harry Truman, who financed the Korean War, left Eisenhower with federal spending equivalent to 18.5 percent of gross domestic product. Since then, with brief exceptions, both parties have pushed up defense and domestic budgets exponentially.
President Lyndon Johnson pushed spending to 19.6 percent of GDP; Presidents Richard Nixon and Gerald Ford pushed that to 21.5 percent; President Jimmy Carter pushed that to 21.8 percent; George S. President George W. Bush pushed that to 21.9 percent; President Barack Obama pushed it up to 24.9 percent (and then back to 21.9 percent); President Donald Trump pushed that to 31.3 percent (during the coronavirus pandemic) and President Joe Biden pushed it to 31.7 percent, but has now fallen back to 22 percent.
Between 1950 and 1970, total debt (including government, households, businesses, and finance) stabilized at around 150 per cent of GDP. After Nixon abolished the gold standard in 1971, debt began to rise dramatically. Since then, total debt has grown by nearly 5,600 percent, more than double the U.S. economic growth rate.
There was a time, even in the middle of the Cold War, when government leaders understood the need for fiscal discipline and control of government growth, despite their international responsibilities and the legacy of the New Deal and the Great Society.
From 1947 to 1966, there were 12 years when the budget was balanced, while the average deficit rate for the rest of the year was almost negligible at 0.07%. By comparison, during the 12 years of the Ronald Reagan and George H. W. Bush administrations (largely hostile or partly hostile Congress), the average deficit rate was 4 percent, due to increased defense spending, the abandonment of domestic restraints (a legacy of Johnson's "subsistence" period, when President Nixon Ford changed most of the economic principles they had previously supported), and the support of Arthur W. Bush. Unfunded tax cuts influenced by Arthur Laffer's view that tax cuts do not lead to a reduction in government tax revenues. Gone are President Dwight D. Eisenhower's insistence on cutting spending before cutting taxes.
The advent of the new millennium has further distorted the situation, with the annual deficit rate averaging 5% over the 20-year period from 2002 to 2023, 20% higher than the nominal economic growth rate (4.2% on average). President Ma Oba, who ran a deficit twice as much as the Congressional Budget Office had originally projected, unleashed a spending spree that Presidents Trump and Biden pushed to new heights.
Now we have come to this point. Unless a new generation of leaders has the courage to cut "immutable" budgets for defense, education, justice, and homeland security, and privatize social security programs, as more than 40 countries have done wisely, the current federal fiscal trajectory will sooner or later lead to a dire situation. If you think it's bad right now, just wait and see. (Fortune Chinese Network)
作者：ALVARO VARGAS LLOSA
Translator: Zhong Huiyan-Wang Fang
At Fortune Plus, netizens have made many in-depth and thoughtful comments on this article. Let's take a look. You are also welcome to join us and talk about your ideas. Other hot topics today:
Check out the great view of "Masayoshi Son: Will Build a Super AI with 10,000 Times More Capabilities than Humans".
Check out the wonderful views of "Ministry of Finance: Stamp duty on securities transactions from January to May was 43.9 billion yuan, down 50.8% year-on-year".
