Obama’s legacies: regulation and debt. From Simon Black at sovereignman.com:
OK, this is pretty nuts.
According to data released by the Treasury Department yesterday, the US national debt has soared by a whopping $294 billion since the start of the 2017 fiscal year, just 45 days ago.
That’s an annualized increase of 13%.
So if they keep up this pace, the national debt will increase by $2.4 trillion this fiscal year, surpassing $21 trillion by next September.
It’s hard to believe how rapidly the debt is growing; debt growth is far outpacing the growth of the US economy… and there’s no way to pretend that this is good news.
That doesn’t stop leading economists from trying.
Nobel Laureate Paul Krugman says “debt is good” because the US economy has grown so much over the last 200 years despite not having been debt-free since 1835.
This kind of logic is astonishing.
Aside from a few anomalies like World War II and the American Civil War, debt levels over most of early American history were low.
100 years ago in 1916, US debt was about $3.6 billion; as a percentage of GDP (i.e. the size of the US economy), that was about 7%.
Today’s debt of $19,867,119,032,053.28 is actually bigger than the entire US economy at over 106% of GDP.
Yet in Krugman’s view, the fact that America prospered a century ago when the debt was 7% of GDP means that the nation will continue to prosper with a debt at 106% of GDP.
Amazingly enough, Krugman has been awarded our society’s most esteemed prize for intellectual achievement. It boggles the mind.
To be fair, there is such a thing as “good debt” versus “bad debt”, and it’s not difficult to distinguish between the two.
If you can borrow money at 5% in order to make a safe investment that has a 25% return, for example, that may very well qualify as “good debt”.
If you borrow money at 5%… or even 1%… and then squander the borrowed funds on useless trinkets, that’s clearly “bad debt”.
In 1803, the startup US government negotiated the Louisiana Purchase from France, a real estate acquisition that doubled the size of the US.
It was the mother of all distress sales. France was desperate for cash, and the administration of Thomas Jefferson negotiated a price that valued the land at around $15 million.
Adjusted for inflation to 2016 dollars, Thomas Jefferson paid about 40 cents per acre to acquire the land that comprises fifteen states and has generated trillions in economic activity.
Naturally the US government had to borrow money that year to conclude the Louisiana Purchase with France, so the national debt increased slightly in 1804.
But when you consider the extraordinary economic benefit of that purchase, it clearly qualifies as “good debt”.
Fast-forward to our modern era and we see that the debt is increasing by more than a trillion dollars each year.
What are the good citizens of the United States receiving in exchange for taking on so much debt?
It’s not like the government bought up half of Mexico or colonized Mars.
No, instead they wasted $2 billion on the Obamacare website, most of which went to a company whose top executive just happens to be an old friend of Michelle Obama.
Today, the US government has to borrow money just to pay interest on the money it’s already borrowed. This is almost the textbook definition of bad debt…
In fact, the government now spends nearly all of its tax revenue just on mandatory entitlement programs like Social Security and Medicare, plus interest on the debt.
The real kicker is that Social Security and Medicare are massively underfunded and quickly running out of cash… so they’ll both require a major bailout (i.e. MORE debt).
To continue reading: Obama On Pace To Increase The Debt By Stunning $2.4 Trillion This Year