The American 2020 election can be looked at as sort of an illusion although it cost over 14 billion dollars. No matter who had won, both these candidates would have had little effect on preventing the horrible economic impact that is coming: the massive wall into which America is speeding. It's international trade deficit is in the trillions. Its accumulated federal government deficit is -$10 trillion (2008); -14 trillion (2012); -18 trillion (2014); -21 trillion (2018); -30 trillion (2023); -34 trillion currently (2024). Its personal household debt (total outstanding private liability) is way over -50 trillion and its exposure to unfunded Social Security Trust Fund is estimated above -40 trillion *, making its total indebtedness around -105 trillion (2024).
Look at it this way: You and your family have a mortgage, (Federal Accumulated Debt), you owe your neighbor money, (Trade Deficit), you’ve agreed to pay for you and your spouse’s parents’ retirement, (Unfunded Social Security) and your credit cards have reached a breaking point (Outstanding Private Debt). Now divide that by a population figure of 325 million Americans and it equals a personal debt load over of -315 thousand dollars per man, woman and child. Note that none of these pressing concerns were election issues in 2008 and only became so in 2012! Note also, this doesn’t include state and municipal debt; see, National Debt Clock, (current) which make my figures look conservative indeed. (The new expression for this in the media class is The Fiscal Cliff.) See also a visualization of the world debt.
Public government debt put into its simplest terms is the ability of any national state to meet its payment obligation; and that financial truism, true for even households, is on another level complex, multifarious and filled with treacherous ifs and buts. One thing is for certain: the inability for even the smallest nations to meet its debt-load could bring the whole global economy down and lead to another 2008-like crisis. On balance, the way to reduce these risks is as simple as reducing public and private debt, i.e, the economic solution. How it will likely, actually, be done, i.e., the political solution: Financial Repression, where society transfers wealth from savers to debtors.
Let’s compare this formula to Canada. It has little if any trade deficit, an accumulated federal government deficit of over $900 billion, a personal household debt of nearly $2 trillion, a Canadian public pension (CPP+RRQ) surplus of some billions, making its total indebtedness of six or seven trillion. Divided by the population of 35 million equals a debt load well over 150 thousand dollars ** per person. You can see the difference but both America and Canada are in for an economic shock. Our national debt load is unsustainable and it's alarming how fast it is increasing, for instance the Ontario province's alarming growth of debt.
As far as savings goes, both the Yanks and Canucks do poorly, (Canadians save at over two times the rate of Americans), but in regards to consumer versus production, America has become a complete consumer nation. Personal consumption has outstripped its production for the last 30 years. A nation must produce more than it consumes to have real savings, that’s a basic fact. Consequently, its debt and credit mess is no surprise. Well, the sheer amount of it is perhaps surprising.
Demographic reality is what is threatening to foil any attempt at a quick turnaround. The baby boom in America started in 1946. Now 78 years later, that statistical curve with nearly 1/3 of the nation’s population is in the thick of retiring. In other words, it’s about to spend far more than the nation has conserved. Put another way, they have not saved enough to fend off a mathematical economic impossibility. Who will pay for the social security bills when the country is tackling a medical insurance crisis, a global environmental problem, an aging, overweight, even obese population and its accompanying enormous medical costs, a sagging welfare economy and massive infrastructure renewal needs? America is exceedingly wealthy, but what to do? Can the fish and loafs be multiplied fast enough? Here is an amazing link to show you all the world's countries' GDP growth from 1961 to 2022.
The American government has limited basic choices. They can devalue the currency, water-down the dollar, (i.e., inflate the dollar), default, or withdraw military commitments from around the globe, (or all of these together as a one time emergency). You might say, “Well, they could just reduce consumption.” This is what the American people will do on their own because of rampant inflation, but what effect will it have? It’s not enough to fend off the economic reality coming their way even if it will go a long way to help. What they have to do in the long term is to be more productive and this will take massive sacrifices from the labor pool. Wages will have to fall, benefits decreased and pension expectations will have to be amply reduced. Military bases will have to be closed, government research will have to be cutback for some time and a federal freeze on hiring enacted. Not exactly what President Biden was hired to bring about and not anything the electorate was expecting. But that’s the thing about life; ever complicated, always a storm; Trump is proof of that.
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* Even the US Government Accountability Office’s, (Gene L. Dodaro, Acting Comptroller General of the United States, April 2008), latest estimate liabilities from underfunded Social Security and Medicare benefits is 34 trillion, though I didn’t use that figure, nor include Medicare or Medicaid unfunded liabilities. I define an unfunded liability as the difference between the benefits that have been promised to current and future retirees and what will be collected in dedicated taxes. If no other reform is enacted, this funding gap can only be closed in future years by substantial tax increases, large benefit cuts or a combination of both. I came to a figure from many estimates, all of them higher than 40 trillion.
** Quebec and other seriously indebted provinces may add on as much as 2000 to 3000 dollars more than a comparable American figure, which might include states like California, with sizable debts, –accurate baseball-park figures are difficult to verify, and even more difficult to figure for municipalities. (Inflated-adjusted public debt across both federal and provincial governments in Canada in 2022 was trillions of dollars and over 70 percent of GNP.)
"In 2014, the US government had outstanding debt of around US$18 trillion. In addition, it needed around US$36 billion to ensure the ability of programs like Social Security and Medicare to meet its future obligations. This means that total federal government liabilities, debt as well as future commitments, were over three times the GDP. In addition, US state and local government had debt of around US$1 trillion and potential commitments to underfunded pension plans of around US$3 trillion." From: The Age of Stagnation, S Das
