CNS News’ Terence P. Jeffrey reports that the 89.2 million full-time private sector employees’ share of the $17.86 trillion national debt hit $200,258.81.
That’s interesting, but Congress has no intention of ever balancing the budget. Plus, with the auto spending we’ll once again be adding $1 trillion to the debt by decade’s end as the retirement wave hits full force, the Congressional Budget Office (CBO) reports.
Therefore, we will never pay down the debt.
So, does the share of the national debt per worker really mean anything if it never comes into play?
We’re more likely to default than to ever pay it off. The national debt has increased every single year since 1958 to its current level. Who really believes that trend will be reversed?
The best that elected officials know to do — based on ample historical evidence — is to continually roll over existing debt, with any luck at perpetually lower interest rates, with the hope that when the bomb does go off, they’ll be dead already.
Consider that from 1985 to present, the national debt has grown at more than 8.5 percent a year on average, such that today the gross debt to GDP ratio is more than 100 percent. Yet, the economy nominally has only grown about 5 percent a year on a non-inflation adjusted basis.
At those rates, by 2044, the national debt will be $227.6 trillion, but our GDP will only be $77.1 trillion, with a gross debt to GDP ratio of 294 percent.
That, obviously, would be a catastrophe. National suicide.
Let’s be generous and say the private workforce doubles in that intervening period (it didn’t the last thirty years but what the heck), from its 2013 level 89.2 million to 178.4 million. By then, the share of national debt per full-time private sector employee would be $1,275,784.
But so what? There’s no way we could ever pay such a gargantuan debt off at that point. It would be stupid to even try.
Alternately, rather than using the past 30 years as a guide — a scary prospect to say the least — we can look to the CBO’s assumptions going forward as a potential baseline.
There, CBO expects nominal GDP growth at an average 4.46 percent a year for the next ten years with no intervening recessions. That’s lower than the past thirty years. But remarkably, CBO only projects gross debt to grow by 4.06 percent a year with no countercyclical budgetary policies implemented or intervening wars. It hasn’t been that low since the 1960s. Pretty rosy outlook just as the Baby Boomers are hitting retirement.
Add to that, CBO has already downgraded its February 2014 nominal economic growth estimate from 4.7 percent to 3.2 percent.
But, for the sake of argument, let’s say they’re right. Then, by 2024, the national debt should be $26.5 trillion, and GDP will be $26.2 trillion. If it continued at that rate, the debt to GDP level would keep dropping slowly such that by 2044, it would be down to 91 percent.
Yet, nobody expects that to happen, not even CBO. After a brief lull this decade, it expects debt will once again be rising as a share of GDP in the 2020’s.
So, then we’re left with the 30-year, 1995-2024 average rate for debt expansion of 6.01 percent, and the average, nominal GDP growth rate of 4.44 percent.
If that happens — the debt slows this decade but then we revert to the 30-year historical mean after 2024 — then by 2044, the debt would be $87.9 trillion, and GDP at $65.4 trillion. A somewhat more “manageable” debt to GDP ratio emerges of 134 percent.
That is still a catastrophe.
Then, the average debt per full-time private sector employee might be $492,713. But that will not matter either, since at $87.9 trillion, there’s still no way we could ever pay it off.
Most importantly, under none of these scenarios is the budget ever balanced. There’s simply no way to pay down the debt if we continue to spend more than we take in each year.
What we’re risking is as CBO warns in its budget outlook, which is slower growth and, eventually, “a fiscal crisis (in which investors would demand high interest rates to buy the government’s debt).”
That would, in turn, become a vicious cycle where we might not be able to roll over the debt, dramatically increasing the odds of a U.S. default.
There’s really only one way out. We can make real concrete changes now to our fiscal, regulatory, and monetary system that get the economy moving and the government shrinking.
For, if we do not correct course, in the end, default will be the only option.
This is a cautionary tale. We can hope that nominal GDP gets ahead of the growth of debt this decade and beyond. So far, it hasn’t, and if recent history is any guide, it won’t. Hope is not a plan.
Robert Romano is the senior editor of Americans for Limited Government.