America’s ticking time bomb: $66 trillion in debt that could bring down the economy

Wake up, America. That ticking you hear is the US debt time bomb that with each passing day is about to explode and crash the US economy.

Businesses, consumers, and especially federal and state governments have become addicted to red ink as if it were crack. Two factors fueled this borrowing frenzy: an era of low interest rates (which is coming to an end) and a decline in real wages thanks to the 15% rise in bidenflation prices.

Let’s review the indexing of borrowings which accelerated during COVID but did not decrease.

The King Kong of borrowing is Uncle Sam. The national debt is $31 trillion if you include unfunded Social Security and Medicare liabilities. This represents nearly 150% of our $22 trillion national gross domestic product. Some $5 trillion has been added in the last three years alone. Balancing the budget seems like a pipe dream these days.

Then add state and local government debt and unfunded liabilities. The American Legislative Exchange Council estimates it at just under $6 trillion.

What about American households? The latest estimate of consumer debt is $16.5 trillion, according to the New York Federal Reserve. Most of that debt is mortgages, but more and more Americans are going into debt for living expenses to pay monthly bills like groceries and gas at the pump. Thank you, President Joe Biden.

Then we have American businesses and small businesses. Their indebtedness, according to the Federal Reserve Board, has just exceeded $10 trillion for the first time. Commercial borrowing can be a good thing, indicating economic optimism. But we have to wonder how many other FTX-like bubbles exist, inflated by low interest rates and all that helicopter money from Washington.

So add it all up, and American society now owes 66,000,000,000,000 in debt! That’s about three times our annual GDP.

What makes this tsunami of debt all the more dangerous is that interest rates are rising (with at least one or two more Fed rate hikes to come), which will make the cost of repaying the even higher debt.

Another warning sign: with wages (5% growth) lower than consumer price inflation (7.5% growth), American families are borrowing more just to maintain their current standard of living. Americans have lost an average of $4,000 in purchasing power and some $30,000 in 401(k) plans in the Biden era.

By far the biggest debtor was Uncle Sam, who created a national culture of living beyond our means. During COVID, President Donald Trump pumped $2 trillion in “stimulus” red ink into the country when the private economy was shut down. But then, in an act of quasi-criminal financial negligence, Biden swept into office and dumped an additional $4 trillion in green energy giveaways, state bailout funds, student loan bailouts and welfare payments to families without person who works.

A new wave of economic strategy called modern monetary theory facilitated this borrowing explosion. The wacky idea hinges on the idea that because the US dollar is the world’s reserve currency, we can jack up the federal credit card trillions and feel good about ourselves in the morning. Until interest rates start to rise.

Consumers are now engaged in the same reckless monkey-seeing, monkey-doing behavior. The latest report from the Federal Reserve Bank of New York says credit card debt has skyrocketed 16% this year to over $1 trillion. The Christmas season sees even more debt to buy Christmas presents. Low-income Americans are going into debt at the fastest rate of all. Come January, don’t be surprised if Americans look at their credit card debt and suffer severe buyer’s remorse.

For now, defaults and chargebacks are low, but we should have learned that financial seas can change in no time. Meanwhile, the federal government continues to fuel soaring debt by increasing ratepayer mortgage insurance for million-dollar homes.

Debt is not necessarily a bad thing. It depends on what we get for it. When we borrow for roads, factories or houses or to fund our military to win wars, borrowing may be necessary and appropriate.

But we don’t do that. We borrow to pay people who don’t work. We borrow to fund wind turbines, Teslas, and “fix” payments to other nations and to pour money into failing schools and ObamaCare grants that go to Americans and bring in up to $500,000.

We act like a nation of crazy-eyed teenage girls on a mall shopping spree – armed with dad’s credit card. Soon we will have to start paying our bills or this debt time bomb will implode. It won’t be pretty.

Stephen Moore is a senior researcher at the Heritage Foundation. He was Donald Trump’s chief economic adviser. His latest book is “Govzilla: How Relentless Government Growth Is Eating Our Economy.”