HOW THE UNITED STATES ENTERED INTO THIS COLOSSAL DEBT | 2023 APRIL

America’s debt is now six times of what it was at the start of 21^st century, it is now standing at $31.4 trillion, and if we look back, it was only January 1, 2001 and we are now only in its twenty-third year. It is the largest ever, even compared with the size of the U.S. economy. The most scary part is that it is projected to grow at an average of about $1.3 trillion a year for the next decade.

Right now the Capital Hill is going into another fiscal showdown and the Republicans are refusing to raise the limit unless President Biden is going to have a steep cut with the spending.

American’s ballooning debt is the result of choices made by both Republicans and Democrats. Since 2000, politicians from both parties made a habit of borrowing money to finance wars, tax cuts, expanded federal spending, healthcare for the baby boomers and emergency releases to help the nation to endure two most devastating recessions.

There have also been bipartisan tax cuts and bipartisan spending increases. But few of the economists believe that the level of debt is an economic crisis at the moment.

There are the lack of actions to reduce the federal budget deficit and this has been going on for nearly a quarter-century since the government tend to spend less than what they received in taxes.

In fact all the spending programs today have to be politically popular, take for instance, the retiring baby boomers are driving up the cost of programs like Social Security and Medicare every year. It can never balance the books for the country in the decades to come.

The White House estimates that to borrow money for $1.5 trillion this year in order to cover part of the $6 trillion budget in this fiscal year.

In just two decades, America added $25 trillion in debt. We can blame this to the miscalculation at the end of the Cold War.

In the 1990s America reaped the so-called peace dividend as it reduced its spending on the military believing it could reduce its spending in national security as Soviet Union ceased to remain as the threat.

At the same time the dot-com boom delivered the tax that the U.S. had never seen before. It entered into the 21^st century with the national reserves full of tax revenues.

Came the September 11, 2001, the Islamic terrorists brought the attack on the U.S. soil. President George W. Bush mobilized wars in Iraq and Afghanistan. George W. Bush didn’t raise tax or issue war bonds to pay for those conflicts, he just sat there without raising any taxes. The same for President Barak Obama, who continued those military conflicts and added trillions of dollars to the national debts.

The Defense Department estimated last year that the direct costs for the wars in Iraq, Syria and Afghanistan exceeded $1.6 trillion. But the researchers from Brown University calculated the cost was much higher, they estimated that it was close to $6 trillion, including care for veterans of those wars, interest spent on money borrowed to finance the military and the price-tag after September 11 stood at $6 trillion.

The federal reserves were eaten up by the surging of the military spending. Another direct result was George W. Bush signed the tax cut in 2001 and 2003, although they were temporary, they were the double blow to the federal reserves. But in 2012, Obama made them more worse by making four-fifths of them into permanent tax cuts.

Obama’s coming into the office in 2009 which he inherited the 2008 financial crisis which led into a recession. He pushed Congress to approve a nearly $800 billion package of tax cuts and stimulus spending, but the next several years of the economy recovered sluggishly.

Affordable Care Act, an Obama signature health expansion, pushed up federal spending on Medicare and health insurance subsidies. The changes it made to the health care system have contributed to a reduction in Medicare spending compared with previous projections and offsetting some or all of the spending increases. But this is arguable as for the last two decades, the growth in spending on Social Security and Medicare, which have already come under financial pressure from the first waves of retiring baby boomers.

We have seen the U.S. went under the two biggest drivers of debts—the 2008 financial crisis and the 2020 pandemic recession.

It was estimated that from 2001 through 2018, those tax cuts and the interest costs of borrowing them to finance them, added up to $5.6 trillions, which was a third of the additional debts that the government incurred at that time.    

With Donald Trump who entered the office in 2017, he approved a much larger collection of aid packages, totaling more than $3 trillion and this was after what happened with the Covid-19 pandemic.

Joe Biden took the office in 2021 and signed a $1.9 trillion package soon after.

It is not hard now to understand how the United States is in the debts of $31.4 trillion. They have to blame the mismanagement of the bipartisan parties in the Congress. 

During the presidency of Bill Clinton from January 1993 to January 2001, he oversaw a healthy economy during his tenure. He had budget surpluses for fiscal years 1998-2001. The U.S. had strong economic growth of around 4% annually and record job creation of 22.7 million positions. He raised taxes on higher income taxpayers early in his first term and cut defense spending and welfare, and this brought surplus from surplus years 1998 to 2001. The last surplus year of the U.S. was 1969.

Clinton’s final four budgets were with surpluses, beginning with the 1997’s budget. The ratio of debt held by the public to GDP, a primary measure of the U.S. federal debt, fell from 47.8% in 1993 to 22.6% by 2000. I would consider him lucky as during his time in office, except he was caught with his scandal in the White House with the trainee and was almost impeached, otherwise he could have done his job perfectly. The economic policies of Bill Clinton administration was called Clintonomics. 

  He signed North American Free Trade Agreement (NAFTA) into law with many other free trade agreements. 

Prior to his presidential election, America had undergone twelve years of conservative policies implemented by Ronald Reagan (1981-1989) and George H.W. Bush (1989-1993). He ran on an economic platform of balancing the budget, lowering inflation and lowering unemployment. We can’t stop to mention that during Reagan’s time he stopped the Cold War and helped to dissolve Soviet Union. 

Entered George W. Bush who was the president from 2001 to 2009, he was a mediocre and his luck was so bad that September 11 happened during his first year in the office. We haven’t had a good president since then.