Last week, the national debt hit $35 trillion, just seven months after hitting $34 trillion. By comparison, the first time the national debt reached $1 trillion was in October 1981, nearly 200 years after the Constitution was ratified.
The fact that the government has increased its debt by $1 trillion in just over six months was not considered worthy of comment by President Biden, Vice President Harris, and most other US politicians. This is not surprising, as the national debt has not been a central issue in Washington since the days of the Tea Party movement. The Tea Party's efforts to draw attention to the debt led to a bipartisan agreement to make slight spending cuts. In fact, most of the cuts were not actual cuts at all; they were simply cuts in the “projected spending growth” rate, meaning that spending is still increasing, but not as much as originally planned.
This isn't the first time that spending limits have been a sham: Budget “surpluses” in the 1990s, for example, were the result of the government counting the Social Security trust fund as both a liability and an asset, not a bipartisan budget agreement.
The rise of a “populist nationalist conservatism” influenced by Donald Trump that downplays the national debt has made Republicans less willing to even talk about the debt, except to hypocritically but legitimately attack President Biden and Democrats for their excessive spending. Similarly, the rise of the Bernie Sanders-inspired “New Left” has caused even centrist Democrats to stop paying lip service to the cause of deficit reduction.
Many Democrats, including those who believe in Modern Monetary Theory, agree with former Vice President Dick Cheney that “deficits are not a problem.” Modern Monetary Theory argues that the government can grow the amount of debt indefinitely as long as the central bank can monetize the federal debt and keep interest rates low. This is not really modern, since the Federal Reserve has long acted as the “great promoter” of federal debt.
Those who argue that budget deficits are not a problem ignore the fact that interest on the national debt will soon become the largest item in the federal budget, consuming 40 percent of federal revenues. This is unsustainable. The devaluation of the dollar through the Federal Reserve's economic stimulus and federal debt monetization programs, combined with growing resistance to America's ultra-interventionist foreign policy, will lead to the denial of the dollar's status as the world's reserve currency. This will result in an economic crisis the likes of which the country has not seen since the Great Depression.
The crisis could lead to increased support for authoritarianism on both the left and the right, resulting in greater restrictions on the economy and civil liberties, a more combative foreign policy, and the scapegoating of those who reject the dollar's reserve currency status for the country's economic problems.
But the economic crisis may also be followed by a society with minimal government and great freedom. The freedom movement continues to grow. Those who understand the philosophy of freedom and sound economics must continue to spread the truth about the dangers of fiat money and the growth of government power and debt, as well as the benefits of free markets, individual liberty, sound currency, and peace.
Ron Paul is a former U.S. Congressman from Texas. This article originally appeared on the Ron Paul Institute for Peace and Prosperity and is reprinted here with permission.
