America finds itself buried under a mountain of public debt that has steadily accumulated over the past four decades. The situation is alarming, and it is time we acknowledged it. Although grappling with this reality is uncomfortable, it opens doors to potential solutions. Let’s explore the current landscape more closely.
The national debt stood at $908 billion back in 1980. Today, it has ballooned to over $26 trillion. In just June of this year, new debt piled up amounted to $863 billion—more than the total incurred during the first 200 years of the nation’s existence.
As this national debt has escalated, economic growth has dwindled down to negligible levels. Initially, this decline was subtle, but in the last twenty years, it has become glaringly evident.
For example, the average GDP growth rate was above 4 percent during the 1950s and 1960s. In the 1970s and 1980s, it dropped to around 3 percent and remained there through the 1990s. However, this century has seen a further decline, with the past decade averaging below 2 percent—a cause for serious concern.
The gap between increasing debt and stagnant growth has widened significantly. In 1980, the debt-to-GDP ratio was 32 percent; today it has soared to 110 percent. When considering U.S. unfunded liabilities—including Social Security, Medicare parts A, B, and D, federal debt held by the public, and benefits for federal employees and veterans, estimated to be over $153 trillion—that ratio skyrockets to 637 percent.
However, this calculation assumes that GDP remains stable or continues to grow at 2 percent. The reality is, a 2 percent growth rate might be a relic of the past. Recently, the Commerce Department revealed that GDP is not growing but is, rather, contracting at an alarming annualized rate of 32.9 percent.
In simpler terms, government debt is ballooning uncontrollably. Moreover, it’s important to highlight that this situation is compounded by state, local, and private debts.
Zombie Economics
State and local debt levels across various jurisdictions have reached similarly alarming figures. U.S. mortgage debt alone approaches $15 trillion, while corporate debt stands at around $10 trillion, and student loan debt has reached $1.6 trillion.
Adding to this mounting debt are $1.2 trillion in auto loans and nearly $1 trillion in credit card debt. Collective, these debts threaten to trap the economy in a prolonged period of minimal growth, resulting in widespread social unrest. As Ruchir Sharma astutely notes in the Wall Street Journal:
“Easy money fuels the rise of giant firms and, along with crisis bailouts, keeps alive heavily indebted ‘zombie’ firms at the expense of startups, which typically drive innovation. All of this leads to low productivity—the prime contributor to the slowdown in economic growth and a shrinking of the pie for everyone.”
“At the same time, easy money has juiced up the value of stocks, bonds, and other financial assets, which benefits mainly the rich, inflaming social resentment over growing inequalities in income and wealth. It should not be surprising that millennials and Gen Z are growing disillusioned with this distorted form of capitalism and say that they prefer socialism. The irony is that the rising culture of government dependence is, in fact, a form of socialism—for the rich and powerful.”
Undoubtedly, the substantial debt accumulation and the “zombification” of many corporate entities hinder productivity. Rather than fostering new business ventures and investments, the economy is primarily focused on servicing and managing existing debt. Regaining sustainable GDP growth above 2 percent would require a miraculous boost in productivity.
Black Lives Matter: An Immodest Suggestion
The pressing question is: Where will America find this productivity miracle? A critical issue lies in public education, which is not equipping students with the skills necessary to compete in the global economy.
According to the National Center for Education Statistics, U.S. students’ math scores rank 30th worldwide. Meanwhile, their East Asian peers are poised to dominate the future growth industries.
This presents a genuine opportunity for the Black Lives Matter movement.
The protests, riots, and discussions surrounding reparations and social justice are important, but they lack a cohesive strategy. Where is the long-term vision?
While selling BLM merchandise may demonstrate entrepreneurial spirit, it won’t address the underlying issues effectively. Furthermore, like winnings from bingo, reparations could be quickly squandered, leaving discontent unresolved.
At Economic Prism, we approach this from a reflective perspective. It appears that the BLM movement suffers from a lack of direction and actionable ideas. Thus, from a place of humility, we put forth an immodest suggestion:
If BLM were to adopt a strategic approach, they could advocate for school vouchers aimed at producing semiconductor engineers in the next decade.
Such a move could enable the community to play a pivotal role in driving the necessary productivity miracle for America. Dignity would replace apathy, and issues surrounding race, class, and identity would fade into the background.
This endeavor would undoubtedly demand tremendous effort and unwavering commitment. Yet, for those willing to pursue it, success is attainable.
Ultimately, performance is the key indicator. Just as professional sports illustrate that top performers command substantial earnings regardless of race, why not strive to excel in promising growth industries?
America’s emerging generation has the potential to innovate and lead. The need is evident, as is the demand.
You may thank us in 2030.
Sincerely,
MN Gordon
for Economic Prism
Return from Black Lives Matter: An Immodest Suggestion to Economic Prism
