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Robert Wright’s review of my book captures the essence of my journey in America.
“There is a right way and a wrong way, always choose the right way.” Abraham Sabrin (1914-2001)
America is at the tipping point. The national debt will reach $33 trillion by the end of 2023 based on the spending spree of the Biden administration and the continued deficits as far as our eyes can see.
The national debt crossed the $1 trillion mark in the fourth quarter of 1981 during the first year of Reagan’s presidency. After his two terms the national debt reached $2.7 trillion, nearly tripling. The only time the national debt did not increase in recent memory was the last three years of the Clinton presidency because the Republicans controlled the Congress and put a lid on excessive spending.
The national debt soared under George W. Bush’s presidency (2001-2009) and continued to increase at a slower rate under eight years of Barack Obama (2009-2017). And then you know what hit the fan—Covid, lockdowns, and a federal spending spree unprecedented in peacetime during the Trump years (2017-2021). Federal spending under Trump rose from $3.98 trillion (Obama’s last budget) to $6.82 trillion (Trump’s last budget), nearly $3 trillion. In addition, the national debt increased by $7.7 trillion under Trump. The national debt continues to increase in the Biden presidency.
The bottom line: Republican presidents are not fiscal conservative despite all the rhetoric about limited government and fiscal responsibility. In fact, Democratic presidents have a better track record than Republicans of holding the line on federal spending.
But the chart that should be of concern to all Americans because it portends a possible horrific future for America. That is, the interest on the federal debt. Annual interest on the federal debt crossed the $100 billion mark in the first quarter of 1980, the last year of the Carter presidency. The annual interest kept creeping up over the next several decades and reached $500 billion in the first quarter of 2018. In the second quarter of 2023 the interest on the federal debt is slightly under one trillion dollars ($970 billion). More importantly, the rate of increase has gone parabolic.
Historically, when a country’s interest expense increases at accelerating rates, it is only a matter of time when the mother of all financial crises occurs—an inflationary depression. I am taking about double-digit inflation but the possibility of triple digit or higher inflation.
The dynamics of a hyper inflationary depression are straight forward. A national government runs humongous deficits and there are not enough buyers of the Treasury’s debt. The central bank purchases most if not all the debt creating a trillion of national currency units. This has played out in dozens of countries since World War I. The US will not be immune from hyperinflation unless the federal budget is cut substantially and the Federal Reserve stops manipulating interest rates and printing money.
The prognosis is for more debt no matter who is elected president. Both parties are responsible for the unfolding fiscal nightmare that will engulf America. I will continue to monitor the fiscal irresponsibility of the Washington Party.
My latest piece on the economy was published in Fortune, https://fortune.com/2023/03/27/recession-2023-layoffs-tech-finance-unemployment-outlook-fed-rates-murray-sabrin/ This is an update of my 2021 forecast, https://fortune.com/2021/12/09/next-recession-heres-everything-bubble-markets-2021-2022-covid-murray-sabrin/
Murray Sabrin, PhD, is emeritus professor of finance, Ramapo College of New Jersey. Dr. Sabrin is considered a “public intellectual” for writing about the economy in scholarly and popular publications. His new book, The Finance of Health Care: Wellness and Innovative Approaches to Employee Medical Insurance (Business Expert Press, Oct. 24, 2022), and his other BEP publication, Navigating the Boom/Bust Cycle: An Entrepreneur’s Survival Guide (October 2021), provides decision makers with tools needed to help manage their businesses during the business cycle. Sabrin’s autobiography, From Immigrant to Public Intellectual: An American Story, was published in November, 2022.