The Editor has had a front row seat on the Federal appropriation process for sixty years, including the establishment of the government-wide regulatory review office in the White House Office of Management and Budget, OIRA. One observation that prevails is that those elected officials who sponsor spending programs have a very high survival rate whereas those elected officials who sponsor spending reduction programs have a very low survival rate as delineated in greater detail in this post. The aforementioned scenario has governed the federal appropriation process for such a long period of time that its unlikely that any attempt to control spending will survive.
Furthermore, even if one were to eliminate all of the ineffective programs of the government, however defined, one would not come close to addressing the historical opposition to sound fiscal management.
The showdown on the continued increase in the deficit will likely occur in the 2030 decade or at the latest in the very early in the 2040 decade. At this point in time the US economy will begin an irreversible nose dive unless spending is reduced to a degree beyond the wildest imagination — and likely violent opposition– of and by nearly all US citizens. The aforementioned conclusion is a result of CRE’s detailed analysis of a number authors writings based upon the utilization of the Debt Sustainability Model to assess Debt Default. The resultant decadent process will not occur in one massive reduction but instead in a series of increasingly painful actions over a period of time probably goaded by the periodic issuance of vast amounts of printed currency.
The U.S. government meets the conditions of a debt default when it fails to meet its debt obligations, specifically when it cannot pay interest on its existing debt or repay the principal on Treasury bonds, bills, or other government securities when they come due. If the United States government were to default on its debt, the reaction of the Federal Reserve Board would likely be significant and multifaceted, as such a scenario would have far-reaching economic consequences. A U.S. debt default would likely cause panic in global financial markets, leading to a sharp sell-off in U.S. Treasury securities, a surge in interest rates, and a decline in the value of the U.S. dollar. [ChatGPT]
In summary no one describes the forthcoming demise more succinctly than does the Council on Foreign Relations:
- Congress has authorized trillions of dollars in spending over the last decade, causing the United States’ debt to nearly triple since 2009.
- As the national debt has soared, the U.S. Treasury Department has had to borrow more money to pay for government spending. The legislative curb on this borrowing is known as the debt ceiling.
- When the Treasury Department spends the maximum amount authorized under the ceiling, Congress can vote to suspend or raise the limit on borrowing.
The problem described herein has been festering for decades and presents an insurmountable challenge because barring some monumental encroachment, comparable to abolishing Social Security, Medicare and Medicaid, the Editor concludes: “game over”; consequently the U. S. must proceed with developing a plan for Debt Restructuring immediately, pay now or pay substantially more later.
CRE has documented experience in developing new management systems for government entities as witnessed by the diversity in the projects currently underway.
Appendix
The mathematical expression for debt sustainability is:
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d_t/Y_t: Debt-to-GDP ratio at time t
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r_t: Real interest rate at time t
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g_t: Real GDP growth rate at time t
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d_(t-1)/Y_(t-1): Debt-to-GDP ratio in the previous period
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T_t: Government revenue at time t
