Through the second quarter of this year, the Federal Government has spent $4.45 Trillion which was equivalent to 24% of the nation’s entire GDP. Of that total spending, only $3.47 Trillion was financed by Federal revenues leaving $983 billion to be financed with debt. In other words, it took all of the revenue received by the Government just to cover social welfare and service interest on the debt.
In the financial markets, when you borrow from others to pay obligations you can’t afford it is known as a “Ponzi-scheme.”
Since the bulk of the debt issued by the U.S. has been squandered on increases in social welfare programs and debt service, there is a negative return on investment. Therefore, the larger the balance of debt becomes, the more economically destructive it is by diverting an ever growing amount of dollars away from productive investments to service payments.
The relevance of debt growth versus economic growth is all too evident as shown below. Since 1980, the overall increase in debt has surged to levels that currently usurp the entirety of economic growth. With economic growth rates now at the lowest levels on record, the growth in debt continues to divert more tax dollars away from productive investments into the service of debt and social welfare.
Read More: The Economic Consequences Of Debt