The Limits of Borrowing: Can the US Continue to Rely on Future Generations?

Borrowing from the future to pay for today is a practice that has long been a part of the U.S. financial strategy. However, as the national debt continues to grow, questions are arising about its sustainability. This article explores whether the U.S. can continue to rely on future generations to shoulder its debts, and the potential consequences of relying on indefinite borrowing.

Is Debt Actually Debt or Savings Accounts?

Contrary to popular belief, the U.S. debt is not simply a matter of borrowing from the future. Instead, it is more accurately viewed as savings accounts at the Federal Reserve with a term. This means that while the government is in debt, it is not necessarily borrowing from future generations. The progeny of today will still be able to purchase everything they need as long as the government can maintain these savings accounts.

Can You Permanently Go Into Debt?

Can you perpetually keep borrowing forever? The answer, much like buying homes with mortgages, is yes, under certain conditions. Just as a bank would continue to lend to you as long as you maintain an ability to pay off the debt, the government can continue to borrow as long as it can service its debt. This is evident from historical examples where individuals have gone into debt even in their 80s, as long as they are economically stable.

Historical Context and Unsustainable Growth

Historically, the U.S. has had some level of debt, but it was not an unsustainable amount. The debt would rotate and simply be paid off and borrowed again. However, in recent times, the growth of debt has become unsustainable. Politicians are often hesitant to take the necessary steps to address this issue, citing fear of losing votes through higher taxes, particularly on the wealthy.

Unnecessary Spending and Constitutional Spending

The U.S. government often finds itself in the situation of spending money on unnecessary projects to maintain political support or favor during election periods. This untargeted spending can lead to inefficiencies and does not serve the best interests of the American people as a whole. Politicians also have a tendency to increase spending in areas where they can secure jobs in their districts, leading to wasteful and unneeded expenditure.

When Will It Have to Stop?

Despite the low interest rates at which the U.S. currently borrows, these rates are not sustainable in the long term. When rates rise, the cost of servicing the debt will increase, potentially leading to a major fiscal crisis. Estimates suggest that when the national debt reaches around 35 trillion, the government will have to reconsider many "priorities" and cut unnecessary spending. A non-partisan audit of the federal budget is needed to identify what is truly essential and what can be cut, particularly in areas like defense spending.

Conclusion

While the U.S. can continue to rely on borrowing for a while, the government must implement sustainable financial strategies to avoid a fiscal crisis. Reducing unnecessary spending, increasing taxes, and ensuring honest and productive use of borrowed funds are crucial steps. The time to act is sooner rather than later, as the consequences of indefinite borrowing can be severe.