America’s Ever-Growing Capacity to Borrow: Curse or Blessing?

Fourteen years ago, in Chicago, I was honored by the Catholic Theological Union with an Honorary Doctorate Degree. I spoke at the commencement about the danger of the nation’s then burgeoning debt of $14.79 trillion. How quaint that seems today, given that the nation’s debt has, since then, grown to approximately $36.5 trillion, which far exceeds the indebtedness of any other country in the world. No one seems concerned. Perhaps, we should be. Not because we can’t comfortably handle that much debt, but rather because so many foreign nations, some of which are not our friends, hold much of our debt. Theoretically, they can create mischief for us, although at considerable cost to themselves.

America finds itself in a proverbial catch-22. It is hard to imagine the current Trump Administration, or those that will follow, reducing federal spending significantly, if at all. While the arc of federal expenditures could theoretically ameliorate a bit as time goes on, we are not very likely to ever see it flatten or reverse course. That could be dangerous.

A decade ago, US debt accounted for 76% of our Gross Domestic Product (GDP), or simply put, the entire economic output of the United States. This year, the US government debt is projected to exceed 116% of the nation’s GDP.

This, of course, raises an issue that we should all be pondering. Given that there is no free lunch, as the Nobel Prize-winning economist Milton Friedman taught, all goods and services involve a cost to someone. The free lunch may seem free, but, of course, it really isn’t. Someone always has paid the bill for what may seem free to others. Sooner or later, the expense of ever-increasing so-called free lunches crowds out needed funding for other goods and services. As an old Russian proverb teaches: “The only place you find free cheese is in a mousetrap.”

There used to be an understanding that sooner or later, a presumed reckoning would come. Money borrowed is, sooner or later, supposed to be repaid, or at least there is a presumption that money borrowed can eventually be repaid. Today, that is a quaint notion, at least when the borrower is our government. Those who are lenders to America (mostly Americans) have long ago abandoned the idea that America will, or can, eventually repay all of its debts. As long as America pays interest to its lenders, no one cares whether America can ever retire all of its debt.

We have become a nation of chronic debt, addicted to spending far more than we will ever have to repay. As a debtor nation, we simply owe more to other countries than other countries owe to us. Our creditors are more interested in our ability to service our debt than in our ability to repay it.

It is anticipated that this year, the ratio of American debt to American GDP will be about 118 percent. The previous high ratio of our debt to GDP was 106 percent, which occurred in 1946, following the end of World War II. So, should we be worried about that? Count me among those who think we should be at least a bit concerned.

A decade ago, a bipartisan panel of national security leaders headed by then Chairman of the Joint Chiefs, Mike Mullen, concluded that the nation’s long-term debt was the single greatest threat to the nation’s security. “High debt,” the panel concluded, “not only crowds out resources that strengthen our security, but it also narrows our tools for dealing with unfriendly nations, leaves our economy more vulnerable to actions of other countries, and weakens our global standing and prestige.”

We are living through a time when national leadership, and especially the White House, should be razor-focused on bringing the nation’s ever-growing debt burden under control. Instead, we are led by a President who has proudly referred to himself as the “king of debt.” President Trump, however, isn’t responsible for our debt dilemma. He simply doesn’t think it’s a big deal. Then again, none of our recent Presidents have displayed much angst over the nation’s profligate spending.

President Trump’s non-COVID-related public debt, during his first administration, was driven by his ill-timed tax cuts, which caused $1.9 trillion in additional borrowing. To add insult to injury, additional bipartisan spending initiatives added an additional $2.1 trillion to the public debt.

President Biden, who, in 2022 and 2023, ran up additional non-COVID spending to the tune of $1.4 trillion, along with student debt relief of $620 billion and another $520 billion for health care for veterans.

Americans, and American institutions, of course, are not the only lenders eager to lend America money. Over 30% of our debt is held by foreigners. Who among these foreign nations is the United States most indebted to? Who, other than Americans or American institutions, owns most of the debt we owe? That would be Japan, China, and the United Kingdom.

China, our strongest foreign adversary, holds $1 trillion of American debt. While it is doubtful that China would choose to use that cudgel as a weapon against us, given that precipitously unloading their holdings would diminish its value and prove very costly to the Chinese. Ironically, China has a strong vested interest in the success of the United States.

It is, of course, a significant positive that America is the nation to which most lending countries want to loan money. That’s because America is the world’s most reliable borrower. No one has ever gotten burned loaning money to America. The question, however, is whether America could get burned borrowing so much from foreign nations, some of whom are our adversaries. Last year, the United States spent nearly a trillion dollars ($881 billion) on interest alone, and that amount is expected to grow to approximately $952 billion by the end of this year. That’s more than we spent on either defense or Medicare.

I am not a debt scold. America is the safest country in the world in which other nations can invest. Nations that have the capacity to lend money want to lend to the United States. However, not all who want to lend to America are necessarily our friends. We should never lose sight of that.

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Recent podcasts have featured my commentary on Liz Cheney’s book, “Oath and Honor,” as well as my commentaries regarding:

U.S. Representative Jim Jordan,

Brian Kemp and Those Republicans of Georgia,

The Trump Indictments,

The Fox Corp Settlement,

The CNN Trump Town Hall,

The Hunter Biden plea deal,

The New American Cult of Personality,

and my interviews with William Bratton, Retired Chief of Police in New York City, Los Angeles, and Boston;

Rikki Klieman, Attorney, Network News Analyst, and best-selling author;

John Thoresen, Executive Director, Barbara Sinatra Children’s Center;

Katherine Gehl, co-author of The Politics Industry and founder of the Institute for Political Innovation;

Jazz artist Ann Hampton Callaway;

Outlander author Diana Gabaldon;

AI Data Scientist Lawrence Kite;

Ryan Clancy, Chief Strategist of No Labels;

Former Senator Barbara Boxer;

Former Senator Joe Lieberman;

and former Maryland Governor Larry Hogan.

Novels by Hal Gershowitz