Annual income twenty pounds, annual expenditure nineteen, nineteen and six, result happiness.  Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.

                                                    The Micawber Principle, David Copperfield, by Charles Dickens

Alexander Hamilton, the first Secretary of the Treasury, was determined at the outset of the new nation of the United States to pay the debts of its thirteen members and to see to it from that point on that America paid its bills.

The United States has always paid its debts promptly, which is one reason–along with political and economic stability–that it has a reputation for being a safe haven for investors, foreign and domestic.

Here we are almost more than 235 years later after the founding of the Republic. America is the richest country in the world. America is also the most indebted country in the world. With a debt of almost $33 trillion, the United States is way ahead of China, which is second with $10.6 trillion of debt. For the United States, the debt is roughly 119 percent of our GDP (gross domestic product) or about $98,000 per person. That puts us ahead of too many countries to list here. When it comes to debt, America is truly First. If it’s any consolation, Lebanon owes about $71 billion, or about 358 percent of its GDP, but only about $12,600 per person. Or there’s Japan, which owes almost $11 trillion, which is 256 percent of its GDP, about $88,000 per person.

Still, being the most indebted country in the world isn’t anything to be proud of, especially when our national debt is growing, growing faster than our GDP and threatens to grow even faster if the “big, beautiful bill” that just passed the House of Representatives remains substantially intact. It isn’t so much that we’re the most indebted nation as it is that we seem addicted to borrowing money.

According to the non-partisan Government Accountability Office (GAO), America is on track to encounter a fiscal crisis in the not-too-distant future.

The federal government is on an unsustainable fiscal path that poses serious economic, security, and social challenges if not addressed. Congress and the administration will need to make difficult budgetary and policy decisions to address the key drivers of federal debt and change the government’s fiscal trajectory. The sooner actions are taken, the less drastic they will need to be.

Debt Is Projected to Grow Faster Than the Economy Over the Long Term

 As of December 31, 2024, debt held by the public was $28.7 trillion. GAO projects that under current revenue and spending policies, debt held by the public will

• reach its historical high of 106 percent of gross domestic product (GDP) by 2027 (1 year earlier than GAO projected last year), and
• grow more than twice as fast as the economy over a 30-year period and reach 200 percent of GDP by 2047 (3 years earlier than projected last year). [Emphasis added]

Perpetually rising debt as a share of GDP is unsustainable. It has many direct and indirect implications for the economy, American households, and individuals. Risks include slower economic growth and increased chances of a fiscal crisis.

Recent history reveals participation in the debt’s growth by both parties in the White House and Congress. Once upon a time Republicans, although not in a position to make good on their position, professed to believe that the federal government should balance its budget—in other words, pay for its programs without borrowing money. Then Ronald Reagan came to the White House. Jimmy Carter, Reagan’s predecessor, had managed to balance his budget. Reagan decided that a tax cut would give the U.S. economy a shot in the arm, and he pushed through tax cuts and also increased spending. The result was big deficits, which weren’t totally erased even after Reagan presided over some large tax hikes.

Needless to say, we can’t continue to lower taxes when times are good, and increase spending when they’re not. Lebanon may be able to get away with it, and operate as a failed state, but that’s not what the richest country on Earth should adopt as a role model. More importantly, we cannot sustain debt that increases faster than our GDP.

And, by the way, how are we the richest country on Earth? Certainly not because we make a lot of money and live within our means. We obviously don’t. Americans, it should be said, want a great deal from their government—national security, healthcare for the infirm, poor and elderly, social programs, well maintained roads, world class medical research facilities, state of the art military equipment, and on and on.

The problem is, we don’t want to pay for them.

Commenting on the tariffs Donald Trump is proposing to levy, Steven Pearlstein recently wrote, “…by refusing to tax ourselves to pay for all the government services we demand — and borrowing the difference from the rest of the world — we are effectively giving households and businesses the money to buy more of the imports that the president is so determined to reduce.”

Politicians believe raising taxes is a death warrant. So, we borrow money. And now, the interest on the debt is $514 billion—more than the $498 billion spent on national defense and more than the $465 billion spent on Medicare.

If inflation persists, and the Federal Reserve has to raise interest rates, the interest payments on the national debt will also increase, as will interest rates for home mortgages, car loans, business loans and any other borrowing. If we should have a recession, the federal government could borrow more money—increasing the deficit and the national debt further—to stimulate the economy; or the government could do nothing, and let the recession play itself out over months—or years.

Meanwhile, our debt situation hasn’t gone unnoticed by would-be lenders. All three credit rating agencies have downgraded our credit rating, a move that can increase borrowing costs for consumers as well as the government. Investors are selling the bonds they bought at lower interest rates to cut their losses or so that they can buy bonds with higher interest; at the same time, with doubt about America’s economic future, investors are selling dollars so that they can buy other currencies—the euro for example—thus lowering the value of the dollar as they flood the market. A weaker dollar makes our exports less expensive to foreign consumers, but imports costlier to us.

What about the “crushing taxes” that Americans supposedly pay? Actually, compared to other comparable countries, the United States is not heavily taxed. A study by the Federal Reserve Bank of Chicago found that the United States ranks 32^nd out of the 35 largest industrial (OECD) countries in the world considering all the taxes paid (or not paid) by Americans.

 The notion of  “America First” is patently ridiculous when the proposed tax cuts are going to be offset ultimately by a significant number of foreign investors in Treasury bonds. They will most likely get a nice return on their purchase because the ever-growing national debt will increase interest rates to attract skittish bond buyers. But we are far from being independent if we have to rely on foreign loans to finance our lifestyle.

Many of us will not be around to experience the economic apocalypse, but our children and grandchildren will be—unless steps are taken to avoid it.

The GAO addressed the current situation in its latest annual report Starting in January 2017, it said, the GAO

has emphasized the need for Congress to have a broad strategy to put the government on a sustainable path. In 2020, GAO recommended that Congress consider establishing a fiscal plan that includes fiscal rules and targets. GAO’s analysis of current fiscal and economic conditions underscores the urgency of addressing the structural imbalance between spending and revenue. GAO continues to emphasize the need for Congress to have a strategy to inform the difficult policy choices that are needed to put the government on a more sustainable fiscal path.

It doesn’t seem as though Congress and the present administration are listening.

[I’m obliged to Steven Pearlstein for his comments and advice. Any errors or flaws are my sole responsibility.]