The People v. The U.S. Dollar: America’s Chronic Debt
Indefinite debt leaves America’s economic future in doubt.
This post originally appeared in my monthly Substack newsletter.
Inflation has forced many Americans into a debt-based lifestyle. Everyday ecommerce transactions reflect this reality: At the end of nearly every purchase sits a “buy now, pay later” option ready to tap cash-strapped consumers. A new Federal Reserve analysis found that financially stressed households tend to use pay-later services as credit cards, making frequent but relatively cheap purchases (under $250) that would otherwise be unaffordable. Financially stable households use them less often, usually with the goal of avoiding interest on pricey items.
Pay-later is a strange form of panic buying that can only thrive in 2024’s inflation-poisoned economy. About two-thirds of Americans live paycheck-to-paycheck, making short-term financing necessary in some cases and irresistible in others. Such is the modern shopping experience.
Americans are increasingly maxing out their credit cards. Balances recently surpassed $1 trillion for the first time at $6,360 per person. Consumer debt reached $17.5 trillion last quarter, averaging $104,215 per household. Auto loan and credit card delinquencies are rising, particularly among younger borrowers.
Optimists say monthly inflation is slowing since its mid-2022 peak. However, the way these statistics are reported masks persistent problems. We’re still paying 19% more for everyday items than in 2020, including a 3% bump over the last 12 months. At the same time, real hourly wages (inflation-adjusted pay) have declined since 2020.
Inflation has always been a necessary evil in the U.S. financial system. As prices rise, the dollar sheds value. The dollar’s inflation rate has clocked a cumulative +3,000% ascent since 1913, when the Federal Reserve was established to oversee this metric. $1 then costs about $32 today, a record low.
Short-sighted monetary policy is partly to blame. Inflation increases when the Fed sets interest rates too low or raises the money supply too quickly. In recent years, the Fed held the federal funds rate near 0% from 2008 to 2015, then again in 2020–2022. Low interest rates mean low yields on otherwise-safe investments like government bonds, treasury securities, and savings accounts. Meanwhile, debt-profiting sectors benefit, including the stock market, real estate, and banks.
Whenever the money supply outsizes the economy, prices rise and the currency’s unit value falls. After the GDP tanked in 2020, the Fed bought billions of dollars of Treasuries and residential and commercial mortgage-backed securities every month to stimulate the economy, despite soaring inflation. Congress printed $5 trillion for COVID relief, then $1.2 trillion for the recovery-focused Bipartisan Infrastructure Law, and then over $400 billion for the tax incentive-fueled Inflation Reduction Act.
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There goes the dollar’s purchasing power. Wealthy consumers can always hedge inflation with high-return investments, but what about everyone else? Wages remain stagnant as the average American struggles with the ridiculous cost of living in 2024.
On the fiscal side, unsustainable levels of government spending contribute to inflation. Debt represents 123% of our GDP, compared to 91% in 2010. The U.S. is $34 trillion in debt, roughly equating to the economies of China, Germany, the U.K., India, and Japan combined. We racked up $2.24 trillion in debt last year alone.
In 2023, the federal government spent $6 trillion but only collected $4.44 trillion in revenue. This left the budget with a $1.7 trillion deficit, up 23% from 2022. The shortfall is expected to keep pace in the coming years, totaling $20 trillion between 2025 and 2034 due to mandatory spending and interest costs. If the trend holds, federal debt will reach 172% of GDP in 30 years.
As policymakers keep spending, investors are concerned about inflation, bond defaults, and currency debasement. U.S. government debt will hit $54 trillion in the next 10 years, at roughly $5.2 billion a day or $218 million per hour. A recent Bank of America note attributes this growth to “fiscal excess in the 2020s.” BofA investment strategist Michael Hartnett added an interesting prediction:
“[It’s] likely central banks may simply bail out governments in [the] coming years via quantitative easing and the introduction of yield curve control (policies that would be US dollar negative).”
As long as Congress continues to borrow without raising taxes or adjusting their ludicrous spending habits, American consumers will suffer the often-hidden consequence of a dollar being sucked dry of its value — thus, inflation.
Where is the mainstream political support for pausing the nonstop churn of our money-printing machines? This silence is likely by design. Politicians on both sides benefit from the government-to-private sector money transfer pipeline. They are preoccupied with their own grifting, preferring short-term wins over sustained economic growth for constituents. It’s an addiction. Even the government has FOMO.
It’s no secret that Congress holds stakes in Big Tech companies that do business with the government. According to Capitol Trades, last year’s top-traded issuers were Google (with 110 transactions), Microsoft (103), Nvidia (65), Apple (56), and Amazon (55). The timing of their trades is impeccable, often beating market performance. One-third of last year’s 100 trading Congressional members outperformed the S&P 500.
Follow the money further and you’ll quickly find lobbyists leeching off political grift to gain billions from federal contracts. This isn’t about politics or choosing sides. Everyone gets along behind closed doors in the Uni-Party. All factions received abundant lobbying funds in the last election. Politicians are stoking the crisis by pimping out our past, present, and future tax dollars to corporate interests, the indirect buyers. Federal lobbying hit a record $4.2 billion in 2023, with the top sectors being pharma/health, finance, and insurance. Since 2015, state and federal lobbyists have spent over $46 billion influencing public policy.
Lawmakers neglect us in their trigger-happy discretionary spending — the share of the budget they control via annual appropriations. This category eats about 30% of the federal budget. The remaining two-thirds are mandatory spending programs like Social Security and Medicare/Medicaid, plus interest expenses (which have nearly doubled since 2020, thanks to Fed policy).
Defense activities claim about half of discretionary outlays; the other 15% funds agency programs (transportation, housing assistance, public health, etc.). Last year’s Department of Defense budget topped $816 billion. (Ironically, nearly $20 billion was set aside for inflation costs, a direct result of federal spending.) Industry giants always get huge shares. The top five defense contractors alone bagged $100 billion over the last 12 months, though more than 32,000 vendors received contracts exceeding $25,000.
With global tensions rising, we should expect more military expenditures. An emergency package is moving through Congress to add $95 billion in foreign aid to our debt pile. This year’s DoD budget request is $842 billion, excluding supplemental funding with military assistance for Ukraine and Israel. Even if we don’t directly go to war anytime soon, the Congressional Budget Office still expects DoD costs to accelerate faster than inflation by 2038 due to increased personnel compensation, operation and maintenance, and weapon systems acquisition.
When we inevitably go to war again, we’ll be stuck with the tab for decades. The 20-year War on Terror amounted to $9 trillion, and taxpayers are still paying for it: roughly $93 million every hour. Our leaders continue to spend billions dropping bombs in the Middle East, while exacting a different kind of war on American wallets in the form of inflation. Members of Congress, even high-ranking ones, aren’t ashamed to profit when voting for weapons manufacturing. Lawmakers made 96 trades in defense stocks last year, some well-timed with the onset of the Israel-Hamas war. Eight (all purchases) occurred in the days after Oct. 7 when the U.S. affirmed its support for Israel.
Americans see the everyday consequences of political grift and fiscal excess beyond our control. Public outrage hasn’t boiled over yet, but the pressure is steadily rising. According to Pew Research, fewer than two in 10 Americans trust the federal government. Gallup data reveals record-low confidence across other U.S. institutions as well, including police, large technology companies, and big business. This is a healthy response. Trust should be earned. We must always question power.
Our economic problems require smart political solutions from competent policymakers with nothing to gain except the support of their people. Unfortunately, such selfless angels don’t exist in our money-fueled political machine. Addressing the roots of inflation should be an urgent effort transcending parties and ideologies. Yet, no one cares about the trickle-down effects of printing money, at least not enough to make a real change. Last year’s Fiscal Responsibility Act pretended to come to the rescue, marketing a laughable 3% reduction in federal debt by 2033: $46.7 trillion to $45.2 trillion. Big whoop.
On a global stage, our downfall is embarrassing at best and catastrophic at worst. The U.S. accounts for a quarter of the world’s GDP, but that share has steadily shrunk from its peak in the 1960s. How long before our allies and partners lose confidence in the U.S. dollar and start dumping billions in investments? Perhaps an alternative currency outside of the Western World will gain influence. One is already being envisioned in the BRICS alliance between Brazil, Russia, India, China, and South Africa.
Americans have long been tired of bearing the weight of our leaders’ spending addiction and financial interests. They fail to protect the value of our dollars. The support they’ve demanded has broken our backs, yet they keep piling on more. Our global position hangs in the balance.
The situation isn’t improving for a reason. No one in power is motivated to fix it. In fact, they’re incentivized not to.
Note: This is an opinion essay. Much like a traditional newspaper column, my newsletter is a side channel to voice my personal views and observations. It’s separate from my main gig as a journalist/reporter. You can find my journalistic work here.
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