The US is not bankrupt, it’s bankrupt – yet

The US is insolvent. It’s not an exaggeration, it’s an economic fact. At least it’s not bankrupt yet. There is a big difference between the two. Bankruptcy is when you are unable to pay your invoice when it is due. When you can’t pay your bills and can’t borrow money to cover them, you’ll go bankrupt.

Today, America is bankrupt. You cannot fulfill your obligations based solely on income. Investors are still lending to us, so we avoid defaults and bankruptcy. In short, we live with credit cards. As long as the card swipes, the music will play. If it declines, the party will end, which ends the financial stability of the world’s largest economy.

Let’s take a look at the numbers. Last year, the government was owed a total obligation of $15 trillion. Approximately $7 trillion funded government operations (from military programs to social programs) and $8 trillion was needed to pay mature debt. The bad news is that revenue was only $5 trillion.

This resulted in an astounding $10 trillion shortfall. $2 trillion to cover the operating deficit and $8 trillion to pay off mature debt. Last year, he covered the gap by borrowing $10 trillion in extra debt. It’s bankruptcy, it’s simple and simple. And it’s unsustainable. Our government says in its annual report.

This is not a partisan point or ideological standpoint. That’s true. Our government operates a legal ponzi scheme in which new borrowings pay the old debt. What happens when investors lose confidence and stop lending? How do you cover the $10 trillion shortage? The truth is calm. When you lose your ability to borrow, you face three horrible options.

Option 1: Dramatically raise taxes. Not just for wealthy people, but for everyone. It is impossible to raise $10 trillion each year through taxation. It would destroy the economy and give up little taxes. It’s fantasy.

Option 2: Print money to cover the shortage. It is the path to hyperinflation and economic devastation, as history has repeatedly shown us from Germany to Zimbabwe and, more recently, Venezuela.

Option 3: Default on debt. It immediately erases the $37 trillion value in US obligations, bankrupt many people and businesses, destroys global markets, destroys retirements, and causes severe depression.

The government’s nonpartisan scorekeeper, the Congressional Budget Office projects a deficit of trillions of dollars each year into a foreseeable future. The $37 trillion national debt is above 125% of GDP, and is projected to reach over 200% in the coming decades. It, like all other advanced civilizations, leads to economic collapse.

Still, no one in Washington is hitting the brakes. Politicians on both sides will keep up with more promises, borrow more and kick the road. why? Because voters reward short-term profits, not long-term discipline. Elected officials focus on the next election, not the next generation.

In the private sector, the first question for lenders is: How would you pay me back? If the borrower doesn’t have a plan, the answer is not a transaction.

In the public sector, calculations are different. Investors lend to the government despite the lack of surplus to pay off their debts. why? In theory, the government can tax or print money.

Over time, debt repayments become more expensive. Any additional borrowing will dig deeper and faster through the hole. “If you’re in a hole, stop digging.” When do you stop digging and deepening the hole?

History tells us where this ends. Civilizations do not always fall from military defeats or foreign invasions. They collapse from the time the Finance Foundation collapses. Rome, France and the UK each failed financially before failing geopolitically.

There is still time to reverse the course. It starts with education. Citizens must understand the gravity of our situation. After that, they need to demand change. Not a slogan, not a scapegoat, but a real solution. That means sharing qualification reform, serious spending discipline, and yes, sacrifices. If we can’t withstand minor pain now, we won’t be able to withstand future pain.

At Main Street Economics, we boil this down into four simple words. Please listen. learn. think. Activities. The future of our Republic depends on us. As the late Senator Everett Darkson once said, “Politicians saw the light when they felt the heat.” If voters don’t speak up, politicians will continue to give bankruptcy with a smile until disaster strikes.

Do we want to hand over the bankrupt country to our children and grandchildren? It is merciless and immoral. It would be embarrassing to us if we let it happen.

We are not bankrupt. still. But we are bankrupt. And the time is running out.

Levin is the founder and president of Main Street Economics. He wrote this Insidesources.com.