How We Got Here In One Sentence

Tyler Durden's picture

Via John Rubino of,

In every annual budget debate since the 1980s, one side figures out that the way to get what it wants – which is higher spending – is to frame the request in a particular, ingenious way: We have to borrow and spend way more now if we want to borrow and spend way less later. History has of course proven this argument to be idiotic, but because it moves the pain of living within our means into the indefinite future, it always manages to attract enough votes to win the day.

The following article, published today by a major news outlet, spells it out in one sentence, in the title no less:

Why federal debt may have to explode before it shrinks

(CBS) – On Tuesday night, President Donald Trump will address a joint session of Congress for the first time. For a country still suffering from bitter political divisions after a contentious election, it’s doubtful his speech will heal still-raw emotions. Especially since Mr. Trump has hinted that he’ll discuss his budget plan, including a big statement on infrastructure spending and sharp cuts to federal agencies.


No matter what you think of President Trump — whether you see him as a buffoon, a wannabe despot or the savior who’ll finally Make America Great Again — here’s one big reason you should have some sympathy for him: He faces the worst fiscal outlook of any recent president.


He has taken office with the national debt nearing $20 trillion and debt held by the public above $14 trillion. According to the Committee for a Responsible Federal Budget (CRFB), debt is at a higher levels as a share of the economy than for any incoming president since Harry Truman in 1945 (chart below). Yet unlike Truman, who was handed an economy demobilizing from the fight against the Japan and Nazi Germany, the national debt is expected to continue to rise during Trump’s presidency and beyond.



Moreover, federal spending on entitlements and interest payments represents a larger share of the budget than under any other president, leaving Mr. Trump with far less room on the “discretionary” side of the budget. Adding a sense of urgency to all of this, three federal trust funds — covering highways, Social Security Disability and Medicare Hospital Insurance — are headed for insolvency over the next eight years, with a fourth set for depletion in 2030 (Social Security Old-Age Trust).


That complicates the tax reform effort the president championed on the campaign trail and touted again recently, saying his tax plan would be something “phenomenal,” with details to come within weeks. What we already know: Mr. Trump and Republicans in Congress want a simplification of the tax code and a cut in overall tax rates for households and corporations.


A tax cut will surely worsen the deficit over the near term. Yet it could also be necessary for invigorating the economy and quickening the growth needed to fix the long-term fiscal outlook. However, the efficacy of a tax cut providing fiscal stimulus is a matter of intense debate, to put it lightly, with economists evenly split on the subject according to a recent survey.


For Mr. Trump, perhaps the only way out of this fiscal bind is by worsening it temporarily, mixing a well-designed tax reduction and reform plan with targeted spending cuts and entitlement reform. No easy task. But a survey of the literature, including this 2014 paper from the Brookings Institution, suggests benefits can result from simplifying the tax code, lowering rates, and cutting “unproductive” federal spending.


According to Deutsche Bank economist Joseph LaVorgna, although the current economic expansion has been feeble and is now in its eighth year, there “remains considerable room for cyclical gains in consumption.”


With the unemployment rate below 5 percent, LaVorgna doesn’t believe job growth alone can do the trick. But a combination of personal tax cuts and wage inflation — driven by corporate tax reforms like full expensing that encourages capital spending and labor productivity gains — could do it.

Notice how the analysis begins by acknowledging the problem of soaring debt in order to soften up fiscal conservatives for the big reveal: That even right-wing think tanks and major banks agree on the need to generate “wage inflation” and “cyclical gains in consumption” via much higher government borrowing.

Since growth is always seen as anemic by those who crave higher tax revenues, this is an ever-green argument that always seems to fit the times and so always ends up being enacted, not just in the US but pretty much everywhere.

Which explains how, 40 years in, we find ourselves here:

Global sovereign debt to hit new all-time high – S&P

(Reuters) – Worldwide sovereign debt is set to reach a new record high of $44 trillion this year despite a slight reduction in governments’ annual borrowings, an estimate from credit ratings agency S&P Global said on Friday.


The United States at $2.2 trillion and Japan at over $1.8 trillion, will again be the most prolific borrowers this year, accounting for 60 percent of the total, followed by China, Italy, and France. Britain’s post-Brexit double downgrade will mean the percentage of world debt now with a top grade ‘triple-A’ rating will fall to an all-time low of just 7 percent down from around 13 percent a year ago. S&P’s calculations also showed Japan faces by far the highest debt rollover ratio this year, reaching a sum equivalent to 66 percent or two thirds of the size its economy.

The solution? More borrowing, of course — with, as always, bipartisan support.

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FreeShitter's picture

CTRL-P, its what your life is now made of.

cossack55's picture

Its painless!!!  Moar please.

O C Sure's picture

"How We Got Here In One Sentence"

...The purpose of this kind of debt is to account for the disparity between what is not and what must yet come to be as the loans are not underwritten against existing collateral but on the lashings of work yet to be done.

Cognitive Dissonance's picture

An addict will always rationalize and justify furthering his or her addiction.


That is THE signature characteristic of addition.

O C Sure's picture

Yes, and of this kind of addiction is debt without collateral. Its cause is the belief that something can come from nothing and the belief is not that of the pushers but the addicts. The pusher exists because of the addicts belief, therefore they must push the belief as part of the dope.

How/when will the addicts ever come to know that those supplying the syringes and smiling with glee at every puncture are not friendly?

hip hop rap's picture
hip hop rap (not verified) O C Sure Mar 1, 2017 11:36 AM

I'm making over $7k a month working part time. I kept hearing other people tell me how much money they can make online so I decided to look into it. Well, it was all true and has totally changed my life. This is what I do...

UnclePhester's picture
UnclePhester (not verified) cossack55 Mar 1, 2017 10:06 AM

Giving a printing press to a private, for profit bank, run by greedy 'nazi jews, and then saying it's "anti-semitic" to audit where the  SEVEN TRILLION $$ they printed for themselves under Obama went, isn't working out well for America?

flaminratzazz's picture

EXACTLY!! why indafvg do we owe these thieving satanists for the priviliage of "printing" our currency? It is fvkin insane.

Erek's picture

The Ides of March in 14 days!

But who will be playing Brutus? The FED? Congress? The President? Nobody?

Stay tuned and find out.


Honest Sam's picture


We will never know how much really Geithner, Lew, have printed and Bernanke, and Yellen have 'invested'. Believing the Balance Sheet of the FED is like a child's belief in the tooth fairy.

I don't think too many people have ever heard or read about the, "Ice-Nine", agreement (unauthorized by Congress) signed by the corrupt Bamster in Brisbane a few years ago (along with the other major central bankers' shills in other countries.)

This little gem turns depositors into shareholders (of the coming failure) of the Too Big To Fail asset managers, banks, Lord Blankfein, Jamie Dimon, and their accomplices. 

Your money in the bank is not your own from that day forward in the event of a run on the banks as happened in Greece and Cyprus. 

Even if you are a 'no fiat ever, gold standard reboot' junkie, you might want to extract your cash or at least half of it from any financial institution.  They are going to keep whatever you have there, in a black duck situation, and issue you shares in their bankrupt institution.

Goog luck trying to sell that worthlesss paper for cash and provide for your rent, food, and porn downloads. 

"There are more things, Horatio......"

GunnerySgtHartman's picture

Well stated, sir.  I would give you multiple up-votes if I could.

I've been telling people for over a year to get their money out of the banks, with the exception of 4-6 weeks' worth of living expenses ... none of them will listen; they keep saying, "My bank is safe, what could go wrong?"  I answer with "forced bail-ins when the house of cards collapses" and they reply "which will never happen."  I simply say "Google 'Cyprus bail-in'" and walk away.

Just like investing - don't put more money into banks than you can afford to lose!

GunnerySgtHartman's picture

"I'll gladly pay you Tuesday for a hamburger today." - U.S. Government

hotrod's picture

GDP was probably more accurately presented during Truman.  Safe to say the debt to GDP is highest EVER given the dishonesty of Government numbers today.

LetThemEatRand's picture

Once we became a financialized economy, GDP became meaningless even if accurately measured (which it isn't, of course).   It is now primarily a measure of the wealth of the .01%, and they are doing quite well.  If GDP were measured based solely on actual productive capacity, e.g., making things with American workers, you are right that the debt to GDP ratio would be much, much higher.

Cloud9.5's picture

Given a choice between blood in the streets and a mouse click, what would you do?

Steeley's picture

Lock and load, I'm tired of internet porn.

LetThemEatRand's picture

Any hope that existed that Trump would change the Titanic's direction -- even if a futile effort at this point -- was dashed in my mind when he said that the MIC gets dollar for dollar increases for cuts in various agencies and programs.  He wants to lower taxes but spend big on infrastructure, just to drive the point home.   And then there are all the bankers in his cabinet.  We already know what they are going to propose.  Ctrl-P to infinity.

I guess all it takes to rally the base is big talk.

LetThemEatRand's picture

I can probably figure out your reasoning, and don't disagree.

HenryKissingerChurchill's picture

moar WAR!


Obadiah's picture

BANKRUPCTY of the fiat money system and to those that must TRY to hold on to it.


It's whats for dinner BITCHEZ

Five Star's picture

The US has spent more on interest expenses on the debt than all budget deficits combined since 1947... The debt is a stupidity tax.

Steeley's picture

Debt is nothing more than inflation in incubation.

Snaffew's picture

gold may be monkey hammered, but silver is incredibly strong and holding its' own.

francissba's picture

I'll gladly pay you Tuesday to live the high life today.

It's filet mignon and truffles. Hamburger is for the plebes


FreeShitter's picture

Hamburger and alpo for the debt slaves

A. Boaty's picture

You can eat dog food,
Ya really oughta try it.

You can fricassee it.
You can deep fry it.

Flip it on over,
Cook it any way.

Eat along with Rover,
Three times a day.

Tom Paxton

numapepi's picture

Keynesian only have one play in their play book... and it is more spending.

earleflorida's picture


1860-1870 Civil War

1915-1920 WWI

1935-1955 WWII & Korean War

1990 - present :: Gulf War Bush #41 & Desert Storm/Afgan  Bush#43

Batman11's picture

You'll like this, the history of money isn't studied much these days as the US would realise its making the same historical mistake everyone makes.

The seven stages of empire:

1) Sound Money

2) Layers of public works

3) Massive military

4) War

5) Currency debasement

6) Loss of faith

7) Currency crisis

It happened the first time in Ancient Greece.

If only leaders had some common sense.
earleflorida's picture

thank you:)

i was editing my comment, but "Too Late" as your resonse lighten'd-up my most recent thoughts... having read up on 'Empires Demise' subect regarding Britain.

again thankyou for the "Seven Stages":)

Ps. is there any particular reading (text) you would recommend (historical?) :) 

Steeley's picture

Like 3rd grade, if you are destined to repeat history anyway, there's nothing to be gained trying to learn from it.

Snaffew's picture

what about obama's afghanistan, somalia, libya, syria, iraq, pakistan and yemen wars or military strikes?

Steeley's picture

Yep, Just imagine how much debt we'd need now if we didn't have all that borrowing earlier.

tbone10's picture

Clearly this is Bush's fault

Serfs Up's picture

77% debt-to-GDP is complete revisionist bullshit.

$20T/18T = 111%

The only way you get to 77% is if you exclude the amount already borrowed and spent from the entitlement programs.  

That would be like me saying I have a trillion dollars in my left pocket when all I really have in there is an IOU I wrote to myself.  Try that "accounting" as a business person and you get tossed in jail, where Janet (et al.) belongs.

Snaffew's picture

I still don't get the rally...Donny didn't say anything, but he did read---more eloquently than he can speak on his own---so the markets are surging because our president can astoundingly, (gasp)  Wow---think what they can do if he can walk and read at the same time---S&P 3k...DOW 25k...points deducted for pissing his pants maybe.