As long as the economy grows faster than the deficit the deficit can continue to grow. The problem is that for about two decades the deficit has been growing far faster than the economy. Eventually, it consumes everything.
Since about 2008, the deficit has grown much faster than the economy. Per the GAO itself:
The federal government’s debt is growing faster than the economy—this is unsustainable over the long term.
How Could Federal Debt Affect You? | U.S. GAO
Eventually, out of control deficit spending results in inflation, dramatic cuts in government programs, and an overall lower quality of life.
This means – as the GAO has been saying every year – that difficult decisions must be made, sooner rather than later.
But no one wants to make decisions and prefers to kick the can down the road – including the road that runs out of money for Medicare and Social Security in less than 10 years.
Raising taxes seems intuitive but increased taxes can slow and diminish economic growth – to where the economy is then growing even slower (or shrinking) relative to the deficits – making this even worse. Some economists think tax rates are close to their “optimal” level to achieve all goals and some think tax rates should be lower and some think tax rates should be higher.
Paying for Government and Past Debt With a Shrinking Population
How we pay off the deficits is complicated by population demographics. The US fertility rate fell below the replacement level of 2.1 in about 1973.
We are faced with a smaller population in the future paying off the past debts of a larger population.
As of last year, the US fertility rate is 1.6. The global fertility rate is 2.3 and dropping rapidly. In some countries the fertility rate must be greater than 2.1 for replacement level, due to high infant/child and other mortality in the country.
This gets us to the present – where a smaller population in the future will have to pay down the debts of the larger population of the past – or, the Feds will use inflation to devalue existing debts.
You can see that the next generation is smaller than past generations in this US Census data population pyramid chart. These are called “population pyramids” because historically, these charts looked like pyramids, with the bottom always larger than the rows above. We no longer have pyramids as the subsequent generations are now smaller.
We have a looming labor problem that is apparent with recent unemployment in the very low single digits (for most of my life it was far higher than today) – and lots of labor strikes now occurring or being threatened.
There are proposals to address this labor shortage through
- immigration
- automation
- improvements/efficiencies in organization processes
In about 1973, about 4.7% of the US population was foreign born; today its 15% and the majority of US population growth now comes from immigration, and 100% of US population growth will come from immigration within 15 years.
Dozens of countries, including the U.S., say they intend to address the looming labor shortage and tax shortage by importing more people from abroad. A reality check: There are not enough skilled immigrants these dozens of countries want, who are willing to move to other countries.
The summary, then, is we have a time bomb on our hands.
- We cannot continue doing what we have been doing – with deficits growing faster than the economy.
- We do not currently have a solution for Medicare and Social Security commitments.
- We are already seeing the effects of the population demographic collapse – all across the country, schools are closing, colleges are closing or eliminating entire departments and programs – this is where these impacts first become apparent. College enrollment is down 15% from its peak and is forecast to decline by an additional 15% by 2030.
- In Oregon many hospital birthing centers have closed as they were serving just 1 or 2 births per week – yet had to have birth staff available/on call 24×7 – an expense that could not be continued.
- Our past model of borrowing to be paid off in future dollars from an ever expanding population has hit a brick wall.
Per Stein’s Law,
“if something cannot go on forever, it will stop.” This principle suggests that unsustainable trends, such as rising debt or costs, will eventually reach a limit and cease to continue.
We have difficult decisions to make – and “business as usual” will not lead to a good outcome.
Most people assume we can continue on with “business as usual”. I see this in social media posts that object to funding cuts for program X – but have no alternative proposals.
I am concerned about DOGE – what criteria are applied to determine programs to cut? So far (as of February 2025), there is not much transparency – it’s a mystery.
However, it is clear we cannot continue “business as usual” and must make difficult decisions and drastic cuts in spending – improve efficiency in operations – and reduce wasteful expenditures that have no clear or obvious return on investment to the U.S.
