Latest / Commentary - TJ Meadows / America’s Looming Doom Loop

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America’s Looming Doom Loop · Commentary - TJ Meadows

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  Speaker 1: Riots in France over rising living costs, political unrest, and
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  Speaker 1: soaring government debt ought to serve as a warning to
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  Speaker 1: American political leaders. Economists call what's happening a, quote, doom loop.
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  Speaker 1: Here's how it works. Government debt rises. Investors get nervous
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  Speaker 1: and demand higher interest rates. Borrowing becomes more expensive, squeezing
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  Speaker 1: government budgets. Citizens demand more services, not fewer, and certainly more.
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  Speaker 1: Don't want to pay higher taxes. Enter the populist politician,
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  Speaker 1: promising more benefits, lower taxes, and none of the difficult trade-offs.
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  Speaker 1: Voters buy it. Investors get more nervous. Borrowing costs rise again.
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  Speaker 1: And the cycle repeats. Sound familiar? France's government debt is
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  Speaker 1: about 119% of its economy. The International Monetary Fund projects
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  Speaker 1: America's debt at nearly 126%. this year. And populism? We've
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  Speaker 1: got plenty of it. Donald Trump promises to protect Social
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  Speaker 1: Security and Medicare while cutting taxes and proposing new benefits.
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  Speaker 1: Joe Biden championed student loan forgiveness. Kamala Harris promoted expanded
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  Speaker 1: tax credits. Bernie Sanders wants Medicare for all. Different politicians,
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  Speaker 1: different priorities, but the same unanswered question. How are we
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  Speaker 1: going to pay for it? America just finished a fiscal
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  Speaker 1: year with a deficit approaching $ 2 trillion. That's $ 2 trillion
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  Speaker 1: more spent than collected. Meanwhile, interest payments on existing debt
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  Speaker 1: consume money that could otherwise fund government services. Now, America
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  Speaker 1: is not France. The dollar's status as the world's reserve
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  Speaker 1: currency gives us extraordinary advantages. We can sustain borrowing that
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  Speaker 1: would overwhelm other nations. But that doesn't make us immune
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  Speaker 1: from economic reality. Everything has a cost. Government cannot do
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  Speaker 1: it all. And eventually, the choices become unavoidable. Higher taxes,
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  Speaker 1: fewer benefits, reduced services, or some combination of all three.
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  Speaker 1: The longer we postpone those decisions, the more painful they'll become.
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  Speaker 1: France is learning that lesson now. America still has an
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  Speaker 1: opportunity to act differently. before financial markets force our hand.
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  Speaker 1: But doing so requires something increasingly rare in American politics.
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  Speaker 1: Leaders willing to tell voters what government cannot afford and
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  Speaker 1: what it should not do. And voters willing to listen
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  Speaker 1: and elect those leaders in the first place.