Historians are raising alarms about the future of the United States as the world’s leading superpower due to a growing debt crisis, according to a report by Daily Mail Online on June 22, 2024. The escalating debt issue, paired with increased interest payments that now exceed defense spending, signals a critical tipping point for the nation.
A Stark Warning from History
Professor Niall Ferguson has highlighted the historical parallels between the United States and previous empires that fell due to unsustainable debt. In his theory, “Ferguson’s Law,” he asserts that any great power prioritizing debt service over defense is on the path to decline. Ferguson’s analysis draws comparisons with the fall of Habsburg Spain, ancien régime France, the Ottoman Empire, and the British Empire.
The Congressional Budget Office (CBO) projects an addition of $1.9 trillion to the national debt this year, pushing the total to an astonishing $36 trillion. This debt, equivalent to the nation’s annual economic output, could surge to $56 trillion in the next decade, reaching 122% of GDP. Rising Medicare costs and a 23-year high bank rate are significant contributors to this increase.
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Bipartisan Contribution to the Crisis
Both President Joe Biden and former President Donald Trump have significantly increased the national debt during their tenures, each contributing $7 trillion. The debt-to-GDP ratio, which saw a decline during the prosperous 1990s, has ballooned to 99% following the 2008 financial crisis and the COVID-19 pandemic.
Yale Professor Paul Kennedy and other historians warn that China’s and other Asian nations’ significant holdings of US Treasury bonds pose a substantial risk. Political disputes could prompt these countries to sell off US assets, destabilizing the American economy. Kennedy, in his book “The Rise and Fall of Great Powers,” had previously warned of the dangers of overextended powers and continues to voice concern about America’s current trajectory.
Economic and Political Implications
Economists Carmen Reinhart and Kenneth Rogoff, in their book “This Time Is Different: Eight Centuries of Financial Folly,” highlight historical precedents that illustrate the dangers of unchecked debt. For example, Spain defaulted 13 times between the 16th and 19th centuries due to its reliance on foreign loans. Similarly, the debt crises of France and Britain contributed to their declining global dominance.
The US dollar’s status as the world’s reserve currency has insulated the nation from severe repercussions, but this shield is weakening. Credit rating agencies like Fitch and Moody’s have already downgraded the US debt rating, citing governance issues and the unsustainable nature of current fiscal policies.
Future Outlook
Despite these warnings, the national debt has not been a central issue in the current presidential race. Both parties continue to make promises that could exacerbate the situation. Biden has pledged no federal tax increases for families earning under $400,000, while Trump aims to extend his 2017 tax cuts, potentially adding $5 trillion to the debt over the next decade.
Michael Peterson, CEO of the Peter G. Peterson Foundation, emphasizes the urgency of addressing the debt crisis. He warns that higher interest rates on an enormous existing debt load are unsustainable and could lead to severe economic consequences.
Historians and economists alike urge immediate and decisive action to mitigate the growing debt crisis, cautioning that the United States must heed the lessons of history to avoid the fate of previous great powers.
