The Path To $60 Trillion

Our country is ‘doing great.’ So, let’s add trillions in debt — then we’ll have a problem

Tuesday, June 10th, 2025

Bill Bonner, from Youghal, Ireland

Photo by NASA on Unsplash

Government is not the solution. Government is the problem.

—Ronald Reagan

If only life weren’t so complicated! So confounding! If only there weren’t some big, steel-toed boots ready to give a swift kick to every dumbass butt...

Democrats have been on the wrong road for a long, long time. They believe government is the solution to almost every problem. They’ve instituted several multi-trillion-dollar programs — to stop drugs, to defeat poverty, cure cancer, end racism, to make housing affordable, (and often with Republicans in the lead) to defeat ‘terrorism’ and make the world safe for US hegemony.

None of them worked. You can trace the entire US debt to these failed programs.

Republicans are still fairly new to this road...and not all of them are comfortable with it. They used to believe that too much government borrowing (and debt) would ‘crowd out’ the private sector...leaving most capital resources in the least productive sector — government. Then, after 1971, they gradually realized that they could run huge deficits — in cooperation with democrats — and kick the can far down the road.

But now decades have passed. We’re getting close to the end of that road...and the boot is headed for their own fat derrieres.

At the heart of Trump-o-nomics is the same failed fantasy. The Trump Team has solutions to things that aren’t problems...and then, their solutions become problems.

The biggest challenge the administration faced was bringing spending and debt under control. That should have been the Number One goal of its BBBA. Ken Rogoff explains why. The Financial Times:

The 2024 budget deficit was a mind-blowing 6.4% of GDP; credible forecasts suggest that the deficit will exceed 7% of GDP for the rest of President Donald Trump’s term. And that’s assuming there is no black swan event that once again causes growth to crater and debt to balloon. With the US debt already exceeding 120% of GDP, it seems a budget crisis of some sort is more than likely than not in the next five years.

The tax cuts in the Big Beautiful Budget Abomination, BBBA, include an extension of Trump’s 2017 tax cuts...along with new cuts for people earning tips, overtime pay, or Social Security. The spending cuts, such as they are, are for the future.

Meanwhile, Trump is putting the full court press on Jerome Powell, asking for a full 1% interest rate chop. The Financial Review:

US President Donald Trump urged the Federal Reserve to cut rates by a full percentage point, intensifying his pressure campaign against the central bank’s chairman Jerome Powell.

“‘Too Late’ at the Fed is a disaster!” Trump posted Friday on social media, using his derisive nickname for Powell. “Despite him, our country is doing great. Go for a full point, Rocket Fuel!”

So simple. So clear. Our country is ‘doing great.’ No problem, in other words. So, let’s add trillions in debt — then we’ll have a problem.

In the sunny forecasts of Republican number crunchers, GDP grows and the tax cuts ‘pay for themselves.’ If only it were that simple. Ken Rogoff, again:

“...the evidence, going back to several rounds of tax cuts since Ronald Reagan in the 1980s suggest that they do not nearly pay for themselves. Indeed, they have been the major contributor to the steady runup in debt during the 21st century.”

MAGA backers have their own math and their own logic. Much of the increase in debt will come from the extension of the 2017 tax cuts. But if you assume that those tax cuts never expire (by law, they terminate at the end of this year), then you can move the ‘baseline’ up, making it look like your new spending is not so bad.

Trouble is, everyone knew the 2017 Trump tax cuts weren’t going to expire. Even Joe Biden was in favor of continuing them. And moving the baseline up may make the BBBA look better (the damage was already baked in the cake) but it doesn’t really have any effect on the debt level.

Either way — no matter which estimates you use — total federal debt is headed north of $60 trillion by 2035.

Musk is right. It’s not beautiful. It’s an ugly abomination, practically guaranteeing that the US adds $20+ trillion in new debt over the next 10 years.

Then, as debt rises, so will interest rates...causing the feds to borrow even more (and raise the debt still higher) in order to keep up with the interest payments.

Finally, some future president and future Congress will come upon the can and be unable to kick it any further. They will do what they have to do...devaluing the dollar (inflation), raising the retirement age to 70 (as Denmark just did), making some benefits only available on a means-tested basis, and hiking taxes on the rich.

That’s the best case. Painful, but orderly.

But watch out. With $37 trillion in debt already, cutting taxes and interest rates is ‘rocket fuel.’ Sometime over the next 10 years, someone is bound to strike a match.

Regards,

Bill Bonner