America has a debt problem. When President Obama took office in 2008, the national debt was $6.3 trillion; when he left office, it was $14.4 trillion. He added more debt than all the past presidents combined. After four years of President Trump, we are sitting on $27.2 trillion in national debt and have the highest debt-to-GDP ratio in United States history.

This cannot continue forever — other countries will eventually realize Americans can’t pay back the debt they’re in.

This isn’t the country’s only debt problem. We have an individual debt crisis, too. This is the amount of debt owed by individuals within the economy. Americans save little money and spend a lot, resulting in them spending money that they don’t have by going into debt. The savings rate is the measure of the percent of income individuals within an economy save. For generations, the United States has been known to have an extraordinarily low savings rate in comparison to other countries, particularly Asian ones.

The data on this are quite clear. Pre-COVID-19, the savings rate in the United States only exceeded 10 percent once, very briefly. This means Americans are spending over 90 percent of their income on average and saving little. In contrast, the savings rate in China has never once dropped below 25 percent in the past 25 years and peaked as high as 39 percent. In Singapore, the savings rate over the past 25 years has remained between 40 and 55 percent.

Both the savings rate and the consumer debt crisis have similar causes, some of which are cultural. Americans have had a consumer culture for decades, which is not as prevalent in many Asian countries. However, in terms of policy, perhaps the biggest reason is the Federal Reserve System (aka the Fed). The Fed is known as the “banker’s bank.” It lends money to banks that then lend to citizens. When the interest rates are low, banks lend out more money, thus expanding the economy measured by gross domestic product (GDP) or the stock market. When interest rates are high, banks lend out less money, shrinking the economy. High interest rates make it harder to get a loan and will incentivize saving money.

When the Fed keeps interest rates too low for too long, this causes individuals to go into more debt in order to purchase more. On the surface, it will boost GDP. As people buy more, the economy appears to be flourishing. However, GDP only measures what’s produced in the economy. It would be like saying that a person who takes on massive amounts of credit card debt to buy a fancy car, a new swimming pool and a nice house is rich. In reality, they only have the appearance of wealth, and have not actually earned the money to buy everything they currently own. Eventually, they too will have to pay off their debts, likely resulting in bankruptcy.

President Trump’s hypocrisy surrounding debt is astounding. For decades, Trump has been warning that the national debt was dangerously high. In 2016, he correctly pointed out several of the problems mentioned so far. He repeatedly campaigned on eliminating the national debt, claiming he could do this within eight years. In addition, he pointed out the fact that the Fed was holding interest rates too low for too long, furnishing a high GDP and stock market through debt without strengthening the economy.

He was right, but he did not have the political guts to fix the problem.

After saying that the stock market was only high artificially during his campaign,Trump almost immediately began tweeting and bragging about how high the stock market was. Similarly, after campaigning on the interest rates being too low, he began saying they weren’t low enough. After repeatedly attacking several past presidents on the national debt, he may have added more debt in one term than Obama did in two. When staffers brought up the oncoming debt crisis to Trump in 2018, he simply replied “yeah, but I won’t be here.”

This current economy is unsustainable. An economy with no savings cannot handle major shocks.

Think of an individual who spends every cent they have and has no savings in the bank. What happens to them if they lose their job? They are suddenly put in a very tough spot.

The pandemic occurred in just about the worst possible economic situation. Without savings, people had no way to pay the bills when lockdowns began and millions of people lost their jobs. This led to an eviction crisis since many could not pay their rent — an estimated 19 to 23 million Americans are currently at risk of being evicted.

The rebuttal to this seems to be that if the government prints more money as a “stimulus” package, then those struggling will be able to pay their bills. This comes with several problems. First, most of the stimulus money went to big corporations and big banks as opposed to everyday Americans. Second, even if the money did go to everyday Americans, the effects of a stimulus bill would be worse than the problem itself, as I explained in a previous article.

In order to fix the national debt, the United States is going to have to drastically cut government spending. This means reverting back to capitalist ideals and creating a government structure that runs budget surpluses fairly consistently. The most free market system that currently exists, in Hong Kong, ran budget surpluses 9 out of the past 10 years. In addition, we must phase out Social Security, Medicare and Medicaid as well as end the war on drugs, all of which are expensive programs which are in fact counter-productive to their purported goals. We must also cut our defense spending by pulling troops out of other countries.

Bradley Forrest can be reached at [email protected].