We Give Up! Government Spending and Deficits Soar Pretty Much Everywhere
The comments above & below is an edited and abridged synopsis of an article by John Rubino
A recurring pattern of the past few decades involves governments promising to limit their borrowing, only to discover that hardly anyone cares. So target dates slip, bonds are issued, and the debts keep rising.
This time around the timing is especially notable, since eight years of global growth ought to be producing tax revenues sufficient to at least moderate the tide of red ink. But apparently not.
In Japan, for instance, government debt is now 250% of GDP, a figure that economists from, say, the 1990s, would have thought impossible.
Over the past decade the country’s leaders have proposed a series of plans for balancing the budget, and actually did manage to shrink debt/GDP slightly in 2016. But now they seem to have given up, and are looking for excuses to keep spending.
In the UK, a balanced budget has been pushed back from 2025 to 2031. In the US, tax reform—the alteration of the tax code to make it simpler and more fair—has morphed into tax cutting, which is, of course, much easier.
China is taking a different path. Instead of financing big government deficits by issuing bonds, Beijing borrows relatively little but encourages its businesses, local governments and state-owned companies to borrow like crazy, so its total debt is soaring.
Debts of this magnitude can’t be repaid, which means the coming decade will be defined by how—and how quickly—the US ends up defaulting.