Regardless of who wins, the US is condemned to everlasting debt (and Mexico is not going to escape its results)

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No matter who wins, the US is condemned to eternal debt (and Mexico will not escape its effects)

October
12, 2020

6 min read

This article has been translated from our Spanish edition using AI technologies. Errors can occur due to this process.

This story originally appeared on Alto Nivel

By Antonio Sandoval

Whoever wins the next presidential election in the United States will not be able to avoid policies of debt growth, but will encourage them. It would have already laid the foundation for the next great global financial and economic crisis if we are still in the first phase of the crisis that triggered the Covid-19 pandemic

Thinking long-term may be idle, but it is not. The United States Congressional Budget Office (CBO for its acronym) has just released a projection of the country's national debt for 2050. The conclusion is terrible for the U.S. economy, as it appears doomed to constant indebtedness which, according to the source itself, could lead to the country and world economic collapse at some point in the next few years.

According to these projections the US economy would enter the first half of this century with national debt equal to 195 percent of its GDP; If we take into account the expected level for this year, this would rise to 98 percent of GDP as a result of the pandemic We're talking about the fact that the world's most powerful economy would more than double in debt over the next 30 years, with little research into the risks.

The pandemic only accelerated the process

This growth trend in United States national debt (held by other countries, private owners, and the Federal Reserve Bank) has been constant for several years, but the crises of recent years have increased the pace.

The pandemic, which no one expected last year, raised the forecast from 79 percent in 2019 to 98 percent at the end of those twelve months . Before the subprime crisis, US debt was a modest 37 percent of GDP, which shows the effects of crises with their massive waves of economic stimulus Prevent the Great Collapse or a New Great Depression . The target has been met so far, but there is no certainty of the future consequences, especially given this high level of debt in such an influential economy.

One more piece of information: if we consider that the average US debt over the past 50 years, according to figures from the United States Congressional Budget Office, is 43 percent, we can expect real economic tragedy with such debt in 2050 would be the 4, Exceed 6 times the pandemic average for the past century.

The presidents who owed the country the most

So far, the presidents have indebted the United States most of all have faced almost any military conflict or major economic problem.

For example, to lift the country out of the global economic crisis, The architect of the "New Deal", Franklin D. Roosevelt, increased the country's national debt by 1,048% . Woodrow Wilson increased it by 727% in the middle of World War I; Ronald Reagan increased it by 185% during his tumultuous tenure as president that included various medium-sized war conflicts around the world and an economic recession, while George Bush (Jr.) had to increase debt by 101% as the economy rattled from the attacks has been . Terrorists who have shaped the country forever.

But the steady rise in debt, which leads to permanent budget deficits ( The country spends more than it has available in its annual budget ), has gradually led the United States into very dangerous territory over the next few years.

Mexico, irretrievably bound to the USA

Imagine, dear reader, that the United States economy is represented by a climber ascending a cliff on a wall. Below him is another climber who represents our country's economy. When the top climber falls, the bottom climber inevitably follows. There is no possible escape.

In a few years, when the situation worsens and the debt in the United States, mainly caused by the economic impetus resulting from the first two major crises of this century (subprime and Covid-19), leads to the economic collapse of the most powerful nation in the world , Mexico will inevitably follow yes or yes .

Experts say the problem could be of great concern to both economies as both the United States and Mexico will face in these years, 2050 or earlier. an irreversible aging process in the population In addition to the years and years of paying interest on debt that undermines a country's finances and the expectation that income, at least in the United States, will rise very little in the decades to come, the CBO calculates that the average interest rate des In the first two decades of the century, which are 16.4 percent of GDP, it will rise to just 18 percent between 2040 and 2050.

The future challenges for Mexico are increasing enormously without considering the current issues it is facing due to the global context of the pandemic and its multiple impacts.

We said that thinking might be idle for the next 30 years, but it is not . Projections suggest that if nothing is done, things may not be much better than they are now. Our country cannot prevent the United States from being the debt machine it is today. But it can think about the consequences and try to lay the foundations for reducing risk .