The ticking time bomb that will result in the destruction of America:
No, this time we’re not referring to Donald Trump, though he does fit the description. This time we mean federal “debt.”
After 85 years of wrong predictions, the debt scaremongers continue to tell the same old lies.
When I say “85 years,” here is what I mean: Historical bullshit about federal “debt.” From Sept. 26, 1940 to August 12, 2025.
Here are excerpts from the latest scaremongering article, this one from Fortune Magazine:
Some form of crisis is almost inevitable’: The $38 trillion national debt will soon be growing faster than the US economy itself, watchdog warns
Story by Nick Lichtenberg, Jan 22, 2026 • The United States national debt has reached a precarious milestone, hitting 100% of Gross Domestic Product (GDP) and placing the nation on a trajectory that could trigger six distinct types of fiscal crises, according to an ominous new warning issued Thursday by the Committee for a Responsible Federal Budget (CRFB).
Well, in the first paragraph, we see “precarious,” “crises,” “ominous,” and “warning.” Get the picture?
First, it’s not a new warning; it’s an old warning. The precarious, ominous warning about crises comes from none other than the Committee for a Responsible Federal Budget, the notorious scaremonger that has been making exactly the same wrong claim since 1981 and still seems not to have learned anything from its ongoing abject failures.
With the national debt now effectively equal to the size of the entire U.S. economy, the nonpartisan watchdog’s latest report, “What Would a Fiscal Crisis Look Like?” outlined a dangerous future ahead.
“If the national debt continues to grow faster than the economy,” the report said, “the country could ultimately experience a financial crisis, an inflation crisis, an austerity crisis, a currency crisis, a default crisis, a gradual crisis, or some combination of crises. Any of these would cause massive disruption and substantially reduce living standards for Americans and people across the world.”
That’s a lot of crises to have predicted but never seen come true.The report warned that unless policymakers enact a “thoughtful pro-growth deficit reduction package,” disaster likely lies ahead.”The United States is deeply indebted, and its finances are on an unsustainable long-term trajectory,” the report concluded. While it’s “impossible” to know when disaster will strike, “some form of crisis is almost inevitable” without a course correction, the CRFB said.
The “Austerity Crisis”: Historic economic collapse
Among the most alarming scenarios detailed is the “Austerity Crisis.” In this potential future, a loss of market confidence would force lawmakers to enact abrupt, massive spending cuts or tax hikes to quell panic. While deficit reduction is necessary, the CRFB warned that rapid implementation of such austerity measures during a weak economy could trigger the worst economic contraction in nearly a century.
Let’s pause to catch our breath from the “disaster,” “unsustainable.” and “alarming” situation to ask, why there would be a “loss of market confidence.”
We have been on the same “long-term trajectory” for 85 years, during which time the economy (Gross Domestic Product) has grown from about $50 Billion to to about $38 Trillion, an increase of about 76 THOUSAND percent.
And here we are, after that 76,000% increase with the strongest economy in our history and in the world. No disaster, no crises, none of the terrible events the CRFB and others have predicted.
The report estimated that a fiscal contraction equivalent to 5% of GDP could reverse modest growth into a 3% economic shrinkage. This would mark a recession deeper than any recorded in the postwar era, with U.S. output not shrinking by more than 2% year over year since 1950. Such a scenario would likely cause unemployment to spike and business closures to multiply, creating a self-reinforcing depression.
What fiscal contraction? The economy is measured by the formula: GDP = Federal Spending + Nonfederal Spending + Net Exports.
Federal “debt” rises when Federal Spending increases. while federal taxes decrease (allowing Nonfederal Spending to increase).
So the CRFB’s suggestion to cut federal spending and/or increase taxes is precisely what is required to reduce GDP, i.e., cause a recession if we are lucky and a depression if we aren’t so lucky.
Here is precisely what the CRFD wishes to do:
U.S. depressions come on the heels of federal surpluses.
1804-1812: U. S. Federal Debt reduced 48%. Depression began 1807.
1817-1821: U. S. Federal Debt reduced 29%. Depression began 1819.
1823-1836: U. S. Federal Debt reduced 99%. Depression began 1837.
1852-1857: U. S. Federal Debt reduced 59%. Depression began 1857.
1867-1873: U. S. Federal Debt reduced 27%. Depression began 1873.
1880-1893: U. S. Federal Debt reduced 57%. Depression began 1893.
1920-1930: U. S. Federal Debt reduced 36%. Depression began 1929.
1997-2001: U. S. Federal Debt reduced 15%. Recession began 2001.
The following paragraph demonstrates CRFB’s economic ignorance.
As an example of such an austerity crisis, the CRFB pointed to Greece in the 2010s during the Great Recession, when economic weakness led to an “untenable spike” in borrowing and bond yields, prompting a painful set of austerity measures that decimated the economy and pushed the unemployment rate to record levels.
Portugal and Spain had similar, less severe crises during this period.
The problem with that example is that Greece, Portugal, and Spain are monetarily non-sovereign, while the U.S. is Monetarily Sovereign. Clearly, they don’t know the difference, which is like an accountant not knowing the difference between a profit and a loss.
America, as a large, Monetarily Sovereign, has the infinite ability to create dollars. It never borrows dollars, and it sets its bond yields at whatever level it wishes, because it does not need to sell bonds to spend money.
(The purpose of U.S. bonds is to provide a safe storage place for unused dollars. This helps stabilize the dollar and make it attractive for use worldwide.)
By contrast, Greece, Portugal, and Spain cannot create their currency, the euro. They are monetary non-sovereigns. They do borrow by issuing bonds, and the interest they pay is determined by the markets.
In short, it is impossible for the U.S. to have an “untenable spike” in borrowing, and yields are set by the Fed. The U.S. cannot be forced into austerity.
You have seen that the CRFD is ignorant of basic economics. Keep that in mind as you read the following.
Crisis scenarios: five more potential outcomes
Beyond forced austerity, the watchdog identified five other crisis scenarios:
1. Financial Crisis: If investors lose confidence in the U.S. Treasury market, interest rates could spike uncontrollably.
The Monetarily Sovereign federal government chooses to sell bonds; it does not need to sell bonds. If Investors lose confidence in U.S. bonds, they won’t buy bonds. No problem for the U.S.The report cited the 2023 collapse of Silicon Valley Bank as a “small-scale” preview of how rapid rate increases can destabilize the banking sector.
In the early 1980’s, the government chose to raise interest rates to extreme levels, in a misguided effort to fight inflation (not to sell bonds). The government can raise or lower rates at will. The Silicon Valley Bank was an example of mismanagement, not of a destabilized banking sector.More broadly, though, it pointed to 2007 as a famous example of a financial crisis, driven by collapsing valuations of subprime mortgage-backed securities, leading to a Global Financial Crisis where hundreds of financial institutions closed, housing values declined by one-quarter, output shrank 4%, unemployment rose to 10%, and the economy took years to recover.
The subprime mortgage-backed securities were an example of criminal lending and had nothing to do with federal debt. The CRFB is simply giving random financial problems as examples of excessive federal debt.
2. Inflation Crisis: To avoid default or bank failures, the Federal Reserve might be pressured to “monetize” the debt—printing money to buy Treasury bonds. This could spark spiraling inflation, eroding savings and purchasing power, similar to historical crises in Argentina or the Weimar Republic.
Contrary to popular belief, federal spending never causes inflation (a sustained, economy-wide rise in prices.) All inflations have been caused by shortages of crucial products having a national usage base, like oil and food. See: The inflation myths debunked. It’s never “money-printing.” It’s always shortages.
Hedge fund billionaire Ray Dalio has been consistently warning, including in conversation this week with Fortune from Davos, Switzerland, about the risks of the U.S. monetizing its debt.
Apparently, making a ton of money by running a hedge fund doesn’t make one a knowledgeable economist. There is no relationship between federal spending and inflation.
So, if federal spending doesn’t correspond with inflation, what does? How about oil prices?
3. Currency Crisis: Reckless fiscal policy could lead to a sudden depreciation of the U.S. dollar, undermining its status as the world’s dominant reserve currency.
It seems that “reckless fiscal policy doesn’t include federal debt. We have not seen the “sudden depreciation of the dollar” despite the 76,000% debt increase.
4. Default Crisis: Although considered “very unlikely,” a failure to pay interest or principal on the approximately $31 trillion in debt held by the public would be “catastrophic.” A default would freeze global credit markets, crash stock markets, and likely plunge the world into a deep recession.
Default cannot occur because the government can’t afford to pay interest or principal. It only could occur if Congress, ignorantly and needlessly fearing debt, arbitrarily decides not to pay —for example, if it decides to believe what CRFB preaches.
5. Gradual Crisis: Perhaps the most insidious scenario is a
slow decline where no acute event occurs. Instead, high debt crowds out investment, slowing growth over decades. Congressional Budget Office (CBO) models suggest this trajectory could leave real income per person 8% lower by 2050 than it would be otherwise.
The idea that high debt could “crowd out” investment is wrong on its surface. Federal spending adds investment dollars to the economy. So, what does ‘crowd out’ investment? Austerity — Exactly the kind of spending reduction, tax increases (i.e., lower deficits) the CRFB proposes.Triggers and warning signs The report noted that a crisis does not require a single “tipping point” but can be sparked by various catalysts, including a recession, a “poor” Treasury auction in which demand for U.S. debt falters, or a breach of the debt limit.
As we have demonstrated, recessions are caused by reductions in federal deficit spending. A “poor” Treasury is meaningless.
The Federal Reserve has used the many tools at its disposal, among which are: buying Treasuries on the open market (Quantitative Easing), providing liquidity and emergency facilities to keep markets functioning, and influencing market expectations and liquidity conditions.
The warning comes as the fiscal situation deteriorates.
It only “deteriorates” if one doesn’t understand that federal “debt” isn’t federal and isn’t debt. It’s deposits, which are wholly owned by depositors. It is nothing like personal debt.
Interest costs on the debt surged to roughly $1 trillon last year, consuming a near-record 18% of federal revenue—an amount comparable to the entire Medicare budget.
Said another way, the federal government pumped $1 trillion in growth dollars into the economy last year, which increased GDP by $1 trillion more than if the government had spent nothing.
“With debt at 100% of GDP,” the report argued, “the U.S. has less fiscal space than any time in history in case of another war, pandemic, or recession.”
Finally, the federal government, being Monetarily Sovereign and able to create dollars at will, has infinite fiscal space.It never can run short of dollars.
Rodger Malcolm Mitchell
Twitter: @rodgermitchell
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