The real-time graphic of the U.S. Debt Clock going higher and higher is familiar to many. Where is the money going? Is a U.S. economic collapse coming?
Will America’s debt contribute to a U.S. economic collapse?
A trillion dollars is beyond the grasp of ordinary people. What is a trillion dollars? A trillion dollars equals $1,000,000,000,000. That’s a 1 with 12 zeroes to the left of the decimal point. A trillion is a million millions.
In September 2023 the U.S. debt reached $33 trillion! (Only 3½ years earlier, in April 2020, the debt was less than $25 trillion.)
When the U.S. debt reached the debt ceiling set at nearly $31.4 trillion, Congress kicked the can down the road. They suspended the debt ceiling until after the 2024 elections, setting up the possibility of another battle in Congress at the beginning of 2025.
This could again “jeopardize the full faith and credit of the United States by preventing the Treasury from paying the government’s bills,” according to the House Committee on the Budget.
U.S. Debt Clock.org estimated that each U.S. citizen’s share of the debt was more than $100,000!
“About a third of the debt held by the public is held by foreign holders. Foreign countries hold a total of roughly $7.4 trillion of U.S. debt as of the end of June.”
The largest creditors are Japan, at about $1.2 trillion, and China, which recently reduced its share to below $1 trillion for the first time since 2010.
Rising interest rates could mean the government will pay $1 trillion more in just interest on the national debt over the next decade. As of October 2023 it costs $89 billion to maintain the debt, which is 19 percent of the total federal spending (treasury.gov).
How did one of the wealthiest nations in modern history become so indebted?
Some of the largest areas of regular U.S. expenditures include Medicare/Medicaid, Social Security, defense/wars, net interest on the debt and federal pensions. Add to that the extraordinary items, such as the federal government’s massive 2020 coronavirus response.
Debt comes when we spend more than we earn. Many who go into debt do so with the hope that future earnings will make it possible to pay the deficit. There is a great deal of wealth in America; but increasingly, the wealthiest seem to get richer while many people slip below the poverty line each year.
The U.S. Census Bureau reported that 11.8 percent of the U.S. population lived below the poverty level in 2018. And that was before the 2020 coronavirus crisis impacted the economy.
U.S. public debt
When you don’t have enough money to pay your bills, you must borrow it. This is also true for the United States when obligations have to be met. Government debt is often held by the public in the form of Treasury securities, which are owned by individuals, corporations, the Federal Reserve System, local governments and foreign nations.
Local, state and federal governments largely raise money through taxes, borrowing and selling securities.
So where does the U.S. stand in terms of its debt?
History.com gives this overview of the U.S. national debt from the time of the Great Depression:
“The national debt again jumped dramatically as the economy tanked and the size, scope and role of government expanded during the Great Depression and the New Deal.
“Then came World War II, when the debt-to-GDP ratio would rise above 77 percent for the first time in the nation’s history, reaching 113 percent (an all-time record) by the end of that conflict.
“In the post-war years, the national debt shrank in comparison to the booming post-war economy, which saw high GDP growth. The debt-to-GDP ratio went as low as 24 percent in 1974.
“Recession and rising interest rates soon caused it to swing upwards again, as did the huge permanent tax cuts during Ronald Reagan’s first term and increased spending on both defense and social programs, and by the early 1990s, the debt-to-GDP ratio had reached nearly 50 percent.
America has on its currency “In God We Trust.” Has this become an empty phrase?
“Economic growth in the late ’90s, combined with tax increases under both Presidents George H.W. Bush and Bill Clinton helped bring the debt load back in line, and by 2001 the national debt was less than 33 percent of GDP.
“But that would soon change, thanks to increased military spending after the terrorist attacks of 9/11, tax cuts under George W. Bush, and the arrival of the Great Recession, when GDP fell rapidly and business activity and tax revenues shrank. …
“Despite the nation’s economic recovery, and the end of the wars in Afghanistan and Iraq, the U.S. debt-to-GDP ratio has remained above 100 percent since 2013. During fiscal year 2017, the total national debt passed $20 trillion for the first time in the nation’s history. Debt levels continue to rise. …
“The COVID-19 epidemic is impacting national debts across the globe. The Congressional Budget Office projects a federal deficit of $1 trillion in 2020. An economic stimulus package from congress could prompt the U.S. national debt to surpass $25 trillion or higher.”
America, once known as one of the richest nations in history, has become a debtor nation. Even though most of the debt is owned by Americans, U.S. debt has increased dramatically in recent years. It wasn’t too many years ago, during the presidency of Bill Clinton, that the United States had a surplus.
Many factors in a free economy can challenge the effectiveness of its financial system. Greed and dishonesty by major companies have taken their toll. Financial scandals have undermined public trust.
U.S. trade deficits
In addition to the U.S. government spending far more than it takes in, people in the U.S. buy far more goods and services from other countries than they export.
According to the Washington International Trade Association:
“As long as foreigners (both governments and private entities) are willing to loan the United States the funds to finance the lack of savings in the U.S. economy, such as through buying U.S. Treasury securities, the trade deficit can continue.
“Some economists also warn that under certain circumstances, a rising U.S. trade deficit could spark a large and sudden fall in the value of the dollar, risking financial turmoil in the United States and abroad. For example, foreigners could lose faith in U.S. ability to honor its debt or no longer see the United States as an optimal place to invest in.”
Threats to the dominance of the U.S. dollar
According to the Congressional Research Service (Sept. 15, 2022):
“The dollar has functioned as the world’s dominant reserve currency since World War II. Today, central banks hold about 60% of their foreign exchange reserves in dollars . . . About half of international trade is invoiced in dollars, and about half of all international loans and global debt securities are denominated in dollars. In foreign exchange markets, where currencies are traded, dollars are involved in nearly 90% of all transactions.
“The dollar is the preferred currency for investors during major economic crises, as a ‘safe haven’ currency. During the global financial crisis of 2008-2009, for example, and amidst the economic turmoil associated with the Coronavirus Disease 2019 pandemic in 2020, investors sought U.S. dollars, expecting the dollar to retain its value.
“That demand, in turn, allows the United States to borrow more cheaply (at lower interest rates) than it would otherwise.
“The U.S. economy generally benefits from the dollar’s status as the world’s dominant reserve currency, once famously referred to as the United States’ ‘exorbitant privilege’ by France’s finance minister in the 1960s.
“Through economic sanctions that impede access to the U.S. financial system (financial sanctions), the United States leverages the role of the dollar to advance foreign policy objectives . . .
“Treasury officials in the Obama, Trump, and Biden Administrations have cautioned that extensive use of financial sanctions could threaten the central role of the dollar and U.S. financial system. Many foreign governments targeted by U.S. financial sanctions and their economic partners are increasingly exploring and creating ways to reduce their reliance on the U.S. dollar. Countries are doing so through a variety of tools: contracts denominated in non-dollar currencies, currency swap lines, digital currencies, and non-dollar payment processing systems.”
Financial curses prophesied
America has on its currency “In God We Trust.” Has this become an empty phrase?
The United States of America has historically been a Christian-professing nation founded on Christian principles that include hard work, reverence for a Creator God and a desire to help others in need. While other nations possessed great national wealth, the spirit of enterprise and opportunity certainly propelled this young nation toward hope and prosperity.
In the Bible the ancient nation of Israel began with blessings from God. Its citizens asked, “For what great nation is there that has God so near to it, as the LORD our God is to us, for whatever reason we may call upon Him?” (Deuteronomy 4:7).
Financial blessings for obedience
If a nation worships God in spirit and truth, God promises many blessings. Notice what God told the ancient Israelites.
“And all these blessings shall come upon you and overtake you, because you obey the voice of the LORD your God:
“Blessed shall you be in the city, and blessed shall you be in the country. Blessed shall be the fruit of your body, the produce of your ground and the increase of your herds, the increase of your cattle and the offspring of your flocks. Blessed shall be your basket and your kneading bowl.
“Blessed shall you be when you come in, and blessed shall you be when you go out. The LORD will cause your enemies who rise against you to be defeated before your face; they shall come out against you one way and flee before you seven ways.
“The LORD will command the blessing on you in your storehouses and in all to which you set your hand, and He will bless you in the land which the LORD your God is giving you. The LORD will establish you as a holy people to Himself, just as He has sworn to you, if you keep the commandments of the LORD your God and walk in His ways” (Deuteronomy 28:2-9).
Continuing to explain the blessings for obedience, God said, “The LORD will open to you His good treasure, the heavens, to give the rain to your land in its season, and to bless all the work of your hand. You shall lend to many nations, but you shall not borrow” (verse 12).
As for the status of those who must borrow, the Bible is clear: “The borrower is servant to the lender” (Proverbs 22:7, emphasis added).
U.S. debt crisis?
The staggering amount of national and personal debt could have serious repercussions, including a depression. If America does not pay its debts, difficult economic times could come for millions of people, especially those who depend on entitlements from the government.
Wealthy civilizations that were known for their military power and influence have collapsed in the past. Will America join the list of ancient civilizations that lie in ruin?
Incurring debt and not repaying it is a mark against the character of an individual as well as a nation. No family or nation can afford to live beyond its means indefinitely. The laws of economics, as well as the laws of God, show that default brings pain on all. God wants mankind to prosper (3 John 1:2), but God will not bless a family or nation that refuses to honor Him and pay its bills.
Is it possible that a great nation with fantastic resources could end in financial ruin? Will a financial crisis bring about a U.S. economic collapse? The future is unclear as to exactly what will happen in the years ahead. But it is sure that if Americans forsake their God and seek their own way, the blessings that have sustained us for decades will surely fade away.
Because of sin, the Bible predicts a time of great trial for the descendants of the ancient Israelites and the whole world (Jeremiah 30:7; Mark 13:19). The United States needs to honor God and pay its bills if it wants to be blessed.
For further study, be sure to read “Who Are the United States and Britain in Prophecy?” and “What Is Going to Happen to America?”
About the Author
Larry Greider
Lawrence W. Greider Jr., who goes by Larry, served in the full-time ministry of the Church of God beginning in 1973 and has served in two countries and in dozens of assignments.
