Every metric of the US economy keeps outpacing expectations. However, economists and taxpayers alike are worried for the future. Why?
The US economy is powering through any possibility of recession. GDP growth in 2023 was much higher than expected, unemployment remains steadily low, and energy prices are decreasing to pre-Ukraine war levels. Nevertheless, most American taxpayers and economic analysts are worried about the future of the economy.
The economic resilience of the United States surprised many. The Federal Reserve brought interest rates to 5,500 points in 13 consecutive months. Many expected this would bring the US into a recession, but it wasn’t the case (even though one indicator still points to a likely recession by January 2025).
Consumer spending was the main driver of high GDP growth. After the COVID-19 pandemic, American consumers had several billions in savings and were eager to spend. That and Biden’s trillion-dollar stimulus to the economy saved his administration from a recession.
Meanwhile, inflation swiftly came down as an effect of the Fed’s hike cycle. January inflation is widely expected to reach 2.9% year-on-year, not far from the Fed’s 2% target (which predictions say will be reached by 2026).
Nevertheless, polls show that many Americans are unsatisfied with Biden’s handling of the economy. Moreover, there is one aspect of the US economy that worries virtually every analyst.
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The US’s ticking time bomb
To power through the COVID crisis first, and the Ukraine war then, the United States was forced to contract unprecedented levels of debt. At the moment, US public debt reached its all-time high at $34 trillion, accounting for 148% of the country’s GDP.
Since the 1980s, the United States has been a net importer, contracting debt with the world’s net exporters like Japan, China, and Germany. To sustain these kinds of debt, the US relied on the absolute power of the dollar. As long as the US dollar remained the global reserve currency, the national debt would be under control.
However, relying on (and therefore devaluing) the US dollar is by definition a short-sighted strategy. The purchasing power of the dollar is at its lowest historical level and continues to plummet as the country contracts more and more debt.
Furthermore, COVID savings are quickly running out, and the resilience of the US economy might be short-lived. Though it’s unlikely the US will fall into a recession, the levels of growth experienced in 2023 are likewise unrealistic.
Sooner or later, the United States will have to tackle the debt issue, halting its unbelievable growth. And the sooner it is, the better will be for future American generations.
