For the last several weeks, we have studied leadership power. For much of this study, we have focused on China because, of all nations, it appears to be most intentional and aggressive about developing its leadership power. Now we examine the United States. The first aspect of leadership power we will look at is debt.
This month, the US reached a debt level roughly equal to the US GDP, $26 trillion. Such a debt-to-GDP level has not been seen since World War II. For most of the post-World War II period, the US debt ran at roughly 60% of GDP. Since 2000, however, the debt has quadrupled. The wars in the Middle East, the Great Recession, soaring entitlement spending, and now Covid has conspired to plunge the nation into debt levels not seen in over a half-century. While borrowing to bail out the economy is certainly understandable and justified, one cannot forget the other side of the coin—the obligation to pay the money back.
After World War II, the national debt was roughly 120% of the US economy. President Truman undertook massive cost cutting measures to drive it down. It seemed to be the mantra that each generation had to pay its own debts—the idea of leaving it to one’s children never entered anyone’s mind. This onus seems to have been forgotten.
What has not changed, however, is the effect of debt on leadership power. Debt declinates wealth. Having one of the highest per capita incomes in the world doesn’t help when your per capita debt is also one of the highest in the world. Elected officials need to recognize the inverse relationship between debt and leadership power. Otherwise, the US will eventually lose its leadership position.
Reference:
Jim Tankersley, “Federal Borrowing Amid Pandemic Puts U.S. Debt on Path to Exceed World War II,” New York Times, 2 Sep 2020, accessed 24 Sep 2020 from https://www.nytimes.com/2020/09/02/business/us-federal-debt.html
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