The American Economy is on a One Way Trip to Hell

Yes, you read it right. The American economy is on a one way trip to hell and no one is willing to talk about it, much less do anything about it. During the 2024 presidential election, neither candidate said a word about problem number one as if it doesn’t exist. But not talking about it won’t make it go away. It’s the cruelest tax that affects everyone, regardless of income,  personal status or state of residence. It’s inflation and even if by some miracle it’s returned to an almost acceptable number, the future augurs poorly for the United States. Inflation means that what something costs today will cost more tomorrow. This is the major stress the consumer, and by extension, the economy and nation faces.

During the administration of Bill Clinton (1993-2001) for several years the federal budget was in surplus and it appeared that the national debt was on the verge of being extinguished. Truly a remarkable occurrence! During the 2000 presidential debates, the two major candidates, Governor George W. Bush of Texas (R) and Vice President Albert Gore, Jr. (D) were asked about managing the economy without the ability to issue debt and affect bond markets and interest rates. Both gave pablum-like answers. Alas, came September 11, 2001 (9/11)  and everything changed.  On that infamous date Al Qaeda attacked the US and more than 3000 innocents were killed as two hijacked planes crashed into New York City’s World Trade Center towers, another hijacked plane crashed into the Pentagon and a fourth crashed in Shanksville, Pennsylvania. As a result of this attack, the US went to war against Saddam Hussein’s Iraq, and Taliban led Afghanistan where Al Qaeda was headquartered. These multi-year wars cost America billions of dollars and thousands of lives. Massive defense and security buildups were effected. The economy  suffered an unrelated blow in 2008, namely the sub-prime mortgage collapse which cost trillions in real wealth as real estate prices, including home values, evaporated and banks, brokerages and manufacturers faced bankruptcy. Under the successive administrations of Bush (2001-2009), Barack Obama (2009-2017), Donald Trump (2017-2021), Joseph Biden (2017-2021) and the second Trump presidency (2021-) spending has gone through the roof and is totally out of control. The defense budget is sacred and cannot be touched. Entitlements are sacred and cannot be touched. A new sacred budgetary item, one that is totally out of control, is the service on the national debt which has hit an astronomical new high of $38 Trillion. (Yes, Trillion, with a capital T! ) One trillion is a thousand billion; that’s not pocket change, that’s real money. Further exacerbating the situation is that the current federal budget deficit exceeds $2 trillion. So, the national debt is rising, interest costs are increasing and we face continuing budget deficits as the sacred budget items remain holier than ever. What can be done? It seems that the executive and legislative branches of government are fiddling while America burns. New entitlements are being dreamt up. Taxes on tips and overtime are gone. Minimum wages are going up as are prices. Tariffs, which this blog has favored as a means to re-industrialize the American economy at this point has led to foreign investment in the US but not yet to any increase in productivity. So prices are up.

The American economy today is primarily a service economy. Products as trivial as light bulbs and underwear and as major as automobiles are imported. The balance of payments of the United States is a disaster and has been for decades. No service economy has been able to sustain a formidable defense posture which requires an industrial base to support it. The American money supply continues to grow massively as the price of imported goods grows and the Treasury prints fiat money to pay its bills and the national debt continues to grow. The Federal Reserve Board and its Open Market Committee have been under intense political pressure to cut the federal funds rate. That rate affects Fed overnight loans to banks and has little effect on bank lending to consumers and home mortgage rates. Corporations have long discovered the bond market and now finance debt not by going to banks but by selling bonds directly to investors. The market sets interest rates with the same supply and demand mechanism which ultimately affects all prices (interest is the price of money). The President and the Treasury prefer lower interest rates to reduce debt service expenditures but there is little evidence this will happen. Foreign nations are major creditors of the United States and will demand proper compensation to hold Treasury debt. The attacks on the Federal Reserve Board chairman and governors must stop. The independence and integrity of the board as it fulfills its dual mandate, price stability and full employment, must be permitted to continue as their efforts are based on solid economic analysis, not short term electoral results.

To sum up, inflation is a result of a supply demand mismatch. The amount of money continues to increase but the quantity of goods available for purchase does not. There are more dollars chasing fewer goods, so inevitably prices rise as the value of the currency depreciates. Remember, it’s only fiat money. It’s not backed by anything but the good name of the government and that may not be enough anymore. The bond rating agencies have lowered US debt from a triple A (AAA )rating to double A (AA), an unprecedented downgrade. Gold, silver and other commodities are increasing in price, and the dollar is weakening against the strong euro.

What must be done? Firstly, the problem must be recognized. The continuing growth of the national debt, budget deficits and debt service are factors in creating an enduring inflationary economy. If the problem is recognized, then action may be developed and taken. Secondly, the growth of entitlements must stop, however unpleasant this may be to certain segments of the voting public. Finally, expenses must be reduced, interest rates need to be brought into line to reduce inflation and the executive and legislative branches must move towards a balanced budget which implies tax increases.  This would be exceedingly difficult for our elected officials. For them, job one is being elected or re-elected. Unhappy voters may cause them to be unemployed, heaven forbid. So, now is the time for courage rather than demagoguery. Will

our elected leaders step up? The inflationary threat to the American economy is more than a threat to the economy. It is a threat to the viability of the United States. Action is needed now!

Garry S. Sklar

Aruba, N.A.

January 29, 2026