George Wolfe
Are We Headed into an Economic “Black Hole?” by George Wolfe
Back in 1991, George H. W. Bush and Bill Clinton were squaring off as leaders of their own respective presidential campaigns. Bush was seeking re-election, and Clinton was making a formidable challenge that would eventually result in him winning the White House. But there was third candidate stirring up the political waters, business tycoon Ross Perot. Perot had garnered enough support to earn him the right to be included in the presidential debates.
In one of the debates, both Bush and Clinton began harping on Perot’s lack of experience in government. When Perot was given the opportunity to respond, he agreed, but then added the following zinger: “I don’t have any experience running up a three trillion-dollar debt!”
That was when the United States’ federal debt was roughly three and a half trillion dollars and 58% of the Gross Domestic Product (GDP), a figure that caused many Americans to shutter in their shoes. Today the national debt is well over TWENTY TRILLION, or 104% of GDP. It’s an amount that makes the 1991 debt seem like pocket change. By some estimates, the debt increases by roughly two million dollars a minute with the average current monthly interest being 31.7 billion dollars.
So, is this the right time, when corporate profits are high, to drastically cut taxes, driving up our ballooning national debt even more? Several economists, including Federal Reserve Board Chairperson Janet Yellen, are skeptical, noting that high deficits in the Republican tax plan will make it difficult to fight recession.
In a 2012 article written for the Business Insider, economist and author John Mauldin draws a parallel between a cosmological black hole, it’s “event horizon,” and the global economy. For my readers who may not be up on black holes and Steven Hawking, when a star collapses to form a black hole, the gravitational pull becomes infinite, so there is no escape velocity. Even light, which travels faster than anything else in the universe, cannot escape once it’s crossed the black hole’s event horizon. Furthermore, in a black hole, the laws of physics break down; our formulas simply don’t work anymore.
Mauldin postulates that a huge economic debt bubble, which is what we have today in the U.S. economy, is analogous to an expanding black hole. Once your debt and the interest it accrues have passed the point where no amount of productive earnings can pay it off, you’ve crossed the event horizon. The economic theories and formulas based on the assumptions of the growth paradigm break down, and any attempt to revive the economy by further raising the debt makes things worse.
This debt bubble is being made even more difficult to deal with by the enormous costs of hurricanes, wildfires and other natural disasters that have befallen the U.S. The cost of recovery from hurricanes Harvey, Irma and Maria, and the wildfires in California, totals in the hundreds of billions of dollars. Such disasters are increasing in number due to human caused global warming and the current administration’s denial of the science that has been warning us for years.
Tragically, we seem to be careening very close to being sucked in by this economic abyss. The gap between the rich and poor keeps getting wider, the population of working poor individuals is expanding, and a wealthy oligarchy, which benefits most from the Republican tax cuts, is replacing our “government of the people” democracy.
Donald Trump, however, is used to this. After all, he’s declared bankruptcy several times. It’s distressing that our Republican-controlled congress is following him into this economic black hole for short-term political gain, potentially spiraling our nation, and most of the world for that matter, toward economic doom.
George Wolfe is Professor Emeritus at Ball State University and former Director and Coordinator of Outreach Programs for the Ball State University Center for Peace and Conflict Studies. He also chairs the Muncie Interfaith Fellowship, is a trained mediator, and is the author of The Spiritual Power of Nonviolence: Interfaith Understanding for a Future without War.