Nearly two years into President Donald Trump’s administration, “the economy has achieved feats most experts thought impossible”, reports CNBC. The combined effects of deregulation and tax reform have stimulated an otherwise stagnant economy. Real gross domestic product (GDP) increased at an annual rate of 4.2% in the second quarter of 2018. There is a record 7.1 million job openings in America. Overall unemployment is at record lows, including the lowest black unemployment, the lowest Hispanic unemployment, and the lowest women’s unemployment in 65 years. Hourly wages have increased 3.1% to the highest since April of 2009. And a bullish stock market has set a plethora of records since the 2016 presidential elections, with the Dow boasting 98 record high closings that peaked at 26,828.39 points on October 3, 2018.
Business and consumer confidence are soaring, and Larry Kudlow, director of the National Economic Council and a chief advisor to President Trump, has said, “I still believe the big story of this year is an economic boom that most folks thought impossible.” The country is enjoying an economy that, according to CNBC, even President Trump’s critics admit is a “uniquely Trumpian achievement.”
With numbers such as these, it would be reasonable to assume that America is finally poised to once again become financially solvent. After all, federal tax revenue reached record highs in 2017 and 2018. Nevertheless, our national debt continues to increase. In 2001, at the beginning of President George W. Bush’s administration, the nation’s debt was $4.4 billion. By the end of his administration, the debt had ballooned to $11.657 trillion. Likewise, by the end of President Barack Obama’s administration, the national debt had reached $20.245 trillion. And in the space of only 19 months, President Trump’s administration had already swollen the national debt by another $1.46 trillion dollars, a 7.3% increase of the overall debt.
It is not only the federal government who is indebted. All 50 states are further indebted with a cumulative state and local debt tallying over $3 trillion. And even most citizens carry a staggering level of personal debt, totaling $13.51 trillion dollars:
- Under 35 – $67,400
- 35–44 – $133,100
- 45–54 – $134,600
- 55–64 – $108,300
- 65–74 – $66,000
- 75 and up – $34,500
Truly, our nation is facing a looming debt crisis—a crisis that is only amplified by poor fiscal responsibility by our lending institutions. Particularly troubling to former chair of the Federal Reserve Janet Yellen is the over-issuance of leveraged loans. These are loans given to troubled companies that are too highly leveraged to secure a normal bank loan. Moreover, they tend to be “covenant-lite,” meaning that they lack protective measures designed to keep the company from selling-off its assets and redistributing its cash, making them exceptionally risky loans.
Regulators under former President Barack Obama helped to reduce the issuance of leveraged loans from $607 billion globally in 2013 to $423 billion in 2015. However, President Trump’s administration loosened banking restrictions, resulting in a record $650 billion new issuances in 2017 and $1.6 trillion in 2018. Anton Pil, head of JP Morgan’s $100 billion alternative investments arm, has warned, “If you look back in 2007, we were worried about cov-lite debt in 2007, and that number was about a quarter of the market. Today it’s almost 80% … If you want to worry about something in the next two or three years, this is it.”
The rapid expansion of leveraged loan debt is quickly becoming a potential crisis. According to the Bank of England, “The global leveraged loan market is larger than – and growing as quickly as – the US subprime mortgage market was in 2006.” Like sub-prime mortgages in 2008, these risky loans are being repackaged into collateral loan obligations (CLOs) and sold to investors, positioning our nation for another potential financial crisis if companies default on their loans.
Already, many of the companies who depend upon leveraged loans have a profit margin that is lower than their interest payments, earning them the status of “zombie firms.” An estimated 16% of all companies in the United States are zombie firms. As such, it is likely only a matter of time before they default on their loans.
It appears that our economy is far more precarious than we realize. As a nation, we are drowning in a sea of debt. On the campaign trail, President Trump and his fellow Republicans preached fiscal responsibility, nevertheless, despite Republican majorities in both the House and the Senate, America continues to increase its debt.
According to Deuteronomy, a nation’s economy reflects its relationship with God:
If you faithfully obey the voice of the LORD your God, being careful to do all his commandments … The LORD will open to you his good treasury, the heavens, to give the rain to your land in its season and to bless all the work of your hands. And you shall lend to many nations, but you shall not borrow. And the LORD will make you the head and not the tail, and you shall only go up and not down, if you obey the commandments of the LORD your God, which I command you today, being careful to do them, … ‘But if you will not obey the voice of the LORD your God or be careful to do all his commandments and his statutes that I command you today, then all these curses shall come upon you and overtake you’” (Deut. 28:1, 12–13, 15).
Perhaps God is using our debt to capture our attention. We have rebelled against God’s moral commandments and refused to submit ourselves to His will. On our present course, we are destined to decline in our national influence as we sink ever deeper into debt.
The solution is spiritual, not political. Multiple administrations on both sides of the political aisle have only led us deeper into debt. Until we as a nation choose to turn back to God and follow Him, we will likely continue to plunge headlong toward financial ruin.
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