In the upcoming presidential election, candidates are debating a plethora of important issues. However, the issue of budget deficits as they relate to the national debt have been widely ignored. It’s no secret why—raising taxes, cutting popular subsidies, and decreasing government programs is widely unpopular. In a democratic political environment, it’s hard for long term initiatives to be passed because more often than not, they’re unpopular in the short run making it nearly impossible for officials to win election. As a result, cumulative deficits have exploded. According to the U.S. Debt Clock, the national debt currently sits at $19 Trillion dollars with a federal budget deficit of $489 Billion dollars—two striking sums. However, the $101 Trillion dollars of unfunded U.S. Liabilities represents the truly sobering sum. These unfunded liabilities represent (among other things) the future social security benefits that the United States government is expected to pay, but hasn’t raised funds for. Based on the campaign so far, it seems unlikely that this important topic will receive attention. My apocalyptic scenario results from the United States defaulting on its debt. Although it’s extremely unlikely this will happen, it’s startling to consider the extent of the national debt and its impact on modern society if left ignored.
Compared to some of the other apocalyptic scenarios presented by other posts (zombies, nuclear fallout, AI invasion) the United States defaulting on its debt doesn’t seem that bad. Many of you might think “what’s the worst that can happen” or “what is the rest of the world going to do if the United States decides to default, I mean we’re pretty awesome.” Much to their surprise there would be several very important consequences. First, the United States’ near perfect credit rating would be destroyed—resulting in higher borrowing costs. The value of the U.S. dollar would collapse as confidence in the currency would disappear resulting in more dollars needed to pay for imports essentially making everything more expensive. In addition, the collapse of the dollar would lead to hyper inflation obliterating U.S. consumers. Companies would be crushed, unemployment would rise, credit would dry up. Due to globalization, these effects would be transmitted throughout the planet. Countries that hold U.S. debt, international trade partners, and foreign investors would all suffer. The cumulative effect: a spiraling global recession. If this were to happen, I’d like three people on my post apocalyptic team: Enron’s Jeff Skilling, Zach Alerhand, and Warren Buffet.
In the midst of a global recession nothing is more important than self preservation. As evidenced by his time with Enron, Jeff Skilling proved his ability to utilize his influence for personal gain. It’s been said that Skilling can “out argue God” proving invaluable in acquiring as many goods and services as possible. He has a pragmatic sense of judgment and is willing to sacrifice his ethical values for personal gain. Although, I’d need to keep a watchful eye on Jeff, his commercial expertise and argumentative excellence would greatly benefit my apocalyptic team. Next, Zach Alerhand—extremely well rounded will be essential to our team. Through his knowledge of business, markets, and sustainability he will prove resourceful in our efforts to combat the extremely poor economic environment. Lastly, Warren Buffet has proven his ability to effectively allocate capital throughout all economic conditions. He has a formidable work ethic and and has been successful in outlining potential areas for growth. He also has a strong understanding of the various forces that affect the economic environment through his vast experience with monetary policy.