Congressional Budget Office (CBO) Director Phillip Swagel's office has been producing a stream of reports, analyses and outlooks, all showing that the federal government's growing debt burden is an unsustainable risk that cannot be ignored.
As the political class is fully intent on ignoring the CBO, Swagel turned to analogy. In an interview with the Financial Times, Swagel said the U.S. risks what's known in economic and political circles as a “Liz Truss moment.”
Truss, who was – for 44 days – Britain's prime minister, watched her government collapse as bond markets rebelled at her initial budget:
Truss's rapid fall from power came after she introduced Trussonomics, a plan for massive tax cuts aimed at Britain's wealthiest, and then reversed course and apologized for all the economic turmoil the proposal created.
That proposed “mini budget,” which also included a rollback of corporate tax hikes and a break on planned cost increases for national insurance, had sent the British financial markets into a weeks-long tailspin. On top of a deepening cost-of-living crisis, Truss's plan sent foreign investors fleeing from the British economy, driving the country's currency to a record-low value against the dollar.
Truss later, and laughably, blamed “the deep state” for her quick exist from power. The real culprit was markets balking at her plans, and the politicians in her own party running scared.
About the possibility for a similar series of events to happen in the U.S. Swagel said:
The US was “not there yet,” Swagel said. But as higher interest rates raise the cost of paying its creditors, on track to reach $1 trillion per year in 2026, bond markets could “snap back,” Swagel added.
That “snap back” is what took Liz Truss out of power. Granted, that's in a parliamentary system, where it's possible to replace leadership when the political and economic winds shift.
But make no mistake. If markets decide they are no longer comfortable underwriting our spending addiction, the snap back will still occur. The political and social repercussions will be substantial. And the “deep state” won't have anything to do with it.
The opinions expressed in this article are those of the author and do not necessarily reflect the positions of American Liberty News.
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