Good morning. Iran and the U.S. exchanged strikes, and each side blamed the other for breaking their truce. President Trump insisted late last night the cease-fire was still in effect. Follow the latest updates. We have more news below — and a dispatch from the American pavilion at the Venice Biennale. But first, I’ve asked my colleague Evan Gorelick what it means that America’s national debt is bigger than its entire economy.
Seeing red
Not long ago, the national debt was a scandal. Economists said it would wreck the financial system. Voters stewed. A 1990 poll found that 76 percent of Americans regarded the deficit as “a very serious problem calling for immediate action.” Presidential candidates ran against it; the 1992 race was a referendum on different belt-tightening proposals. At the time, the debt was around $4 trillion. Now it’s over $31 trillion, bigger than our entire economy. Here’s what that means: If the federal government were to demand, for an entire year, that all workers hand over 100 percent of their wages, that all landlords hand over 100 percent of their rents, that all investors hand over 100 percent of their capital returns and that all corporations hand over 100 percent of their profits, then at the end of that nightmarish year, the government would still be in debt. That’s not healthy. The United States hasn’t held this much debt since World War II. And it’s still growing, fast.
Yet neither voters nor politicians seem worried, my colleague Tony Romm writes. Both parties keep cutting taxes, even as aging Americans receive more money from Medicare and Social Security. Lawmakers keep spending more on the military. And the Treasury must make debt interest payments so huge that they exceed the annual cost of Medicare. Our views on the debt, clearly, have changed. Why? Caution to the windIn the ’80s, we treated government debt like personal debt. A red ledger reflected poor judgment and a corrupt character. It seemed “irresponsible, inequitable and immoral,” Steve Hanke, who served on Reagan’s Council of Economic Advisers, told me. Voters agreed, and they picked leaders who finally balanced the federal budget in 1998. Then came a shift:
George W. Bush took that insight to the bank. He cut taxes while spending trillions to fight wars in Iraq and Afghanistan. After the 2008 mortgage crisis, the government spent trillions more to revive the economy. Borrowing kept rising, even as the conditions that made it tolerable disappeared. Interest compounded. A global pandemic later, and we’re $31 trillion in the hole. The reckoningThe solutions to this problem have never changed: spend less, tax more, or both. But the urgency to deal with it is gone. Even the fiscal hawks in Congress voted last year for tax cuts that will increase the debt by $3 trillion. Rating agencies have downgraded our credit, and many economists say we’re entering a period of protracted higher interest rates. Can we keep borrowing forever? In about 20 years, no amount of tax hikes or spending cuts will be able to stop the country from defaulting on its debt, according to projections shared by Kent Smetters, an economist at Wharton. If America defaults, the price of borrowing will skyrocket, starving businesses of cash and throwing the economy into crisis. Governments rarely allow that; instead, they often print money to pay. But doing so causes hyperinflation and makes everyone poorer. Both outcomes are terrible. We’re collectively betting that the country will grow its way out of this mess before then. If the economy gets bigger — say, because of an A.I. productivity boom — then Americans will get wealthier, and the government may collect enough in taxes to retire decades-old debt. But economists expect the labor force to shrink, too, and displaced workers may need financial support. It could be a wash, Smetters told me. Without a new approach in Washington, the debt probably isn’t going anywhere. Related: On “Interesting Times,” the billionaire investor Ray Dalio warns that the U.S. is repeating fiscal mistakes that ended great empires. Listen to the podcast here. Back to you, Sam.
War in the Middle East
Politics
Around the World
Cruise Ship Outbreak
Why does the United States maintain so many military bases in the Middle East? How do we compare with Russia and China? How many military bases do they have in foreign countries? | Tom Ahlberg | Gig Harbor, Washington Anton Troianovski, who covers global diplomacy, writes: The Persian Gulf war in 1991 ushered in the era of permanent, large-scale military bases in the Middle East — in part to protect oil supplies. The rationale evolved to include crushing Al Qaeda, promoting democracy and fighting the Islamic State. The bases are part of a military network spanning the globe that officials say helps project America’s economic and political power. Russia and China also have global ambitions, but their military footprint is much smaller. Russia’s main military presence outside the former Soviet Union is in Syria, where its influence has declined after the fall of the Assad regime in 2024. China has an African base near the Red Sea and is expanding elsewhere — Cambodia, for instance. Have a question for The Morning? Ask us here.
Meta is dying, despite its immense wealth and influence, Julia Angwin writes, arguing users should log off and close this chapter of the social-media revolution. The Pentagon says the war in Iran has cost $25 billion. But the economist Justin Wolfers estimates that the true cost will be in the hundreds of billions of dollars, possibly trillions. The Times Sale ends soon: Expand your knowledge with our experts. Take advantage of our best offer and gain understanding and insight in every area of life. Just $1 a week for your first year of unlimited access to news, culture, cooking and more.
Remembering: New brain research might someday help people with dementia preserve their memories. Influenced: Half of U.S. adults under 50 get health and wellness information from influencers or podcasters, research found. Your pick: The most-clicked story in The Morning yesterday was about doing the minimal effective amount of exercise.
72,000— That is how many children participated in a recent digital detox across five European countries, giving up their smartphones or strictly limiting their time online. The Times interviewed 14 Austrian participants about the experience. “The children spoke of a world transformed,” wrote our reporter. |
