The world is sinking deeper into debt

For once, Finland is firmly part of a global trend: countries around the world are sinking deeper into debt, and there is no visible end to the borrowing. The trend may accelerate because taking on debt is politically less painful than stopping it.

Debt does not automatically create a crisis if the economy grows faster than borrowing. It can also be tolerable when it demonstrably creates future growth or prevents spending from rising later. But the article says growth in almost all heavily indebted countries is failing to keep pace with debt.

The United States, it argues, does not meet those mitigating conditions. Its debt already exceeds the size of its gross domestic product, while debt-servicing costs are also enormous. Under President Donald Trump, the article criticizes spending on what it calls senseless purposes, including the costly war against Iran and expensive domestic projects it describes as unnecessary.

Trump claims that taxes and tariffs on imports will generate revenue from trading countries to offset the debt. The article says ordinary Americans will primarily pay those charges, while tax increases capable of correcting the situation are unlikely during his presidency. It also argues that US borrowing is not reducing future costs, especially as climate change creates additional spending. The administration’s industrial and economic policies, in the article’s view, are accelerating rather than limiting climate change.

The United States still benefits from having the world’s largest economy and the dollar’s role as the global reserve currency. Strong demand for dollars helps keep borrowing costs under control, but the article says the situation is becoming more dangerous. Rising government-bond yields worldwide and Trump’s remarks could move rates more easily in an already sensitive market. Climate damage, efforts to counter global warming and higher European defense spending are all increasing pressure on public finances. The article singles out France as Europe’s greatest concern, despite noting that Greece may have a worse debt ratio, because France is the euro area’s second-largest economy and a potential political risk.