The already staggering US national debt just got even more staggering. As the coronavirus pandemic continues, the economic response to the outbreak has forced the government to borrow another $2.9 trillion for the recent “stimulus” payments signed into effect by President Trump.

Bloomberg reported, “The U.S. budget deficit may quadruple this year to almost $4 trillion. Projections from the Committee for a Responsible Federal Budget (CRFB) say that by 2023 U.S. debt held by the public will surpass records set in the post-World War II years.

And these projections only include spending enacted so far—in a three-month-old crisis that has seen emergency Congressional appropriations top $2.3 trillion.”

The publicly reported fiscal operating debt level of $24 trillion is far below the actual total, which also takes unfunded liabilities into account. The real debt level could be as high as $215 trillion. In his testimony to Congress, Boston University economist Laurence J. Kotlikoff said, “America is broke today…indeed, it may well be in worse fiscal shape than any developed country, including Greece.”

By Kotlikoff’s projections, the Federal Government has $215 Trillion of unfunded liabilities. Most of these liabilities are driven by Social Security, Medicare, and Medicaid. These programs account for 60% of the yearly federal budget. The costs of these programs will continue to rise as more and more Baby Boomers retire and sign up for government benefits, and longer life expectancies mean that retirees collect those benefits for longer stretches of time.

This is pure insanity and the government is playing with fire, especially given the heated rhetoric between the US and China. China owns a lot of our debt and any pullback in debt-buying from the Chinese could spell doom for the financial health of the country. A Chinese debt retaliation would spook markets and cause investors to demand higher yields to compensate them for taking on the added risk of buying US treasuries.

This threat might actually come to fruition, as recent reporting has suggested. The South China Morning Post has reported that “China could trigger a crash in the US dollar and financial markets by flooding the market with US Treasuries for sale, which would push down US bond prices and cause yields to spike. But that would also ignite a global financial catastrophe, hurting China as well.”

Instead, China could cut back or stop buying new US Treasury issues, which would gradually reduce its holdings of US government securities as old ones expire and are not replaced.

“In the coming months, [China could] halt its Treasury purchases to send a clear signal of its intentions. If it decides to do that, it could make actual sales [of its other holdings] at a later date.

In the meantime, China may consider imposing tariffs of its own, or reducing its US agricultural purchases. China has agreed to buy an additional US$200 billion worth of US products and services over the next two years compared to 2017 levels as part of the

phase one trade deal signed.”

It is far more likely that China would reduce their holdings of U.S. Treasuries by purchasing less than actually dumping them on the market which would ensure that they never are repaid while at the same time plunging the world economy—and the Chinese economy—into a global economic calamity.

It is time that we get our fiscal house in order…before it’s too late.