Goldman Sachs CEO Warns of a Reckoning as U.S. Debt Continues to Surge
David Solomon cautions that America’s debt addiction threatens the country
The United States is piling on debt at a pace that even Wall Street’s top banker calls unsustainable. Goldman Sachs CEO David Solomon said recently that the math is simple — and dangerous. “If we continue on the current course and we don’t take the growth level up, there will be a reckoning,” David Solomon said at a recent interview with David Rubenstein hosted by The Economic Club of Washington.
With the country’s national debt now over $38 trillion, the speed of its climb (not just its size), is what some say is most alarming. According to the Peter G. Peterson Foundation, the jump from $37 trillion to $38 trillion marked the fastest peacetime increase on record.
“Adding trillion after trillion to the debt and budgeting-by-crisis is no way for a great nation like America to run its finances,” the foundation’s CEO Michael Petersen told Fortune last month.
The worry isn’t just the total debt. More borrowing means more buyers, and if foreign demand slips, Americans will end up carrying the load. “We have to find people to buy and finance our debt,” Solomon said. “Ultimately, it's not going to other people around the world if it keeps growing — it's going to turn to us and that crowds out investment that ultimately slows growth and it can become a problem.”
The Government Accountability Office outlined a few of the impacts of rising government debt on citizens, including higher borrowing costs for things like mortgages and cars, lower wages from businesses having less money available to invest, and more expensive goods and services.
“I think a lot of people want to know that their kids and grandkids are going to be in good, decent shape in the future — that they will be able to afford a house,” Kent Smetters of the University of Pennsylvania’s Penn Wharton Budget Model told the AP Press. “That additional inflation compounds” and erodes consumers’ purchasing power, he said, making it less possible for future generations to achieve home ownership goals.
Solomon stressed that the solution to America’s towering debt doesn’t lie mainly in tax hikes or new revenue streams. What he calls “the revenue path” is far less viable, in his view, than “the growth path.” He argued that raising the nation’s growth trajectory is critical, pointing out the “monstrous” gap in debt sustainability between compounded growth of 3% and the current trend of 2%.
Other business leaders share his sense of alarm about the debt’s trajectory. Bridgewater founder Ray Dalio has repeatedly warned that growing debt could lead to what he calls an “economic heart attack.”
Beazer Homes CEO Allan Merrill made the same point in simpler terms at a recent housing conference, saying “We want things that we don’t want to pay for” as a country.
Solomon gave one final warning, sharing widespread concerns that the US and other western economies are becoming addicted to debt-fueled stimulus, which has grown significantly since measures during the COVID-19 pandemic helped drive up consumer spending.
“Fiscal stimulus and an aggressive fiscal play is really just embedded in the way these democratic economies are operating,” he said, citing worries from the financial community with regard to the US and other advanced nations. “And it’s accelerated meaningfully in the last five years.”
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