Could data centers and the power grid be America’s next “renaissance?” With the U.S. national debt exceeding $37 trillion and interest payments surpassing defense spending, many articles have been written about the “debt doomsday” event coming. Such was a point we made in “The Debt and Deficit Problem.”
“In recent months, much debate has been about rising debt and increasing deficit levels in the U.S. For example, here is a recent headline from CNBC:”
“The article’s author suggests that U.S. federal deficits are ballooning, with spending surging due to the combined impact of tax cuts, expansive stimulus, and entitlement expenditures. Of course, with institutions like Yale, Wharton, and the CBO warning that this trend has pushed interest costs to new heights, now exceeding defense outlays, concerns about domestic solvency are rising. Even prominent figures in the media, from Larry Summers to Ray Dalio, argue that drastic action is urgently needed, otherwise another “financial crisis” is imminent.”
As we discussed in that article, the “purveyors of doom” have been saying the same thing for the last two decades, yet the American growth engine continues chugging along. Notably, Ray Dalio and Larry Summers focus on only one solution: “cutting spending,” which has horrible economic consequences.
“Furthermore, investors must understand a critical accounting concept: that the government’s debt is the household’s asset. In accounting, for every debit there is a credit that must always equal zero. In this case, when the Government issues debt (a debit), it is sent into the economy for infrastructure, defense, social welfare, etc. That money is “credited” to the bank accounts of households and corporations. Therefore, when the deficit increases, that money winds up in economic activity, and vice versa. In other words, those shouting for sharp deficit reductions are also rooting for a deep economic recession.” – The Deficit Narrative
The other challenges with cutting spending are that it is politically toxic, and tax hikes drag on growth.
However, one solution that all the mainstream “doomsayers” overlook is raising productivity and GDP through private-sector capital investment. In other words, as the U.S. did following World War II, it is possible to “grow your way out of your debt problem.”
That’s where the AI data center boom and massive electricity demand come in.
Hellbound and Down 