For decades, the U.S. government has worked relentlessly to smooth out the business cycle — determined to prevent recessions at almost any cost.

Through massive fiscal spending, easy credit, and sweeping guarantees, Washington props up the economy whenever trouble looms. This interventionist reflex has turned downturns — once a natural part of capitalism’s rhythm — into rare, almost extinct events.

Behind that stability, however, lies a staggering financial risk. The federal government now carries over $130 trillion in contingent liabilities — future promises and guarantees that don’t appear on the official balance sheet.

That $130 trillion is five times U.S. gross domestic product, The Economist reports.

These guarantees include FDIC deposit insurance protecting trillions in bank savings, backstops for mortgage lenders through agencies like Fannie Mae and Freddie Mac, and the vast, unfunded commitments of Medicare. These safety nets reassure markets and voters alike — but they also represent a massive, deferred claim on future taxpayers.

By cushioning every dip, policymakers have dulled capitalism’s natural mechanism of renewal. Such a “recession recession” also risks exacerbating a recession when it happens.

Austrian economist Joseph Schumpeter called this process “creative destruction” — the painful but necessary cycle through which failing firms are cleared away, freeing up capital and talent for new and better ideas. As Schumpeter wrote, depressions “are not simply evils, which we might attempt to suppress... they represent something which has to be done.”

Yet the U.S. has come to fear such cleansing too much. Instead of allowing weak firms or speculative excesses to collapse, the government increasingly steps in to guarantee stability.

The result: a swelling army of unproductive, speculative markets driven by influencers, meme stocks, crypto traders, and fears of an artificial intelligence bubble in the stock market.

Investors are growing uneasy as Big Tech’s $5 trillion AI infrastructure boom starts rippling through the bond market, The Financial Times reports.

The debt of major “hyperscalers” — Alphabet, Meta, Microsoft, and Oracle — has come under pressure, with bond spreads over Treasuries widening to their highest level since April.

This signals investor concern over the massive capital spending on data centers and chips needed to power artificial intelligence, which JPMorgan estimates will require every source of public and private financing — including government support.

Economic history shows that downturns often give birth to transformation. The painful stagflation of the 1970s coincided with the founding of Apple and Microsoft — companies that redefined productivity for a generation.

The financial crisis of 2008–09 paved the way for Uber, which revolutionized mobility. As the saying goes, “Great companies are born in recessions.” When easy money dries up and speculation fades, innovators are forced to create real value.

A resilient economy cannot thrive on endless stimulus and speculative fervor. It must be allowed to adapt — to prune inefficiency and reward ingenuity. America’s current strategy of guaranteeing everything and fearing failure may prevent short-term pain, but it breeds long-term fragility.

To borrow from Schumpeter once more, growth requires destruction. If the U.S. continues to suppress every economic correction, it risks trading vitality for complacency—and prosperity for promises it cannot afford to keep.