Wolf Report National Debt

National debt hits $23 trillion: Only $22 trillion back in February

Eight months. That’s all it took for the U.S. to add $1 trillion to the national debt.

According to the U.S. Treasury’s latest numbers, the national debt has soared past $23 trillion even though it was at $22 trillion back in February. At our current rate, we’re adding $1.3 trillion in debt each year.

Normally, debt numbers don’t bother me. Debt’s great if you 1. use it productively and 2. can repay it. A $20,000 credit card balance is huge deal if you’re a middle-class family but nothing if you’re a billionaire. And so far the U.S. government’s been good for it. It’s debt to income ratio’s been pretty reasonable (at least on the scale of nations).

Yes, $23 trillion sounds like a lot (because it is) but when the U.S. economy produces $19 trillion in goods and services each year, the ratio’s not that unreasonable. You have to spend money to make money. It’s ok if debt grows as long as the income grows with it.

But the rate of debt growth is starting to become a problem. In a 12 month period ending in the third quarter, the US gross national debt rose by 5.6% while nominal GDP grew by only 3.7%. This means that debt is growing faster than the economy’s growing. Debt is outpacing growth.

According to the Federal Reserve, the current debt to GDP ratio’s 103. Not great but not terrible from a historic perspective.

The problem is that we’re growing the debt despite… as President Trump puts it… being in the “Greatest Economy in American History!”

If we’re running debt ratios of 103% during great times, when the next recession hits (and many expect it to happen starting in 2020), we might see multi-trillion dollar debt growth and historic debt ratios if we have to spend a lot on stimulus to keep the economy afloat.

Leave a Comment