Our National Debt Has An Ugly 34 Trillion Dollar Handle

If you have not heard, America's national debt now has a 34 trillion dollar handle. It crossed the threshold as 2024 rolled in. This is a sobering number and future budgets provide little hope the current trend will change. Today we are looking at an America that is running a wartime deficit at a time of peace. The emergence and acceptance of Modern Monetary Theory have turned our economic system upside down. Skeptics of its substance and sustainability have been brushed aside.

With America's national debt now blowing past 34 trillion dollars, it is important to keep the numbers in perspective. A Trillion Dollars Is Roughly $3,300 Per Person In America. Not every taxpayer, but every man, woman, and child. It is important to remember most of these people don't pay taxes. 

To us who believe in old-school economics, debt matters and is tied directly to interest rates and inflation. For years central banks across the world claimed a lack of inflation as the key that allowed their QE policy to continue, however, now that inflation has started to raise its ugly head much of their flexibility has been lost.

In short, the chart below shows, that our future is filled with huge ugly deficits.

Total Deficits, Primary Deficits, and Net Interest Outlays

Data source: Congressional Budget Office. See www.cbo.gov/publication/58848#data.

For years the argument that "This Time Is Different" has flourished but history shows that periods of rapid credit expansion always end the same way and that is in default. This also underlines the reality that any claims Washington makes about the budget deficit being under control is a total lie. Sadly, America is not alone in spending far more than it takes in and running a deficit. This does not make it right or mean that it is sustainable.

Click (Here) To View The National Debt Clock

 

Much of the world's so-called economic growth is the result of government spending. This has created a false economic script and like a Ponzi scheme, it has a deep relationship to fraud. Global debt has surged since 2008. Throughout history, debt has always had consequences. 

 

Much of the massive debt load hanging above our heads in 2008 has not gone away it has merely been transferred to the public sector where those in charge of such things feel it is more benign. A series of off-book and backdoor transactions has transferred the burden of loss from the banks onto the shoulders of governments and the people. Still, the debt exists. Shifting the liability from one sector to another does not alleviate the problem.

When the 2018 financial year budget was first  unveiled it was projected to be $440 billion. An under-reported and unnoticed report painted a far bleaker picture. The report titled the “Mid-Session Review” forecast the deficit much higher than originally predicted. The newer report predicted the deficit would come in at $890 billion which is more than double what they predicted in March of 2017. 

 

We should remember that not many years ago, some Washington optimists were forecasting that deficits would begin to decline in 2020 and that we would even have a small surplus of 16 billion in 2026. Since then, partly due to Covid-19 those in charge of spending have blown the lid off that glimmer of hope and replaced it with more trillion-dollar deficits going forward.

Back then, the summary that began on page one of the Mid-Session Review came across as a promotional piece using terms like MAGAnomicics. The report even went so far as to assure us that the deficit would fall to 1.4 percent of the GDP in 2028, from what was then 4.4 percent. It praised and touted the Trump administration for its vision and great work. This is a time when it would be wise to remember numbers don't lie but the people using them do. That report is an example of how to re-frame a colossal train wreck into something more palatable. 

As a result of the American economy having survived with little effect what was years ago was described as a "financial cliff" the American people have become emboldened and now enjoy a false sense of security. Today instead of dire warnings we hear news from Washington and the media that this is simply another situation that we will have to navigate through, in short, it is business as usual.

In 2019, National Debt Hit 23 Not 12 Trillion dollars

The chart to the right predicted that by 2019 the national debt would top 12 trillion dollars, instead it hit 23 trillion. Projections made by the government or any group predicting budgets based on events that may or may not happen at some future date are simply predictions and not facts. This means that such numbers are totally unreliable. The ugly truth many people ignore is that starting in 2018 entitlements became the major force carrying the deficit higher into nosebleed territory.

It is very disturbing that so many people have forgotten or never taken the time to learn recent financial history. By recent, I'm referring to the last fifty to one hundred years. The path that Fed Chairman Paul Volcker set right decades ago has again become unsustainable and many people will be shocked when this reality hits. Do not underestimate the value of insight gained from decades of economic perspective. It tells us the economy of today is far different from the way things have always been.

 

Back in September of 2012, I wrote an article reflecting on how the economy of today had been greatly shaped by the actions that took place starting around 1979. Interest rates, inflation, and debt do matter and are more significant than most people realize. Rewarding savers and placing a value on the allocation of financial assets is important. 

 

Many Americans living today were not even born or too young to appreciate the historical importance and ramifications of the events that took place back then. The impact of higher interest rates in the 1980s had a massive positive impact on corralling the growth of both credit and debt. Still, over the years that impact has diminished. In 1980 it was about billions of dollars of debt, today it is about trillions of dollars. Something has gone very wrong. We should expect what is happening today to affect and shape the level of interest rates for decades.

 

 (Republishing this article is permitted with reference to Bruce Wilds/AdvancingTime Blog)