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The US National Debt - Information and Analysis


DFIN The US Debt is a current feature for DFIN.  This will be a continuing focus for DFIN going forward.  Think of this site. DFIN as a canary in a coal mine.  i.e.: an early warning

It is incumbent on every generation to pay its own debts as it goes. A principle which if acted on would save one-half the wars of the world; Thomas Jefferson

Why Do We See This as a Problem?  

History

  1. Until the mid 70s the US was focused on reducing debt.

  2. The US would typically run up debt for a war

  3.  After the war the governments focus was to pay off the debt

  4. The US Government is not immune from the dangers of too much debt. Think back to 2007 when consumers did what they could to borrow and buy one or more homes. This did not end well as 300,000,000+ remember.                                  

  5. The last time the US was debt free was after the War of 1812 during the Jackson presidency

  6. After WW2 a great effort was made to reduce the debt and pay for the war including tax rates as high as 91%




A Libertarian Perspective - Only Five President Did This Damage After Hundreds of Years

"The Jefferson administration's enduring achievement was to contain the federal government by restraining its fiscal power. That was Gallatin's work. He abolished internal revenue taxes in peacetime, slashed federal spending, and repaid half of the national debt."
National Debt






Oil and Natural Gas Prices in Europe February 2022  
Russia and China Team Up and Russia Has Troops at Ukraine Boarder

Oil and Gas Price increase





US National Debt Exceeds Thirty (30) Trillion for First Time 
February 2022  



US National Debt




 

Recent Debt Growth and Major Economic Events : https://howmuch.net/articles/timeline-us-debt-history

 US National Debt

  • Debt levels started to explode during the 1980s and 1990s, rising from $908B when Volcker raised the Fed rate to 20% to tame inflation to $5.6T when the Glass-Steagall Act was repealed in 1999.

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  • For the first 50 years in our visual from 1929 until 1979, the U.S. national debt only grew gradually. It was just $16B in 1929 or about 16% of GDP, rising to $827B or 31% of GDP in 1979.

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  • In the late 1990s, the growth of the national debt slowed down. The U.S. government actually ran a surplus in 2000, and the debt decreased as a percentage of GDP from 65% in 1995 to 55% in 2001.

 

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  • The U.S. debt resumed its skyrocketing trajectory with the War on Terror, the Great Recession and now the Coronavirus crisis. It’s projected to be well over 100% of GDP for the foreseeable future, topping $30T in 2021.






The US Trust Funds

Politicians and US Trust Funds :
The deterioration of many USA Trust Funds should have been in analysis and repair since at least 2000.  It appears that an easy fix was passed by.


US Trust Funds Graph








Trillion Dollars and Climbing


The USA Took 205 Years to Reach 1 Trillion in National Debt :
The magic date was October 22, 1981. "When Ronald Reagan took office in January of that year, the gross domestic debt, as a percentage of the nation’s annual income, had reached its lowest point since 1931: 32.5 percent. As the Republican presidential nominee, Reagan had often spoken out during the campaign against deficit spending. Once ensconced in the White House, however, he encouraged Congress to spend heavily on arms while also cutting taxes. As a result, during the eight Reagan years the national debt soared.  https://www.politico.com/story/2017/10/22/us-national-debt-tops-1-trillion-oct-22-1981-243966


History of the United States Public Debt : The 2020 US Depression is accelerating the speed to our reaching the inevitable crippling debt disaster.  In May of 2020, the US debt to GDP is at highest level since WW2.


 

US National Debt Grapg


US Debt as a Percent of GDP







150 Years of US National Debt as a % of GDP

I am not a fan of Alexander Hamilton because he was the first big government deficit spender.
The following is quoted from a Cato publication from June 2015 that is in line with my beliefs..

Fortunately for the nation, Jefferson’s election to the White House in 1800 was the beginning of the end for the big‐​government Federalists. Jefferson and his Treasury Secretary Gallatin substantially cut the debt before the War of 1812 intervened. After the war, Jeffersonian leaders pushed once again to run surpluses and pay down the debt. That anti  ​debt drive succeeded with the complete extinction of federal debt under President Andrew Jackson in the mid 1830s.


 
Outside of the Great Depression and WW2 President Johnson changed the game and ramped up spending. Only  President Clinton and Newt Gingrich had success in creating a budget surplus for a few years.

In the mid 1980s the USA accumulated 1 Trillion in debt for the first time.  In 2021 US debt will reach about 31 Trillion and we are growing the debt by at least two Trillion per year. This spending is unsustainable.


The following Graphic illustrates the total debt outstanding compared to the GNP. It is common belief that 100% is a danger point. I am not that kind. This explosion in debt will be a problem and any delay in gaining control will add to the pain for future generations.

US Debt






US Inflation -  The US Deficit Creates Money and More Money Creates Inflation

In May 2021 the market has growing concern for inflation due to the debt, FRB monetary policy and explosive Fiscal policy. Those with debt and physical assets may be hurt less than average. The low income and poor will be harmed the most.


Inflation





Global Government Debt is Becoming a Big Problem


Japan has the greatest Debt to GDP ratio but they traditionally have a high level of citizens holding of the national debt.  Still poor money management but they are not reliant on foreigners and foreign government. In the past 100% was considerded to be the end. https://bigthink.com/strange-maps/debt-to-gdp-ratio/ 

"Fourteen countries fill out the third circle (109%-138%), including some of the largest economies in the world: Canada (109.9%), France (115.8%), Spain (120.2%), and the United States (133.4%), whose debt-to-GDP ratio, according to this map, is just below that of Mozambique. As per the U.S. Debt Clock, America’s debt-to-GDP ratio is just 128%. Still, it’s the same ballpark: the country owes its creditors roughly 1.3 times all the goods and services produced in the U.S. in a year."



Japan Debt to GDP






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