US National Debt has crossed above $27 trillion for the first time. A year ago it was below $23 trillion.
As a percentage of economic output (GDP), our national debt has never been higher, steadily increasing over the past 40 years…
Why is the ratio going up?
Simply put: we have been borrowing at a faster rate than the economy is growing – for a long time.
Over the last 15 years, the US National Debt has increased at a rate of 8.5% per year versus an increase in US economic growth (nominal GDP) of 2.8% per year.
This has been true during both recessionary and expansionary environments, and both Democratic and Republican administrations.
The one constant has been more debt.
From June 2009 through February 2020, we had the longest economic expansion in US history.
If there was ever a time when a “balanced budget” should have been possible, it would have been during these years.
But the budget was never balanced as there’s simply no appetite for the short-term pain that might come from slowing the borrowing binge. Above all, most politicians simply want to remain in power, and they will kick the can far down the road in furtherance of that goal. And so, during the longest expansion in US history, the National Debt more than doubled, rising from $11.5 trillion to $23.4 trillion.
When the pandemic recession hit back in March, the immediate solution from both parties was the same: borrow and spend like never before. And have the Federal Reserve buy all of that new debt and more in an attempt to keep interest rates from rising.
With fears of “another Great Depression” occurring, no one dared to argue against it. Doing so would’ve been political suicide.
But as the economy reopened and started to recover, a strange thing happened: the calls for adding more debt and sending out more free money continued, with little opposition.
With all of the political division we have seen this year, Americans have never been more united on this one issue: the belief that there is absolutely no downside to borrowing from our future so that we can spend more money today.
All aboard the free money train. Next stop: $28 trillion.
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