Now that you have awakened from your tryptophan-induced slumber after the Thanksgiving feast and had your patience tested by your nephew espousing the virtues of socialism, it is time to face up to reality again. On the menu in America are the growing interest payments appetizer, the ballooning deficit side dish, and the skyrocketing national debt main course. Like Aunt Maude’s macaroni and cheese casserole, these aspects of the country’s fiscal calamity can be challenging to digest.
A National Debt Hangover
On Nov. 25, 2022, the national debt stood at around $31.367 trillion. On Nov. 25, 2023, it was $33.827 trillion. Over the last year, the total outstanding increased by approximately $2.46 trillion. Let’s look back to Thanksgiving 2021, when the national debt was about $28.908 trillion, meaning it has increased nearly $5 trillion since President Joe Biden’s first Turkey Day in the White House. What’s more, adding $100 billion to the country’s red ink took less than a month. Done? No, one more: It took a single day to contribute $61 billion to the pile of IOUs!
The American people’s share of the national debt keeps growing daily. The 2022-23 jump gave their representation a modest boost of roughly $7,000. As of Dec. 1, every taxpayer is on the hook for about $260,000 (for each citizen, it is a little more than $100,000). These are frightening numbers, even though it is no longer Halloween. ‘Tis the season to be jolly, but not if you glance at Uncle Sam’s budget.
Of course, these account for only a portion of the story about the federal government’s books.
The nightmare on Capitol Hill is the ever-increasing interest payments. Because of rising yields on US Treasurys, the average interest rate on the debt was about 3% for fiscal year 2023, nearly double what it was in fiscal year 2021. The US government’s interest bill is the story that never ends in today’s climate, topping $1 trillion at the end of October. As a result, nearly a fifth of the federal budget is dedicated to servicing the national debt, and about a quarter of tax revenues is allocated to interest payments.
“If federal finances continue on their current path, we are only a few years from the entirety of income taxes being needed to finance the debt,” wrote Heritage economist E.J. Antoni on X Nov. 21.
These figures are why many observers have become concerned about the US government’s fiscal path. This year, Fitch Ratings and Moody’s Investors Service have downgraded Washington. “In Fitch’s view, there has been a steady deterioration in standards of governance over the last 20 years, including on fiscal and debt matters, notwithstanding the June bipartisan agreement to suspend the debt limit until January 2025,” the ratings agency said in August.
Federal Reserve, Please Help
As Liberty Nation has detailed over the last month, the US Treasury finds it increasingly difficult to auction government bonds. While there have been glimmers of hope, many of these events, which have captured the attention of Wall Street, have delivered abysmal results. Moreover, despite higher yields, foreign governments and investors also have been disinterested in US government debt as of late.
For decades, US Treasury securities were seen as the safest asset in the world. Unfortunately for American taxpayers, this is no longer the case, with investors demanding more than 5% returns. Indeed, if you purchased a ten-year bond in 2020, the value of that investment has been halved.
Federal Reserve, can you please help? For now, Fed Chair Jerome Powell and his merry men and women of policymakers appear unable to toss a lifeline to Uncle Sam. The Eccles Building is on a quantitative tightening campaign that aims to reduce its holdings of Treasurys. Of course, if a deep recession strikes and the government launches another stimulus and relief crusade, the central bank could reverse course and start monetizing the national debt again.
Santa Claus Will Rescue America
Right now, the only miracle Republicans and Democrats hope for is Santa Claus. With the Christmas season on the horizon, the politicians responsible for saddling future generations with so much debt can line up at the local shopping mall, sit on his lap, and beg him to buy Treasury securities. Will he? It all depends on whether the elected officials have been naughty or nice. Everyone knows the answer.