US Gross National Debt Jumps $723 billion in 12 Weeks, Yellen “Very Worried about Sustainability of US Debt Trajectory”



Wolf Richter wolfstreet.com, www.amazon.com/author/wolfrichter

But only a few lost souls in Congress care.

Even as lawmakers are trying to cobble together a tax-cut bill that would cut revenues by $1.5 trillion over ten years, the gross national debt has spiked $723 billion over the past 12 weeks since Congress suspended the “debt ceiling.” It just hit $20.57 trillion, or 105% of GDP.

Over the past six years, since November 2011, the gross national debt has surged nearly 40%, or by $5.8 trillion. Back in 2011, gross national debt amounted to 95% of GDP. Before the Financial Crisis, it was at 63% of GDP. There are no signs that the relentless rise in the debt is slowing down. On the contrary – the tax cuts are going to steepen the curve:

In the chart above, note the last three debt-ceiling fights – the flat lines in 2013, 2015, and 2017, followed each time by an enormous spike when the debt ceiling was lifted or suspended, and when the “extraordinary measures” with which the Treasury keeps the government afloat were reversed.

And the Fed is getting increasingly nervous about the “sustainability” of this debt.

There are only a few lawmakers left in Congress that have a sense of fiscal responsibility. One of the lost souls is Senator Bob Corker, a Republican from Tennessee, who, to address his anxieties about the deficit and the debt, wants to add a provision to the tax-cut bill that would raise taxes automatically if the economy doesn’t hit certain growth targets in the future. This “trigger” is designed to slow by a smidgen the relentless rise of the national debt. He has come under withering criticism for it from Republican lawmakers and conservative lobbying groups.

Fitch Ratings believes that “under a realistic scenario of tax cuts and macro conditions,” the US gross national debt will balloon to 120% of GDP by 2027. The way things are going right now, that is likely an impossibly rosy scenario.

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So on Wednesday, Fed Chair Janet Yellen was telling Congress about the economy, its challenges, and the “disappointingly slow” recovery since the recession. And when she was asked about this “trigger,” she said that it was up to Congress to decide how to confront the fiscal outlook, but added that she was worried about the “sustainability of the US debt trajectory”:

“The idea of triggers is motivated by the concern that some have over the picture we have of debt sustainability now and into the future, and I would simply say I am very worried about the sustainability of the US debt trajectory.”

The future of the deficit and the debt trajectory “should be a very significant concern,” she said.

On Monday, Dallas Fed President Robert Kaplan had chimed in about the unsustainability of the trajectory of the national debt. Further complicating his assessment: In addition to the $25.57 trillion in outright debt, there are also the “unfunded entitlements” with a present value of “approximately $49 trillion,” he said. And he added:

“In my view, the projected path of US government debt to GDP is unlikely to be sustainable – and has been made to appear more manageable due to today’s historically low interest rates.”

Ah yes, the admission: The Fed’s interest rate policy has made the US debt only “appear more manageable” because it brought down the cost of servicing this debt and removed an incentive for Congress to do anything about it. But when rates are rising as they are, at the same time when the debt is ballooning as it is, this debt will start imposing an ever larger burden on the budget, and it will become less and less manageable.

So here you have it. The trajectory of US government debt is “unsustainable,” according to Yellen, Kaplan, and many others. In fact, just about everyone acknowledges this except for the only people that can actually do something about it: the lawmakers in Congress. They don’t even know the meaning of “unsustainable.” It’s not part of their vocabulary. It has been replaced by “fund raising” and “campaign contributions.” And they’re happier than ever to run up the debt, no holds barred.

The Fed is increasingly pointing at “excesses,” “distortions,” and “imbalances” in the markets. Read… Stock Market Lazes Happily on a Powerful Time Bomb, and the Fed Begins to Worry

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2 Responses

  1. Zaphod Braden says:

    Get some FACTS straight …. the DOW, NASDAQ, & S&P are hitting all time highs. Unemployment is supposed to be at all time LOWS. We are supposedly having a glorious upsurge in the economy, If we do not pay off the debt NOW when will we? All this glorious economic news and we still have DEFICITS?! Why do you have to “cut taxes for the already rich” so they will supposedly be inspired to create more jobs …… when everybody is supposedly employed???!! And the true job creation is proven to be by Small Business and financed by Middle Class spending, NOT by millionaires.
    We should be raising taxes. If these Billionaires had to pay a proportionate amount equal to the benefit they derive from Us protecting Their money, property, LIVES …….. they would take an interest in getting a GOOD government not just one that serves their immediate interests …. They would insist on ending corruption and waste and balancing the books. People whine there is no such thing as “fair” taxes ,,,,, but there is . The Workers pay with blood & money for ONE house with a mortgage to the BANKSTERS ….. counting all they pay for state, local, sales, federal taxes 1/3 of their gross. The Billionaires whine they need tax cuts “to create jobs” and NEVER SERVE in uniform so they never get PTSD, amputations, maimed or die.
    TAKE 60% of their gross because they own multiple homes with NO mortgages.
    It is past time these Billionaires & mega-corporations PAY for the wars from which they profit and which protect them. Either PAY for the wars, or we put your Boards of Directors in the Front Lines to BLEED with us working stiffs. You want to move your corporation, OUR JOBS, to another country to dodge taxes here? So WE have to pay for your wars? Over YOUR DEAD BODIES. The U.S. has intervened militarily and covertly in so many nations it is impossible to recount them all but in every case the American military is protecting some investments of value to American corporations, or a strategic position or both.
    Those who benefit the most should contribute a proportionate share.
    Amazing that all these leftwing tech billionaires do not want to share THEIR wealth. They always talk left wing “communalism” but they clutch their money like it is life itself ….Even when they “give” charity it is through THEIR trusts &foundations that THEY control and reapTAX BENEFITS FROM. Even though They are always eager to spread YOUR money around……
    Time for the 1% to contribute PROPORTIONALLY to the War Efforts. Much is expected from those to whom much is given.
    Some of our Troops give ALL, or are maimed for life,and the 1% balks at giving MONEY when they have so much?!
    Cut taxes for the “Rich” so they will invest their money in creating more jobs? By that logic giving ALL your money to the Rich would make Everyone rich. Humanity already tried that. It was called FEUDALISM, a primitive form of COMMUNISM.
    LISTEN to what these neocon PSEUDO-capitalists are saying:
    “TAKE from the POOR and GIVE to the RICH”
    “FROM each according to their ABILITY, TO each according to their NEED. The POOR have the ABILITY to be squeezed for more taxes …….. and the Rich NEED more money …… to create jobs”???????.
    This is INSANITY, this is C-O-M-M-U-N-I-S-M by a different name.
    MAKE ZUCKerberg and these other Billionaires want to flood the labor pool and drive down YOUR wages with cheap illegals & invaders ….. . As it is, YOU pay to bring in and train YOUR replacements.
    The rich “Nobles” paid NO taxes and they created LOTS of jobs for the SERFS and PEASANTS………building CASTLES and making life better for the RICH-NOBILITY. Work and Taxes was all the Serfs knew. Where do the heroic figures of Robin Hood and William Tell spring from if not resistance to this inane idea? Seing this extremist idea dragged out of the muck of history proves to me that our Nation has truly been DUMBED DOWN and Public Schools need to be upgraded and intensified.
    Quit living in Never-Never Land where Wars are not paid for. The Founding Fathers of America didn’t. The Founding Fathers were rich, but they knew it was their CIVIC DUTY to contribute. It was called LEADERSHIP. They personally “raised” entire companies of men for the war. That means THEY PAID FOR THEM. Not like today when the YELLOW-BELLIED-DRAFT-DODGING Neocan WAR PROFITEERS beat the drums for endless war, and insist that YOU pay for it, while they reap profit off Defense Stocks. It is REALITY CHECK time America. Make those who pound the War Drums, GO TO THE WAR.

  2. Zaphod Braden says:

    Give the Rothchilds a choice —- total debt forgiveness or …………………..

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