U.S. Debt

Every now and then I’m reminded about an unfortunate fact about the American economy: the U.S. has massive debt problems.

U.S. debt to GDP continues to climb and that's problematic for the country on a long-term basis. Countries that have extreme debt long-term tend to have less growth potential than countries that have no debt.

There's a simple solution; spend less or tax more. Neither seems to be terribly appealing right now to the powers that be. Though massive debt less of a problem for us and more of a problem for our children, I'm sure that statement gives you no comfort.

Click below for the latest national debt clock. It's a bit sobering.
www.pgpf.org/national-debt-clock

I don’t think the U.S. economy is going to crash, but I do believe that economic growth will be stunted over the long-term if we continue with such high levels of debt on the federal balance sheet. I wish I had a simple solution, but I do not. Instead, we must invest based on the perspective that crushing debt is here to stay.

Here's a few descriptive paragraphs about the national debt.

***

Begin quote

“The term "national debt" refers to the outstanding financial obligation of a country. The national debt is what the federal government owes its creditors. It's made up of different types of debt, such as that which is held by the public and federal government trust funds.

The national debt represents the sum of past annual budget deficits reduced by annual budget surpluses. U.S. national debt totaled around $35.8 trillion as of October 2024.

Understanding National Debt

Debt is a financial obligation that one entity owes to another. Individuals, businesses, and governments take on debt to support themselves, make purchases, or invest in future growth. Consumer debt includes credit cards, loans, and mortgages. Corporations can take out debt in the form of lines of credit and corporate loans among other sources.

Government debt is known as national debt or as federal or public debt. It's money borrowed by the government to pay for its expenses. The national debt in the U.S. is primarily held by the public, followed by foreign governments, banks, and investors.

America's national debt in dollars is generally viewed as less important than its proportion to the country’s gross domestic product (GDP) or the debt-to-GDP ratio because a country’s tax base grows alongside its economy. It increases revenue that the government can raise to service the debt. The U.S. national debt-to-GDP was 120.04% at the close of the second quarter of 2024.”

End quote

Source: https://www.investopedia.com/updates/usa-national-debt/

***