A National Shame: U.S. Sovereign Debt Just Topped $34 Trillion

In 2023, main topic of conversation on Wall Street was artificial intelligence. This year, unless something more pressing comes up, the top-of-mind theme will be the U.S. national debt – or at least, that’s what people ought to be talking about.

I remember reporting on the national debt hitting $30 trillion and feeling a sense of discomfort. Of course, the country’s politicians and media pundits didn’t spend much time on this topic. It’s just business as usual on Capitol Hill, apparently.

As long as the stock market is up, which it has been since October, then Wall Street isn’t particularly interested in what’s happening in the real economy. And as long as people are gainfully employed, then there shouldn’t be too much of an outcry on Main Street.

But then, it’s debatable whether people in America are actually gainfully employed. According to the Bureau of Labor Statistics, the number of Americans who voluntarily quit their jobs in November hit the lowest level since September of 2020.

When people are afraid to quit their jobs, that a sign of a tightening employment market. It means that people are reluctant to leave their positions out of fear that another job won’t be available.

Courtesy: Guy Berger

When employment rolls over, that will be the final blow to the recession deniers, who have based their sunny outlook on the claim that everyone’s gainfully employed. And by the way, the Job Openings and Labor Turnover Survey (JOLTS) also showed that U.S. hiring declined to 5.3 million in November, the lowest level since July 2020.

Of course, the market doesn’t seem to mind it when people don’t have jobs. In this upside-down world, bad news is good news and a cooling labor market will give the Federal Reserve an excuse to cut interest rates this year.

Or at least, that’s what large-cap stock investors are assuming will happen. However, their assumptions might not pan out, as December’s FOMC meeting minutes contain language that doesn’t seem to support the argument for easy money policy.

According to the FOMC meeting minutes, Fed officials “reaffirmed that it would be appropriate for policy to remain at a restrictive stance for some time until inflation was clearly moving down sustainably toward the committee’s objective.” That objective is 2% inflation, and we’re definitely not there yet.

The FOMC meeting minutes made it clear that there’s still work to be done, noting that progress on tamping down inflation has been “uneven” across sectors. Specifically, inflation in energy and core goods moved lower, but core services inflation has stubbornly moved higher.

Richmond Federal Reserve President Thomas Barkin conveyed how difficult it will be for the Fed to get inflation to its 2% target without fundamentally damaging the economy. “The airport is on the horizon. But landing a plane isn’t easy, especially when the outlook is foggy, and headwinds and tailwinds can affect your course,” Barkin explained.

Courtesy: U.S. Debt Clock

None of the Federal Reserve’s posturing and maneuvering will matter much if America’s economy collapses under the weight of its own debt. No matter how much fiscal discipline you might have in your own life, you still live in a nation that owns an unmanageable amount of money.

Just to provide some perspective, the national debt was $19.573 trillion in 2015. In just 8 years, America added $14.4 trillion to its debt load, representing a 73.7% increase.

Now at $34 trillion, the U.S. national debt translates to $100,000 per U.S. citizen, and $202,000 per U.S. taxpayer. Now, how do you feel about your government’s borrowing and spending habits?

The decision makers don’t seem too bothered about it, and they’ll continue to generate votes by promising the sun and the moon to their constituents. Maybe, 2024 will be the year when people get the message that spending our problems away isn’t a sustainable strategy – but I’m certainly not holding my breath.