How to Interpret Federal Government Debt?

May 2, 2022 | Ask "Z" Economist

While the federal government had $30 trillion in debt outstanding at the end of 2021, it is not fair to compare it to the $17 billion outstanding at the end of 1929 (market crash) because these dollar amounts have not been adjusted for inflation. However, it is appropriate to analyze the debt load as a percentage of GDP (which approximates the size of the economy). As the chart indicates below, the current debt load is at the highest percentage of GDP (currently 120%+), exceeding the WW2 level. 

However, when compared to total household assets ($163 trillion at the end of 2021), $30 trillion in government debt looks more manageable at 18%. This compares favorably to $1,436 billion in HH assets at the end of 1952 (earliest available info) vs. $259 billion in government debt (also 18%).  

This suggests that GDP growth has not kept-up with asset accumulation as older Americans are richer but less productive. In turn, less productive Americans are more dependent on the government and, resultantly, Uncle Sam must make-up for this deficit with more debt fueled spending. 

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Disclaimer of Liability: Although the information in this post has been obtained from sources NBE Media LLC believes to be reliable, NBE does not guarantee its accuracy. The views expressed herein are subject to change without notice and in no case can be considered as an offer or solicitation with regard to the purchase or sales of any securities. NBE Media LLC’s analyses and opinions are not a guarantee of the future performance of the economy nor any industry, company or security. NBE Media LLC disclaims all liability for any misstatements or omissions that occur in the publication of this post. In making this post available, no client, advisory, fiduciary or professional relationship is implied or established. While this post is intended to provide an relevant economic analysis, it cannot be used as a substitute for independent investigations and sound business judgment.
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