Image Source: PixabayLost in the wake of debt topping $34 trillion is another budget showdown. Will this showdown be like all the other Republican capitulations? And what about the chants of hyperinflation?Debt Blasts Past $34 Trillion
Data from US Treasury, chart by MishQ&A on Debt LevelsThe Committee for a Responsible Federal Budget has a nice Q&A on Gross Debt Versus Debt Held by the Public
Which is a more important measure of debt, gross debt or debt held by the public?
Most economists regard debt held by the public – particularly as a share of GDP – to be the most economically meaningful measure of debt.
Debt held by the public measures the amount of U.S. debt held by entities other than the federal government and traded publicly. It is thus relevant for understanding the extent to which debt is providing fiscal stimulus, crowding out private investment, influencing interest rates, and consuming fiscal space.
Gross federal debt also has some significance as one measure of the government’s total obligations. With some minor adjustments, gross debt is also used to determine when the government has or will hit the national debt limit.
Who owns the national debt held by the public?
Of the $26.2 trillion of debt held by the public, over 30 percent is owned by foreign entities, roughly 50 percent by private and public domestic entities, and over 20 percent by the Federal Reserve Bank. The Federal Reserve has significantly expanded its Treasury holdings since the COVID-19 public health and economic crisis began in 2020.
Foreign holdings come from a mixture of foreign individuals, businesses, banks, and governments. Of the nearly $8 trillion of foreign-held debt, over 14 percent ($1.1 trillion) is held by Japan and 12 percent ($869 billion) is held by China. The next largest holders are the United Kingdom, Belgium, and Luxembourg, who each hold between $329 billion and $705 billion of U.S. debt. On a combined basis, the Eurozone holds about $1.4 trillion, and Organization of Petroleum Exporting Country (OPEC) member nations together hold $256 billion of U.S. debt.
A Truly Depressing AchievementAlso consider Gross National Debt Tops $34 Trillion; Third Milestone in 12 Months
The following is a statement from Maya MacGuineas, president of the Committee for a Responsible Federal Budget:
“Though our level of debt is dangerous for both our economy and for national security, America just cannot stop borrowing. The U.S. gross national debt – the combination of both the debt held by the public and intragovernmental debt – hit $34 trillion Friday, which is barely three months after it hit $33 trillion. A truly depressing ‘achievement.’
There is not a single economic reason to add to the debt at the rate we are, but sadly our political leaders are unwilling to make the changes we need to turn the fiscal situation around.”
“We can be a weak divided country where our leaders fight, pander, and take the easy way out while we become increasingly vulnerable, or we can do the hard work to be stronger, more secure, and more prosperous for the long run. This is a moment of consequence and continuing to refuse to pay our own bills will not lead us to where we need to be as a nation.”
Interest on Debt Tops $1 Trillion
On November 6, Bloomberg reported US Debt Interest Bill Rockets Past a Cool $1 Trillion a Year
Estimated annualized interest payments on the US government debt pile climbed past $1 trillion at the end of last month, Bloomberg analysis shows. That projected amount has doubled in the past 19 months from the equivalent figure forecast around the time.
For comparison purposes, consider the 2024 Fiscal Year Budget.2024 Fiscal Year Budget Items
Ridiculous Hyperinflation CallsAlong with the debt ceiling blowout came the expected hyperinflation calls.Hyperinflation is a complete collapse in currency in a short time frame. Weimar Germany, Zimbabwe, and Argentina (numerous times) are examples.In hyperinflation, the value of a currency quickly heads towards zero vs. everything, not just oil, gold, or Bitcoin. US dollar hyperinflation would mean the dollar goes to zero vs the Peso, the Yuan, the Yen, and the Euro.If you think that is going to happen, you are delusional. Hyperinflation calls are as laughable as ever.Upcoming DeadlinesPlease note the Upcoming Congressional Fiscal Policy Deadlines
In mid-November, the President signed a second continuing resolution (CR) for fiscal year 2024 that is “laddered,” or consists of two separate expiration dates for two separate sets of appropriations bills. The Senate cleared the measure late Wednesday night, after the House passed the bill on Tuesday night. The first expiration date in the CR, Jan. 19, would apply to the programs covered by the Agriculture, Energy-Water, Military Construction-VA, and Transportation-HUD bills.
The second expiration date, Feb. 2, would apply to the programs covered by the Commerce-Justice-Science, Defense, Financial Services-General Government, Homeland Security, Interior-Environment, Labor-HHS-Education, Legislative Branch, and State-Foreign Operations bills. Besides extending appropriations, the measure also includes several policy extensions through Jan. 19 for certain health care programs and a farm bill extension through FY 2024.
The first “clean” continuing resolution in 2023 cost Speaker Kevin McCarthy his job.For discussion, please see Hoot of the Day: 209 Democrats and 127 Republicans Pass Clean Spending Bill
New Republican House Speaker, Mike Johnson, just passed the exact same bill that got former House speaker Kevin McCarthy booted.
On November 18, I commented House Speaker Mike Johnson’s Grace Period is Over, What’s Next?
“We’re on the job now. We’re going to make it happen,” said Johnson this week. Really? Make what happen? [I asked].
House Freedom Caucus member Rep. Chip Roy (R., Texas) gave a fiery speech on the House floor in which he fumed about the short-term funding vote and asked GOP colleagues to “explain to me one material, meaningful, significant thing the Republican majority has done.”
And for the first time ever, I agree with Progressive Rep. Pramila Jayapal (D., Wash.) who said, “It’s the same menu, different waiter.”
Dateline January 4, 2024And so here we are. Nothing different happened.Q: Will anything different happen?
A: Why would it?What to ExpectThe idea that 10-12 holdouts are going to swing this puppy is nonsensical. The way Congress works is “more of this in return for more of that”.Biden wants more money for defense, more money for Ukraine, more money for Israel, and more money for the border (not a lot but more, to appease Republicans).Some Republicans want more money for defense, more money for Ukraine, more money for Israel, and all of them want more money for the border.Some Democrats want more money for defense, more money for Ukraine, and more money for Israel.A bipartisan majority wants more of this and more of that. So that is what you should expect.The fallback position is not less of anything. Rather, it’s another clean continuing resolution.Debt to GDP Alarm Bells Ring, Neither Party Will Solve ThisIn case you missed it, please see Debt to GDP Alarm Bells Ring, Neither Party Will Solve This“Neither party will fix the deficits. Neither party will do anything about mounting debt. No one will do anything about anything because the political system is totally broken.” MishThat’s the message of gold. Bitcoin advocates would say Bitcoin as well.More By This Author:The Free Money Has Run Out And It Shows In The Polls How The December Fed Minutes Influenced Rate Cut Odds For 2024 ISM Manufacturing Production Turns Positive But New Orders Down 16th Month
