Precisely one year ago today, the US federal government opened Fiscal Year 2019 with a total debt level of $21.6 trillion…Today is the start of the government’s 2020 Fiscal Year and the total debt is now $22.6 trillion meaning the government has accumulated $1 TRILLION in new debt over the course of the 2019 Fiscal Year – and FY2019 was, literally, the BEST year EVER measured by short-term U.S. financial performance.
- The stock market reached an all-time high.
- Real estate prices reached an all-time high.
- Corporate profits are at record highs.
- Personal income is at a record high.
- Unemployment is hovering near an all-time low.
All of the above factors drove U.S. government tax revenue to an all-time high and in FY2019 there were:
- no major foreign wars,
- no natural disasters,
- no banking crises,
- no economic panics,
- no massive bailouts,
- and the U.S. government was shut down for most of the month of January due to a budget conflict, so federal spending was at a minimum for a good chunk of the year.
Despite this bonanza of good news, however, the national debt STILL increased by more than a trillion dollars! How is that possible ? Well:
- in FY2012, the government spent $359 billion paying interest on its debt,
- in FY2015 they spent $402 billion,
- in FY2017 they spent $458 billion and
- in the FY2019 that just closed yesterday, they spent more than $540 billion just paying INTEREST on the debt.
Do you see the pattern? The problem becomes substantially worse every year – and FY2019 was a GOOD year – so what’s going to happen when the economic sun isn’t shining so brightly?
It would be foolish to expect every year to look like Fiscal Year 2019. Honestly, the combination of so much good news and so little bad news in FY’19 was pretty rare…[so]:
- how much longer will everyone keep pretending that the world’s biggest debtor is simultaneously the world’s biggest superpower?
- how much longer will financial markets and foreign governments continue loaning money to the US government at trivial interest rates?
…No one knows for sure but you don’t need a PhD in economics to realize that this might not have a happy ending – or that you might want to think about a Plan B.