Ten Years Since Financial Crisis, How Much Is U.S National Debt?
U.S. national debt or public debt is close to $20.0 trillion. That means every American individual owes about $9,000 (per capita debt) just for being alive. Many are criticizing President Donald Trump, but it was the Hollywood-darling President Barack Obama who allowed America’s debt to surge and the U.S. economy to weaken.
Obama, during his two terms at the White House (January 2009 to January 2017), accounted for a huge increase of public debt. At no time did national debt by year expand—or explode, rather—like this. Obama alone raised it by about $9.3 trillion. In fact, more than just increase debt, he practically doubled it at a rate of 8.2% per year or four times the average GDP growth rate.
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These percentages and debt numbers serve as a boulder-weight reality check. They help Americans paint the correct and dire picture of the U.S. economy. It’s true that Obama came on the tail end of the largest financial crisis since the Great Depression. It’s also true that Trump’s predecessor talked a great talk and won a Nobel Peace Prize. But he also got the U.S. involved in more wars, spending more of Americans’ tax dollars without any real benefit for the economy.
Indeed, the U.S. economy was growing at the lowest rate since the Second World War. But that’s just the proverbial tip of the iceberg that could crash the RMS Titanic. Because of low-interest rates, the United States’ creditors have paid historically low interest on the debt. That’s possibly what has allowed the U.S. economy not to sink yet.
But the low-interest party has come to an end. U.S. national debt is about to show the full extent of its fangs. The Federal Reserve has kept low-interest rates to counteract the financial and economic crisis since 2008. For example, in 2008, the last full year of George W. Bush’s presidency, interest rates were four times higher than today and considered low, given previous trends, as the national debt chart shows.
Thus, Fed Chair Janet Yellen gradually pushes rates to the levels last seen eight years ago—when many present-day financial analysts were still in college. Interest rates on national debt could cripple the U.S. Trump, meanwhile, wants to cut taxes on the rich and on corporations. Thus, the situation is such that one president has gambled U.S. resources, accumulating trillions of debts, while another plans to resolve the problem of sluggish growth by reducing tax revenue.
The bulk of Trump’s economic strategy is to cut taxes and boost spending on infrastructures by as much as $1.0 trillion over the next four years. The risk is that Trump, regardless of good intentions, as Obama’s probably were, will only encourage the U.S. taking on more debt.
Cutting taxes makes the sources to pay for the improvements unclear. Thus, it would be fair to guess that much of the new infrastructure, should Trump actually get it done, will be financed on deficit. Except, the conditions will be such that interest rates could reach unpredictable or unsustainable levels.
Part of the reason why debt is so unpredictable, of course, is that China has long been one of America’s main creditors. Japan has now taken over that role, but China still owns enough U.S. Treasuries ($1.1 trillion or thereabouts) to have the power to wreak havoc. China could use the threat of selling U.S. Treasuries as a political weapon.
Relations between Beijing and Washington have worsened since Trump went to the White House. Trump recently allowed the sale of sophisticated weapons to the tune of some $1.2 billion to Taiwan, China’s breakaway and rival republic. It could retaliate, and one of the tools at its disposal is its Treasury ownership.
Selling the Treasuries would increase the value of the Chinese yuan. This would hurt China’s exports, but it would also accelerate the U.S. Federal Reserve’s rate increase program, to uphold the value of the dollar. However, the rate increase could prove too much for the U.S. economy to take, given personal and public U.S. debt levels.
