Earlier this week, when the US closed fiscal 2018 on September 30, we reported that US gross national debt jumped by $84 billion on September 28, the last business day of fiscal year 2018; with this last push higher, total gross national debt in fiscal 2018 rose by $1.271 trillion to an all time record of $21.52 trillion.
What is more stunning, is that only six months ago, on March 16, it had for the first time risen above the $21-trillion mark, while a year ago, at the end of September 2017, it was just $20.2 trillion.
The reason for the soaring debt total is, of course, the runaway US budget deficit, which while providing a temporary sugar rush to the US economy comes at a cost of explosive debt. As a reminder, one month ago, the CBO revised its forecast, and now expects the deficit will approach $1 trillion by the end of this fiscal year or one year sooner than disclosed in the CBO's most recent forecast; in April the agency didn’t expect the deficit to reach $1 trillion until 2020.
Many have asked if any of this actually matters in the grand scheme of things. Last week Bloomberg published a piece titled "Skyrocketing Deficit? So What, Says New Washington Consensus" which explained that neither Republicans nor Democrats are bothered by the devastating long-term trajectory of US debt, effectively making deficit hawks an extinct species:
In both parties, deficit spenders are gaining ground. That makes Year Two of the Trump administration look increasingly like end-times if you are, for example, the Committee for a Responsible Federal Budget.
“The tax cuts really set off a spiral of irresponsible justifications for not caring about fiscal responsibility,’’ says Maya MacGuineas, president of the CRFB. The group gets funding from the Peter G. Peterson Foundation, a project of the late Wall Street billionaire, who advocated slashing social programs to balance the budget.
One reason why US legislators no longer care about either the deficit or US Federal Debt may be because deficits are supposed to trigger inflation and scare off bond investors. And while until recently, the latter have been all but missing, a sharp repricing took place last week when as we discussed previously, 10Y yields soared in the last three days of the past week amid a vicious repricing of inflationary expectations, which led to a near record bond market rout, a surge in bond market volatility and a sharp selloff in stocks.
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Originally Posted by Zippyjuan
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