"For The First Time In Modern History" US Government Debt Will Surpass Household Debt

Last week, rating agency DBRS raised a red flag when it calculated that in the past decade average US wages have risen by only 5.7%, while consumer debt over the same period rose 60% more, or 9.3%. However, while the US household's reliance on debt to fill in the income gaps is hardly news, on Monday JPMorgan found another, even more concerning debt inflection point: household debt, fast as it may be rising, is about to be eclipsed for the first time ever by the even faster rising federal government debt.

As JPM writes in its weekly market recap, prior to the Financial Crisis, household debt relative to federal government debt hit a high of 3 to 1 times. Since then, a combination of bank credit  tightness and consumer prudence has sharply limited the growth in household debt, with liabilities increasing just 4% since 3Q 2008. However, JPM adds, "the same cannot be said of the federal government, with liabilities increasing almost 150% over the same period and nearly reaching household debt levels for the first time in modern history."

JPM continues:

On top of that, the CBO projects that, even excluding the impact of tax cuts, government debt levels will continue to march upward over the course of the next 10 years, ultimately hitting $25.5 trillion by the end of 2027.

 

While this does not point to an impending crisis, it does mean that, should another downturn occur, the government would be far less able to come to the rescue as it did in 2008. It also means that while tax cuts may take place today, it becomes all the more probable that they will become tax increases or spending cuts in the future, with tax increases likely to hit higher income households and elderly households being more vulnerable to spending cuts.

Finally, "this means that while consumers have taken steps on their own account to ensure a smaller debt burden, older and wealthier households should be particularly wary of the potential impact of rising government debt on their finances" especially once the next government - far more likely to be of the "wealth redistribution persuasion" - decides to do just that..

Comments

hedgeless_horseman NoDebt Mon, 12/04/2017 - 16:27 Permalink

 

While this does not point to an impending crisis, it does mean that, should another downturn occur, the government would be far less able to come to the rescue as it did in 2008. 

Why?Is there something wrong with the Heidelberg presses or the helicopters?Is the Discount Window stuck?Have they lost the keys to Hank Paulson's tanks?

In reply to by NoDebt

Yen Cross Mon, 12/04/2017 - 15:59 Permalink

  Is this .gov debt figure  without the Fed. balance sheet? [ $4+t] I have the national debt at $20.5 trillion. The chart above has .gov debt at $15 trillion.

nsurf9 Mon, 12/04/2017 - 16:19 Permalink

That would now make your 2017 $100 dollar bill a 2007 $66.6 dollar bill - fitting number don't you think.  And, a total of $4.44 stolen by the US federal government, not include inflated taxes.  And, its likely more than that.  And, more to come that hasn't even made it into full dilution of the money supply.I'm just wondering if they'll need a 10 foot lamp post, or 12.

falak pema Mon, 12/04/2017 - 16:13 Permalink

And.. the GOP tax cuts are only gonna make the private PEOPLE's debt bigger and bigger; all the while the 1% get richer and richer...The best way to destroy a nation is to make the 99% the DIRE enemies of the 1%; that was the great lesson of the French Revolution...Now coming to Lafayette's other country; the one HE TRULY LOVED ! Lafa didn't buy into Robespierre and Napoleon, he wanted a balance between blood letting and divine rights. A true republic.He was right and his true horizon was  a young nation called the US which he had the immense happiness to see born when he was 19 years old, when he arrived in the revolted British Colonies as an adventurer passionate about freedom.A true Millenial of his times! Not a man of status quo nor a suppot of reactionary Imperial order that the US is today; that Rule Britannia was then ! 

Vlad the Inhaler Mon, 12/04/2017 - 16:12 Permalink

"should another downturn occur, the government would be far less able to come to the rescue as it did in 2008."  Nonsense!  Central bankers are magic people.  The new money will be printed and distributed, and the bad debt will simply be loaded onto a hard drive, put on a Tesla rocket, and placed into orbit around Mars.  

aliens is here Mon, 12/04/2017 - 16:53 Permalink

I have no doubt we'll go bankrupt by the number of ppl applying for SSDI and how much we are paying the medical consultants to evaluate them applicants. Each medical consultants gets anywhere from $75 to $100 an hour and we have lots in each state offices.

Zorba's idea Mon, 12/04/2017 - 18:45 Permalink

Well, given all the household debt chasing my family, HC, College tuition, mortgage, (((shrinking)))groceries, transportation, credit cards to compensate for shrinking disposable, neglible savings...I suddenly feel better :/