Is the U.S. Debt Bubble Going to Burst?

by howmuch

The U.S. economy may be in the middle of its largest expansion in history, but record levels of debt could signal trouble on the horizon. In February 2019, the U.S. national debt reached a record $22 trillion, and the annual deficit for this year alone is expected to be almost $1.1 trillion. At the consumer level, household debt (which includes mortgages, auto loans, student loans, and credit card debt) has risen for 19 straight quarters. With these overarching trends in mind, we compiled 10 of our recent visualizations to show a more complete picture of debt in the U.S. Here’s what we learned.

  • The national debt has rapidly increased over the past 40 years, doubling in the past decade alone.
  • The U.S. has one of the highest debt-to-GDP ratios in the world.
  • In general, the governments in larger states incur more debt than the governments in smaller states.
  • Millennials have higher debts than other generations like Gen X and Baby Boomers.
  • The type of debt that consumers incur has changed over time, with mortgage debt decreasing over the past decade and student loan debt increasing.

1. How Has the U.S. National Debt Changed Over Time?

The visualization above references data compiled by The Balance from the Treasury Department’s “U.S. Debt to the Penny” report to map how much the national debt has grown since 1934. The national debt was only $25 billion back then, and it stayed below $1 trillion until 1982. After that, the national debt increased exponentially from the 1980s to the 2010s, eventually leading to the $22 trillion mark where it is today.

2. Who Should Be Blamed the Most for The Increase in National Debt?

Another way to analyze the increase in national debt is to view it in conjunction with the political leaders of the time. According to other research conducted by The Balance, the national debt soared under certain presidents. This visualization shows how much was added to the national debt during each presidency, with each block representing $3 billion in current dollars. As shown in the previous visualization, the majority of the national debt was accrued over the past 40 years. More specifically, Reagan added $1.86 trillion, George H.W. Bush added $1.55 trillion, Clinton added $1.4 trillion, George W. Bush added $5.85 trillion, and Obama added $8.59 trillion. Trump is expected to add $4.78 trillion to the national debt during his first term. The only presidents in the past century who saw a decrease in the national debt are Warren G. Harding and Calvin Coolidge.

3. Which Foreign Countries Hold the Most U.S. Debt?

The national debt is financed by the sale of treasury securities, specifically short-termtreasury bills and long-term treasury bonds. While many treasury securities are held by the American public and government agencies, foreign countries are some of the bigger holders of U.S. debt. According to the visualization above, both China and Japan each hold over $1 trillion in U.S. debt, accounting for roughly one-third of U.S. treasury securities owned by foreign countries. The data for this visualization comes from the Treasury Department’s database for Major Foreign Holders of Treasury Securities, as of April 2019. Altogether, foreign countries hold more than $6 trillion in U.S. debt.

4. How Deep in Debt is the U.S. Compared to the Rest of the World?

The good news is that the U.S. is not alone in its accrual of debt. While the U.S. national debt of $22 trillion is truly staggering, the country’s economic output is also much higher than other countries’. The best way to compare different countries’ national debts is to use the debt-to-GDP ratio, which compares a country’s output with its debts. The visualization above uses data from the International Monetary Fund to illustrate debt-to-GDP ratios between countries, with the larger, redder countries toward the center representing the highest ratios. The countries with the highest debt-to-GDP ratio are Japan, Greece, and Barbados. By this measure, the U.S. ranks 13th.

5. How Does Debt Compare to Output Within Each State?

Now that we’ve analyzed U.S. debt at the national and international scale, let’s take a look at how debt varies across states. In the visualization above, we used data from the U.S. Census Bureau and the U.S. Government Debt website to visualize each state’s state & local government spending (shown in pink), measured against each state’s output (shown in blue). Overall, the states have a combined state and local government debt of $3.1 trillion and gross output of $21 trillion. Large states like California, Texas, New York, Illinois and Florida have the highest output, as well as the highest debt.

6. How Does the Debt Per Capita Vary Across the States? 

Outside of government borrowing, household debt is another measure of economic health. Household debt is mostly composed of mortgages, credit cards, student loans, and auto loans. In this visualization, we used data from Credit Karma and the New York Federal Reserve to illustrate consumer debt per capita in each state.  Across the U.S., the total debt per capita is $50,090, but this ranges from $29,430 in West Virginia to $86,730 in The District of Columbia. Notably, mortgages are the largest source of total debt per capita in each state.

7. How Has Personal Debt Changed Across Generations?

In addition to varying across location, household debt varies by age, too. For this visualization, we analyzed Federal Reserve data detailing debt and assets held by Millennials, Gen Xers and Baby Boomers (with all numbers adjusted for inflation). As of 2016, millennials had more savings than Gen X or Baby Boomers at the same point in their lives, but also more debt due to the massive increase in college loans. Millennials also have more equity in their homes than Baby Boomers did in 1989 but less than Gen X did in 2001.

8. Which American Cities Have the Highest Mortgage Payments?

With mortgages accounting for the majority of consumer debt, some locations are more budget-friendly for homebuyers than others. This map uses data from Zillow Researchand the St. Louis Fed to illustrate the metro areas with the most expensive mortgage payments (shown in dark pink) and least expensive mortgage payments (shown in light pink). In general, the South and the Midwest have the least expensive mortgages while the Northeast and the West (especially California) have the most expensive mortgages.

9. How Much Credit Card Debt Do Consumers Have In Each State?

With credit card debt reaching $1 trillion, many consumers are struggling to pay off their outstanding bills. This heat map uses research from Creditcards.com to see average credit card debt in each state and how long it would take to pay off if people in every state allocated 15% of their income toward credit card debt. Dark red states like New York and Texas represent higher credit card debt, while light red states like Iowa and Wisconsin have lower debt. In general, southern states would take the longest to pay off credit card debt.

10. Is the Debt Bubble Going to Burst by the End of 2019?

That’s the question on everyone’s mind. This final visualization uses the Federal Reserve Bank of New York’s Center for Microeconomic Data to show how individual categories of consumer debt (mortgages, auto loans, student loans, credit cards, HE Revolving debt, and other) have changed since 2003. The most noticeable changes are that mortgage debt as a share of overall household debt has decreased, while student loans as a share of overall household debt has increased. It remains to be seen if these trends are the “new normal,” or if they are part of a cycle in which different types of debt wax and wane. Regardless, it’s important for both governments and consumers to keep spending and debts to a manageable level to avoid major financial problems in the future.

What do you think about the overall picture of debt in the U.S.? Please let us know in the comments.

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