In this episode of "DataBreak with Gary Ralston," we shift our focus to an issue that continues to make headlines and spark concerns among individuals worldwide: the national debt. Join Gary Ralston as he explores the staggering figures, examines the factors contributing to this situation, and analyzes the potential implications for commercial real estate.
What Is The Current National Debt?
The US Debt Clock offers a unique glimpse into the current national debt situation. When you visit the US Debt Clock webpage, the first figure that grabs your attention is the $31.7 trillion US national debt. With the country's gross domestic product (GDP) sitting at $26.3 trillion, the alarming disparity between debt and GDP raises questions about the reasons behind this growing gap.
Why Is There So Much National Debt?
To comprehend the origins of this problem, we must understand the parallels between personal finance and national economics. When a person spends more money than they earn, they accumulate debt. Similarly, the federal government operates under a deficit when it spends more than it earns
The national debt is the amount of money the federal government has borrowed to cover the outstanding balance of expenses incurred over time. In a given fiscal year (FY), when spending exceeds revenue, a budget deficit results. To pay for this deficit, the federal government borrows money by selling marketable securities such as treasury bonds, bills, and Treasury inflation-protected securities (TIPS). The national debt is the accumulation of this borrowing along with associated interest owed to the investors who purchased these securities. As the federal government experiences reoccurring deficits, which is common, the national debt grows.
Recent Developments In The National Debt
In the last fiscal year, the federal government's spending exceeded its collections by 28.7%, leading to a massive $1.45 trillion deficit. This staggering deficit compounds the issue further. Taking a closer look at the past few years, we observe a concerning trend. From 2020 to 2022, the US public debt skyrocketed from $23.2 trillion to $31.4 trillion, representing an increase of $8.2 trillion. This increased debt represents a significant growth spurt in a relatively short span.
What Does This Mean For Real Estate?
While the national debt and interest rates pose challenges, there are bright spots in the real estate landscape. Florida, particularly Central Florida, stands out as a resilient market with promising growth prospects. The state's population is experiencing remarkable growth, adding approximately 1,142 individuals daily. With over 21 million residents, Florida ranks as the third most populous state in the US. Moreover, some of Florida's key counties, such as Polk, Hillsborough, Orange, Osceola, and Lake, are among the fastest-growing in the state, accounting for about 20% of Florida's population.
This growing population translates into increased demand for real estate, creating opportunities for investors and developers. While other parts of the country may face recessionary trends or headwinds, Florida remains "insulated" due to its population growth. This demographic advantage positions the state's real estate market favorably for future investment and economic stability. According to Gary, "Real estate is space for people… more people means increased demand for real estate."
Understanding the US national debt and its implications is crucial for navigating the evolving real estate market. The staggering debt figures, combined with rising interest rates, significantly impact the commercial real estate sector.
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US Debt Clock:
Federal Reserve Bank of St. Louis: