The more things change, the more they stay the Same
November 12, 2026
We feel today’s subject title is applicable relative to the “change” aspect, in light of the midterm election results, while also speaking to the “remaining the same” aspect with today’s subject matter in mind.
Regardless of the change, and we have seen a lot of change in D.C.’s political control over recent decades, one thing remains the same, and that is the funding of government operations. Think deficits, not as an isolated approach to aid the economy in getting out of a rough spot, but rather, as normal operating protocol.
In particular, this 21st century has devolved into the government living far beyond its means, with few even questioning the long-term viability of such an approach.
The overarching problem with this is it is not the government who is ultimately responsible for all of this debt. While it is normally referred to as the federal debt, or government debt, pragmatically speaking, it is the citizenry’s debt.
It is the citizenry that incurs the downside of these runaway debt policies through debasement of the currency, higher interest rates, and higher price inflation. (If you happen to be a citizen that has thought this topic doesn’t impact you, we invite you to rethink your view.)
Now that we are in November, we can look at the results for the government’s fiscal year 2026. Keep in mind the government’s fiscal year runs from October 1st through September 30th of each year.
With this, the government is now operating in their fiscal year 2027.
As offered, we can look at 2026 in its fullness now that the new fiscal year is well underway. Below is an excerpt directly from the Treasury’s site.
A deficit occurs when the federal government’s spending exceeds its revenues. The federal government has spent $1.99 trillion more than it has collected in fiscal year (FY) 2026, resulting in a national deficit.
$1,992,473,224,352
Compared to the national deficit of $1.78 trillion for the same period last year (Oct 2024 - Sep 2025), our national deficit has increased by $217 billion.
$217 B
12%
As the above offers, we continue to run $2 trillion deficits, give or take, in recent years as a way of doing business. Last year, fiscal year 2025, we were at $1.78 trillion with this year’s deficit increasing by 12% to $1.99 trillion.
We now stand at $40-plus trillion in our accumulated debt.
For perspective, while emphasizing how these $2 trillion type annual deficits are a way of normal operating protocol, just a few years ago now, in 2020, the accumulated federal debt stood at just over $27 trillion. For further perspective, in 2019, just over $23 trillion. Here in late 2026, $40.5 trillion.
A Broader Perspective
Throughout many editions, covering many topics, we have shared over recent years how this 21st century often depicts stats and storylines that are less than desirable, shall we say.
Taking the above deficit and debt storyline to a broader view here in this 21st century, it tells a story that is certainly less than desirable.
Above we have charted the continual growth in federal debt from the outset of this 21st century.
We added yellow text boxes along the path to narrate the growth in debt. Per the chart, with just a bit of rounding, we can say the federal debt continues to double every 9 years.
To think we were at a mere $5 trillion back in 2000 is difficult to fathom. At this stage, with our annual $2 trillion-dollar type of deficits in mind, $5 trillion is doubled in just over a couple of years!
For a deep historical perspective, that $5 trillion back in 2000 was the accumulated debt the United States had totaled from the Treasury’s inception back in 1789! Let that sink in. All through the 1800’s, all through the 1900’s, $5 trillion accumulated.
Now, in our current state of fiscal affairs, $5 trillion every couple-plus years.
The Logical Follow-on
When debt is consistently accumulated to the point of exceeding the level of economic activity in the country (think GDP), the servicing of that debt becomes its own burden. First in the servicing is paying in full the maturing bills, notes, and bonds previously issued. Second in the servicing is paying the interest rate to the debt holders.
The interest payments have reached their own notable line item within the Treasury’s spending outlays by category. Below we have excerpted the top 5. Spoiler alert: yes, interest payments have easily attained a top 5 level.
The above represents the top 5 by dollar expenditures in fiscal year 2026. To think that the interest payments exceed the massive budget for national defense is difficult for most to fathom. Realizing interest payments are just under the well-recognized and often discussed Medicare program is equally hard to register for most.
As the above excerpt depicts, both are true relative to fiscal year 2026.
Interest can be expected to remain as a notable line item within the treasury’s categorical outlays in light of the massive size and continued growth of the nation’s accumulated debt.
When debt growth exceeds GDP growth, you have a problem
Earlier we implied that GDP growth has not kept up with debt growth by offering that accumulated debt exceeds GDP, which is the go-to measure for overall economic activity.
This has held particularly true here in the 21st century on an overall trend basis.
Above is total federal debt relative to the size of GDP. If the line is rising, this offers that debt is growing faster than economic activity in light of it being an ever-higher percentage relative to the size of GDP.
As we see with the beginning point of our red arrow, since the year 2000 we have gone from debt being 55 percent of the size of GDP to our current 120-plus percent level. With this, the accumulated debt is larger than annual GDP, i.e., economic activity.
Also, yet again, here is one of those 21st century stats and storylines that are less than desirable, as we are doing our best to put it kindly.
Expect more currency debasement
As offered above, ultimately this is not a problem of the government. Ultimately, it is a citizenry problem of which the citizens pay for via higher interest rates, price inflation, and a continued debasement of their currency.
In a simple phrase, expect more debasement of the currency in light of the government’s continued large deficit financing protocol.
There are many tools to gauge currency debasement. One simple go-to is pricing gold in the currency under review.
For its part, the U.S. dollar back in the beginning of this 21st century was 1/270th of an ounce. One dollar purchased 270ths of an ounce. This is how you can place one dollar’s debasement into context. At that time, a full ounce purchase required $270.
Today, with a small touch of rounding, we see 1/4000th of an ounce. One dollar purchases 4000th of an ounce. A full ounce purchase requires $4000.
A dollar isn’t what it used to be, as the saying goes, and certainly holds true in this 21st century. A big player in this big storyline is the runaway debt and deficits of the past 25-plus years.
As we offered at the outset, regardless of the change in political control, expect more of the same relative to the government’s debt and deficit storyline and the logical downstream follow-on of currency debasement.
I wish you well…
Ken Reinhart
Director, Market Research & Portfolio Analysis
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