Agenda 11-04-2021; 12-5 - Information Item - Financial Report - First Quarter FY 2021-22

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14 Figure 5. North Carolina Personal Income and Retail Sales. (PERSONALNORTH CAROLINA PERSONAL INCOME AND RETAIL SALES •ME-BILLIONS OF . • OF 610 18 590 17 570 16 15 530 12 510 10 490 2019,12019,11 2019, 2019, 2020,12020,11 2020, 2020, 202 1,1 Jon Feb Mar April May Jun Jul Aug Sep Oct Nov Dec 2020 -2021 Source: US Bureau of Economic Analysis;NC Dept.of Revenue. Personal income are inflation-adjusted dollars. Retail sales are nominal dollars. WORRIES ABOUT BIG ISSUES As the economy moves beyond the pandemic, there are three big issues attracting concern: rising national debt, faster inflation, and adaptability in the labor market. With all $6 trillion of the federal pandemic assistance borrowed, the national debt now exceeds national annual income (GDP) for the first time since World War II. This has sparked renewed worries about the ability of the nation to carry the debt and implications for long-run financial viability. At this point, those worries appear to be overstated. The ability to carry debt—whether the debt is owed by a person, company, or government—is based on three factors; the size of the debt, the interest rate charged on the debt, and the borrower's income. While the national debt is very large, fortunately interest rates are very low. Also, national income is high enough so that the ratio of the interest payments on the debt as a percent of national income is relatively low, at about the same level as during the 1950s to 1970s and half the level as in the 1980s and early 1990s. Of course, there are "opportunity costs"to the additional $6 trillion debt, meaning the $6 trillion could have been used in other ways that would have created benefits. But if the $6 trillion had not been borrowed to prop up the economy during the pandemic, there's a real chance a 8