The Dope on National Debt
Lisa | Mar 30, 2008 | Comments 12
Are you sitting down?
The US National Debt is 9.5 trillion dollars. If you divide that by the U.S. population, that means each American owes 31 thousand dollars. We are all paying interest on this money through our taxes.
The government adds to the national debt by not balancing the budget each year. Its current budget deficit is growing the national debt at a rate of 1.66 billion dollars per day. That’s about 1 million dollars a minute. Click this link if you’d like to see the history of how the national debt has gotten so high. National debt has increased during Republican administrations, and decreased during Democratic administrations. Financing the wars in Iraq is not cheap. Nancy Pelosi states that “right now we pay in interest four times the amount we spend on education and four times what it will cost to cover ten million children with health insurance for five years.”
Who do we owe this money to? 2.4 trillion dollars is currently owed to foreign countries. The major holders of this debt are Japan ($587 million) and China ($493 million). 40% is owed to the Federal Reserve. The Federal Reserve is actually privately as well as publicly owned. The remaining is owed to social security, individuals, corporations, and states through various bonds.
Will we actually ever pay back the national debt? There is controversy over whether or not we even want to. Many analysts argue that reducing this debt would create a bizarro deflation scenario so acute that the readjustment period would create havoc.
Some say it would be impossible to do. ” Stephen Moore wrote in the Wall Street Journal:
Here’s an experiment. What if we were to try to pay off the $4-plus trillion national debt by having Congress put one dollar every second into a special debt buy-down account? How many years would it take to pay off the debt? One million seconds is about 12 days. One billion is roughly 32 years. But one trillion seconds is almost 32,000 years. So to pay off the debt, Congress would have to put dollar bills into this account for about the next 130,000 years—roughly the amount of time that has passed since the Ice Age. Even if we were to require Congress to put $100 a second into this debt-buy-down account, it would still take well over 1,000 years to pay the debt down.
But much of the money is borrowed in the form of guaranteed loans, so it has to be paid back. And taxes will continue to increase as the interest increases. And what happens if we don’t pay back the money borrowed from Social Security?
It is a complicated problem, and we are in deep. Where is our current administration? They have let the deficit spiral out of control. In fact, the government is borrowing money for our upcoming tax rebate. What’s wrong with that picture?
Are you looking forward to November as much as I am?
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Filed Under: Commentary • Debt Reduction • Economy • The Dope On...
Linda
The Passive Dad
J. Money
Matt
Mr. GoTo
You paint a real world version of what the national debt is. But if you do that, imagine what your real world, the one you live in, would be like if there was no debt, only cash transactions.
Let me explain.
You would have no house, because it is unlikely you would be able to afford a home. Rent prices would soar as well because you would have no other option and the cost of housing would skyrocket because the cost of building stuff would go up. Why? because business would not be able to borrow any more than they could sell. Each time they sold a product, they would have to take the money and buy more raw materials. Do you see where I’m going with this.
It is easy to say that the federal government should balance the budget, as happened during the Clinton administration so much so a surplus was created. But that is only fixed if we put on the brakes and quickly. No war would be a nice start. But that would be a costly endeavor as well. But it would sure save a ton if we pulled out and didn’t have to pay another dime.
And those tax cuts that the current administration wanted to make permanent would not have helped. In fact, raising taxes might not even help in the short-term. The new president will have their hands full!
The real key to the deficit reduction lies not in the federal government not spending - we want services and we expect our taxes to pay from them. We just want what we send spent on what we can understand - not something that is part of a certain group’s agenda.
The real key to the deficit reduction is getting our products out there to a global marketplace and that means getting over the crisis we are currently in. Cheap money will do that but prudent lending will do even better.
The real key to deficit reduction is counterintuitive. It means saving less and spending more on American made goods. It means buying them with good credit habits and, although it sounds cliche, it also suggests that we are living within our means. Once again, not easy if no one will lend you money at a cheap rate. We bemoan those cash advance places as usury, but your options narrow when you fail to take care of your own household finances.
The real key to deficit reduction lies in moderation. But it has to start at home, it has to be focused on US goods and services and it has to be part of a saving/spending regime that is within reason.
We can make numerous calculations about how much we waste on the interest we pay to service the deficit but the solution involves spending differently, wisely, and with moderation. The government, the states, the city we live in, all of us.
There are numerous other keys to reducing the deficit but I have gone on for too long. I like what you do here at greenerpastures but, I’ve been in a mood about this economy lately… what (more) can I say!?!
Best always, Paul