References: https://www.treasurydirect.gov/govt/reports/pd/pd_debttothepenny.htm ; https://www.thebalance.com/who-owns-the–s-national-debt-3306124; https://www.fiscal.treasury.gov/reports-statements/treasury-bulletin/current.html (September, 2020 issue)
“‘Curiouser and curiouser!’ cried Alice.” She could have been talking about the national debt.
What We Owe
According to the US Treasury Department per the above sources, as of Ocober 1, 2020, the national debt was just a jot under $27 trillion. To put that number in perspective, there are roughly 330,000,000 people in the US. Debt divided by population equals almost $82,000 for each man, woman and child in the US. That is in addition to what you already know you owe for credit cards, cars, mortgages, student loans, etc. So if you have a family of four, your share of the national debt is about $328,000.
For each trillion dollars our elected “representatives” decide to use to pander to the woke mobs for more stimulus, pay off student loans, reparations, air force toilet seats, etc., it will cost every person in this country another $3,000, plus interest.
And it gets worse, way worse. The US has to pay interest every month on this debt, and does so without paying down any of the principal – that is called “servicing the debt.” That is just like you paying the minimum every month on your credit cards – actually it’s worse since your minimum payment at least usually includes some small amount of principal.
Would you believe for fiscal year 2020 it cost this country, and you, $522,767,299,265.34 just to service the national debt. https://www.treasurydirect.gov/govt/reports/ir/ir_expense.htm. That’s BILLIONS, and that’s just this year. Using our same calculation, in fiscal year 2020 servicing the debt cost each person in this country almost $1,600. Again, for a family of four that is about $6,400. We’ll bet you could sure find some other uses for that kind of money.
Another perspective is that the 2020 federal budget had expenditures of approximately $6.6 trillion, which included the original stimulus money. So the service on the national debt consumed almost 8% of the total expenditures. And note that that $6.6 trillion included $3.1 trillion in new debt (this is called the “deficit”, which was more than TRIPLE that of the prior year) – that is, the government’s income in fiscal year 2020 only covered HALF the expenditures. All that stimulus money? The government had to borrow it.
A more realistic perspective for debt service is to use the original 2020 federal budget amount of $4.79 trillion. That comes to about 11% of the original budget. True, the pandemic has skewed things, but not in a good way. It has generated so far about $3.1 trillion in unanticipated expenditures, which had to be borrowed and which will significantly increase what it costs to service the national debt. It has also reduced revenues by hundreds of billions due to shutdowns.
But wait, it gets better (worse actually). For the past several years, the annual deficit has been about $1 trillion dollars, which means the national debt gets bigger every year. But it’s costing over 1/2 trillion dollars to service the national debt. so that means that the government has to borrow money just to service the debt. So that means we’re borrowing money to pay the interest we have to pay on the money we already borrowed! And that money will become part of the national debt next year and then we’ll be paying interest on that money. And so on, and so on… Is that nutty or what?
Who We Owe It To
We owe it to all those entities who have loaned money to the US. This includes foreign countries like China (about $1.07 trillion) and Japan (about $1.3 trillion), and the total foreign debt is about $6.81 trillion. Note that this just includes what the US has borrowed from those governments. It does NOT include all the property and companies in the US that foreign countries have purchased outright or invested in.
The US also owes the Social Security Trust Fund, the Federal Reserve, state pension plans and private sector pension funds, mutual funds and a variety of other entities, from which it has borrowed money. Notably, Social Security and public and private pension plans and 401(k) funds are all owed collectively just a bit under half of the debt. So actually retirees in the US, both current and future, are the ones most at risk if the US cannot pay back this money. Put another way, almost half of the national debt is owed to you and us via retirement plans of one sort or another, including Social Security.
The Debt Ceiling
The sad reality is that the US government spends more than it makes every year, so it has to borrow more money every year. You may have read or heard from time to time about politicians in Washington arguing about whether or not to increase the “debt ceiling.” Congress sets a limit, called the “debt ceiling,” on how much the government can borrow in total – that is, the highest the national debt can be.
Why the Debt Ceiling Matters
Congress must raise the debt ceiling so the United States doesn’t default on its debt. During the last 10 years, Congress increased the debt ceiling 6 times. It raised it four times in 2008 and 2009 alone. If you look at the debt ceiling history, you’ll see that Congress usually thinks nothing of raising it.
The debt ceiling only matters when the president and Congress can’t agree on fiscal policy. That occurred in 1985, 1995 to 1996, 2002, 2003, 2011, and 2013. It’s a last resort to get attention by the non-majority in Congress. They might have felt slighted by the budget process. As a result, they create a debt ceiling crisis.
https://www.thebalance.com/u-s-debt-ceiling-why-it-matters-past-crises-3305868
OK, So Why Is All This A Problem?
Think about it. It’s more-or-less the same as if you had to use 11% of your take home pay (after you’ve already paid out, say, 30% via taxes and FICA) every month to pay just the interest on your credit cards, but still leaving your family of four with a debt of $328,000, on top of the principal you owe everyone. Wouldn’t you be worried? Would you run out and spend another $1,600 you don’t have? Well, if you had that kind of debt in the first place you probably would since you obviously cannot manage your finances intelligently. And with that kind of debt and a normal income, no one is going to extend you any more credit anyway. But if you’re a government you get cut a whole lot more slack when it comes to borrowing.
But governments and people who spend beyond their means have to pay the piper at some point. At some point in the future, this money, or a good chunk of it anyway, is going to have to be paid back. But you’ll be dead by then, so what do you care? Well, if you have kids or care even a little bit about the future of the country, you should care. Your kids, and their kids and their kids are going to have to pay it back somehow sometime. And where does that leave them? They are paying off our foolishness (Congress’s actually, but we all want all the goodies the government dishes out but don’t want our taxes raised and don’t much think about the consequences) in not being able to live within our means. Maybe they can kick the can down the road like generations before them and just keep raising the debt ceiling.
The answer, of course, is simply to budget and spend responsibly, start paying off some principal, and stop raising the debt ceiling, but anyone familiar with how Washington works knows that isn’t going to happen. And if this progressive brigade takes over, well, the first thing they’re going to do is authorize spending for all sorts of pet projects, like paying back peoples’ student loans and spending trillions on reparations for blacks, and the so-called Green New Deal, and goodness knows what else – just look at the Democratic platform wish list.
In the end, there are going to have to be some serious behavior changes among our elected “representatives” and “entitlements” since the following description is what we have right now and it show no signs of moderation:
Elected officials have a lot of pressure to increase the annual U.S. budget deficit. Increases in the budget push the national debt higher and higher. There is not much incentive for politicians to curb government spending. They get re-elected for creating programs that benefit their constituency and their donors.
https://www.thebalance.com/u-s-debt-ceiling-why-it-matters-past-crises-3305868
The End
How did this country get to the place where it cannnot live within its means? You have to live within your means or the bank comes for your car or house. We have to live within our means or the bank comes for our car or our house. Here, the debt service of over 1/2 trillion dollars for 2020 is HALF of the budgeted 1 trillion 2020 deficit!!! That is, half of the new debt is going to pay interest on the old debt, and the rest of the new debt gets added to the national debt!!!
Spineless and gutless elected politicians and their ceaseless pandering to special interest groups of one party or another and election and re-election pressure to bring home the bacon for most Congresspersons is to blame. Congress is like a weak-willed parent who just can’t say “no” to their kid screaming in the checkout aisle.
We need better people to represent us. A representative democracy isn’t worth a hill of beans without qualified, decent and responsible people making these decisions for the rest of us. Look at this election – are Biden and Trump really the best we have to offer???
But we the citizens and voters have to step up too and stop returning these losers to office. Incumbency has become almost like tenure; most incumbents don’t even face serious challengers anymore, it’s too expensive unless you already have the power and can help out your donors.
We’re not saying we have any answers to make this happen, but we’re certainly open to ideas and it certainly is about time to start this discussion. One obvious potential solution is to allow only individuals to donate to federal election campaigns, up to a reasonable maximum, say $1,000 per candidate. No union, no corporate, no PACs, no national committees, no black money, politicians would just have to rely on individuals. As it is now, there are all kinds of ways to game the system and the only ones that aren’t hurting are incumbents. Think of what a responsible politician could do with the money wasted on political campaigns!
Now the obvious problem is the Supreme Court’s general view that political contributions are “free speech” of some kind. Well, that is utter nonsense, but it will have to be overcome. If a cap on individual contributions is constitutional, why isn’t the elimination of, or at least a cap on, corporate/union/PAC/committee contributions? Something isn’t making sense here. Not that the law has ever had anything to do with sense, common or otherwise.
Other ideas, anyone?