Tuesday, April 6th, 2010...3:05 pm
The National Debt - A party foul of epic proportions
Our national debt scares me. It’s currently at $12.7 trillion. We also have a $1.4 trillion dollar budget deficit so that’s how much it’s growing by each year….plus interest. We only collect $2.2 trillion in tax revenues each year, which means that we’re about 6 years worth of income in debt.
Think about how much you make annually right now, then think about what your life would be like if you owed 6 times that much (if you have no job, you win here). If this were credit card debt, with interest in the 17-29% range we would already be in an inescapable black hole of debt; an event horizon if you will. That’s because the yearly interest would exceed our yearly tax revenue. The US would collect tax money, and it would all go to China. At that point, we’d basically be owned by China.
Luckily, our debt is not taken out through credit card companies. It’s instead comprised of many different loans, which on average, currently have a 3% APR. This means, that at our current rate, it will take until 2033 before we reach the event horizon. If interest rates jump upwards to a reasonable 5%, the event horizon occurs at 2021 instead. We’re really only a couple presidents away from a huge crisis.
I haven’t heard any serious debate about what we’re going to do about this. I don’t even know if escaping this debt is a reality. It’d be political suicide to even mention cutting spending on social security and medicare which comprises of almost half of our spending. You know who did discuss this? Ross Perot. This was the whole thing he campaigned on those 2 times he ran for president, but everyone told him to shutup and stop stealing votes from the other candidates.
The one good thing I can see in this is that the 3% we’re paying is less than we could reasonably expect by investing it. Because this is the case we’re better off using surplus money to invest than to pay back, and could hopefully come up with some extra money in that way. Of course, we’ll also have to get rid of our budget deficit or maybe even have a budget surplus again, like those 2 years with Clinton in office. I definintely wish we could get a refund on our war, it was defictive anyway.
If nothing changes, I could see us ending up like the Weimar Republic in Germany after WW1; massive inflation, a complete reset of the economy. I hope I’m not saving for retirement for nothing.
P.S. Check out this awesome debt clock. So many numbers.
5 Comments
April 6th, 2010 at 7:35 pm
Your blog is becoming much more political and much more interesting…
It would be good to get a refund check on the war. You know the interesting thing about war is it allows the victor to reap the spoils which can be significant in a bigger war.
Part of the reason WW2 caused such a major boon for the USA economy was that the modes of production were so completely destroyed, the only manufacturing base that was available was in the USA. Maybe a WW3 could reset the balance sheets?
In general, since the dollar is still by far the largest world reserve currency, those we are in debited too (like China) are heavily vested in their dollar investments to not lose value so it is like the housing crisis where everyone needs the dollar to maintain value.
The budget deficit is easily addressable if we reverse the Bush tax cuts for the top 1% of earners which has cost more in revenue than this Obama health care plan that caused such an uproar, but America is setup for those who have money to have more. The more likely outcome is that we will address Social Security by making it that folks like you and me can never retire before we die and collect reasonable benefits.
I am wondering if I am better of retiring in whatever the hot developing economy is when we are older.
Can your blog be setup to mail me when you reply to my comments? I leave my mail, so it seems like it could notify in new comments??? You are a geek, make it happen!
April 7th, 2010 at 9:48 am
Hey Derek,
I’m trying to talk about politics without being too partisan. I watched some documentary on credit card debt the other day and it reminded me of how our country is no better off than most of our individuals.
Oh, and I did find a wordpress plugin to email you when people respond so I’ll get right on that.
April 7th, 2010 at 5:41 pm
I enjoy the non-partisan spin. Don’t confuse me as a partisan nut either. Happy you plan to integrate the plug-in. If possible, I would find it interesting to see a non-partisan party (if that is not an oxymoron). Or at the very least, a party that always went down the middle on every issue. I think it would be interesting to see if always compromise 100% to meet in the middle would provide a better/worse outcome.
April 9th, 2010 at 10:04 am
Yes, I’m sure noone would object to aborting just half a baby.
April 9th, 2010 at 3:15 pm
depending on which half is aborted, it may not be that bad?
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