Government Debt Made Simple
Have you been scrupulously paying your way out of debt using one of those "Get out of Debt Now" programs? Or maybe you're already debt free. I'm sorry to say this, but you are so wrong. You may be personally out of debt but your beloved federal government has been taking you in the opposite direction.
Let's start with some government debt and deficit numbers, numbers so big that they are almost meaningless. But just for you, I'll reduce these numbers to what they would mean for an average family, so that you can get appropriately incensed. Frankly, most newspaper and magazine articles just stick with the big numbers, and we the people can only wonder what a trillion dollars means, and whether or not a zillion dollars is more or less than a trillion dollars. (Just for the record, a "zillion" is not real, but it is only slightly less not real than a trillion).
So bear with me for giving you the big numbers and I'll soon get to some numbers one can actually understand. You can even skip the next section if you start to get a headache.
Here are the Big Numbers
The National Debt as of November, 2009 is about $12 trillion. The federal government expects the National Debt to be $14 trillion for the fiscal year 2010. Just for perspective, four years ago in 2006, the National Debt was about $9 trillion.
Federal spending for fiscal 2009 was around $4 trillion. (Or was that $4 zillion?) The 2009 deficit was about $1.8 trillion. This means that the federal government spent $1.8 trillion more than it took in during the 2009 fiscal year.
Interest paid during the 2009 fiscal year on the National Debt was $380 billion, about 9% of the entire federal budget. No debt was paid off, but plenty of debt was added.
During the month of October, 2009 (the start of the 2010 fiscal year), the federal government spent $178 billion more than it received in taxes – the $178 billion was "only" the deficit spending, just for that one month. The federal government actually spent over $330 billion in October. Don't try this at home.
Over a year, this would amount to over $2 trillion in deficit spending. And that is the actual deficit estimate expected by the federal government for 2010. This will increase our National Debt to $14 trillion, and the interest we will pay on that will be about $440 billion.
Here are the Same Numbers Given on a Per-Family Basis
To put this in perspective, I'm going to rewrite the information given above on a per-family basis, so that it is understandable to us humans. It isn't hard to do once you know that there are about 110 million households in the U.S. If you had a headache, now is the time to start reading again. Your headache will get worse.
The National Debt as of November, 2009 is about $109,000 per family. (Never doubt my math skills). The federal government expects the National Debt to be $128,000 per family for the fiscal year 2010. Just for perspective, four years ago in 2006, the National Debt was about $82,000 per family. Shame on you for increasing your debt so quickly.
Federal spending for fiscal 2009 was around $36,000 per family. The 2009 deficit was about $16,300 per family. This means that the federal government spent $16,300 per family more than it took in during the 2009 fiscal year.
Interest paid during the 2009 fiscal year on the National Debt was about $3,500 per family, about 9% of the entire federal budget. No debt was paid off, but plenty of debt was added.
During the month of October, 2009 (the start of the 2010 fiscal year), the federal government spent $1,600 per family more than it received in taxes – the $1,600 per family was "only" the deficit spending, just for that one month. The federal government actually spent over $3,000 per family in October. Go ahead and try this at home for a few months and let me know how it turns out.
Over a year, this would amount to over $19,000 per family in deficit spending. And that is the actual deficit estimate expected by the federal government for 2010. This will increase our National Debt to $128,000 per family, and the interest we will pay on that will be about $4,400 per family.
Did You Have Any Idea That We Were in This Much Debt?
Did you know that your family accumulated an additional $16,700 debt in 2009? And that your family's total debt as a result of federal spending will be $128,000 within a year? And that you'll be paying $4,400 just to pay the interest on that debt?
Not to worry, it's easy to solve this problem. Each family just needs to give the federal government an additional $128,000 next year.
I'm sending my money in tomorrow.
Enjoy Your New Debt
This debt is not like student loans that accumulate while a student is getting an education, and then are paid off when the student gets a job. This debt has grown during every presidential administration since 1969 and has dramatically increased over the last few years. Each year it takes up a larger fraction of federal spending, and shows no sign of letting up. (I won't scare you by telling you how much more debt will be added just to keep up with our Social Security, Medicare and Medicaid obligations. You wouldn't believe it anyway.)
Solutions to Our National Debt Problems
Actually, there are no realistic political solutions. As most of you know, our politicians do not have the courage to face up to this, because any solutions they come up with will be unpopular with a large number of groups, and this will decrease their chances of getting elected (or re-elected), which is the most important consideration for many politicians. For instance, we'd certainly have to increase the minimum age needed to get full Social Security benefits and/or decrease the amount of the benefit. I wouldn't be happy about this myself, but them's the bitter truth. (Why isn't my grammar checker working?)
But I'm not a politician, thankfully, so here are some realistic solutions that can and should, but won't be done:
1) Pass a balanced budget amendment. (To be realistic, it could go into effect in, say, 15 years, just to give the government time to rein in spending). After that, no more debt would be accumulated. Texas and many other states have such amendments, and it has suffered less through the current recession than most of the rest of the country.
2) Allow federal spending to increase only at the rate of inflation, and population growth. Tax receipts will normally increase faster than this, so we could then start paying down the National Debt.
I could list lots of other items here, but if we do these, you and I would be happy campers (or at least I would). Think anyone could get elected to the presidency with those two items on their platform? Neither do I.
Tim Farage is a Senior Lecturer in the Computer Science Department at The University of Texas at Dallas. You are welcome to comment upon this blog entry and/or to contact him at email@example.com.