National Debt

[Texsox]

Very good article

 

The Issue

 

The federal deficit is the difference between what the government takes in from taxes and other revenues in a single year and the amount of money the government spends. The national debt is the total amount of money that the government owes, which comes from adding the up the deficits and budget surpluses (if any) for the past 200 or more years.

 

To explain it with a personal example, if each month you spend $500 more than you earn, then each month you have a deficit of $500 and have to borrow money to pay it off. If this keeps up for a year, at the end of the year your debt is $6,000, and the amount you've borrowed to pay off that debt has grown along with it. Unless you earn enough to pay off the loan, eventually it takes all of your money just to pay the loan's interest, and you have to file bankruptcy.

 

Every year since 1969, the U.S. Congress has spent more than it has taken in, meaning the Treasury has had to borrow money. Currently, the federal debt totals approximately $7.3 trillion. This number isn't really comprehensible to most people, so let's try to put it in perspective. One way to do that is to just type it out rather than spell it -- $7,300,000,000,000. Given a population of 294 million in the U.S., it would take a payment of $24,830 by every individual to retire this debt. If we instead asked only the residents of Virginia (population a little over 7.3 million) to pay it off, each person would have to fork over one million dollars.

 

At the moment, however, the U.S. is moving in the opposite direction. Current projections for the government fiscal year (FY) 2004 (October 1, 2003 through September 30, 2004) are that the national debt will increase by approximately $430 billion. That figure would be the highest on record, topping the deficit of $375 billion in FY '03. A significant contributor to the deficits in both years is the interest the government pays on this debt: approximately $318 billion in FY '03, and likely more than $360 billion in FY '04. The entire FY '04 budgets for NASA and the Departments of Interior, Energy, Justice, Homeland Security, Housing & Urban Affairs, Transportation, Labor, Education, and Agriculture together total $378 billion, about the same as the interest payment on the national debt.

 

In theory, this should put a significant damper on spending by the federal government, but in practice it has not. There are varying opinions as to why that is, and as to whether that is a good thing or a bad thing. But, one thing on which everyone agrees is that it obviously cannot go on forever. At some point, the debt has to be paid down, or the credit rating of the federal government will deteriorate so much that no one will buy savings bonds, Treasury bills, etc., which is one way the government gets the money to pay off debt.

 

At the moment, there is also growing concern in some quarters about how much of this debt is being purchased by foreign governments, and whether having other nations as our creditors is a dangerous thing.

 

According the Alan Greenspan, chairman of the Federal Reserve, "... the federal budget deficit will pose serious long-term fiscal difficulties unless it is addressed soon."

 

The bold was added by me. Howstuffworks.com has a nice campaign section highlighting some issues and summarizing the candidates positions.

[Chisoxrd5]

Given a population of 294 million in the U.S., it would take a payment of $24,830 by every individual to retire this debt.

 

 

Ok...so who do I write the check out to again??

[knightni]

I wonder.

 

How many people own credit cards or have mortgages, car payments, student loans?

 

Being in debt is pretty normal.

 

 

There will come a day when the deficit will be paid off, just like the last one was.

[Queen Prawn]

At the moment, there is also growing concern in some quarters about how much of this debt is being purchased by foreign governments, and whether having other nations as our creditors is a dangerous thing.

 

Hostile take-over?!

[jackie hayes]

I wonder.

 

How many people own credit cards or have mortgages, car payments, student loans? 

 

Being in debt is pretty normal.

 

 

There will come a day when the deficit will be paid off, just like the last one was.

The deficit doesn't really get paid off, the debt does. (The deficit is just a flow, how much spent in one year less revenue.) And the debt was never paid off, although we started paying it down a bit.

 

I agree that debt isn't unusual (the U.S. will likely always be in debt, which is okay), but the size of it is getting unmanageable. The debt is approaching the size of GDP, meaning that the U.S. government owes the value of nearly everything that everyone in the U.S. produces in one year. On top of that, the deficits have become so big, so quick, and the government has promised so much future spending, that it looks like a big problem.