Hi, I’m Evan from stockinvesting101.net! MLR has allowed me to submit a guest post!
Take a quick look at the US Debt Clock. Over the past 3-4 years we have all seen and heard people ramble about the amount of debt our government and our citizens are in, but most never realized it was this bad, including myself.
Breaking Down the Debt
Currently the federal government is over 12 TRILLION dollars in the hole. This is not meant to be a political post, both parties are certainly at fault in one way or another. 12 Trillion works out to be over $115,000 per tax payer. If the average person earns 40,000 dollars at a 20% tax bracket that would yield 8,000 dollars a year. It would take over 14 years for the debt to be repaid based on that example assuming there is no spending from the government which, of course, is completely unrealistic.
MLR’s note: I like to put things in perspective. Saying we have more debt today than in 1970 in nominal terms is pretty much a given. Let’s put the numbers in context:
What is the national debt as a percentage of GDP? Last year we were at 53% of GDP, which is up from 35% in 2000, but much lower than the 109% at the end of World War II.
What is the national debt as a percentage of total credit market debt? Last year we were at 22%, higher than the 17-18% for the rest of the 2000s, but lower than the +50% post WWII, +30% 1960s, and +25% 1995.
You can also see that the average citizen has over $50,000 dollars in debt compared to a paltry $1,500 dollars in savings. That is pitiful to say the least.
Where is all of this going to end? Are we going to push our national debt up to 15, 20, 50 Trillion dollars? When will China and other creditors pull the plug? We are no where close to having a balanced budget currently and even if our budget was balanced, we would still have a huge amount of debt on our shoulders.
Biggest Problem Facing America
This is, without a doubt, the biggest problem facing America. In the midst of the worst economic period in 80 years it makes sense that the government did not make any efforts to decrease spending or increase taxes, we could be in a depression currently if they did. But when will the government and our citizens start changing their ways?
Part of the problem is that politicians think we are playing with monopoly money. The government has no real money, it all comes from taxes. Guess who pays taxes each and every day? Me, you, and everyone else!
Social security is set to go bankrupt within this new decade and, Medicare and Medicaid are both on life support [get it?].
MLR’s note: I am not aware of anyone predicting social security going bankrupt this decade in the same sense as a business going bankrupt. The term bankrupt when used with social security typically means that the benefits will have to be cut. The Congressional Budget Office predicts that social security will pay out full benefits until 2037 at which point it will have to reduce distributions to 78% of promised benefits. Not ideal, but it will rebalance the inlays and outlays.
We are going to have to make some drastic changes soon. 14 trillion dollars is more than anyone could possibly imagine. That is 14 thousand billion dollars.
I am naturally an optimist and I do think that we will get this problem worked out in the end, however the situation does not look too pretty now. All politicians are worried about is getting re-elected, which means they are all promising to decrease taxes and increase spending, which got us in this situation to start with.
You Can Help.
Do everything you can to turn this around. E-mail your congressmen, talk to your friends about the problem. A vote and a voice are two very powerful things. Put them to work!
I'm MLR. After graduating from college debt free, I decided to write a blog encouraging people to adapt responsible and sensible personal finance rules.
April 7th, 2010 at 10:31 am |
Is there anyone that thinks we’ll ever make a dent in the debt?
Maybe we could sell off some pieces to foreign investors in order to retire some debt. I’d suggest Nebraska. :)
Kosmo @ The Casual Observer´s last blog ..Sports Recap
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April 7th, 2010 at 11:18 am |
I don’t think writing to our representatives helps much. They are the ones who got us into the mess and they will continue to do so. I say, let’s bring Clinton back. He is the only one who has taken our debt ratio (as a percentage of GDP) down. Reagan started the big expansion of budget deficits and hence big government, Bush I and II followed suit. Obama is killing it now. (http://zfacts.com/p/318.html)
ctreit´s last blog ..Become a Better Consumer in 3 Steps
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April 7th, 2010 at 10:18 pm |
As I see it, it all starts with us.
We need to manage our own finances more responsibly, and we need to vote out the people in DC who won’t.
David/Yourfinances101´s last blog ..Wide World of Blogs
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April 26th, 2010 at 9:50 am |
Always a joy to read your articles, and always learn something new! thumbs up!
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April 26th, 2010 at 11:58 pm |
Hey,
I read somewhere that the US treasury could pay down the national debt with what they currently have. The problem is, the US gov doesn’t use simple tips on budgeting that are proven to help the average person reduce expenses and improve cash flow. They feel they have an unlimited supply of money (our taxes) and they can spend it as foolishly as they want, because there’s always more.
Thanks,
Guy
Tips on Budgeting´s last blog ..Tips on Budgeting – The #1 secret that makes a budget work
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May 7th, 2010 at 10:19 pm |
14 TRILLION dollars is hard to even comprehend. It is going to take some time for America to get out of this mess. Just mind boggling how something like this can actually happen in the first place!
Adam´s last blog ..Paid Writing Jobs Online
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June 14th, 2010 at 3:03 pm |
Evan’s guest post above was very informative and I wanted to add to his final paragraph where he says “You Can Help” In his words he asks to write to your congressman and put them to work. well for those who don’t know its very easy to do as the house of representatives have a nifty service where you can do just that. a quick search on google for Email your congressman will give you the link but if its allowed to stay in the comments section I’ll post it below:
https://writerep.house.gov/writerep/welcome.shtml
mcdpoker´s last blog ..How To Make Playing Poker Comfortable
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July 13th, 2010 at 9:37 am |
I am most concerned about our debt to China – if they decide to start selling US Bonds, the dollar will suffer horribly. This is such a security risk, and no one in the government seems to care.
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August 11th, 2010 at 11:52 am |
Thank you Evan for breaking down this debt clock. Its really amazing that the US is such a hole and it still continues to grow. We need to figure out what is going to get this economy rolling. Whether its a new discovery or some sort of work. We need something and we need it bad
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August 16th, 2010 at 4:30 pm |
It is really amazing to me that no one really seems to be speaking up about this. These are major problems that our government needs to examine and take care of. That’s an unbelievable amount of money to owe in debt. With foreign countries buying our real estate, our debt, and financing our needs, will we even govern ourselves in the future?
Gobankingrates´s last blog ..What You Didnt Know About Wall Street Reform
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August 29th, 2010 at 8:32 pm |
Wow this is very scary! I have been reading more and more about the national debt and it’s not looking good at all. I am optimistic too, and I hope that everyone realizes that it’s time to SAVE and not spend it all or buy useless things in credit. Thanks for sharing, and making the population more aware of the situation!
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