DEBT DIAGNOSIS

$15 tril­lion debt, and Con­gress on Prozac

Bill Vin­cent, Fort Worth Per­sonal Finance Exam­iner
Novem­ber 16, 2011

One of the incred­i­ble ben­e­fits of being in Con­gress MUST be a vir­tu­ally unlim­ited Prozac sup­ply. There can’t be any other expla­na­tion to the inac­tion on pub­lic debt.
Per­haps Con­gress views the pub­lic debt like many peo­ple view birth­days. A birth­day is a mile­stone, cer­tainly. But just another day. And so, it seems, is the atti­tude of the United States Con­gress, to what should be the earth-shattering news that the United States’ Government’s accu­mu­lated debt, also known as the “Pub­lic Debt”, just sur­passed $15 tril­lion. Yes, a huge mile­stone. But, for Con­gress, just another num­ber.
As of this writ­ing, the pub­lic debt stands at $15,037,781,593,007.03. And count­ing! That’s $15 BILLION, one thou­sand times! The def­i­nite ben­e­fits of proper use of Prozac aside, per­haps mem­bers of Con­gress are on enough psy­chotropic med­ica­tions to dull the sense of the sheer eco­nomic impact that $15 tril­lion in debt has on all Amer­i­cans. Either that, or their con­tin­ued spend­ing binge is a lethal and astound­ing com­bi­na­tion of inep­ti­tude, mis­man­age­ment, and almost psy­chotic lack of empa­thy for what this spend­ing is doing to the next 3 – 4 gen­er­a­tions of United States’ citizens.

Well, before you read the rest of this, make sure to remove your­self from any access to sharp objects. Or, per­haps, take that pre­scribed dosage of Prozac, to enable you to han­dle learn­ing just what pub­lic debt is doing to you, with­out expe­ri­enc­ing uncon­trol­lable out­rage.
What exactly IS pub­lic debt? Pub­lic debt is the accu­mu­lated debt the United States Gov­ern­ment owes for its oper­a­tions. Each year the gov­ern­ment spends more than its rev­enues, the pub­lic debt increases. We call this “deficit spend­ing”. When the gov­ern­ment bal­ances the bud­get, pub­lic debt stays the same.
When the gov­ern­ment takes in more rev­enue than its expenses, pub­lic debt decreases.
The U.S. gov­ern­ment has par­tic­i­pated in deficit spend­ing many years in its his­tory. We started with $75 mil­lion debt in the 1780s, in order to finance the Rev­o­lu­tion­ary War. And so began pub­lic debt.
Except for 1835 …
In 1835, the United States actu­ally com­pletely paid off its pub­lic debt. It’s the only year in our his­tory in which we didn’t have pub­lic debt. Andrew Jack­son was run­ning for pres­i­dent, on the plat­form of abol­ish­ing the cen­tral bank of the time, called the
Sec­ond Bank of the United States. The head of the cen­tral bank, a man named Nicholas Bid­dle, objected to Jackson’s plat­form, so much so, that he decided to shrink the money sup­ply of the entire United States, caus­ing a Reces­sion. He fig­ured to pub­licly force Jack­son to change the plat­form. Jack­son did not.
And the char­ter for the Sec­ond Bank of the United States was allowed to expire. With no cen­tral bank, the United States com­pletely paid off its pub­lic debt. Since then, pub­lic debt has sky­rock­eted, in recent years expo­nen­tially.
Why should any­one be alarmed now? Because of the rate of increase of the pub­lic debt. Here it is in each of the last few years, pro­jected into 2012:
2008: $10.0 tril­lion
2009: $11.9 tril­lion
2010: $13.5 tril­lion
2011: $15.5 tril­lion
2012: $16.7 tril­lion
So, will this cost me any­thing? Yes. Absolutely.
Pub­lic debt is Con­gress’ credit card. And since the 16th Amend­ment autho­rizes Con­gress to tax cit­i­zens directly, Con­gress expects you to pay for it. And remem­ber that Con­gress ALSO has the author­ity to raise its “credit card” limit. That limit is called the “debt ceil­ing”.
How much is our por­tion? Well, here is the math: $15 tril­lion of debt, with 300 mil­lion cit­i­zens to pay for it.
That works out to be $50,000 per per­son. A fam­ily of 4 cur­rently owes $200,000. Since no fam­ily of 4 wants to pay the United States $200,000 in addi­tion to reg­u­lar taxes, this debt will more than likely be passed down to 1 – 3 gen­er­a­tions.
Exactly who owns the pub­lic debt? China owns $1.4 tril­lion, Japan owns $1 tril­lion, the U.K. owns about $1 tril­lion. The rest is made up of other coun­tries and indi­vid­u­als. Basi­cally, any­one who buys gov­ern­ment bonds owns a por­tion of the pub­lic debt.
So yes, for­eign coun­tries have own­er­ship of our pub­lic debt. That per­cent­age of for­eign coun­try own­er­ship has risen in the last few years.
“But this isn’t my fault,” you’re prob­a­bly say­ing. “I didn’t make these pur­chases! And I cer­tainly didn’t expect to owe a for­eign coun­try any­thing for Amer­i­can gov­ern­ment func­tions!” And you would be cor­rect.
What are your options? The 2012 elec­tion is a chance to make a state­ment to D.C. politi­cians that the prac­tice is to stop.
Or, you can reach for that Prozac. Like Con­gress must be doing. Busi­ness as usual.