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The Debt

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The Debt?


Is It Real $ ?

Any Interest?

You Owe $

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Is it real money? 
We owe it to ourselves, so it doesn't matter, right?
Wrong!

Please note: the numbers in some of these article can quickly become out of date. Current numbers are always available on the page, The National Debt Numbers At a Glance.

What's The National Debt?
Written in 2004

It's just paper, right. Doesn't mean anything, because we owe it to ourselves, right. Well, let's look closely.

The national debt is real money, owed to real people by the U. S. government (that's you and me). It is in the form of U. S. savings bonds, treasury bills, notes, and bonds, and a few other things. Most of it, about 75%, is owed to private individuals and organizations. Those organizations include banks, savings & loan associations, insurance companies, corporations, state & local governments, and foreign investors. Some is owed to various private pension funds, including labor union and corporate pension funds. About 25% of it is owed to other federal government entities. Some of the debt is probably owed to you, directly or indirectly. 

People show up to collect their share, every day. They cash in bonds and notes. They retire and draw pensions. Many of them count on those bonds and notes to meet some pretty important needs—like college for the kids, or capital to start their own businesses, or health care for their parents. This year, about 20% of the debt must be paid to people and organizations whose bonds and notes will mature and come due. Next year, another 20% is due. It never stops. And it is never paid off, because we always borrow more to pay what's due. 

How Do We Pay It?

We borrow more money. Every year, the U. S. government issues new bonds, bills, and notes, to finance the debt. When someone buys a Treasury bill, that person is loaning money to the government. The loan will be paid back, with interest of course. But the government will borrow new money to pay back the old. 

And the interest attached to the debt is no small matter—it's a huge matter. Every working American pays for the national debt, every working day. Every day, we pay interest on the entire $7 trillion. Every day, we pay some of what we owe to the people we borrowed from. But we're not paying enough to keep up. Every day, the debt gets bigger. It gets a lot bigger—in the first three months of fiscal year 2004 (beginning October 2003), it grew by two billion dollars per day.

Almost all of the payment on the debt is made, directly or indirectly, by employed people. If you're employed, here's what your share looked like in January, 2004: 

TOTAL  YOUR SHARE
The debt:  $7,008,606,702,828 $41,809
Interest:   $ 38,347,000,000/mo $ 276.91/mo

That's right, the interest alone on the national debt is costing you $277 per month. If two people in your household are working, your share is $554 each month. 

(See the National Debt Numbers at a Glance page for the most recent figures.)

Some Of It Is Hidden, Of Course

Maybe you're having trouble seeing how you can be paying that much each month, just in interest on the debt. Well, the answer is that not all of it is coming out of your paycheck, or showing up on your tax returns. A big chunk of the U. S. Government's income is from corporate income taxes. So, corporations pay a lot of the interest. 

But, who pays what the corporations pay? You do, of course. You pay it in higher prices for nearly everything you buy. Corporations adjust their prices to pay their costs, so they can remain profitable. When their taxes go up, your prices go up. There's no place to hide, is there? 

How Is This Happening?

It takes a deficit to make a debt. And the U. S. government operated with a deficit in seventy of the years of the last century, and every year but one since 1970. In most of the years since 1982 (the year of the last large tax cut), we spent at least a hundred billion dollars more than we received. In 2003 we spent 374 billion dollars more than we received. 

Here's what it looked like in 2003, with the numbers reduced again to show each working American's share. 

Payoff of the National Debt

This debt must be paid off. It's costing each of us far too much right now. And it will cost our children and grandchildren even more in the future. What does it cost us to pay it? 

Monthly payment, per working American 
To pay the debt in 15 yrs, your monthly payment = $442.70
To pay the debt in 30 yrs, your monthly payment = $322.08 
To pay the debt in 50 yrs, your monthly payment = $287.81 
To pay the debt in 100 yrs, your monthly payment = $277.31 

The first thing these numbers show is that it doesn't work to stretch the payments beyond thirty years. It's just like your house mortgage. The reason mortgages aren't usually written for longer than thirty years is that monthly payments don't go down much for longer terms. If we ever want to pay off the debt, we must each come up with about $322 per month. Every month. Starting now. Remember—you're already paying about $277 per month. You only have to pay an additional $45 per month. You pay it by paying more, not less in taxes . Some of it can also come from reduced government expenditures. But, if we reduce our taxes now, we are making smaller, not larger payments.

(The figures above were correct in January, 2004. Payoff amounts are controlled by interest rates, and the interest figures can vary widely month-to-month; see the National Debt Numbers at a Glance page for the most recent payoff figures. Remember, these numbers might be higher or lower next month, but they are rising over the long term.)

What If We Can't Pay?

We have to. If we don't, it gets worse every year. Even if we decide never to pay it, we have to pay that interest every year. And in any year that we don't pay all the interest, we have a deficit, the debt gets bigger, and the interest payment gets bigger. 

Eventually, the amount of money we have to borrow each year will drive interest rates higher. And ultimately the burden of paying the interest each year will become the dominant factor in our economy. It will rob us of our ability to produce. And our entire economic system truly could collapse—along with it our republic. The stakes are truly that high. 

In recent years, interest rates have been quite low—and it's a good thing. These lower interest rates, coupled with the general health of the economy, are the chief reasons the deficit was reduced in the late nineties. But we lost that position. We're back to huge deficits. We must now begin a serious attack on the debt. That begins by eliminating the deficit. Then we begin paying off the debt. That is the only way we can reduce the terrible expense that we pay in interest.

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copyright © 2010, J. C. Adamson