Everyone has become accustomed to hearing about trillion-dollar U.S. deficits for the past five or six years. It now just feels like “old news.”
A trillion is such a huge number that counting the zeroes can make your head spin (luckily, commas help you keep track). But, what does this deficit (and debt) really mean in terms of numbers that we really use in everyday life?
Well, the math is not complex, just a bit unruly. Let’s look at it this way. The national debt is approximately $17 trillion. Add to that the state and municipal debt, including unfunded retirements, totaling about $6 trillion, for a grand total of about $23 trillion.
Now, assume that we decided to toughen up and face the music, i.e., no more borrowing. The deficits (yearly shortfalls) have averaged about $1.3 trillion over the past five years. Assuming state and local deficits are running parallel to this in proportion to the debts, that would be another $400 billion per year for those deficits, for a total government deficit of $1.7 trillion.
If we divide that by the population of the United States (about 316 million), we will find that each family of four would have to pay about $17,000 per year to eliminate deficits.
But, wait a minute. We still have to pay interest on the $20 trillion that we already owe. The interest on federal debt was about $450 billion last year. If we assume the same rate for other debt (which probably underestimates the cost), that adds another $150 billion. So, the grand total is now nearly $24,000 per year per family of four to freeze debt at current levels.
How many families could come up with that?
Something else to keep in mind is that the government’s borrowing rate is at historical lows since the government is basically borrowing from itself (in the form of the Federal Reserve) and gives itself a great deal. When the Fed stops printing money to “lend” to the U.S. government, rates most certainly will rise. Bottom line: The numbers show we’re in big trouble.