An Old Guy Looks at Debt

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You may have noticed recently that the US has managed to grow our national debt to 38.9 TRILLION dollars. So what, you may ask. Well, for the first time in over 80 years our debt is greater than our annual GDP. Yup, not since WWII have we managed to do that. Again, you may ask so what. Well, for one thing our annual interest payment is now over one trillion dollars per year (and unlike your mortgage payment there ain’t no principle in there.) Well, how did that happen?  You tell me.

Social Security costs 1.5 trillion per year (yeah, I know, there’s allegedly a trust fund somewhere that you paid into but that it is just an accounting trick now.) Medicare, another “fund” you paid into, costs 1.1 Trillion per year. (Your contributions are peanuts in relation to our pitiful healthcare system.) Medicaid? Another 600 billion. Don’t forget that our Dept of Defense, er, War also costs one trillion per year – and if our cracker jack administration gets their way it will go to 1.5 trillion next year. And then there’s the whole rest of the government that totals up to about 7 trillion dollars.

The good news is that the federal government took in about 5.25 trillion in taxes in 2025. The bad news is that it spent 7 trillion. Hey wait, that’s almost 2 trillion short! How can that be since we all pay way too much in taxes to the gubmint?! I guess we better call the credit card company, we’re going to be about 2 trillion short again this year! 

Well this certainly calls for a tax cut!

Many years ago, several politicians – all Republicans – claim to have said, "A billion here, a billion there, and pretty soon you're talking real money."  Well, bunky, put “T” on it and I think we are talking real money now. And it’s not going to get better; it is forecast to go on in perpetuity. (175% of GDP by 2050.) So, at least a trillion dollars per year in interest payments with no end in sight. Great.

Just for grins, did you know we actually had a budget surplus not that long ago? Yup. 1998-2001 under no less a raging conservative than Bill Clinton we had surpluses. They quickly disappeared, however, after the Bush’s tax cuts and 20 years of war.

Seeing a pattern here?

Anyway, there’s no point in sweating this, there is really no way to get rid of these deficits. The sad truth is if we weren’t running them, we would be in a recession now much worse than 2008. That’s just how it works. Besides how do we get rid of them? Yes, we could raise taxes and cut some things (a LOT of things) but if it were easy we already would have done it. Nope, we Americans would squawk way too loud and politicians know it.

So, let’s just keep on keeping on until one of three things happen: interests rates sky rocket, the dollar collapses, or nobody in the world will buy our bonds – and probably all three.

Sorry, wish I had some better news in these difficult times but somebody's got to do it - no point in being an ostrich.

On a positive note, the weather is getting nice!

So good luck, kids. I'd like to help but sadly I have to protect my social security and Medicare. 

Taxman   The Beatles