Let’s talk about the national debt for a moment, shall we? I know, with all the other, sexier items in the news; the boring old debt conversation has sort of faded into the background. That fact is alarming. The debt incurred by the United States is big and scary, and nobody wants to talk about it until the debt ceiling needs to be raised. It is getting larger and larger every single day, and needs to be addressed pro-actively rather than reactively. When pundits compare our debt to a ticking time bomb, they could not be more correct. It affects our national security, our foreign policy and weakens our economy. Correcting our debt is like doing anything else painful and difficult. The longer it’s put off, the more difficult it gets, and we may have waited too long already.
The amount of money that we pay annually on our debt represents more than double what we take in from corporate taxes. In fact, it comes out to about 35% of what the IRS takes in from personal income tax. That means that every tax-paying citizen works for the first four months of the year just to pay the interest on our debt! Please take note that this does absolutely nothing to improve the financial position of the country. As we are currently spending about 50% more than what we are bringing in, it can’t even be considered treading water. We are paying what amounts to an interest only home loan, and borrowing money on our equity line at the same time. This year, we are going to borrow approximately eight times our interest payments.
As a real estate broker, I deal with long term debt pretty regularly…every day, in fact. As such, I will put this into the perspective of a thirty year mortgage. As the budget stands right now, we have a projected deficit of $1,327,000,000,000. Simply put, we are bringing in about $2.5 trillion and are spending about $3.8 trillion. Estimates put our national debt at about $16,400,000,000,000 at the end of the 2012 fiscal year. Now, rather than abbreviating it, I chose to put all of the numbers up there. I know it looks dramatic, but I feel like it should. That is a great deal of money, and it really needs to be put into proper perspective, for it is the place that we begin.
Now, the great credit history of the United States warrants a tremendously low interest rate. The historic average that the country has paid on our national debt is 3.15%. So, I will use that figure when calculating our “national mortgage”. If we were to begin amortizing our brand new thirty year mortgage January 1st 2013, our monthly payments would be $70,476,848,775.58 or $845,722,185,306.96 per year. If we would like to pay off that debt within that thirty year timeline, those are the payments that we are going to have to make, and that is going to require some serious budgetary changes within the United States! For a little bit of perspective, you can check out the CBO breakdown of the budget here. Please note that that payment is larger than the entire budget for Defense, Social Security or Medicare!
From a monetary standpoint, that is going to mean that we need to increase revenue AND decrease spending by a combined total of about $2.2 trillion annually starting less than 250 days from today; but that is not the real change that we have to make. We have to change our national mindset. We have to begin electing representatives who are honest with the American people about spending and deficits. Liberals, including President Obama, have beaten up Paul Ryan over his budget proposal as being radical, despite the fact that it doesn’t even balance the budget until 2028 and doesn’t pay off the national debt until 2080! They have thrown labels like “draconian” and “radical” onto a budget that represents minor, gradual changes to our debt and budget problems over generations.
Personally, I don’t think it’s aggressive enough, but in order to incorporate my ideas into our national plan, we would have to double taxes across the board, AND cut about 40% of the spending from the existing budget. I think we can all agree that the current political climate doesn’t support the kind of cooperative action necessary to move that kind of agenda. We can’t even have a civil discussion about the subject. We have our elected federal officials actually arguing over such trivialities as corporate taxes, the Buffett Rule and Bush tax cuts. These are not real issues. The debt ceiling talks stalled over the cutting $2.2 trillion dollars over ten years on a budget that is currently ADDING OVER A TRILLION IN DEBT EVERY SINGLE YEAR! Politicians are having polls done to find out the appropriate wording to score maximum voter approval for plans that do absolutely nothing for our national debt situation. In order to pay off our debt within my lifetime, we are going to have to disburse annual funds in roughly the same amount as social security. In a political climate where a budget that doesn’t see America’s debt paid off until my grandchildren are old enough to be grandparents is roundly ridiculed as being radical, how are we to move any closer solutions?