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The American National Debt-How Big Is It Really?
How Is Your Financial Future?....and your Children's?
The national debt is a term we have all heard about but many of us fail to understand just what this debt is and what its long term effects on our economy and our own personal finances could be.
These days politicians and the self-serving , so called, experts from all sides of the political spectrum discuss and debate this issue constantly. this has not always been the case. For most of the last 230+ years the national debt was the last thing any politician wanted to talk about. As usual each side is trying to blame the other and hoping to convince anyone, who will listen to them, that only "they" can fix the problem and only "their" solution will work if we will just elect or reelect them. Isn't it a bit disingenuous of these characters to ask us to trust them to fix the problem that they and their kind created and are making worse everyday they are in office.
Put simply the national debt is the result of overspending by multiple generations of politicians from George Washington to Barack Obama. All governments, right and left, are guilty. We the citizens also bear responsibility as we, constantly, place demands on our politicians to give us what we want and to gain or retain power most of them do exactly that.. regardless of the cost.
In your own, day to day, life you probably have a mortgage, a car loan and a credit card or two. You make monthly payments and over time....pay off your debts. As the years go by, depending on your employment and financial circumstances, you begin the cycle all over again looking for a bigger house or a newer car.
Loans are made to you based on your income and ability to repay. You only have so much money from your paycheck, after living expenses, and your debt load is, often, tied to your disposable income. Most of us know how much we can afford to take out of our paycheck for a payment and while we may often see things we would like to "have" we know that if the extra money is not there, in our budget, we will have to do without that item. This explanation is oversimplified but for the most part this is the way credit and debt is suppose to work.
The national debt has been with us since the inception of the United States. In 1791 the first President, George Washington, presided over the first occurrence of a national debt in the sum of seventy-five million dollars. It was expensive setting up an independent country. There were a few periods in our history where the debt was "0" but those times were very rare. By the end of the Civil War in 1865 the national debt had reached the three billion dollar mark and climbed rapidly after that.
By WWI the debt had soared past the twenty billion dollar mark and at the beginning of WWII the national debt topped out at nearly forty billion dollars. In 1950 with the aftermath of WWII and the world reconstruction program, mostly funded by the US, the national debt reached a staggering 260 billion dollars. It was clearly out of control but the politicians had found a way to deal with the debt that allowed them to continue spending and running up deficits. They simply ignored it.
From the 50's to the late 1980's a time looked upon, by many, as an era of unlimited growth, excesses , and good times the national debt continued its upward climb and reached 900 billion dollars.
By the time the 80's were finished we had more than tripled our national debt. In 1991 two hundred years after our first recorded national debt of 75 million dollars we were at levels very few could comprehend.....nearly three trillion dollars. Even mathematicians and economists had problems dealing with "trillions" It was a figure so large that most politicians could not relate to it and in most cases consciously chose to ignore it, much like their predecessors had done for nearly 200 years. With the debt and the unimaginable numbers cast aside they chose, instead, to focus on the yearly deficits. That figure was easier to understand, for our severely economically challenged politicians, and more easily used as an election ploy against one's opponent until these also began growing exponentially .
By 2000 the debt reached 5.5 trillion dollars and we will close out the year 2010 with a national debt at 14 trillion dollars and an annual deficit of 1.3 trillion dollars and counting. But just how much money is 14 trillion dollars? Let's take a look.
There are a lot of analogies out there trying to demonstrate how large the national debt is so most of us can appreciate and understand the enormous figures. It is not easy to explain as these are really big....big...numbers. You may have heard the example "if you place 14 trillion 1 dollar bills end to end they would stretch several times around the earth"! Another one is "if you stack $1000 dollar bills on top of each other 14 trillion dollars would make a pile 180 miles high"! There are many more examples but I have heard a couple that are much more to the point and maybe a little easier to comprehend.
The total currency in existence , in the world, is estimated to be about 5 trillion dollars. This total not only includes all of the worlds currency but every one's bank accounts and piggy banks too. Every country and every person..... all the money. When we were children a common child's expression went something like... "I would love to have all the money in the world". Well that, in paper money and coins, adds up to about 5 trillion dollars. The United States national debt is equivalent to "ALL THE MONEY IN THE WORLD" nearly 3 times over. The scary part is this is not a child's fantasy this is the situation we are in and future generations of our families will be saddled with this crushing yoke. Another one I have heard is that while the country is 234 years old the national debt accumulated during the first 231 years has been surpassed by the debt total of the last 3 years. This situation is out of control and if we don't stop spending now our future will be very bleak indeed..
The next time you hold your infant child in your arms and feel the love and warmth that only a parent and child can know ,,,,,,remember this. Your beautiful , wonderful and adorable child so innocent and vulnerable in your arms, so totally dependent on you, this beautiful gift from God ............is already about $50,000 in debt because of the political class that has ruled this nation for more than 200 years.That is your child's share of the national debt at this point in history. If you have 3 children then each of them also owes that same amount....$50,000! You the parents as working tax paying members of society are also on the hook. You and your spouses share is about $120,000 each at this point . The debt has to be repaid and massive tax increases are in your children's, their children, and their children's children's future. Just like your own debt the national debt must be paid and the life styles and future standard of living of future generations of your family will be severely affected by what the politicians are doing today.
There are really only two ways for governments to raise money and pay for programs. They either cut their spending, raise taxes or both. There is no magic formula to resolve this crisis. The Government has spent too much and we have demanded too much out of them. The new twist in this financial crisis is much of our debt is funded by foreign governments. Countries like China, Japan and the UK, not to mention dozens more, hold 4 trillion dollars of our debt in the form of government bonds.
Think of it this way. When you owe your local bank for your mortgage, car loan and credit cards who has greater control over your financial life? You .......or your bank? You give away some of your freedom and choice when you take on debt. There is a saying... "only the debt free are truly free". Countries are no different only the consequences are. For example what if China wants to do something we disapprove of. How strong will our hand be, in foreign policy, when the people we are trying to deter from a particular path are our Creditors? How open would your banker be to your suggestions on how he should be running the bank? Interesting dilemma for the USA isn't it!
So the next time a politician comes knocking at your door looking for your vote you have a decision to make. They will tell you that only their party and ideas can solve the problems of the day and only they can look after what's best for you and your family. All you have to do is vote for them and all will be well. Before you say anything gather your children around you and ask yourself is this person part of the political class that is enslaving your children and the generations to come or not.......you decide but remember your decisions have, potentially, huge consequences.