National Debt

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By: Hubert Crowell

On November 16th 2009 it became offical, the National Debt reached $12,031,299,186,290.07 or 12 Trillion Dollars. As I tried to grasp this number and get an understanding of it, I could not. I then decided to reduced the numbers down to something that I could understand. The average household income for 2008 was $50,303 so I decided to see what an average household would look like finically compared to the U.S. Government.

If the government were the average household making $50,000 a year, it would be like a family living above their means and spending $83,000 a year with a debt load of $265,000. There may be some families that only make $50,000 and own a home with a mortgage of $265,000, but I don't know any. Spending $83,000 a year I believe is fairly common for someone that lives in quarter million dollar home. If one partner lost their job, then I could see where they could be in this situation. On the other hand for someone to live year after year spending more than they earn, accumulating debt at a $33,000 or more a year does not seem likely.

A family that finds them self in this mess, would not increase their spending, but look for ways to cut back and sell what ever they could to lower the debt.

The other alternative would be to get a higher paying job or a second job. For the average American, this may not be possible with the current unemployment levels. The Government on the other hand, could and more than likely will raise taxes to increase the level of income. Cap and trade is a good example and is forecasted by the government to produce 73 Billion a year starting in 2012. This is listed in the Proposed Budget by Category as Climate revenues.

Corporation income taxes are also projected to more than double by 2012 from the 2010 levels. But with most everything else increasing, the deficit is expected to remain well over $600 billion a year, adding to the National Debt.

Our family in the example would not able to extend their credit and would have to take drastic steps in order to survive. I am not so sure that our government is prepared to do the same.

The year that U.S. Government ends without a deficit and no new taxes, I will contribute $100.00 toward reducing the debt. If you would like to join with me and see how many others are doing the same, Click here.

The gross domestic product (GDP) or gross domestic income (GDI) is a basic measure of a country's economic performance. It is the market value of all final goods and services made within the borders of a country in a year.

2009 third quarter GDP was $14,301.5 billion. Gross National Debt November 16, 2009 reached $12,000 Billion or 84% of GDP. The following is part of a testimony given to the House of Representatives. Note: Chart no longer available at

Testimony of OMB Director Robert J. Portman
President's FY 2008 Budget Committee on the Budget
United States House of Representatives

February 6, 2007

Chart 7: [Current Trends Are Not Sustainable]

As the next chart shows, the current trends are not sustainable. Under current law, we estimate that by 2040, spending on these and other important programs, plus interest on the debt, will crowd out all other spending -- for defense, homeland security, and education -- unless we make the necessary reforms.

It seems to me there is now nearly universal, bipartisan agreement that the unchecked growth of these programs presents real long-term threats to beneficiaries, our federal budget, and the economy. We now face a $32 trillion unfunded obligation in Medicare over the 75 year horizon. Our choices without reform will be massive benefit cuts, enormous deficits and huge tax increases.

The balanced budget is important, in part, because it better positions our country to address these looming fiscal challenges. But our five-year budget proposal also makes an important down payment toward sensible reform of mandatory spending -- reducing spending growth by $96 billion over five years. These reforms are primarily in the Medicare program, but also in Medicaid and other programs. The proposals are similar in character to those this Administration has offered in the past.

End of testimony.
The revised 2009 estimate for 2010 has spending at 27% of GDP, much higher than the above 2007 chart or about what was then estimated for 2050. Revenues have also dropped to 16% of GDP for 2010.

Interest on the debt $383,363,826,680.60 2009 fiscal year end.

Interest paid out on the National Debt over the past ten years amounts to over $3.7 Trillion. During the previous ten year period 1990-1999 we paided out over $3.2 Trillion.

Interest on the debt is dropping due to the low rates set by the government. For the last twenty years I have been a a firm believer in the variable rate loans and until I paid all my mortgages I used the ARM. With the government having to pay the interest on the debt I knew that they would keep it low. Now however they have lowered it about as low as it can go to .375%. Over the next few years as securities come due the total interest on the debt will drop until they no longer can sell securities and then it will start to rise again. The average rate on the debt for the 2009 fiscal year was about 3.2%. The 2007 fiscal year was about 4.7%. If the rates had not been lowered the interest on the debt for 2009 fiscal year end would have been $564 Billion instead of $383 Billion.

Recent Bill Auction Results
Security Term Issue Date Maturity Date Discount Rate % Investment Rate % Price Per $100 CUSIP
4-WEEK 11-12-2009 12-10-2009 0.060 0.061 99.995333 912795R37
13-WEEK 11-12-2009 02-11-2010 0.065 0.066 99.983569 912795T27
26-WEEK 11-12-2009 05-13-2010 0.165 0.167 99.916583 912795UQ2
4-WEEK 11-05-2009 12-03-2009 0.035 0.035 99.997278 912795Q61
13-WEEK 11-05-2009 02-04-2010 0.060 0.061 99.984833 912795S85
26-WEEK 11-05-2009 05-06-2010 0.170 0.173 99.914056 912795U41
300-DAY 10-30-2009 08-26-2010 0.315 0.320 99.737500 912795U82

Suggestions for families and governments in debt.

First, cut back on spending, sell any asset that is costing money that is not required in order to survive. Government should get out of the mortgage market and sell its holdings of Fannie Mae and Freddie Mac debt, totaling $165 Billion. Medicare and Medicaid together take in $189 Billion and pay out $736 billion, turning this over to private insurance companies would reduce the Deficit by $547 Billion alone. Make major cuts in Non-defense discretionary spending. Currently the government is over budget for 2010 in the amount of $110 Billion with more estimated each year. Government just like families must learn to stay within their budgets.

Compare our Government Spending with Revenue and ask when will we start spending less than we take in?

Compare the Deficit with our Revenue and you can see that the only positive years were just prior to 9/11/2001.

In 1835, under President Andrew Jackson, the US Federal Budget was balanced and the National Debt was paid in full. This has never happened since. In 1982 the National reached 1 Trillion dollars, doubled ten years later in 1992 and doubled again by 2006. From 2001 to 2007 the National Debt increased over 1/2 Trillion dollars per year, in 2008 increased 1 Trillion and in 2009 increased 2 Trillion!

The government owns vast amount of land and mineral rights, much of this could be sold and placed into productive use and the proceeds used to reduce the debt.

Second, don't bite the hand that feeds you. Corporate and Individual income taxes (including Social Security payroll taxes and Unemployment insurance), make up 84% of the income. Passing any laws that may reduce or harm the working force must be avoided. On the other hand passing laws that encourage Corporate growth will provide more jobs.

Replace the Income Tax with the Fair Tax to create an incentive for businesses to grow.
These points address common questions regarding the FairTax plan:
.. The FairTax is revenue neutral at $0.23 out of every retail dollar spent.
.. The FairTax lowers the lifetime tax burden for most Americans.
.. The FairTax benefits retirees who depend mostly on Social Security.
.. The FairTax preserves the overall progressivity of the federal tax burden.
.. The FairTax dramatically improves the U.S. economy.
.. The FairTax improves the international competitiveness of American producers.
.. The FairTax promotes home ownership better than the current system.
.. The FairTax simplifies tax compliance, thereby reducing tax evasion.

Third, turn Social Security over to private investment companies willing to bid on high rates of return. Investing with a return of only 6.5% would erase the deficit in 2010 for Social Security and provide growth in the fund in future years. Or allow individuals to invest their own Social Security funds. The Social Security Trust Fund, (Old-Age and Survivors Insurance Trust Fund), is currently invested in Treasury authorized "special obligations" purchased exclusively by the trust fund. The rate of interest on special obligations is the average market yield on long-term U.S. obligations. Rates have varied over the years.

The problem with this is that we are paying for this through the interest on the National Debt instead of private investments. The gross Federal debt includes amounts owed to Federal trust funds, including the Social Security trust funds. New Treasury obligations cannot be issued to the trust funds if doing so would cause the debt limit to be exceeded. This limit is about to be reached, the time has come to start investing the trust fund in private investments.

The National Debt changes each day and may increase or decrease depending on securities that may come due. The debt to the penny on 3/31/2011 is $14,270,114,530,800.38. The treasury will hold the debt down to the current limit until Congress approves a higher level of debt. They will be able to hold the debt down for a while by selling securities and moving funds around. However as pressure builds Congress will be forced to increase the limit again.

It does not take a Phd to see how big of a mess we are in. If I can look at this and see what is wrong, anyone should be able to.

Actual debt figures from Treasury Dept.
Debt to the penny, for those who like to split hairs. The current limit set by Congress is $14.2894 Trillion.
11/16/2009 12,031,299,186,290.07 The National Debt reached 12 Trillion for the first time in history.
6/1/2010 13,050,826,460,886.97 The National Debt reached 13 Trillion after only 6 months.
7/7/2010 13,181,991,714,131.18 New Record Highs are being reached each day. There is no way to keep up with it!
9/8/2012 16,000,000,000,000 By the end of the DNC in Charlotte, NC.
2/4/2013, the President signed legislation suspending the debt limit until May 18, 2013. As a result, the debt limit does not apply for the period from February 4, 2013 through May 18, 2013.

There is debt and then there is debt. The Debt Subject to Limit is the maximum amount of money the Government is allowed to borrow without receiving additional authority from Congress. The new graph on the right does not show the rapid growth of the debt as well as the previous graph on the left. It is interesting how a slight change in the scale can make the debt look so much better!


About the clock at the top of this article:
The debt clock was set at the last record high and is running at the current yearly average rate.
The Gross National Debt clock is increasing at a rate of over 3 million a minute!
Debt subject to the limit is about 1% less than the total debt.

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