Apparently, our government believes the solution to the problem of being incredibly deep in debt is to go even deeper into debt.
For quite some time, there has been a statutory limit on the amount the U.S. government can borrow to pay its bills. Time and again that debt ceiling has been raised each time it was reached. Until the other day, that limit was $31.4 trillion. Just a few days before that limit was reached, the President and Congress reached an agreement to suspend the limit.
According to the government and the media, a failure to raise or suspend the debt ceiling would have had catastrophic effects for the U.S. economy. Undiscussed, however, are the consequences of forever going deeper and deeper into debt.
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Apparently, being only $31.4 trillion in debt isn’t enough. Not only is the government unable to pay down any of what it presently owes, but it can’t even pay its current bills unless it borrows more. Thus, the government has suspended the current debt ceiling so it can go even deeper into debt. There will now be no limit on how deeply into debt the government can go.
Part of the problem, I submit, is that the numbers have become so huge we cannot really comprehend them. A trillion is a one followed by twelve zeros. That is a number that is beyond our ability to grasp. Ordinary people do not deal with numbers that big. It is, therefore, difficult for us to visualize and appreciate their significance. They become unreal and virtually meaningless.
Nevertheless, I will attempt to illustrate our national debt in a way that may enable you to grasp its enormity and its significance and implications.
According to government figures, the median household income is slightly more than $70,000. That means one half of the nation’s households have an income of less than $200 per day. Of course, that also means one half of the nation’s households have an income of more than $200 per day. Some have an income that is a lot more than $200 per day, so let’s take a household of two that has an income of $1,000 per day. That is five times the median household income. That couple could go out to dinner every evening at a decent restaurant, order a cocktail for $10 each, an entrée for $50 each, and a dessert for $10 each. That comes to $140. They leave a generous $30 tip, and are still under $200. They still have $800 of their $1,000 income left.
At a $1,000 per day, that household’s annual income is $365,000. At that rate, it will take that couple almost three years to acquire $1 million.
Now imagine a household with an income of $1 million a day. That is five thousand times the current median household income. In a year, they will bring in $365 million. It will take them almost three years to acquire $1 billion.
We must ask ourselves, if there is no longer any legal limit to the amount the government can borrow, is there any practical limit to the amount of debt the government can incur?
Let’s now imagine that our government is serious about reducing the national debt and therefore decides to reduce the debt by $1 billion a day. That is five million times the current median household income. In a year, it will have reduced the debt by a whopping $365 billion. In almost three years, it will have reduced the debt by $1 trillion. With a national debt of over $31 trillion, it will take more than sixty years to pay it all off, even at a rate of $1 billion per day.
Currently, the U.S. gross national product (GNP) is less than $24 trillion. (The GNP is an estimate of the total value of all of the goods and services produced by the nation’s residents for a year.). Thus, the US government owes more than the nation’s residents produce in a year.
We must ask ourselves, if there is no longer any legal limit to the amount the government can borrow, is there any practical limit to the amount of debt the government can incur? Is the government, in effect, in possession of a credit card that can never get maxed out? Won’t the interest on the national debt eventually exceed the total amount of taxes the government collects? Can it then borrow even more just to pay the interest it owes on the amount it has borrowed? Surely, there is a limit.
With half the nation’s households earning just slightly more than $70,000 a year, the government cannot tax its way out of debt without reducing government spending. But with politicians buying re-election votes with government funds, it will be difficult to reduce government spending.
A likely consequence is uncontrollable inflation. It is time to think seriously about the solution. Surely, the solution to being hopelessly in debt is not to go even deeper.
Howard Lurie is Emeritus Professor of Law, Charles Widger School of Law, Villanova University.
Just like clockwork, the right all of a sudden cares about debt again when it’s a Dem president.
Trump added $6.7 Trillion to the debt in only 4 years (double the rate of Obama). Who knows how much he’ll add if he’s in the White House again?
W. started two disasterous wars that cost tens of trillions of dollars (not to mention the lives of Americans)
Reagan tripled the national debt!
Last time we had a balanced budget was under guess who… Bill Clinton.
Debt is a problem. But let’s stop making bad faith politically motivated attacks.
I agree with you that the national debt is a problem that has had many fathers. The issue is that no one wants to responsibly address it, or any of its component parts. Every proposed solution is depicted as a zero sum game where someone has to lose. The effect of the debt is one that ultimately impacts all.
Cicero, I said the same thing when Trump was President.
Mr. Lurie, Good article. The next million seconds will take 11.6 days. The next billion seconds is 31.7 years. The next trillion seconds is 317 centuries. The past 3 and 1/3 years have shown that the great majority are content and will do what they are told. And our federal leaders are mostly corrupt or blinded by cognitive bias. We have allowed corporations, that are psychotic in nature and primarily focused on money, to have too great an influence over our leaders. I do not see how that will change. Unless there is a great disruption our behavior will not change because people are being rewarded to focus on the short term. Our education and standards we allow are subpar – though there are exceptions. Meanwhile there is small minority which allow themselves to be distracted and greatly astonished by ideologues who have moved into positions of power focused on a war with Western Judeo-Christian values and binary systems of “truth.” This small minority’s indignant reactions have inadvertently made these new and insane ideas deemed worthy of debate and consideration. One solution is to focus on your daily blessings and find joy in helping your fellow neighbor. My advice is secure assets that will provide income which exceed your annual expenses. When history repeats itself and hyperinflation catches up to the United States those assets will have to be such that it will allow you to relocate to another country for a few years. Extreme? Yes. But when the debt collapse arrives it will be an extreme scenario.