In early 2023 the federal debt was more than $31 trillion ($31,000,000,000,000) — the most it’s ever been. Mere mortals can’t even comprehend what a number like that means.
- The number of grains of sand on Earth is estimated to be between 7.5 and 12.5 trillion.
- The total amount of money in circulation in the world is estimated to be between 80 and 90 trillion dollars.
- The estimated number of stars in the Milky Way galaxy is around 100-400 billion. Therefore, 31 trillion is equivalent to around 77-308 Milky Way galaxies.
The federal debt and interest payment system involves a complex series of mechanisms and reactions that are difficult to understand and even harder to unravel. It’s a system that has been built up over time, with different components and actors playing their roles, leading to a convoluted and intricate process.
As US federal debt continues piling up unsustainably, there’s no reason to think that will change anytime soon. With interest payments for an ever-growing debt load, and multiple fiscal crises loading up government budgets, this is a bomb waiting to explode.
This monumental waste of our national resources is having dire consequences on individuals and their financial security. All this money could be put to better use.
Debt Servicing Payments Drain Our Federal Budget and Stifle Economic Growth
The federal debt crisis is one of the most important issues we are facing. It burdens us with far-reaching consequences.
Our collective resources are being wasted, dragging down both our economy and individual citizens.
As we collectively carry that debt burden, we need to consider the effects this debt will have on our economic future and its overall impact on people’s lives.
This amount of debt is unsustainable and will lead to ruin. When governments run up huge deficits,
Taking responsibility now will lead to economic stability in the future. The federal debt needs to come down urgently before more suffering ensues for everyday people.
What is the National Debt?
The national debt is the total amount of money owed by the government, and the budget deficit is the amount of money the government spends more than its revenue. The combination of these two creates a massive financial burden for future generations and poses significant risks to the economy.
The national debt must be addressed, or we’ll all keep suffering the consequences. When a government runs a large deficit, it must borrow money to cover its expenses. This borrowing adds to the national debt and means more money is spent on debt servicing. This money could be used instead to invest in infrastructure, education, or health care — all of which would benefit taxpayers in the long run.
The National Debt vs National Deficit
The national debt is the total amount of money owed by the federal government to its creditors, which includes foreign governments, individuals, and institutions. It represents the accumulation of all past budget deficits minus surpluses.
On the other hand, the national deficit refers to the difference between the amount of money the government spends and the amount of money it collects in taxes and other revenues during a given fiscal year. If the government spends more than it collects in revenue, it creates a budget deficit for that fiscal year. The national deficit is just one component of the national debt and adds to it each year it occurs. In the rare event of the government taking in more than it spends, the debt would decrease.
The national debt is the total amount of money the federal government owes, while the national deficit is the yearly shortfall between government spending and revenue. Each year, no matter what party is in power, the deficit adds to our debt.
Causes of the Federal Deficit
On paper, the federal deficit can be attributed to two main factors: government spending and tax revenue. But of course, the real problem is that our leaders are clowns.
Government spending has increased over the years due to various reasons, including defense spending, healthcare, social security, and general malfeasance by those we elect to represent us.
Entitlement spending refers to federal government programs that provide benefits to individuals or groups who meet certain eligibility criteria.
Because entitlement spending is not subject to annual appropriations, it is difficult for Congress to adjust the level of spending in response to changing economic conditions or budget constraints.
This spending is mandated by federal law and there is little anyone can do about it, the costs just increase and increase.
The two largest entitlement programs in the United States are Social Security and Medicare. They are referred to as “entitlements” because anyone who meets eligibility requirements can receive the benefits, regardless of the overall cost or impact on the federal budget. Other examples of entitlement programs include Medicaid, food assistance programs, and veterans’ benefits.
Entitlement spending represents a large and growing portion of total federal spending. In 2021, entitlement programs accounted for approximately 62% of all federal spending, or about $2.8 trillion. This share is projected to continue growing, due in large part to the aging of the population and rising health care costs.
While entitlement programs are popular and provide important support to many Americans, their growth is perhaps the government’s biggest long-term fiscal challenge.
Defense spending is another significant part of the federal budget. In 2021, the US spent approximately $740 billion on defense, accounting for approximately 16% of all federal spending. This includes personnel, equipment, research and development, construction, and other related activities.
Like entitlement spending, defense spending has important implications for the federal budget and the overall economy. Critics of high levels of defense spending argue that it can divert resources away from other important priorities, such as education, health care, and infrastructure. Proponents of defense spending, on the other hand, argue that it is necessary to maintain national security and protect against potential threats.
Defense spending is subject to annual appropriations by Congress and can be adjusted based on changing circumstances or policy priorities.
Because nobody wants to run on less safety, and the military supports manufacturing plants across the country, cutting defense is basically impossible.
Less Tax Revenue
In contrast to increased federal spending, tax revenue has not kept pace with the increased spending. This is due to various reasons, mostly because voters don’t like tax increases. Our leaders don’t do their job and just keep spending money we don’t have. Just like people who put everything on their credit card and then end up in bankruptcy court, our financial reckoning is coming.
Republicans pretend that they are fiscal conservatives and care about the debt, but the Bush and Trump presidencies make clear that this is just pretend. They run their mouth when out of power but are just as hypocritical as Democrats about helping the country stop wasting money on debt servicing.
The Economic Impact of the Federal Debt
The federal debt has reached a breaking point that is having serious economic consequences. As we keep carrying this unsustainable burden, we shrink resources available for public spending, research, and investment, leading to an overall decrease in economic growth.
This can manifest itself through unemployment spiking, public services being scaled down, and taxes increasing.
When Countries Run Up Huge Deficits
When governments run up huge deficits, it can have a variety of negative consequences.
To pay back the debt, governments may need to increase revenue by raising taxes on businesses and individuals and other fees. This reduces economic growth and makes it more difficult for people to afford necessities.
One of the main risks of high debt levels is that it can lead to inflation, as governments may print more money to pay off their debts, which can decrease the value of the currency. This makes it harder to afford daily life and erodes the value of savings.
When investors lose confidence in a country’s ability to repay its debts, they demand higher interest rates to lend money to the government, which can make it more expensive for the government to borrow money and increases debt payments.
This can lead to a vicious cycle where higher interest rates and debt payments make it even harder for the government to pay off its debts, leading to more borrowing and higher deficits.
Another consequence of large deficits is that they can lead to a reduction in government services and programs. This results in cuts to important social programs (like Social Security, and Medicare), education, infrastructure, and other crucial investments.
There is less flexibility in the budget, limiting the government’s ability to respond to crises or unexpected events. It makes the economy more vulnerable to shocks, such as a recession or a natural disaster as the government is forced to cut spending or raise taxes.
And perhaps the most worrisome consequence of massive debt is instability. As the economy worsens and cost rise, people find it harder to make ends meet, leading to unrest, violence, and protests. In extreme cases, governments may be unable to keep the peace and we can see civil war or other forms of political chaos.
The High Debt Hurts the Most Vulnerable
The high federal debt has brought more than economic repercussions – individual lives are impacted too. Our government wastes away funds that should be used to safeguard individuals and allow them to save for their futures. We all pay taxes, and by wasting those taxes our elected officials are hurting us all.
When high taxes are used to pay interest, families have a harder time getting the resources needed for catching up on payments, and paying for medical bills and groceries; household expenses skyrocket as money is directed to paying off the inevitable interest accumulated by debt. The cost of living goes up.
It further exacerbates financial inequality between citizens, stunting opportunities for those already struggling to make ends meet. The dysfunctional relationship between our government and our citizens needs to end, now.
The Federal Debt Is Too High And We Need To Reduce It Asap
This house of cards is held up by a delicate balance of economic factors. If one factor were to collapse, the whole system could come crashing down.
Through open discussion, fiscal responsibility, and personal agency, we can all be part of coming up with solutions to relieve the massive federal debt so that our collective resources are better used.
The federal debt is real – and should not be taken lightly. Knowing what’s at stake and recognizing the potential benefits of finding a way forward are key steps in reaching a solution.