October 22, 2013: As of 2000, the United States deficit grew $1,648.93 trillion (US Government Debt [Bias =0]). It stayed in the hundreds of billions under Bush, ending at $458 billion in 2008, and skipping forward to $1,412.69 billion in President Obama’s first year in office. Of course Congress sets the budget, not the President. The president has a lot of influence, but giving him full blame wouldn’t be right. None-the-less, the deficit is massive, and the debt itself isn’t very small either.
We hear it all the time. “The Debt is out of control!” “We’re going bankrupt!” And so on. The US Debt is now over $17 trillion (US Debt Clock [Bias =0]), well over any other nation. Of course few organizations measure debt as a whole. Most measure only the foreign-held debt, excluding any debt held by the nation (on the basis that money the US owes itself isn’t technically debt.) This leaves the US at $11 trillion, still well above any other nation (Wikipedia [Bias -+1). That’s almost $37,000 per capita.
This is the largest the US Debt has ever been, and is increasing at a tremendous rate. Well… No. It’s not. The US Debt was well above the current debt back in World War II. Although the World War II debt was around $200 billion, it was higher than the current debt. In fact, there are a few nations with much larger debts than the US. Japan, for example, has almost three times the debt. I’ll give you a minute to research their debt…
If you found a number sounding something like one quadrillion, you are right. Not in dollars though, that’s in yen. In dollars, it’s about $11.2 trillion (National Debt Clock [Bias =0]) which is right next to us. So no, the US isn’t that far ahead, unless you include the $6 trillion we owe ourselves, then we still aren’t. Even with that $6 trillion, our debt was higher in World War II.
If you are wondering how, it’s because you don’t understand how our debt is measured. That’s how they want it. $17 trillion gets more attention then $11 trillion, or 72.5%. Debt is measured in two fashions… Debt to GDP ratio, and Interest. Think of it this way…
Ben had $1,000 in his account, and about $5,000 in debt. His debt was extremely large. George had four times the debt, at $20,000, but had $100,000 in his account. His debt was extremely small.
Numbers lie. The Debt isn’t measured by itself. A debt is large for a nation that can’t afford it, but smaller for a nation that can. Measured in Debt to GDP ratio (the professional way), the US Debt is at 72.5% of the Economy (GDP). The US Debt in World War II was at 117.5% (Wikipedia [Bias -+1]). Even if you apply that extra $6 trillion, we are only at 102.4%.
At 102.4%, we are under 14 other countries by CIA standards. Of course, CIA standard only measures foreign held debt, so a more correct comparison has the US at a 72.5% Debt. By CIA standards, the US is under 34 countries.
Some notable examples include Germany [81.7%], Canada [84.1%], the UK [88.7%], France [89.9%], and Japan [214.3%].
People have it ingrained in their minds that debt is rated by actual size… $17 trillion is huge… But it isn’t when measured the right way. Well, okay, it’s still large. Understand that Governments spend more during recessions, they always have. Having a recession during a large war didn’t help, and the recession of 2008 didn’t make things better. The US Debt is still large, but it’s not the largest, and it’s not that dangerous. (Most of you would stop me right there if you could.) What do you mean, not that dangerous? I’ll tell you!
The size of a debt is measured with the Debt to GDP ratio. The threat of a Debt is measured by Interest Rate. A large debt seems pretty nice when the Interest Rate is low. The US Government has a very low Interest Rate, paying $222.9 billion in interest in the 2014 budget (US Federal Budget [Bias =0]). That interest is rather easy to pay off, we know it is because the US Government will bring in $3 trillion that same year (US Government Revenue [Bias =0]). Of course Interest gets paid off, each year is budgeted so Congress can make sure the interest is paid each year (they have to by law… 14th Amendment law). Interest doesn’t became dangerous until the Government can’t afford to pay off the interest and cover their most important programs at the same time. The US Government can afford far beyond $222.9 billion in interest.
We know nations can afford high amounts of debt because history shows they can. Britain held around 175% debt during the 1930’s, with an interest rate of almost 10% (Wikipedia [Bias -+1]). After World War II, the UK held almost a 250% debt with 6% interest. The US holds a debt of 72.5% with 1.22% interest (US Federal Budget [Bias =0]). Even if we used the 102.4% estimate for the Debt, we are in a reasonably safe area…
The US doesn’t want a large debt… It does want small. Small is always nice. That’s not the issue, though. The issue is people thinking the Debt is out of control, and is destroying the US, when it’s actually in an okay location for now. The other issue is the Media and Politicians calling it the largest debt in the world, or that we can’t manage it.
You could say that technically, they are right, Wait, no, you can’t… By NO means can you say they are right. By no means can the US Debt be considered the largest debt in the world because Debt can not ever be measured like that. It’s practically a sin. You can not measure a debt by the initial amount because the number literally means nothing. $17 trillion isn’t larger than $11 trillion, because they are completely relative, and the numbers actually mean something completely different because their true size is measured in interest and GDP. It’s like comparing apples and oranges, they are both fruit and grow on trees… But the trees are different. One nation’s debt is completely different from another because their interest and economy sizes are different. One US dollar of debt is different from one Japanese dollar of debt, so even from a literal numerical comparison, dollar-to-dollar, the debts can’t be compared, like if they were comparing numbers to letters.
Another misconception is that our children have to pay off the debt. I mean, it’s not far from the truth, but it’s not the whole picture. It’s a play on emotions, because it leaves out that the vast majority of us will still be there paying off the debt with them. They will make up a minority of the group paying for it, a small minority in fact. The Debt is made of Treasury Bonds, most of which are set to mature in 30 years (Savings Bond Advisor [Bias =0]). This means that if we stopped collecting debt, the US would pay its debt off in 30 years. The time it takes to pay off a debt doesn’t depend on size… A $100 trillion debt will take the same amount of time as a $50 debt. At the end of the 30 years, the last batch of bonds mature, and are collected, and there is no more debt.
Now don’t get excited, spending isn’t going to stop anytime soon, but the idea that our children have to live with the debt is a play. We will be there most of their lives, and for much of their children’s life, paying a long side them. The idea behind the claim is that we will all suddenly disappear from existence, and a ton of new people (we call our children) will have to pay for everything we did, but generations don’t operate like that. After 30 years, they won’t be paying for our debt… They will be paying for theirs. It’s not a system where they will have to work in sweat shops trying to get enough money to pay for our $17 trillion debt.
They are also not likely to see tax hikes related to the debt since the US is currently seeing a revenue increase of almost $250 billion a year according to the US Government Revenue website [Bias =0] while the Interest Rate is estimated to increase no more than $238.6 billion after the whole 4 years (hint, well under the revenue increase) and while deficit spending decreases by $268.9 billion by then.
So in 30 years, most of us will still (hopefully) be alive, and at this point, we paid our current debt. I’m not saying they won’t be paying for debt, or that things right now are great. I’m saying life isn’t over, and that we have quite a long ways to go before it is. Right now, we are most certainly not a failing nation, and with current estimates, we aren’t likely to face a failing nation any time soon. “But Rep Ted Cruz said…” I don’t care what Rep Ted Cruz said (don’t listen to me, what your reps and senators say is important.) Both sides want you to think everything is just a mess, and they want the other side to be to blame for it. I’m not saying things aren’t messy, with things like the PPACA and the recession, but financially, the government isn’t broken like everyone says.
The current debt is not the largest in US history, it’s not the largest on Earth. It’s in a comfortable place, and estimates are looking nice. The US will have our entire $17 trillion paid off in 30 years. There will be more, since spending isn’t going to stop, but it’s not going to crash the World.
If there is one thing I don’t like, it’s the media lying to you, and both political sides of the spectrum do it. Remember that the US Debt is not our greatest threat, and that your children are not going to be crushed under higher taxes for it. Of course all of these are mostly based on (HIGHLY educated) guesses from the Government and Congress, so keep your eyes open, and remember to do your own research!
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