The Federal Debt and How Much We Owe

The United States is currently running a credit card bill that many Americans never think of when they pay their bills on a monthly basis. According to The National Debt Clock, as of March 30^th, 2008, the current federal debt is $9.4 TRILLION Dollars. What this means is that over time, we have spent $9.4 trillion dollars more than we have taxed ourselves. With a U.S. population of 303 million, this means we owe on an individual basis, roughly $31,000 each. This increasingly growing debt amount has exploded over that last 20 years as members of Congress and the White House have become less concerned about deficit spending, and more concerned about spending money on government programs without fully funding them.

According to the White House Office of Management and Budget (OMB), during the first 200 years, the Federal budget was mostly run as a surplus. Traditionally, government deficit spending was done only when the country was facing extraordinary circumstances, such as war, or major economic disruption. During the 1980s, for the first time, major increases in spending were done simultaneously as taxes were cut. During this period, the Federal debt increased from $781 billion in 1981 to $3 trillion in 1992.

After peaking at $290 billion in 1992, the annual federal deficit declined each year to $22 billion in 1997, culminating in a surplus of $69 billion in 1998. This was the first surplus of the Federal budget since 1969. According to a BBC article in 1999, projections showed that if government spending and tax collections continued at the current pace, then the federal debt would decrease from $3.0 billion in 1999 to $1.2 billion by 2009.

The events of the terrorist attacks on 9/11/01 and the resulting economic downturn, increased military spending, and tax cuts culminated in the Federal Debt increasing at a rapid pace. Once again, federal spending was increased at the same time that taxes were cut. And for the first time, the United States went to war without increasing taxes.

According to projections by the Concord Coalition, even with the most optimistic White House budget economic scenarios, the federal debt is expected to balloon the $12.2 trillion dollars by 2013. A Concord Coalition scenario shows the Federal debt could increase by an additional 6.5 trillion dollars between 2009 and 2017. This scenario is compounded by the fact by 2017, the amount of money collected for the Social Security trust fund will be less than the amount spent, meaning that additional funds will have to be paid directly from the general budget.

A final national security concern is who is buying and owns this debt the U.S. federal government is creating. According to McClatchy article, the amount of debt held by foreign sources has increase from 30% in 2000 to 44% in 2007.

What does this all mean? The United States is currently funding government programs with money that will eventually have to be paid back. The current status quo of spending more money than is taken in can not be maintained on a permanent basis. Many politicians do not want to face the burden of telling their constituents that their taxes may be raised, or their programs must be cut. But in reality, something must be done soon, or we may ultimately face our greatest economic crisis ever.

Sources:

National Debt Clock www.brillig.com/debt_clock

Kevin G. Hall, "Federal Deficits Soaring Higher, Menacing the Future" McClatchy Newspapers

Concord Coalition Plausible Baseline 2008 - 2018

BBC article http://news.bbc.co.uk/2/hi/business/411973.stm