In the 19 seconds it took me to write this sentence, the United States national debt increased by almost one million dollars.
Don’t just take my word for it; https://usdebtclock.org shows in real time how our country’s public burdens race ever higher. The last four digits of the monstrous number change faster than they can keep up with. It’s frankly depressing to watch when you consider my generation will have to pick up the slack that number represents - who knows how.
Some eye-catching statistics from the website: The total debt exceeded $27 trillion on Friday, Oct. 2, amounting to $82,273 per citizen and $217,934 per taxpayer. With the median American salary being $34,517, the average worker would need to work six years and four months for free to pay their share of the debt.
Federal expenditures ($6.6 trillion) nearly double tax revenue ($3.4 trillion) this year, thanks to countermeasures to the coronavirus pandemic. Most astoundingly, the unfunded liabilities of Social Security and Medicare approach $155.3 trillion.
We first reached $1 trillion debt in October 1981. If you do the math, this means that in the 39 years since, the federal government has spent money at nearly 138 times the rate it had in the preceding two centuries of our history. Clearly, Uncle Sam loves spending nonexistent dollars far more than he loves to take responsibility for his actions.
Does this debt mean we are screwed? Well, yes and no. Important to note is that U.S. public assets total $155.5 trillion - thus exceeding liabilities, albeit barely - and family assets surpass $129.3 trillion.
Economists contend, however, that existing debt cannot be viewed in terms of simple dollars. Instead, we must observe it as a relative percentage of gross domestic product, or GDP - the collective value of all goods and services in the U.S. during any given year. This, indeed, is where we run into trouble.
To put our current debt levels into perspective through such a lens, let’s do an overview of our country’s history, courtesy of data from The Atlantic.
In 1790, due to Revolutionary War expenses, the young nation held a 29.6% debt-to-GDP burden. Thereafter, debt consistently declined until President Jackson oversaw a debt-free country from 1835-36. This was, to date, the first and only time our nation’s finances were in the black, and based on 2020’s picture, it may well be the last time, too.
The Civil War returned debt to above 30% of GDP, and it resurged to similar levels during WWI after a long-term decrease in the interim. Another brief decline occurred before the Great Depression prompted a spike above 40%, then WWII took the debt to an unprecedented 112.7% of the country’s economic output. Into the early 1980s, however, occurred a mostly tranquil economy, bringing the debt eventually under 30% of GDP.
Revenue shortages from President Reagan’s tax cuts increased debt to 50%, until three straight years of balanced budgets in President Clinton’s second term lowered it to around 30% again. This remained steady until the Great Recession and current pandemic brought the debt above 100% of gross output for only the second time ever, and caused the debt to double since only 2010.
It prompts the question: To whom, exactly, do we owe all this debt? Well, we owe $20.1 trillion to ourselves - about 74% of the total, per CBO. This simply means we haven’t paid our bills, which are dominated by mandatory entitlement programs including social security, Medicare and other public benefits. These together comprised over 60% of the federal budget in fiscal year 2019.
The U.S. Treasury notes the $7.1 trillion remainder is owed to foreign countries, including China, Japan, Brazil, Ireland and the United Kingdom, who have invested in American debt bonds.
Our current debt sits at 128.1% of economic capacity. So, why does this matter, when you consider that a handful of other countries - including Canada, Greece, Italy and Japan - also have debt levels exceeding their GDP, and we are still able to borrow as much as we need, with low interest and on good credit?
Well, a recent University of Massachusetts study finds that historically, when debt was under 30% of GDP, annual economic growth averaged 4.2%. When it exceeded 90% of GDP, however, average growth slowed to 2.2%.
We are, rather hastily, approaching the point of no return. For one thing, in 2019 we paid a net $375 billion in interest on debt, and over this decade, it is projected that such payments alone will cost taxpayers about $7 trillion. Imagine how we could improve our country with that money, instead of it essentially “disappearing.”
This could mean higher interest rates for everyday people and increased unemployment, which, combined with dull economic growth, would make it more difficult to generate revenue for even the most basic expenditures, including education and infrastructure.
Once the pandemic ends, we must quickly reverse our fiscal course. The younger generation may be the first in American history to have a lower quality of life than their parents, having to foot the bill for benefits the elder generation currently receives while we ourselves might not be so lucky. We must stop spending more than we take in and face tough decisions now, or tougher ones later.