The amount of debt that the USA now has is staggering. It seems that all we hear about is the amount of debt that we have (around $13 Trillion) as compared to the GDP (estimated around $14.4 Trillion). That doesn’t sound too horrible, right? But it is misleading! The GDP is NOT the amount of money the government has available to spend. The Federal Government only collects between $2-3 Trillion in tax revenue per year. The estimated DEFICIT (money collected minus money spent) is around $1.5 Trillion!
Let’s put this in perspective, and compare the government to an everyday occurrence. Let’s pretend that you (government) make $100,000 per year and that you’ve taken out a mortgage on a $400,000 house. That doesn’t sound too bad, does it? Payments would only be about $2,150 per month on a 30 year fixed at 5%. That's over half your income, but you decide it's worth it. But wait just a second. In reality, you’re not making mortgage payments. Really, you’re constantly refinancing the interest payment, as well as other foolhardy purchases, back into the mortgage to the tune of an additional $50,000 per year. Oh, and it’s an adjustable rate that is low now, but could go up at any time. Does that sound like a good idea? How long would you keep your house at this rate? Will your debt ever be paid off? Of course not! But this is exactly what our country is doing.
How long is it going to take before we’re no longer able to refinance our country’s debt? When will the general public wake up and realize that someday the ENTIRE federal tax revenue will be spent solely on interest payments on that debt? The hard fact is that our nation is insolvent right now. We are bankrupt! The printing press is the only thing keeping us on life support, but the crash will eventually come. As soon as our creditors lose confidence, the jig is up.
The emperor, in fact, has no clothes!
It's hard to believe that at one point in time deficit spending was put forth as desirable because it would help limit the size of government (i.e. borrow now and that will mean next year you have less to spend because you're required to pay interest in addition to general expenditures). Definitely hasn't turned out that way, huh?
ReplyDeleteDo you think we could get a couple buddies together and usurp control of a small latin american country? Or perhaps an island? Then we'll have better control of our destiny when the house of cards collapses. I bet Randal would be in.
Nathan very well stated! I found this site that explained the situation to me more clearly as well: http://www.nationalreview.com/exchequer/246159/our-debt-more-all-money-world
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