Uncle Sam cries, “No more. I’m broke.”
While everyone is reading headlines about the massive spending bills being considered in Washington D.C., here is a quick heads-up about our national debt.
As of March 31, 2021, our national debt was $28.1 trillion. That is $28,100,000,000,000.00!
I understand that everything is relative, but that is still a lot of money. How did that debt come into being? We have accumulated annual deficits by spending more than our government takes in each year, just like a family or a business increases its debt when expenditures exceed income.
Our annual deficit for 2020 was $3.1 trillion calculated as follows: Revenues = $ 3.4 trillion, Outlays = $ 6.6 trillion (Mandatory $4.6T, Discretionary $1.6T, Net Interest $0.3T). Source https://www.cbo.gov/publication/57170
The national budget deficit is the amount of money (each year) by which expenditures exceed revenues. When the government spends more than it receives in fees and taxes, it borrows the difference in order to pay its bills. The money borrowed creates national debt. If the government borrows more money each year, the national debt increases. As noted above, the accumulation of annual deficits add up to a national debt of $28.1 trillion. Not only does the government need to repay that debt, it needs to pay interest every year on the outstanding balance. As the outstanding debt increases, the interest expense increases.
Why would a country with our resources, talent, and potential, consciously put ourselves deeper in debt? Some economists argue that fighting wars or helping a troubled economy justifies running a deficit. We are doing neither. In fact, at this very moment the government is slowing our economic recovery by handing out disincentives for people to return to work.
Pandering to special interests and spending beyond the nation’s needs is not new; politicians have been larding spending bills to gain votes since our country began. But do you really believe our national debt can grow to the sky with no negative consequences? Do you have any idea who holds the greater portion of our national debt? Look in the mirror; we do.
According to the February 2021 U.S. Treasury, Monthly Treasury Statement, the public holds over $21 trillion, or almost 78%, of the national debt. Foreign governments hold about one third of the public debt, while the rest is owned by U.S. banks and investors, the Federal Reserve, state and local governments, mutual funds, insurance companies, savings bonds, AND PENSION FUNDS: Social Security trusts – $2.90 trillion, Civil Service (Office of Personnel Management) Retirement – $955.1 billion, Military Retirement Fund: $1.01 trillion, and Medicare/SSI – $304.4 billion.
I understand the government intends to cover the annual cash requirements by all these retirement funds, but if the debt grows and grows, there will come a time when that becomes impossible. While our federal politicians are debating how many trillion to spend this year, think about all the pension and retirement funds that could become insolvent and ask yourself, “Are our elected officials carrying out their broad fiduciary duties in a manner that is faithful to the public trust, or are they seeking votes?” Would you allow your elected representatives to act as your banker managing the funds in your savings account? Neither would I.