U.S. National Debt: Too Big to Fail?
At $18 trillion, the U.S.’s national debt is larger than the total gross domestic product of China, India, Canada, and Japan combined in 2013.
If you placed 18 trillion U.S. dollar bills end-to-end, they would stretch more than 1.7 billion miles. That’s 9 round-trips to the sun, or 68,270 times around the earth at the equator, or 3,620 flights to the moon and back.
$18 trillion. It is difficult to even fathom the magnitude of this number, it is so large. If every person living in the U.S. – from babies to the elderly, all 319 million people – were to have an equal share of the national debt, they would each owe $56,426. And, that burden is even higher when considered on a household basis to equate for children, dependents, and families; the approximately 118 million U.S. households would each owe $152,540 of the national debt.
The national debt got significant attention in 2013, when a 16-day government shutdown preceded a Congressional vote to raise the debt limit, which was $16.7 trillion at the time, and to allow for new funding for the national budget.
As time has passed, attention has shifted away from the national debt toward other issues. However, the national debt is still rising.
Each year, the government may run a surplus, meaning it takes in more revenue than it spends, or a deficit, when it receives less revenue than it spends. Deficits increase the national debt, while surpluses allow for it to be paid off.
For the last two years, the U.S. has run budget deficits of $680 billion (2013) and $483 billion (2014). While these deficits are smaller than during the peak of the recession when government stimulus spending was rampant, they are still deficits that add to the total national debt.
When additional money is borrowed to fund government expenditures, taxpayers are burdened with paying off the principle – the original amount borrowed – as well as paying the interest. And, as one would expect, the interest on $18 trillion is quite high. In its fiscal year 2014, the Treasury reported about $431 billion in interest payments. While the national debt may be carried forward for future generations to pay back, funding the interest costs is a current problem.
How can the national debt be reduced?
It all starts by balancing the national budget this year so that expenditures are equal to revenue. Avoiding a deficit and stopping the growth of the national debt is an important first step toward greater financial solvency. The U.S. hasn’t had a budget surplus since 2001, almost 15 years ago.
Many economists suggest that the most effective means of balancing the budget involves a two-pronged approach of decreasing spending and increasing taxes. While neither of these measures is pleasant, both can help contribute to reducing the U.S.’s national debt obligations and to creating a more stable financial climate.
As Congress and President Obama work toward designing and implementing the 2016 budget, it is important to consider both the current and future burdens of running future deficits. The national debt is already almost unfathomably large and adding to it further could damage the financial security and sustainability of present and future generations of Americans.