You Owe $14 More Today Than Yesterday
The following is a guest post by Mike Kane. Friend him here on Facebook.
(If you’d like to be considered for a guest submission, contact us here.)
- Federal spending is at an all-time record high – $3.796 trillion in Fiscal Year 2012.
- The deficit in FY 2012 totals over $1.327 trillion dollars.
- In other words, the United States spends over $3.92 billion everyday that it doesn’t have.
- Think of all the people you know. Each one of them — your family, your friends, and the strangers you pass on the street — contributes $14 dollars per person per day to the national debt.
- Annually, you contribute over $5,000 per year. Note, though, that this is per person, not per taxpayer. If we annualize each taxpayer’s debt, this figure jumps to roughly $13,783.
- With a national debt of over $15.811 trillion dollars, every man, woman and child currently owes over $51,000 for their share of the U.S. public debt.
Your Share, in perspective
- Last year, the The U.S. debt to GDP ratio was 102.93%. I would take roughly every dollar of value we create in a year to fully pay off our entire debt.
- The average pre-tax per capita income in 2011 was $41,663. That means that, before taxes, each American is indebted for at least one year just to pay their contribution.
- Considering current inflation rates, tax rates, levies and duties, etc.; the actual period of indebtedness is closer to around two and a half years.
Interest Compounds the Problem
- A startling 9% of all federal receipts pay just the interest on the debt, and does not even pay down a dime of principal. Interest payments for FY2012 so far total almost $272 billion.
- That means that every taxpayer already has paid over $1,178 this year simply to service the debt. ($13,097 x .09 = $1,178 dollars).
- Our interest payments are down from $454 billion in 2011, in part because we’re only halfway through the year, and because interest rates are slightly lower than last year.
- Looking forward to 2016, the U.S. debt is projected to approach $23 trillion.
- If interest rates were just to rise to historical norms of about 6-7 percent, interest payments would climb to nearly half of all federal receipts.
- In a somewhat unlikely, but not implausible early 1980s-like scenario, interest rates of 10% would cause interest payments to climb to an astronomical 95% of all federal receipts.
No matter which way you slice it, the U.S.’s fiscal picture isn’t pretty.