Understanding the National Debt
As of 5/2/2011 the National Debt stood at $14.321 trillion.
The National Debt fluctuates, sometimes by huge amounts, on a daily basis. Today it is up $33 billion from the last business day and is now $27 billion more than the official debt ceiling of $14.294 trillion set by Congress on 2/12/2010.
Why is the current National Debt higher than the official debt ceiling? Aren’t we supposed to have a debate about that before it is allowed to go higher? What does this growth mean? How does this relate to the big fight over the debt ceiling which is about to erupt in Congress? How does this relate to the subject of debt reduction in general?
Before taking up these heady issues we need to understand what the National Debt is, what it means and why this is an important debate.
How Do You Find The National Debt?
The U. S. Treasury Department maintains a handy dandy little web site called Treasury Direct. It is a treasure trove of data about public debt and accountability reporting.
Among its many useful accountability reports is this one: The Debt to the Penny and Who Holds It.
This simple, neat little report lists online, on a business daily reporting basis, the exact amount of the National Debt.
It has the incredibly useful ability to select a range of start and stop dates, starting with 3/31/2005 through to the present day where it lists the exact value of the National Debt for every day between.
Growth of the National Debt
For example, try this little experiment:
Select a start and stop date of January 1, 2010. It will show just one day – 12/31/2009 – and the National Debt on that day was $12.311 trillion dollars. Now, select a start and stop date of January 1, 2011. It will show just one day – 12/31/2010 – and the National Debt on that day was $14.025 trillion.
Subtract the first amount from the second and you see that in Calendar Year 2010 the National Debt grew by $1.714 trillion.
That is a lot. In fact, it is a lot higher than the $1.3 trillion deficits over the last couple budget cycles you’ve read or heard about in the media. It is even higher than the $1.6 trillion deficit projected for next year’s 2012 budget we’ve also been told about.
Why is that?
The Interest on the National Debt
There are several reasons why budget deficit projections are so much lower than the actual growth of the National Debt we just calculated, but the main reason is that budget deficit projections, incredibly, do NOT include interest payments on the National Debt!
That is like us ignoring interest payments on our credit cards when figuring out how to pay our bills. You just can’t do that, but the federal government does!
Last calendar year the interest paid on the National Debt was $413 billion dollars.
That amount is over 10 times more than the diddly squat little $38 billion in budget cuts to the current year budget that Congress haggled over so much that it threatened a partial shutdown of the federal government itself just a few weeks ago.
Yet the federal government totally ignores interest payments on the National Debt… as if they don’t exist.
That’s a problem!
The Real 2012 Budget Deficit
It’s a safe bet that in 2012 we will pay more than $413 billion in interest payments on the National Debt.
That means for us, the people who actually have to pay for everything, that we need to understand that when we hear the talking heads discuss a $1.6 trillion deficit that the actual true total deficit will be over $2 trillion!
Total revenue collections by the federal government estimated for 2010 is $2.162 trillion.
The true total deficit for 2012 will about match the total amount of actual revenue receipts for the entire federal government from last year!
That means, if nothing changes, we will add almost as much to the National Debt in 2012 as we took in total revenue receipts in 2010!
You don’t have to be a rocket scientist to understand that this kind of spending is insane.
The Bottom Line
Since President Bill Clinton talked about paying off the National Debt in 10 years back in the late 1990s the National Debt has nearly quadrupled!
It’s current growth rate threatens our economic national security far more than Osama bin Laden ever did our physical security, including 9/11.
Democrats and Republicans will toss blame back and forth at each other, but the truth of the matter is both are responsible for our current predicament.
The frightening growth rate of our National Debt, with its burgeoning interest payments, threatens our economic stability and the quality of life for our children and grandchildren for generations to come.
And that is why we need to face reality and balance the federal budget ASAP to reverse the damage wrought on our economy by out of control spending and debt interest growth.
That will take many years, perhaps even decades, but if we do not face it now then a future of economic prosperity will be lost, perhaps forever.
According to the U. S. Treasury the reason today’s Nation Debt exceeds the debt ceiling set by Congress is because that limit only applies to “Debt Subject to Limit” as shown in the top graphic.
In other words, there exists debt that is subject to no limit at all.
Debt Subject to Limit is defined as “the Public Debt Outstanding adjusted for Unamortized Discount on Treasury Bills and Zero Coupon Treasury Bonds, Miscellaneous debt (very old debt), Debt held by the Federal Financing Bank and Guaranteed Debt.”
Yeah, it doesn’t mean anything to me either! Its just another government parlor trick to spend without limit whatever amount they want.
That needs to change.