Finance - Solving Too Much Debt


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Money Matters

March 26, 2021 by Scott Crosby

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Finance - Solving Too Much Debt

Politics aside, what is $2,000,000,000,000? 

There are about 332,000,000 people living in the U.S.  That means Congress will spend $6,024 per person living in the U.S., child or adult.  

S36-1.jpgThat is on top of $28 trillion of existing debt, or more than $84,000 per person.  

Do you have $90,000 to pay off that debt, plus another $90,000 for your spouse, plus an additional $90,000 for each of your children?  

One news item reported that the U.S. government took on more debt in 2020 than in the entire history of the U.S. since the American Revolution in 1776.

 Debt is not free. 

The government has to pay interest on that debt.  Just like for your home budget, the more debt you have – mortgage, car payments, credit cards, student loans – the bigger proportion of each paycheck must be spent on paying off that interest – and hopefully, the debt itself.

The Congressional Budget Office (CBO) reports that, “Even after the effects of the 2020 coronavirus pandemic fade, deficits in coming decades are projected to be large by historical standards.” 

For the U.S. government, what is the easiest way to pay off overwhelming debt?

If you are old enough to remember what happened in the 1970s, you know the answer:  inflation.

In the 1960s, a hamburger cost $0.15 – fifteen cents. A burger now costs about $1.12.  A loaf of bread was $0.39; it is now about $3.25.  In 1970, gasoline was $0.32 a gallon; now it is about $2.50.  In the 1960s, an engineer’s salary was $15,000, and a good-sized house cost $27,000.

See a pattern?  Everything costs just about ten times as much.  That is inflation.  

The government controls inflation.  If it has a lot of debt, the easiest way out is to increase inflation.  

Thanks, Presidents Johnson, Nixon, and Carter.  Thanks, Congress.

If you are too young to have experienced the inflation of the 1970s, just note:  your salary will not keep up with inflation, and the raises you get will put you into a higher tax bracket – more money for the government, less for you.  

As the government solves its debt problem, you lose.  

Thanks, Presidents Bush, Obama, Trump, and Biden.  Thanks, Congress. 

 

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