Sunday, March 2, 2014

The National Debt

This is the first of many blogs on this subject.  And the reason I know I will post on the subject again is the widespread misunderstanding of what should be easy stuff.

The National Debt is the sum of all annual Deficits minus the sum of all annual Surpluses plus Interest on the Balance.   Debt = Deficits – Surpluses + Interest.

What the Interest part should tell us – now that the Debt is at $17 Trillion – is that we should work to CUT the Debt, as Interest payments are beyond starting to get serious.  Even at only 1% interest, the annual cost of Interest on the Debt is $170 Billion.  When interest rates begin to creep up – as they surely must – the Interest hit will become $300 Billion or $500 Billion or $700 Billion, every year.  The current low figure – $170 Billion – costs every man, woman and child $535 / year in taxes, or a family of four $2140.  Not chump change, for the nation's credit card interest.

But here is the meat of this brief post: the Deficit part of the equation is NOT equal to government spending.  The Deficit is spending that is not paid for; that is – government spending less tax collections.  In the same way, your credit card "deficit" for the month is not what you BOUGHT this month; it is what you bought that you don't want to pay for.

Those who refuse to raise taxes are not serious about the National Debt.  You can’t curse the Debt and demand lower taxes in the same brain.  If this is not clear I have failed to make a very easy point.  The National Debt is a) government spending b) that we refuse to pay for.

OK, so why does this happen to us?  Because while we all like to buy stuff and pay for it with plastic, no one likes to pay his credit card bill every month.  It’s easy to spend, but it’s way less easy to pay for what we bought.  Similarly, no one likes to pay taxes.  And no one ever got elected on a platform of raising your taxes, even if it was necessary to pay for what you already bought.

Paying down the National Debt requires surpluses, and surpluses are the result of government taking in more money in taxes than it spends on government programs.  That sound OK with you?  The government taxing more than it needs this year?  No?  Well, then, stop bitching about the Debt, because you don't really give a shit.

If this puzzles you, please re-read, as I have done the best I know how to try to explain it.  The National Debt is to a great degree the inevitable result of having a democracy and liking to buy stuff and not liking to pay for it.