The Real National Debt Figures

The chart is incredibly deceptive because it doesn’t factor in that we are running deficits. Thus, the following figures are unsustainable. We bled so much red ink last year that it shows interest on the national debt at only 5% of the budget, yet according to the United States Treasury Department, we paid $383,071,060,815.42 in interest in 2009.  We collected $2,105,000,000,000 in taxes.  Thus, if we were running balanced budgets interest on the national debt would be 18.19% – and we are at historically low interest rates! A tiny increase in rates is going to cause the percentage to substantially increase.

My guess is that the nation will “monetize” the debt.  That is, it will print money and cause inflation over the next 10+ years so that benefits decrease in real purchasing power for social security and medicare recipients but politicians can claim they never voted to decrease those benefits.  It is a back-door tax increase that punishes savers and rewards those with debt.  As I mentioned the other day, that is one of the reasons I haven’t paid off the last relatively small $336,000 in debt I have, all of which is at fixed rates of 4.25% or less with maturities spanning from 20 to 30+ years; most all of it is secured by assets such as real estate that are more than covered by the equity cushion.  (As Buffett says: Get money while it is cheap, at fixed rates, and at a low cost.  Yet another thing I learned by reading him as a kid that is now helping my net worth.)

So, whether it comes in the form of outright benefit cuts for social security and medicare (unlikely) or higher inflation (more likely), if you rely on these sources of income, you better go get a job at Wal-Mart because you are going to have a bitch of a time over the next 10 years unless something comes along like the Internet did in the 1990′s and revolutionizes society.  That is more and more likely with the technological advances we have.  After all, a search engine optimizer gets paid $100,000+ a year and that job didn’t even exist 15 years ago.

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