Bad News:  You Own Part of the National Debt

Bad News: You Own Part of the National Debt

 © W.Scott - Fotolia.com American Piggy Bank in Flag

Maybe you’d rather listen?  Click on the link below:

Bad News You Own the Debt

Okay, just a tiny part.  But you do own some …

The topic came up at the dinner table again this weekend, when someone asked me to talk about the deficit and the debt.

So many people are dazed by the magnitude of the numbers today … who thought we’d ever be talking in trillions?  And they’re confused about what each one is … the deficit and the debt … and want to know if they should care.

What complicates matters is that many use the words interchangeably, including many politicians.  I don’t know if it’s because they’re confused about the difference themselves or if they’re simply happier keeping you off guard by confusing you.  Truth is, the two things couldn’t be more different.

So What’s the Difference?

The “deficit” is like what happens when you have a certain amount of income for the month or year, and you run out of money before the period is over.  It’s the shortfall.  You and I might have to scramble to figure out how to close out the month.  The U.S. Government just borrows more money and puts it on the tab.

That tab is what’s referred to as the national debt.  It’s the same as the big number at the bottom of our credit card statements.  It’s the accumulation of what we owe to others.

Let’s put it in perspective.  With an accumulated debt level that just went of over $16 trillion, that represents about $50,800 for every man, woman and child in America.  You say you’re part of a family of four?  That’s over $200,000 of debt that you and your family are carrying … without even knowing it.

So, should you care?  No one’s going to pull $50,800 out of your bank account … or come to the door with an invoice, are they?

Well, in a way they are.

We owe a lot of money to other governments.  And some are not exactly our best friends.  If one ever decided it wanted to call its loan, it would cause more than a hiccup to our economy.

And What Are the Options?

One solution might be to go to the equivalent of a “loan shark” who offers money at a much higher interest rate, because as a borrower we’re definitely over a barrel.  If we had to pay high interest rates … like you do when the bank bumps your rates up seemingly arbitrarily from 13.9 percent to 29.9 percent … you’d have to dig much deeper into the available income to pay the interest alone.  And you’d have less left over for other things.

So how else could the Government get more money?  It could either get it from taxes or it could print it.

If the Government raised taxes, that would be the equivalent of coming to you with an invoice.

If the Government let the printing presses run wild, the currency would devalue but they’d have enough dollars to pay the outstanding credit card tab.  In that case, whatever you’ve put aside for retirement or for any other purpose would suddenly be able to buy much less.  That’s the same as sucking money out of your bank account.

Or, using all the fuzzy math and manipulation we’re seeing these days with budgets and statistics, our politicians could simply continue to kick the can down the road.  Rather than take responsibility for past actions and deal with some unpopular pain today, it’s much easier to let your kids and grandkids pay it back.  They’d be paying debts accumulated years before they were even born.  What an inheritance, huh?

So, no, you don’t have to become an economist and go all wonky over macro- and micro-economics.  But in these articles, we talk a lot about how the linchpin of getting control of our finances is personal responsibility.

Desperately Seeking Responsibility

Where’s the personal responsibility at the national level?  Listen carefully to smooth-tongued politicians and see which path they’re trying to lead you down.  If the plan isn’t to deal with things head on … but instead counts on presenting that invoice to you as tax hikes, sucking money out of your account in the form of inflation, or sending the invoice forward to your kids … don’t vote for him or her.  Vote instead for someone who will.

Let me know what you think in the Comments section below.

x-x-x-x-x

Bio: Sharon O’Day lost everything at age 53: her home, her business, everything. But how could that be? She’s an expert in global finance and marketing with an MBA from the Wharton School. She has worked with governments, corporations, and individuals … yes, she was the secret “weapon,” if you will, behind many individuals in high places. Yet she did! Since then, with her finances completely turned around, Sharon has gone on to interview countless women. She’s done extensive research to understand how that could have happened, especially with her strong knowledge of numbers and finance.

The surprising answers are shared in her posts, articles and an upcoming book. Today her mission is to show as many women as possible how to become financially free for the long term, through her coaching programs. She has developed a step-by-step plan to get past all the obstacles that keep women broke and scared … and from reaching the financial peace of mind they so deserve … if they’re willing to do what it takes!

  • Such good advice here Sharon. And lots of food for thought. It’s not just our generation but generations to come that will have to deal with the governments debt problem.

    • And unfortunately, Carolyn, it’s not just the U.S. that has done this. Your U.K. government, and so many others, are perpetuating the same problem.

  • Claudia

    My son was asking me yesterday if a war will help with the economy. What about the QEs? Unfortunately, the next generations are inheriting debts instead of assets.

    • At times in our history, Claudia, wars have served to jump start our economy. But it’s not affordable when we’re already so weakened and in debt. As for the QEs, I see them as more manipulation of how the economy would normally react to events and is something we’ll pay for in the long term as we try to suck all that excess back out of circulation. And you’re right about future generations … today’s policies are doing them no favors.

  • Good food for thought. I don’t think we can put all the blame on the politicians. (I wish!) The apathy of our population is horrible. The percentage of registered voters that actually vote is ridiculously low and don’t even get me started on the group that doesn’t bother to register. If only folks would WAKE UP!

    • Martha, you’re right that we’re the ones who vote our politicians into office. And, as someone who is very active politically, I second your frustration with the apathy. I will say, though, that there has been a shift in concentration of power away from the populace over the decades … and towards Washington … which diminishes accountability.

  • This applies to a lot of governments, probably my Canadian government as well….thanks for the eye opening post, Sharon…

    • It’s pretty much a rampant disease, Sherie! Although Canada’s looking pretty good these days … relatively! 😉

  • Woo hoo – boy, that’s telling it like it is, Sharon! This is a must-read for everyone to better understand these concepts and the need for all of us to take a stand to take a stand for dealing with it, now.

    • LIsa, the more people understand, the more they have the tools to take a stand. But unless someone chunks it down for us, so much of what we hear just sounds like “noise.” I hope this lowers the noise level and helps people listen with knowledge going forward!

  • Yikes this is something to think about ! I have no idea how to fix it either.

    • There’s a pretty important vote coming up in a month or so … and the solutions offered by each candidate should be a big part of one’s decision-making. Beyond that, it’s time we all got involved more at the lower (more local) level of politics so we start feeding people into the funnel who will have the same sense of accountability (once they get to national politics) that we have to have in our own lives.

  • Susan Preston

    Wow! This is something definitely to ponder. Thank you for sharing your great knowledge and expertise. I love how you don’t sugar coat it, lol.

    • We’re where we are because it’s been “sugar-coated” FOR us, Susan! And I know you’re someone who comes from the truth … so this is a great fit! Thanks for the kind words … 😉

  • Jamie

    What a great explanation of the National Debt and the huge deficit. Ugh. It’s pretty sad the gov’t even allowed it to get that high in the first place!

    • No single administration or party is responsible for the craziness, but this has to stop. You’re so much younger than I am, Jamie. Your generation is going to be strapped with this forever if it isn’t reversed and brought back down. And it starts with reining in this administration’s unconscionable deficit … now!

  • Wow….interesting information, though not so pleasant to read. Thanks for posting.

    • Meryl, as you know from the topic you write about, sometimes the most important information is not so pleasant to read. But if it moves one or two people to take better care of themselves … whether their health or their money … it will have been worthwhile! 😉

  • Cathy Taughinbaugh

    Hi Sharon,

    Great explanation of the difference. It is so complicated and honestly, depressing to think about. Hopefully in the near future we can get all of this under control.