Who among us does not want to leave a better world for our children and grandchildren? Well, we better start paying close attention to the spending habits of our federal government, which can be best described as out of control. Our federal debt has grown to $33 trillion in 2023 – 12 zeros. One billion is one thousand million and one trillion is 1,000 billion. This debt equates to roughly $100,000 for every man, woman and child in the United States and approximately $235,000 for every taxpayer.
What is the federal debt? When we spend more than we take in for any given year, the difference is the deficit that must be borrowed. An accumulation of deficits is the federal debt. As recently as the year 2000, our federal debt was about $10 trillion. So, in the ensuing 23 years, we increased our debt to $33 trillion or an average of $1 trillion of spending more than we take in every year. Recently, we have increased that pace, adding close to $2 trillion to the debt every year. Fitch recently downgraded the U.S. debt from AAA to AA+ citing “high and growing general government debt burden.”
Who holds all this debt? Roughly one half of the debt is held by domestic investors and one half by foreign governments in the form of U.S. Treasuries because the United States is seen as stable, rich and dependable. The biggest foreign holders of U.S. Treasuries are China, Japan the U.K. and Saudi Arabia and their Sunni allies. As the perception of U.S. financial stability decreases, the demand for U.S. debt decreases, pushing up interest rates and making it difficult to fund the ever-increasing federal debt. As Russia, China and Saudi petrodollars move away from the dollar as a reserve currency for international payments, demand for dollars decreases further, exacerbating this vicious cycle. Over time, this erodes our ability to spend and invest in our country.
What does this mean to the world we leave to our children? Every dollar that goes to interest payments means fewer resources to build a stronger, more resilient future. Being irresponsible with our budget means our kids and grandkids inherit this growing monster. In 2022, thanks to low rates, the average interest rate on federal debt was 2.07%, or about $725 billion of interest annually – roughly $2 billion per day. As a reference, in 2001, average interest on federal debt was 5.4%, a rate we are rapidly approaching. At that rate, our interest expense would rise to $ 1.8 trillion – or $5 billion per day. The buyers of U.S. debt will start seeing us as increasingly unstable, forcing rates up and decreasing the availability of debt to fund our spending spree.
As Americans, we need to recognize this growing peril and move it front and center in our election priorities. Is anyone in this presidential cycle clearly articulating a well-thought-out plan to address this hidden danger? No. If this were your credit card and 30% of your paycheck was going to just pay rising interest expenses – while the debt itself keeps growing – would you be panicked about your family’s future? Well, that is where we are nationally, and for our kids’ and grandkids’ future, we need our leaders to act.
Reddy or Not represents the opinion of Lucky Dog Publishing owner Rom Reddy but not necessarily that of the newspaper. In keeping with the paper’s philosophy of publishing all opinions, the publisher welcomes responses, which must be limited to 400 words and will be published on a space-available basis.