One of the abuses of the federal government is the spending and debt crisis.
Have you ever wondered how much debt is too much? Let us look at a high-level snapshot of where we are heading.
Some definitions are required.
GDP: Total market value of all final goods and services in the United States for a particular year. For example, in 2019 it was approximately 21 trillion dollars.
United States Debt: Total cumulative debt owed by the federal government. As of today, it is $28 trillion.
GAO: Government Accountability Office; a non-partisan arm of the federal government.
Debt as a Percentage of GDP: United States total cumulative debt divided by the GDP for a particular year. Debt is presented as a percentage of GDP to normalize the debt value, so it can be compared year to year without the need to account for inflation.
Net Worth of United States: Total of all U.S. assets minus liabilities.
Using data from the GAO, the graph above shows federal debt as a percentage of GDP through 2019 and two lines for projected debt from 2019 through 2093 based on the GAO data and simulations. The details of the GAO’s simulations Key Budget Assumptions can be linked to here.
For perspective, overlaid on the GAO graph is the "money" box labeled “Total Net Worth of United States.” This net worth is the total value of all United States assets minus liabilities. Yes, that includes the wealthiest top 1%.
Although the total net worth varies year to year, data from the last 50 years shows it between 500 to 600% of GDP. As you can see, there is a frightening convergence of the federal debt level to the net worth of our country.
How do we operate the country and pay an ever-increasing interest on the debt when the piggy bank is running dry?
If you believe that the simulations exaggerate our situation, let us review the data. Historical government baseline projections have underestimated future federal spending and overestimated future federal revenues.
The data for the graph above is a good example, because it is already inaccurate. The graph was created using the latest data through 2019 and did not include the recent federal government COVID spending. As a result of significant spending on COVID relief, we are anticipated to reach the historic WWII debt load high of 106% in early 2022 and not 2030 as shown.
The reality is that a course correction is required quickly and if not taken, there will be increased risk of:
- Federal government default
- Higher interest rates
- Spiraling inflation
- Loss of the United States social, economic, and political power, leading to a national security issue.
Writing in retirement, Thomas Jefferson told his close friend and fellow Virginian John Taylor that "the principle of spending money to be paid by posterity, under the name of funding, is but swindling futurity on a large scale."
Let us heed Thomas Jefferson’s words and do what Congress refuses to address and use the solution our Founders gave us in Article V of the Constitution. Sign the petition for the Convention of States resolution to propose constitutional amendments and constrain the runaway spending.
