National Debt Millennium

 

The U.S. national debt is a terrifyingly huge number, currently $19.9 trillion dollars and racing frantically to the $20,000,000,000,000 mark. If you were wondering whether it is going up at an unimaginable rate – wonder no more! In the mere 26 days between November 18, 2016, and December 14, 2016, the national debt rose by $97,769,384,008.

$98,000,000,000 in 26 days.

Whenever anyone refers to a number above the “million” mark, I think they should have to write out or say all the digits in the number. This would make the act much more embarrassing and highlight the lunacy of such large numbers.

What number looks bigger?

  1. $0.02 quadrillion
  2. $19,939,371,772,662
  3. Nineteen trillion nine hundred thirty-nine billion three hundred seventy-one million seven hundred seventy-two thousand six hundred sixty-two dollars

If you didn’t take the time, they are all the same number but #2 and 3 both look really big compared to “0.02” anything.

Making scary numbers more simple makes them more easily digestible and less real.

The US is a Really Big Country…Right?

Why is it that whenever anyone quotes a national debt statistic, it is obligatory to follow with a statement also mentioning the “Debt to GDP” percentage? This is another instance when the details get lost in translation. What this is really comparing is the National Debt of the Federal US Government to GDP of the US Economy.

We are trying to compare two separate things.

Government ≠ Economy

GDP is a good indicator of the general earning power of an economy, but aside from tax receipts – the only real “Revenue” of the government – GDP doesn’t have much at all to do with the debt bearing capacity of the U.S. government.

Comparing the amount of national debt to the amount of earning power of the entire economy is like when Groupon claimed their revenue included the entire amount of revenue that passed through their site. In reality, only a small fraction (~5%) of the total revenue that ran through the site was Groupon revenue.

If you look at the Revenue to Long-Term Debt ratios of the largest companies is the world versus the government it is also quite disturbing.

Company Revenue Long-Term Debt Ratio [Rev/Debt]
National Govt. $3,307b $19,939b 0.17x
Apple $216b $75b 2.86x
BP $223b $46b 4.90x
Wal-Mart $482b $42b 11.48x

Not only is the US Government’s Revenue to Debt ratio much less favorable to that of these companies, it also glosses over a finer point that each of these companies pays a dividend yielding from 2-7% of based on current stock prices.

These companies make money while each year the US national government runs deficits of at least $500,000,000,000.

These stats just scratch the surface of the fiscal powderkeg that is the US’s governmental financial position. Hopefully, we can actually start to talk about these important issues with a view toward the sustainability of our great nation before we have fewer viable options for reducing our reliance on debt.

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