The government debt will exceed $12 trillion and yet balance is necessary. About half of the debt is held by the public (through Treasury Bonds), while the rest is borrowed from within the government itself. Social security may soon be paying out more than it takes in but over the last 75 years (since its inception in 1935) the system has collected more than it has paid out so far. That amount is expected to peak at near $6 trillion. Yes, $6 trillion.
The real issue, just like your personal finances, is not how much the mortgage is (I am sure if you have one the balance exceeds your annual income, too, just like the government), but how much that mortgage is as a percentage of your spending plan.
The government, in effect, is paying "interest only" on its debt. Here are some numbers:
In 2000, the government's annual interest on its debt was $220 billion.
In 2003, that had fallen to $150 billion.
From 2004 to 2008, the annual interest slowly was rising to $250 billion by 2008.
In 2009, the interest cost was under $200 billion again and in 2010 is expected to be slightly higher than $200 billion. The is between 5-6% of the 2010 government budget of $3.8 trillion.
Not much. The average household spends almost 15% on interest costs as a percentage of income per year (mortgage, cars, credit cards, etc.).
Another interesting point is that 20 and 30 years Treasury bonds issed by the government in 1980 and 1990 are reaching maturity and being replaced by bonds with today's much lower interest rates. This is like re-financing your own debt and helps the government be able to withstand more debt because of the lower interest costs.
I am NOT condoning the over-spending but, again, keep things in perspective.
An Introduction
Hi. Welcome to BourGroup and my blog. Phil
Phil Bour is a CERTIFIED FINANCIAL PLANNER(tm) professional since 2004, a Magna Cum Laude college graduate and an accounting professional for over 35+ years. I love numbers, statistics and economic history.
I am also an Enrolled Agent (EA) to represent taxpayers before the Internal Revenue Service and to prepare tax returns.
"Phil"osophy: I believe that you can manage your money on your own (not necessarily through individual stock selection but through mutual funds, ETF's and other solutions) once you receive some one-time, professional guidance. Why pay annual fees when there may be little added value? For additional information, first read the "An Introduction" label at the left. Then move on to others.
Phil Bour is a CERTIFIED FINANCIAL PLANNER(tm) professional since 2004, a Magna Cum Laude college graduate and an accounting professional for over 35+ years. I love numbers, statistics and economic history.
I am also an Enrolled Agent (EA) to represent taxpayers before the Internal Revenue Service and to prepare tax returns.
"Phil"osophy: I believe that you can manage your money on your own (not necessarily through individual stock selection but through mutual funds, ETF's and other solutions) once you receive some one-time, professional guidance. Why pay annual fees when there may be little added value? For additional information, first read the "An Introduction" label at the left. Then move on to others.