“You load 16 tons, and what do you get? Another day older and deeper in debt!” Tennessee Ernie Ford – 1956
I originally wrote this before Harvey hit Houston. Now Congress is wrestling with how to send aid to Houston and the debt ceiling in one fell swoop. (What about Irma?) It is still applicable but I now have to add another song!
Sing it Dean! https://www.youtube.com/watch?v=4Rt1VicF5-0
During September, our fearless leaders in Congress are set to address the debt ceiling. In simple terms, the debt ceiling is a limit on the amount of money the government can owe. The national debt is the amount of money we owe our creditors, i.e., China, Japan, and the American public!
The current debt ceiling is $19.8 trillion.
The current debt is already at $19.9 trillion but there are caveats on what counts towards the debt ceiling and what counts as just plain debt. Think of it like money you owe to credit cards versus money you owe your mom. Mom will probably let you slide a month or two. That is, if you have been a good little boy or girl.
This link http://www.usdebtclock.org/ is a great place to review debt, tax collections, and spending. It’s also a great place to get a headache, so you may want to pop a couple of aspirin before you click.
How much is $19.8 trillion? If you spent $1,000,000 a day, you will spend $365,000,000 every year. In 100 years, you will spend 36.5 billion. Moreover, in 10,000 years you will spend 3.65 trillion. It would take over 54,000 years to spend $19.8 trillion dollars at $1,000,000 a day.
To paraphrase Senator Everett Dirksen from the ‘60s:
“A trillion here, a trillion there, pretty soon, you’re talking real money.”
You, too, have a debt ceiling. Unfortunately, you cannot raise yours unilaterally. You have to apply, grovel, or beg for additional credit. At some point, based on your income and assets, you will hit whatever the lenders have decided is your personal debt ceiling.
“Saint Peter, don’t you call me ‘cause I can’t go. I owe my soul to the company store.”
The government does not have to talk to a lender and they do not fret over their credit report. They own the company store!
(Well, maybe they place a call to China and Japan.)
Even so, there is always much hand wringing and brinksmanship before they capitulate, but to date they always capitulate.
There is often confusion between the National Debt and the Deficit. The deficit is the current year short fall in revenues to expenditures. Think of it as borrowing money to get you through to your next payday. Yes, the United States is essentially using a payday lender to get by.
Deficit reduction does not equal debt reduction. It means we are increasing our debt at a slower rate. Kind of like quicksand. A balanced budget, i.e., only spend what is taken in through taxes and fees earned, would go a long way towards solving this issue.
Why is this important? Great question. Imagine a country in default. Greece, anyone?
Give us a call if you would like to discuss further.
Listen to Tennessee Ernie Ford, 16 Tons @ https://www.bing.com/videos/search?q=16tons+you+tube&view=detail&mid=155727448CD0DA6A9CAA155727448CD0DA6A9CAA&FORM=VIRE