Recently, the U.S. passed a milestone: We’ve amassed $33 trillion in debt, as a nation. Or, as you may have also heard it phrased, our national debt is now $33 trillion.
For most people, $1 trillion is an amount of money that is hard to wrap your mind around. And $33 trillion is, well, perhaps impossible to grasp! And yet, that’s where the national debt currently stands: $33 trillion and counting.
The Treasury Department keeps a running tally of the national debt so that citizens — or anyone who’s interested in taking a look, really — can see it for themselves, up to the minute. And, as the Treasury Department stipulates, the national debt isn’t the same as the type of debt that a person takes on, though it can be similar. “The national debt is composed of distinct types of debt, similar to an individual whose debt may consist of a mortgage, car loan, and credit cards,” the Treasury’s site says.
“The U.S. has carried debt since its inception. Debts incurred during the American Revolutionary War amounted to $75 million, primarily borrowed from domestic investors and the French Government for war materials.” Finally, “the national debt enables the federal government to pay for important programs and services for the American public.”
The U.S. government needs to pay for a lot of things, such as national defense and social programs. In fact, that’s what eats up the vast majority of the federal budget: Social programs (such as Social Security, Medicare, and Medicaid), defense, and interest on our current debt. Of course, as that debt increases, so do the interest payments — which creates a bigger problem.
The government brings in revenue through taxation. This is an important part of a functioning society, of course, which is why Money Vehicle is quick to point out that paying taxes isn’t necessarily a bad thing — it’s more of a necessary thing. But there can obviously be some arguments to be made about who is taxed, what is taxed, how much things are taxed, and so on.
But all that said, the government is currently running a deficit, which is leading to more national debt. That’s an important distinction: The deficit refers to the fact that the federal government spends more than it brings in. The national debt is the running tally of many years of deficits. It’s the grand total of all the debt over the years.
And, over the past couple of decades, some large-scale problems have led to increased government spending and more debt. Most notable were the financial crisis between 2008 and 2009, and the COVID-19 pandemic. Both required a big response from the government, which led to huge increases in spending without tax increases to offset that spending — thus, more debt.
Debt, Deficits, and Financial Literacy
Here’s the national debt, visualized, per data from the Bureau of Labor Statistics, and visuals from the Treasury Department:
We can see, too, that at the end of fiscal year 2022, the government had not yet reached $31 trillion in total debt — we’ve already crossed the $33 trillion mark, which means we’re not making much headway in lowering our deficits or debt.
What would a financially literate student say about this? Obviously, the answer to solving the national debt problem, and budget deficit issue, is to lower spending or bring in more tax revenue. But therein lies the problem: Where do you cut spending? And who wants to pay more taxes? It’s a tough nut to crack.
Add in a series of events, like financial crises and pandemics, and it’s even harder to try and rein it all in.
While no one, on their own, is going to be able to solve the national debt crisis or pass a balanced federal budget, it may be helpful to visualize and understand the nation’s financial state and compare it to a personal financial situation. It may make sense to cut spending or increase income to solve the national debt — why not the same concept for your personal finances?
Again, it’s not always easy. Debt is a part of the typical person’s financial plan — most people need to borrow money to pay for school, a car, and a home. This is all to say that debt is a part of everyone’s financial picture — yours, your family and friends, and even the country at large.
With the U.S. recently passing the $33 trillion mark, there isn’t really much to celebrate, but it is a reminder that while the country may be run by armies of financially literate people with good intentions, it’s hard to keep a financial plan on the straight and narrow. Give yourself a bit of wiggle room and forgiveness as well. You can always reassess, go over your budget, and do what you can to get back on track.
The nation, hopefully, will do the same.
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