Debt - Just Add It to the Pile

I've been around for less than a quarter century, and during that time, the total US National Debt has grown from 48% of the 1986 GDP to 87% of the 2008 GDP. It is projected to be 120% of the projected GDP for 2012. That means our debt as a percentage of our income will have increased 150% in just 26 years. And that's with an increasing income.


Let me put that into a little illustration. A hot-shot college grad, Joe, enters the job market in 1986 making a cool $20,000 (in current, inflation-adjusted dollars). He also has about $9,500 (also inflation-adjusted) in college loans to pay off. That sounds like a pretty normal scenario.

Fast-forward to today. Last year, in 2008, Joe made just under $64,000. He's done pretty well for himself. But unfortunately, Joe was more of a spender than a saver, and his debt burden has now grown to nearly $56,000. That's over 87% of his current income.

Not only that, but he currently estimates that he'll be making about $10,000 more by the end of 2012 and he'll add on $32,500 more debt. We're not talking about a mortgage here - this is just to cover his year-to-year spending.

To most people, 74k is a pretty nice income for one person, but even if he spends it all to pay for his debt in that year, he'll still have nearly $15,000 left over. Now he's really in a pickle.

It's okay, he says, my kids will be able to pay for it when they're grown up.

What would you tell this guy? Stop spending money! I can't imagine anyone disagreeing that Joe has so far led a pretty irresponsible and wasteful adulthood. If we wouldn't do that in our personal lives, why do we allow the government to do it? Not only do we allow it, we demand it with our insatiable desire for more and more programs and public amenities.

It's a basic principle of life - if you spend money, you'll have to pay for it someday. Even if the government simply prints money, we'll pay in skyrocketing prices. But people seem to think that public benefits are free. (Free health care!)

They're not. Unless the doctors work for free and the equipment and supplies are free, health care will always cost what it costs. And you cannot change the cost by hiding it. The taxpayers are ultimately liable to pay for the government's spending - if not now, then later.

On a personal level, we can see through Joe's mistakes. We know he's going to get into some trouble sooner or later. We can see that debt for what it is, not as free money. Why, then, can we not see what is happening to our country? And if we can, why are we not doing something about it?

I believe people have become completely insensitive to large numbers. $700 billion for TARP. A trillion or so for government health insurance. When will it end? In case you've forgotten, here is a nice illustration of what a trillion dollars is.

We cannot depend on the politicians to be responsible for us. All they hear from voters is, "We NEED [x program]" And they're happy to give it to us. They only have one goal - to stay in power. If they can expand that power in the process, that is a major plus.

The only solution to this mess is to start thinking of the government's money as our money. After all, it is - they can only get it by taking it from us or borrowing it and taking it from us later, along with interest.

We need to remember that our representatives are on our payroll, and that makes us their boss. What does a boss do with an employee that spends money on things the owner wouldn't? Maybe the employee will get a warning once or twice. After that, he's out of there because he can't be trusted.

If the taxpayers as a whole thought of our government this way and enforced it the way they would in their personal lives, our entire nation would be looking at a much brighter future.