National / Public Debt

OUR FEDERAL NATIONAL DEBT

What are the Issues?

Federal Government Debt

$38,195,735,000,000

November 14, 2025

  • These are big numbers. Growing numbers. Behind the scenes, politicians negotiate the debt

A “Time” Perspective… Remember?

  • Million seconds ≈ 11 days

  • Billion seconds ≈ 32 years…

A “Taxpayer” Perspective

  • Share of debt per citizen…

    • About $111,687 per person

GROSS FEDERAL DEBT AS % OF GDP

WWII U.S. DEBT TO GDP RATIO = 119 - 125%

COVID U.S. DEBT TO GDP RATIO = 135%

Terminology

  • Federal budges

    • Estimated expenditures vs. estimated tax revenues

    • 12 month period

    • Oct 1 through Sept 30 (fiscal period)

  • Congress / president

    • Cannot decide

    • result—no budget, only spending expenditures

  • Budget deficit

    • Expenditures exceed tax revenue - 12 month period

  • National debt 

    • Accumulation of the many “budget deficits”

What’s the largest source of revenue for the federal government? — Income Tax

Medicaid is like Medicare but for people with low income.

We currently have a Social Security surplus. The SS tax percentage is 6.2%—the surplus means that they are collecting more money than they are giving out in social security. The government buys treasury bonds with the SS money that they hold. 

Payroll Taxes = Social Security Taxes

Social Security started in 1935

Why Are We in Debt?

  • Historically—start with wars (not the MAIN reason)

    • War for independence

    • WWII, etc.

      • National Debt = 125% of GDP

    • Cold war, etc.

    • War on Terror (2001 and beyond, etc.)

  • Macro Goals—Recessions

    • Spending bills / bailouts

    • For example—TARP Bailout (2008), Infrastructure Bills, etc. 

  • Social / Entitlement programs

    • Difficult to cut

    • Non-discretionary

  • Pandemic (w / government shutdown tossed in)

Entitlement Programs

  • Difficult to cut

  • Non-discretionary

This is incorrect. “Difficult” is not the right word.

“No government ever voluntarily reduces itself in size. Government programs, once launched, never disappear. Actually, a government bureau is the nearest thing to eternal life we’ll ever see on this earth”—President Ronald Raegan

When was the last time we had a Federal Budget surplus?

2001

Monetary Policy = interest rates and money supply

Fiscal Policy = government spending and taxes

What are Some of The Problems with the Debt?

  • Size!!

  • High interest on the debt

    • We are DODGING a bullet right now!

    • Interest rates won’t stay low forever

  • External debt

    • Debt owed to foreign nations / residents, etc.

  • Mandatory amount of spending

    • 65%

    • So-called?

    • See earlier slide

  • Rate of increase

    • 1980’s

      • No longer compares to current trends

    • 2000’s

      • 2008 - 2016

      • 2020 - today

  • Future generation issue

Federal debt held by foreign / international investors — external = $7.3T

Debt held by the Federal Reserve — Growing! = $5.1T

Federal Budget — FY 2024

  • Money IN = $4.9 T

  • Money OUT = $6.8 T

What Can We Do About It?

  • Cut spending — the DEFICIT! (duh!) ❌

  • Taxes — (increase on who?) ❌

  • Default (???) ❌

    • NO

  • Re-finance

  • Sale of assets

  • Show US citizens some seriousness

REALITY—not ONE answer

What is the Issue?

  • Too much spending and not enough revenue…

  • What is the congressional dilemma?

  • “Super Committee”— why did they “fail”

Budget Philosophies

  • Balanced budget

    • Revenues = expenditures

    • Most states have

    • Amend the constitution

  • Cyclically Balance

    • Revenue coming in, surplus, hold it. Think business cycle

    • Works “in theory”

  • Functional Finance

    • Meet macro goals (and keep voters happy)

    • This is what we do!

A Suggestion

Anytime there is a deficit of more than 3% of GDP, all sitting members of Congress are ineligible for Re-Election.