Attitudes about the rising U.S. national debt seem to reflect a growing degree of complacency these days. From a fundamental financial standpoint, we know that harboring debt has consequences; when we don’t pay our electric bill, our power is shut off. When we miss several credit card payments, our account is sent to collections. Yet when we think about the debt of the U.S. government, which has grown by leaps and bounds over the past thirty years, the same principles don’t seem to apply. We spiral farther into debt, yet for the most part, our nation keeps humming along. The consequences of accumulating such massive debt remain either obfuscated or largely dismissed.
However, as experienced financial advisor Dawn J Bennett points out, we all have skin in the game when it comes to the national debt, which has increased by 1 trillion dollars in just the past year alone. To put that value into perspective, it took 200 years for the national debt to reach 1 trillion dollars, yet it now takes us just one year to accumulate that same amount. As it stands today the United States is 18.1 trillion dollars in debt, the largest national debt in the world.
Despite the government’s plans for even more grandiose spending, which have included proposals for two years of free college tuition, there’s no denying that such excessive national debt will eventually catch up with each and every one of us. Why? Four of our national entitlement programs—two Social Security Trust Funds, the Disability Insurance Trust Fund, and the Old Age and Survivors Insurance Fund—comprise nearly $3 trillion of our $18.1 trillion of debt. These programs, which all of us pay into and which in part all of us expect to benefit from as we approach retirement, are now funded by money that we owe ourselves. In short, if we’re not able to balance our federal budget and reduce our national debt, the American people will be the ones hardest hit. “Defaulting on ourselves,” as the government likes to put it, is positioned as an acceptable solution for now, but in the long-term, it offers nothing but empty promises.
Even worse, the U.S. national debt is now larger than the size of our economy. Our gross domestic product (GDP) has been exceeded by our national debt for over three years now; essentially, even if we wanted to make meaningful strides towards reducing debt and replenishing these entitlement programs, we simply don’t maintain the capacity to generate enough capital to do so.
At what point will time run out on the U.S. debt clock? That may just be the defining question of our generation. However, as we wait for our economy to come crashing down, we can make efforts to invest more wisely and better position ourselves for hard times ahead.