Servicing Government Debt

[Scott_Connery]

I recently read a blog:

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Which among many other things mentioned the total government debt load per capita in the US. Including the present value of entitlement programs like medicare, and social security, we owe at least $53 trillion dollars according to the former Comptroller of the Currency of America, David Walker. So, per capita we owe at least $200,000. This figure includes every last citizen.

That 200,000 figure got me thinking. Exactly how much does America need to spend per capita to service that debt?

Well, if someone was so kind as to offer America a 30 year fixed loan at 5% to cover $200,000 we would each owe $12,883 annually on top of all other government expenditures.

That doesn't sound so bad at first, but then I realized my wife owed that much too. Every person owes that, not just income earners.

Nationally we would owe (using the census figure of 304,059,724) $3,917,408,184,904.32 just to service our debt.

If on the other hand, our hypothetical lenders decided we were not such a good credit risk and charged us 7% we would owe:

$15,957.20 each annually,

and

$4,854,982,425,052.80 annually as a nation.

So, let's look at the income and debt of an average American household.

The average household income for 2007 according to the census bureau (I suspect it's worse now due to un-employment) was $50,233.

The average household size was 3.19 according to the last census information. So, at 5% the average family owes $41,096.77 to service government debt.

At 7% the average family owes $50903.47 just to service government debt.

Now for you bankers out there, let's consider this for a moment. What interest rate would you charge a family that owed $638000 and had a combined income of $50,233?

Don't forget that this family has other debts, like a mortgage, student loans, car payments, and credit card bills.

[Steve D'Ippolito]

Unfortunately, your analysis is faulty. A lot of that money is committed, to be sure, but it is not yet actually *spent*, has not been borrowed, and therefore we are not paying interest on it.

Yet.

We *will* have a gigantic headache in the future.

[Scott_Connery]

That would be what it would take to convince someone to buy our current liabilities.

I think those entitlement programs are so firmly committed that we will see the country burn before we see them end.

[Steve D'Ippolito]

I think those entitlement programs are so firmly committed that we will see the country burn before we see them end.

I wish I could disagree.