Did you realize the U.S. Department of Treasury sponsors a website Pay.gov where today you and I can begin making payments or “Gifts to Reduce the U.S. Public Debt?” Yes, right now, you and I can start doing something about the $19.4 trillion U.S. debt.But, before you go and contribute your gift let us help you in determining an appropriate and equitable amount…
What’s the issue?
One, while budget policy wonks are very bright people they are not good at explaining what the cumulative U.S. debt situation actually means to U.S. citizens.
Two, despite Congress’ best efforts to “return to normal order,” their historical performance suggests they cannot agree on fiscal policy each year, much less fiscal policy for the next ten years. Simply put, our federal lawmakers’ track record at fixing the U.S. debt is not good.
Congress did adopt an annual budget resolution in FY 2015. Congressional budget resolutions are responses to the annual budget submitted to Congress by the White House and typically cover the upcoming fiscal year and four subsequent years. But, this was the first budget resolution adopted by Congress since 2009.
In addition, according to the Congressional Research Service (January 2014), ”Between fiscal year 1977 and fiscal year 2015, Congress only passed all twelve regular appropriations bills on time in four years – fiscal years 1977, 1989, 1995, and 1997.”
The current level of U.S. debt totals $19.4 trillion and rising. The amount of U.S. debt exceeds the amount of total market value of all goods and services produced in the U.S., known as Gross Domestic Product (GDP) by $1.1 trillion.
U.S. total debt = $19.4 trillion.
U.S. GDP = $18.3 trillion.
On Tuesday, July 12, 2016 the nonpartisan Congressional Budget Office (CBO) reported to Congress that if federal policies remain the same and nothing changes the U.S. debt held by the public (that’s you, me, other individuals, corporations, state & local governments, the Federal Reserve Banks and foreign governments) is projected to rise to 141 percent of Gross Domestic Product (GDP) by 2046.
So What Does It Mean For You?
Keep this in mind as you read the following example – The longer the U.S. waits to address this fiscal problem the worse it will be on you and me.
Consider this. Currently there are just over 151 million people in the U.S. workforce (civilian, nonfarm). According to the U.S. Department of Labor the U.S. labor force is projected to grow, but at a slower rate than in previous decades. The projection over the next 9 years, to 2024 is nearly 164 million people in the U.S. workforce.
The leading edge of the baby boomers (those born in 1946) became eligible for early Social Security benefits at age 62 in 2008. They reached full retirement age at 66 in 2012. In 2024, baby-boomers will be ages 60 to 78 and largely will have left the U.S. labor force.
This example assumes that those remaining in the U.S. labor force are likely going to be the only segment of the U.S. population that can financially bear the huge burden of U.S. debt.
So, for all of us who are employed and ready to make our gift to reduce the U.S. debt (in addition to income/payroll taxes already being paid) we will set a goal to reduce the U.S. debt by HALF (to $9.7 trillion). Here is a simple calculation to help you in determining a level of your contribution to meet this goal:
- For employed individuals, total one-time, up-front payment, $64,110.
- For employed individuals, a 5-year payment plan @ 2.5% APR, $1,138/monthly.
- For employed individuals, a 10-year payment plan @ 3% APR, $619/monthly.
Again, this is just an example to show you the seriousness of the U.S. fiscal challenges and what it can mean to you, now and in the future. To reiterate, the longer policymakers wait to address this fiscal challenge the worse it gets. And, this example only takes care of HALF of the total U.S. debt.
Timeliness of Release of CBO Report
The timeliness of CBO’s release of their report is likely meant to motivate political parties and presidential candidates as both political parties head to their national conventions to nominate their respective party’s candidate as the next leader of the free world. To date there has been little focus on the issue of the U.S. debt, an issue that will significantly impact U.S. citizens in the future. For those watching the political conventions in the next two weeks you will be well-served if you take into consideration each candidate’s willingness to quickly make the hard decisions necessary to tackle the U.S.’ fiscal conundrum.