The National Debt

On November 3rd 2009 the National Debt reached 12 Trillion Dollars. As I tried to grasp this number and get an understanding of it, I could not. I then decided to reduced the numbers down to something that I could understand. The average household income for 2008 was $50,303 so I decided to see what an average household would look like finically compared to the U.S. Government.

If the government were the average household making $50,000 a year, it would be like a family living above their means and spending $83,000 a year with a debt load of $265,000. There may be some families that only make $50,000 and own a home with a mortgage of $265,000, but I don’t know any. Spending $83,000 a year I believe is fairly common for someone that lives in quarter million dollar home. If one partner lost their job, then I could see where they could be in this situation. On the other hand for someone to live year after year spending more than they earn, accumulating debt at a $33,000 or more a year does not seem likely.

A family that finds them self in this mess, would not increase their spending, but look for ways to cut back and sell what ever they could to lower the debt.

The other alternative would be to get a higher paying job or a second job. For the average American, this may not be possible with the current unemployment levels. The Government on the other hand, could and more than likely will raise taxes to increase the level of income. Cap and trade is a good example and is forecasted by the government to produce 73 Billion a year starting in 2012. This is listed in the Proposed Budget by Category as Climate revenues.

Corporation income taxes are also projected to more than double by 2012 from the 2010 levels. But with most everything else increasing, the deficit is expected to remain well over $600 billion a year, adding to the National Debt.

Our family in the example would not able to extend their credit and would have to take drastic steps in order to survive. I am not so sure that our government is prepared to do the same.

The gross domestic product (GDP) or gross domestic income (GDI) is a basic measure of a country’s economic performance. It is the market value of all final goods and services made within the borders of a country in a year.

2009 third quarter GDP was $14,301.5 billion. Gross National Debt November 3, 2009 reached $12,000 Billion or 84% of GDP. The following is part of a testimony given to the House of Representatives. Note: Chart no longer available at

Testimony of OMB Director Robert J. Portman
President’s FY 2008 Budget Committee on the Budget
United States House of Representatives

February 6, 2007

Chart 7: [Current Trends Are Not Sustainable]


As the next chart shows, the current trends are not sustainable. Under current law, we estimate that by 2040, spending on these and other important programs, plus interest on the debt, will crowd out all other spending — for defense, homeland security, and educationunless we make the necessary reforms.

It seems to me there is now nearly universal, bipartisan agreement that the unchecked growth of these programs presents real long-term threats to beneficiaries, our federal budget, and the economy. We now face a $32 trillion unfunded obligation in Medicare over the 75 year horizon. Our choices without reform will be massive benefit cuts, enormous deficits and huge tax increases.

The balanced budget is important, in part, because it better positions our country to address these looming fiscal challenges. But our five-year budget proposal also makes an important down payment toward sensible reform of mandatory spending — reducing spending growth by $96 billion over five years. These reforms are primarily in the Medicare program, but also in Medicaid and other programs. The proposals are similar in character to those this Administration has offered in the past.

End of testimony.
The revised 2009 estimate for 2010 has spending at 27% of GDP, much higher than the above 2007 chart or about what was then estimated for 2050. Revenues have also dropped to 16% of GDP for 2010.

Suggestions for families and governments in debt.

First, cut back on spending, sell any asset that is costing money that is not required in order to survive. Government should get out of the mortgage market and sell Freddie and Fanny to private or public corporations. Medicare and Medicaid together take in $189 Billion and pay out $736 billion, turning this over to private insurance companies would reduce the Deficit by $547 Billion alone. Make major cuts in Non-defense discretionary spending. Currently the government is over budget for 2010 in the amount of $110 Billion with more estimated each year. Government just like families must learn to stay within their budgets.

The government owns vast amount of land and mineral rights, much of this could be sold and placed into productive use and the proceeds used to reduce the debt.

Second, don’t bite the hand that feeds you. Corporate and Individual income taxes (including Social Security payroll taxes and Unemployment insurance), make up 84% of the income. Passing any laws that may reduce or harm the working force must be avoided. On the other hand passing laws that encourage Corporate growth will provide more jobs.

Third, turn Social Security over to private investment companies willing to bid on high rates of return. Investing with a return of only 6.5% would erase the deficit in 2010 for Social Security and provide growth in the fund in future years. Or allow individuals to invest their own Social Security funds.

It does not take a Phd to see how big of a mess we are in. If I can look at this and see what is wrong, anyone should be able to.

Hubert Crowell Retired and working part time. Hobbies are caving and propecting for gold. Please visit my web page at:

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