• Tag Archives debt
  • 18 Facts on the US National Debt That Are Almost Too Hard to Believe

    At around $22.5 trillion, the United States national debt sits at 106 percent of Gross Domestic Product (GDP). There is no disputing that this gigantic debt will someday become due and payable. However, there is hesitation among the political class as to what must be done to pay down and eliminate this debt.

    Progressive lawmakers have largely refrained from discussing this liability, preferring to claim that the United States can continue to fund exorbitant government programs. Conservatives have unsuccessfully, on numerous occasions, attempted to limit federal outlays. With each failed attempt, conservatives instead continue to vote for spending increases. At the National Review, Michael Tanner writes,

    there is no effort to prioritize or make the difficult choices of governing, there is only…more.

    Each attempt to cut or reduce the growth of federal spending has been met with resistance and ferocious outrage.

    If there is any takeaway from these unsuccessful attempts to reduce spending, it is that federal spending has subsidized numerous projects or programs, which have grown dependent on the federal government. There may be many good uses of federal funds, but this does not provide lawmakers with a “Get-out-of-jail-free card.” For now, lawmakers continue to spend as if they are children in a candy store with no limit on their parents’ credit card. At some point, lawmakers must address the underlying problem: federal spending.

    Lawmakers are representatives for their constituents. This goes without saying, but lawmakers are unlikely to address the ever-increasing national debt until voters demand action. What remains unfathomable to many voters is how much money $22.5 trillion truly is. As Jon Miltimore has written, “the problem is that the human mind has trouble understanding a figure so huge.” Below are some facts that help put into perspective just how large is the sum of $22.5 trillion:

    1. In order to pay down our national debt you would have to combine the GDP of China, Japan, and India.
    2. The United States owes $68,400 per citizen.
    3. The United States owes $183,000 per taxpayer.
    4. The United States currently has $125 trillion (yes, trillion) in unfunded liabilities.
    5. According to the nonpartisan Congressional Budget Office (CBO), the US debt held by the public will reach 100 percent of GDP in 2028.
    6. In 2008, interest on the federal debt was $253 billion. Interest for Fiscal Year (FY) 2019 is roughly 89 percent higher.
    7. For FY 2019, interest alone on the federal debt is $479 billion. In 1979, total federal government receipts were $463 billion.
    8. In the year 2000, the federal debt was $5.67 trillion. In 2019, federal debt is 297 percent higher.
    9. At Forbes, Jim Powell writes that the old New Deal cost about $50 billion from 1933 to 1940, whereas the “future cost of old New Deal programs still in effect is reckoned at more than $50 trillion.”
    10. A recent analysis by the CBO projected that the federal budget deficit (deficit as in the difference between federal outlays and revenues) will grow to $1 trillion alone in 2020.
    11. As of December 2018, only ten countries have worse Debt-to-GDP ratios than the United States.
    12. At NPR, Danielle Kurtzleben writes that Senator Bernie Sanders’ “taxation-and-spending plans…would together add $18 trillion to the national debt over a decade.”
    13. According to the Center on Budget and Policy Priorities, roughly 24 percent of federal spending goes to Social Security, 26 percent to federal health insurance programs, 9 percent to safety net programs, and only 2 percent on transportation infrastructure.
    14. By 2025, the cost of servicing our national debt will exceed the cost of our military spending.
    15. The cost of implementing a Universal Basic Income, presidential candidate Andrew Yang’s central social program proposal, would cost $3.8 trillion per year or roughly 85 percent of current federal spending.
    16. It would take the United States 713,470 years to pay down the national debt if we paid $1 per second of the year.
    17. Modern presidents have doubled the national debt every nine years.
    18. The Federal Reserve “purchased large amounts of federal debt as part of its quantitative easing program,” thus cheapening the cost (decreasing the interest rates) of money.

    Lawmakers and political pundits continue to insist that federal revenues are the real issue despite continuous growth in federal revenues. Heated rhetoric over federal tax cuts ignores the reality that federal spending increases continue to outpace federal revenue increases.

    At some point, purchasers of US treasury securities may request a higher return, materializing in higher interest rates, unless lawmakers address our growing national debt. For now, it is up to voters to demand that lawmakers implement responsible policies that protect our nation’s financial security.

    Mitchell Nemeth

    Mitchell Nemeth holds a Master in the Study of Law from the University of Georgia School of Law. His work has been featured at The Arch Conservative, Merion West, and The Red & Black. Mitchell founded the Young Americans for Liberty chapter at the University of Georgia.

    This article was originally published on FEE.org. Read the original article.

  • I Immigrated to the US to Pursue the American Dream, Not to Pay for Your College Degree

    Candidates were back at it last week, competing to see who could present the best student loan forgiveness plan. Sure, that might appeal to some of the party’s base and America’s cash-strapped millennials. But for roughly 46 million immigrants like me, the idea that the government should forgive student loans is totally unfair. After all, when we came here, our idea of the American Dream was to work hard for a brighter future—not for the government to pick our pockets.

    I understand the motivation behind these proposals; alleviating student debt sounds ideal. I came from Russia to attend grad school in the US, so I know just how expensive tuition can be. But when I got my degree from Stony Brook University in New York, I did so without taking out a single loan. And it wasn’t because I was Hawkings-brilliant or Gates-wealthy. I planned meticulously, made sacrifices, and worked hard. This, I believed, was the way Americans did things and got what they wanted.

    Affording US tuition wasn’t easy for my lower-middle-class family, even at America’s cheapest schools. So, to earn the scholarships I had to have, I went above and beyond. While others partied, I spent my weekends studying and engaging in extracurricular activities that would boost my resume. When I didn’t understand a subject, my parents hired tutors with the little savings they had. While most of my classmates enjoyed their summers off, I was working at a department store six days a week from seven in the morning to 11 at night, building up savings for graduate school.

    As a result, I was offered a tuition waiver and a graduate assistantship, which included a stipend and health care benefits. I had to work as a teaching assistant and later a research assistant for next to minimum wage. Even with this financial package, there were times when I couldn’t even afford so much as a cup of coffee with my classmates, which made it more difficult to socialize and fit in.

    I knew that immigration wouldn’t be easy, so like many of my fellow immigrants, I chose a major that maximized my chances for an employer-sponsored visa and a decent income. I struggled against the natural pull of humanities and performing arts—creative professions that would have been a great fit for my personality and interests. But I literally could not afford the risk of being unemployed. Instead, I pursued a path that would still be professionally satisfying for me while also paying the bills. After all my classes, internships, and networking, I graduated with an MA in economics and political science. And, as a result, I found a well-paying job with benefits.

    I’m not alone. There are millions of highly-educated, foreign-born individuals in the US workforce with stories like mine. We took an entrepreneurial approach to our lives, seeking to better ourselves and live the American dream. That’s why it’s disappointing to see some Democratic presidential candidates push programs that would heavily tax people who have worked and saved for their future.

    To give you a sense of the fiscal impact of some of the proposals, let’s take a look at their estimated cost. Sen. Elizabeth Warren’s plan of canceling up to $50,000 in student debt would cost an estimated $640 billion. Sen. Bernie Sanders is proposing wiping out all of the existing student debt—a sum of about $1.6 trillion. To be fair, not everyone jumped on the wagon. Some of the candidates proposed smaller-scale solutions to the issue. And yet, although the specifics of how all the presidential candidates would raise the funds to cover their proposals differ, rest assured, in one way or another it will come out of taxpayers’ pockets.

    To boot, college loan forgiveness proposals don’t even address the root issue of the problems they claim to fix.

    Without a basic understanding of debt and future earning potential, there will always be a risk of overspending while young and becoming indebted for life. And low levels of financial literacy are still one of the primary reasons that millions of Americans are taking out student loans they then struggle to pay back. But basic financial knowledge could teach people to plan for their educations, mortgages, and retirement savings and give them the personal finance management skills they need. Some independently operated schools are already teaching financial literacy in places where parents don’t even have bank accounts.

    But proposing student loan forgiveness programs is just misguided. After all, a free lunch still isn’t free, and all Americans, foreign-born and natives alike, will end up paying the bills for these costly proposals. And for immigrants like me, that doesn’t quite look like the American Dream we thought we’d signed up for.

    Jen Sidorova

    Jen Sidorova

    Jen Sidorova is a Young Voices contributor and a policy analyst at the Reason Foundation. You can find her on Twitter @Jen_Sidorova.

    This article was originally published on FEE.org. Read the original article.

  • If Student Loans Might Be Forgiven, Why Not Borrow More?


    It’s one of the rules of electoral success: advocate policies that concentrate the benefits on an easy-to-identify interest group (preferably one that is sympathetic in the public eye) and disperse the costs onto the entire electorate. It’s how we get Coke sweetened with corn syrup rather than actual sugar. It’s also how we get proposals to cancel student loans. As my AIER colleague Will Luther points out, the fact that two of the Democratic frontrunners have made debt cancellation such an important part of their campaigns suggests that the issue is going to be with us for a while.

    But would it be a good idea to cancel student debt? And importantly, how does even the prospect of canceled student debt affect people’s incentives?

    First, let’s consider the quality of the policy. A lot of commentators are pointing out that it’s fundamentally regressive, meaning that we’re basically taxing the poor to pay the rich. As economist Alexander William Salter puts it in the Dallas Morning News, it’s

    a transfer of wealth to those with relatively high levels of expected lifetime income, at the expense of those with relatively lower levels of expected lifetime income.

    The idea might have some merit, but it will make wealth and income inequality worse rather than better.

    Even saying that the idea might have some merit is perhaps too charitable. In 2011, economist Justin Wolfers called it the “Worst. Idea. Ever.” in a Freakonomics post. Why? First, there’s the distributional effect. If we’re going to have policies that transfer wealth from one group to another, it doesn’t make much sense to transfer wealth from taxpayers generally to high-income college graduates. As Will Luther and so many others have pointed out, a college degree brings spectacular financial returns. As a group, college graduates aren’t “needy” by any reasonable definition.

    Second, Wolfers points out that debt cancellation doesn’t make college more affordable because it’s a transfer to people who already went to school and who are already enjoying the returns on their investment. Third, he notes that a successful campaign to cancel student debt will encourage further wasteful lobbying for transfers. The “cancel debt” movement is already part of the fallout from past bailouts, subsidies, and transfers. Capitulating will only encourage more lobbying.

    Hence, I think we would do well to focus on the downstream effect debt cancellation—or even the reasonable prospect thereof–will have on people’s future incentives. Encouraging people to produce and exchange rather than lobby for transfers and special privileges are important parts of the problem of constitutional design that has animated so many scholars, among them Douglass C. North and James M. Buchanan.

    The prospect of being able to enjoy good times now and stick other people with the bill later encourages people to be less-than-completely-responsible right now. My kids are seven, nine, and almost-eleven, and we’re very fortunate in that I work at an institution with an employee tuition benefit (which means, of course, that my salary is lower–so it’s not exactly “free” tuition), but there are a lot of other expenditures that go into college beyond tuition. If student debt cancellation is on the horizon within the next couple of decades, we now have an incentive to change how we plan to finance their college education and what they plan to study.

    There are three important effects here. First, the prospect of student debt cancellation encourages us to finance the entire thing with borrowed money. Why pay now or go to the trouble of trying to earn scholarships if we can borrow on the cheap and have a reasonable expectation that taxpayers will ultimately be left with the bill? Second, why should we be price-sensitive college shoppers, and why should colleges work to contain costs if there