National Debt: The Race Toward $10 Trillion

By Morgan Housel
September 30, 2008
Comment (6)

5 Recommendations

An inconvenient fact has gotten shoved out of the headlines by Lehman Brothers' demise, AIG's (NYSE: AIG) overnight implosion, the collapse of Washington Mutual (NYSE: WM) and Wachovia (NYSE: WB), and 60% plunges from the likes of National City (NYSE: NCC). As a result of a sickly economy, government bailouts, and an otherwise continued instance to spend more than we make, our national debt is about to surpass the $10 trillion mark.

The numbers are pretty amazing: 10 trillion dollars. Fourteen digits. About $33,000 per American. One quarter of it is owned by foreign investors. Almost 1 trillion has been added in the past year alone, with $300 billion added in just the past month.

Take a look at how fast national debt has grown over the past five years:

Year

National Debt

Growth

2003

$6.79 trillion

9.52%

2004

$7.35 trillion

8.25%

2005

$7.93 trillion

7.89%

2006

$8.52 trillion

7.44%

2007

$9.00 trillion

5.63%

Today

$9.89 trillion

9.89%

Pretty scary stuff, especially in the context of the banking industry's ongoing dilemmas. What we've learned in the past year should resonate loud and clear throughout the national debt market: When you become overextended, bite off more than you can chew, and rely on debt to feed your way of life, bad things usually happen. In a year when every American has become far too familiar with the words "bailout," "leverage," and "bankruptcy," and as "debt" has become the naughtiest four-letter word of them all, few stop to remember that the U.S.A. is the world's largest debtor.

In reality, passing the $10 trillion mark is purely symbolic; in and of itself, it means nothing. Nonetheless, we live in a "boiling frog" economy; No one dares to move a finger until a crisis lies on our doorstep. Will $10 trillion finally be the number that graces enough headlines to wake America up to its looming debt problem? By golly, I sure hope so.

More on the national debt:

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Fool contributor Morgan Housel doesn't own shares in any of the companies mentioned in this article. The Fool has a disclosure policy.

Comments from our Foolish Readers

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  • On September 30, 2008, at 3:36 PM, TMFSinchiruna wrote: Report this Comment

    Amen, Mr. Morgan! :)

  • On October 03, 2008, at 11:41 PM, buywater wrote: Report this Comment

    Itis not surprising that Mr. Housel has not waded through the whole 400 pages, but he may be surprised to note the increase in the national debt limit as one of the earmarks: to $11.350 trillion.

  • On October 04, 2008, at 12:43 PM, TMFHousel wrote: Report this Comment

    buywater,

    Thanks for your comments. The $11.350 trillion figure is a debt-ceiling figure, not the total amount of current national debt. The $10 trillion number was actually broken the day after this article was published.

    -Morgan Housel

  • On October 05, 2008, at 10:02 AM, JOttoN wrote: Report this Comment

    I was watching the debt numbers looking for the flip to $410T. I found it very interesting that from 30 Sep to 1 Oct, the US added $100B in new debt.

    One day and $100B in new debt!

    I have a feeling that occurring on the first day of the fiscal year wasn't mere coincidence.

    There are some that make big deal about the ~$17B in earmarks for this government fiscal year. We often get "something" for that ~$17B, a new road, a new museum, something that translates to jobs in either the long term or the short term.

    How about interest expense on the National Debt? $431 Billion so far this fiscal year, with one more month to go.

    http://www.treasurydirect.gov/govt/reports/ir/ir_expense.htm

    We get nothing for that $431 Billion. You know how much was in the budget for that fiscal year to pay interest expense? Sit down. $280 Billion. Assuming for a moment that the interest expense for Sep pushes that $431 Billion to $470B, that's a shortfall in the budget of $190 Billion. They never planned to pay the interest expense; it's just rolled over into new debt.

    It makes zero down payment sub-prime mortgages look fiscally responsible. The only difference is the US Treasury has the option of printing money when it wants by holding an auction.

    Jim

  • On October 05, 2008, at 10:03 AM, JOttoN wrote: Report this Comment

    I was watching the debt numbers looking for the flip to $10T. I found it very interesting that from 30 Sep to 1 Oct, the US added $100B in new debt.

    One day and $100B in new debt!

    I have a feeling that occurring on the first day of the fiscal year wasn't mere coincidence.

    There are some that make big deal about the ~$17B in earmarks for this government fiscal year. We often get "something" for that ~$17B, a new road, a new museum, something that translates to jobs in either the long term or the short term.

    How about interest expense on the National Debt? $431 Billion so far this fiscal year, with one more month to go.

    http://www.treasurydirect.gov/govt/reports/ir/ir_expense.htm

    We get nothing for that $431 Billion. You know how much was in the budget for that fiscal year to pay interest expense? Sit down. $280 Billion. Assuming for a moment that the interest expense for Sep pushes that $431 Billion to $470B, that's a shortfall in the budget of $190 Billion. They never planned to pay the interest expense; it's just rolled over into new debt.

    It makes zero down payment sub-prime mortgages look fiscally responsible. The only difference is the US Treasury has the option of printing money when it wants by holding an auction.

    Jim

  • On October 05, 2008, at 10:11 AM, JOttoN wrote: Report this Comment

    Sorry about the type/double post. I get too excited when I start on the Debt.

    We could cut earmarks, we can cut discretionary spending, we can even cut mandatory spending with a change in the law. But you can't cut interest expense on the debt. You can decide not pay it, but it just keeps on accruing.

    In all likelihood the interest expense on the debt is going to exceed spending for the Dept of Defense. [Afghanistan and Iraq are separate appropriations from the DOD budget.]

    Arghhhh,

    Jim

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