Foolish Collective
National Debt

Format for Printing

Format for printing

Request Reprints


By yttire
March 23, 2006

Posts selected for this feature rarely stand alone. They are usually a part of an ongoing thread, and are out of context when presented here. The material should be read in that light. How are these posts selected? Click here to find out and nominate a post yourself!

The national debt has been approved to extend to 9,000,000,000,000

That is a lot of zeros. But further, you can ask- who is paying off this debt?

You will be.

With a population of around 300,000,000 people, we can estimate the amount of debt owed by each individual. This works out to be, 30,000 per person.

This seems more manageable. Until you realize of course, that children, the unemployed, the elderly who are drafting pensions, the unemployable- these all are not going to be contributing to paying off the debt anytime soon. Hmmm...the actual work force is around 146 million people. Thus, every employed person really owes around $60,000 in national debt.

Another way to look at it is that the typical family of four owes $120,000 in national debt, which is slightly less than the median value of a house in the United States. Fortunately, the interest rate on the national debt is slightly less than a home mortgage, and also your interest payments on this debt are tax-free.

Except actually, your interest payments on this debt are not tax-free.

When you have interest on your home, you get a special form, which allows you to deduct from your income the amount you paid in interest on your home loan, thus reducing your taxable income.

When you have interest on the national debt, it is drafted out of your taxes- and your taxable income is not affected.

Of course this is immaterial in the grand scheme of things, someone is going to have to pay off that national debt one way or another- but it does affect the relative progressiveness of the tax burden of paying off that debt. If individuals were allowed to reduce net income by the amount paid towards national debt, it would slide tax brackets around and make everyone appear to be making less income than they make currently. Which in fact, would be a more accurate reflection of reality.

Today the 30 year fixed mortgage is running at 5.88%
The federal reserve US treasuries are running at 4.62%

Thus the typical family of four is paying $5,544 to service their national debt each year. Except of course, they are not- because the government tends not to pay down their debts, but lets them accumulate to be a bit larger each year.

If we look at $5,544 on a yearly basis, that is 106 dollars a week, or $2.66 per hour which is required to service our debts. Thus a person earning minimum wage with a family of four does not get to clear much of their paycheck, most of it must go towards servicing the national debt.

Except of course - it is ridiculous to assume those earning minimum wage are going to shoulder the national debt, is it not?

Around 12 percent of the work force earns within a dollar of minimum wage. If we take these people out of the equation we have a "debt workforce" of 128 million people. This leaves the debt level per individual earner at $70,312. Ouch. Maybe it is better to have a stay at home mom - at least that will not increase your individual debt load on the household to be greater than the median value of the home itself!

Become a Complete Fool
Join the best community on the web! Becoming a full member of the Fool Community is easy, takes just a minute, and is very inexpensive.