What is all this hoopla over U.S. debt? Forget the complex arguments, here are four charts that offer a simple explanation of U.S. debt.
The Congressional Budget Office is a rather good source if you are looking for baseline predictions.
Some argue that the CBO may underestimate real total spending and this could be for a few reasons: One in particular is that their projections only account for current legal spending which historically goes in an upward trend.
There are some important things to note about this chart. Before World War I, notice how low the debt was. For most of U.S. history, debt was a problem that was quickly corrected. The growth of the federal budget, if nothing is changed by 2037, will see over a 2-1 debt to GDP ratio, which is double what it is currently. We currently have the highest net interest payments since 1945. Another thing to notice is how, if nothing is changed, there will be a period of slow growth and then sudden rapid growth, this can largely be attributed to what now we call “unfunded liabilities,” these will be addressed more later.
Another interesting fact that many people are unaware of is that it has been four years since a budget has been passed. You are probably thinking, “how in the world does the country operate without a budget?” Well that is a good question, it may help to explain why there has been such a large growth in government spending.
The following chart is a little dated but it still helps to accurately represent how your tax money and government debt is divvied up. The debt is currently over $16 trillion, since this was published the debt has grown over $2 trillion, sounds like very little but the following chart after this one will help to put that into perspective.
A few points to notice about the above chart are how little the proposed cuts, in general, tend to be relative to the total debt. In 2011, the budget cut amounted to 1.64% of the annual budget and barely put a dent in the total U.S. debt. Social Security is already the largest chunk of the budget and that is expected to grow more over time.
The following is rather long and you may need to zoom in to read it but this helps to visualize the debt and spending. My friend remarked the other day that it is virtually impossible for people to fathom what a billion means, let alone a trillion, in monetary terms. It also does not help that the words “trillion” and “billion” are thrown around a lot in the media and congress and serves to desensitize people to what they really mean.
Once again this chart is also a little dated but it still serves to show you just how much $15 trillion looks like. The last image shows what the predicted “unfunded liabilities” would look like. There is some debate on what the actual number is since these are predictions based on population growth and life span.
It is safe to say though that the current debt does not even begin to describe the promises that the government has made in the future but not developed sustainable ways of paying for it.