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Friday, June 01, 2007

On National Debt

According to a story in USA Today (, the federal government has more than a couple of categories of national debt. To be specific, there is what business people would commonly call "on balance sheet" and "off balance sheet" debt. You can also have assets in that category; it's common to business. But today we're just talking about debt.

Anyway, the USA Today story lists our combined debt in these two categories as a whopping $59.1 trillion. This amounts to $516,348 for every U.S. household. And it grew just last year by more than $1.3 trillion, or more than $11,434 per U.S. household.The national debt of the U.S. government has always intrigued me. It's reported in such phenomenal numbers and so casually as to seem abstract --- or unreal.

My business experience tells me that debt isn't abstract or unreal though. It also tells me that this is a lot of money we're talking about. I don't understand why more people aren't talking about. I think I've blogged in the past about national debt. There is actually much to be learned (and said) about it. Here are some of my favorite sites for information about the national debt of the U.S. government:

Now I have to point out that despite the fact that these sites are informative, absolutely none of them accurately reports the national debt of the U.S. government. Remember, this blog started about off-balance sheet and on-balance sheet assets and debt. So these sites are only trying to accurately report the on-balance sheet public debt. What the USA Today article reported is actually the most accurate in my humble business opinion.

I have to confess I don't have a very optimistic view about this. That's basically because I don't see anyone doing anything about it. (If no one is trying to solve a problem, I tend to believe it won't get solved!) I did some research in the past and saw that there were periods when our country operated without any debt. But they were long ago.

It's interesting to see how much the national debt has increased during each presidency (Ronald Regan's years saw our greatest increases in the national debt.) Perhaps the most interesting (and disturbing) observation to make is the fact that we have not seen any decrease -- only increases -- in the national debt for more than 40 years.

I'm also not very optimistic because this looks like sin --- and experience has taught me that ongoing sin patterns aren't sustainable --- even if they look like they are. Moreover, ongoing sin doesn't usually have a happy ending. But is it sin? What about obeying our government? Well, it's not sin in the sense that you and I as individuals maybe commit.

But it is sin in the sense of what we as a people group (American citizens) commit. And the Old Testament especially is replete with examples of groups of people whom God held accountable for their sin. In fact, it is full of examples where the "corporate sin" of a people group resulted in dire circumstances for all.. (Remember Sodom and Gomorrah?)

Romans 13:8 tells us, "Let no debt remain outstanding ..." Mind you, it doesn't say we can't borrow. It just says we need to pay back our debts. It has been more than 40 years since we made any payment on the principal of our national debt. Does God say anything about percentage of GDP here? Are we being obedient to God's standards?

Proverbs 22:4 tells us that, "... the borrower is servant to the lender." Who is the borrower in the case of our national debt? The American citizens. Who is the lender? Those who hold our debt? Do you know who holds our national debt? Who buys our U.S. Treasury securities? Well, it used to be held primarily buy Americans themselves. Remember the old posters admonishing Americans to buy "war bonds?" Anyone remember savings bonds? Well, that's all changed.

Americans are no longer savers. Few of us save anything. As a people group, we have almost no savings at all. In general, we spend what we have, and often more than that. And that's just as individuals. It's been way more than 40 years since we were able to operate our government on what it had. So the reality is ( or that an increasing proportion and amount of our national debt is held by foreigners. They buy more of our government debt than we do.

Individual citizens of other countries can hold our debt by simply investing in U.S. Treasury securities, savings bonds, etc. But the biggest buyer is actually the central banks of their governments. The central bank, or government, of China, for example, is one of our largest creditors (

How do you feel about Proverbs 22:4 now, when the U.S. government becomes the biblical servant to the Chinese government? I'm sure there will be some who say I'm being irrational. But I don't think so. You see, I take the Bible literally. I think God means what He says. So I just look at what God says in His Word and try to find the practical application in today's life. More importantly, I always believe there IS practical application of ALL of God's Word in today's life, even if I can't see it or comprehend it. (I believe that because of who I believe God is.)

How are we becoming their servants? Well, two primary ways.

The first is the interest expense on this national debt ( Last year, the government reports --- and remember this is only the on-balance sheet figure --- that we paid $405,872,109,315.83 in interest on our national debt. That's a pretty big number! That's the equivalent of about $4.00 per day, for every man, woman and child alive in the United States.

How many people are in your household? It's $1,353 per year for each one of them. How much are you paying in federal income and other federal taxes per year? Before the government can pay for anything, like wars, roads, benefits to disabled vets, aid to foreign countries, etc., we need to first pay the interest on this national debt. Depending on who you talk to, that number now appears to range from 7-9% of our total income. And that's just the interest!

The second way we become their servants is the terms of our national debt ( and You see, most of it is what most of us would consider short term. Remember, we haven't reduced the principal on our national debt in more than 40 years.

In other words, it has increased every single year for more than 40 years. But that doesn't mean that we're just issuing new debt every year. We're actually refinancing old debt every year as well. Many of our federal government's loans are in things as short as 3-month treasury securities. Those have to be refinanced every three months, for example.

When things are refinanced in any sector, the terms are always at what is called prevailing rates. So if the Chinese government, or any other government, has a favorable view of the stability and credit worthiness of the U.S. government, then our interest rates might only be 5-6%. But if that were to change, or if they were to decide to "put the squeeze" on us, they could simply refuse to buy those treasury securities and other issues at those rates. Our desperate hunger for increasing debt could require us to pay much higher rates.
What if the overall interest rate on our national debt rose to 12% or even 18%? What would that do to our economy?

You know, I'm really not a doomsayer. (At least I hope I'm not!) I'm certainly not a politician. And I don't have a particular agenda here. But I am concerned about the national debt. The ability to get factual answers is difficult, as the USA Today article points out. But even the answers we can get are disturbing. They suggest to me that we are a sinful nation. Of course we are no doubt a sinful nation in more ways than one.

Folks, if it looks like sin, and feels like sin, and the Bible points to it as sin --- then I tend to think of it as sin. So do we want to rationalize the government debt problem we have? Or do we want to deal with it like responsible adults? Perhaps it's time we step out of denial and begin to face the reality of the mess we're creating here folks! I don't know about you, but with the upcoming presidential election, I'm watching for a candidate who looks like they can lead us to just that.

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