National Debt

How serious is our National Debt problem?

Well, it is very serious or maybe it isn't.

It is certainly at historic amounts and is consuming more and more of our annual budgets every year just to service it.

However as long as people, and countries, are willing to lend us money by buying our bonds and notes, we can move along quite nicely.

Until we can't.

If you consider the current period a bit of a grace period to get our act together, we have to somehow turn our annual deficit into an annual surplus, if we want to reduce the debt.

There is no current scenario where that is going to happen without either an incredible increase in growth, a dramatic reduction in spending or a significant increase in taxes.

Growth would of course be the best scenario as it helps to reduce some entitlement spending and increase taxes as more taxable income is generated.

This was the scenario at the beginning of the second Bush administration and we almost immediately reduced taxes and increased spending.

Per Capita real GDP rose 23% during the 8 years of the Clinton Presidency and we went from deficit to surplus.  In the 20 years since, it has increase by 21% and we have slid back into deficits.

Yes we had the Internet bubble and the financial crisis, but we would need to return to the growth of the 90s for a prolonged period to get back to surplus.  The chance of that happening seems slim to zero, but maybe something will change.

So spending and taxes would have t be addressed, and I'll discuss those next.