In The News - The National Debt

 Info from The Pour Over:

Did you know that the U.S. has been in debt every day since its inception? Uncle Sam’s IOU has topped $40T for the first time. 

What is national debt? It’s the total amount of money the federal government has borrowed to pay its bills. 

When government spending outpaces revenue (taxes), a budget deficit is birthed. The government borrows to cover it, and if it's not paid back quickly, that baby deficit grows into a big adult deficit. “National debt” is just the running total of all those unpaid deficits stacked up. 

On Tuesday, the Treasury reported that the gross national debt reached $40.05T and has more than doubled since January 2017. In the last 10ish years, the U.S. has racked up ~$20.1T in debt (~$11.6T during President Trump’s two terms so far, ~$8.5T during former President Biden’s tenure). 

Some major debt contributors: 

• Increased spending on federal line items like Social Security, Medicare, and Defense (~$7T) 
• COVID-19 relief (~$5.6T) 
• Tax cuts and extensions (>$2.2T) 
• A rise in interest payments on the national debt (currently ~$1T annually) 

Why does the debt keep growing? There are many reasons, some of which include: 

• Tax cuts = less revenue 
• Spending increases (think: Medicare, Social Security, and foreign wars) 
• Recession responses (think: COVID relief checks) 
• Rising interest rates (the U.S. pays about $1T in interest annually) 

So who do we owe money to?

Similar to how an individual’s total debt might consist of credit cards, a car loan, and a mortgage, the government’s debt consists of two types: debt held by the public (DHBP) and intragovernmental debt. 

DHBP makes up about 80% of national debt. It refers to all the money borrowed from outside lenders. The government does this primarily by selling Treasury securities to things like state and local governments, mutual funds, and even individuals (so that bond fund in your 401(k) earns money because the government is paying you interest for loaning it money). Foreign investors hold ~29% of DHBP ($9.3T).  

Intragovernmental debt makes up 20% of national debt and is debt that Uncle Sam owes himself… (yes, he can do that). For example, if the U.S. needs money to fund a war, and they take it out of the Social Security trust fund, that’s intragovernmental debt. 

Economists say the threshold isn’t economically significant by itself, but pushes the U.S. debt-to-GDP ratio to ~125% (Uncle Sam’s debt is 25% larger than the country’s annual production). Watchdogs warn the spend-more-than-you-make trend could lead to a wider economic crisis if unchecked.  

Christian Perspective:
Because our hope is built on God’s promises—not our financial futures—we can be content and even joyful in the face of massive national debt. In Christ, we are fabulously wealthy. The saints have “become rich” through the poverty of Jesus, guaranteed a “glorious inheritance” that can’t slip suddenly away when the economy takes a turn. No matter your thoughts on the national debt, Christians are called to manage their own finances wisely and to live generously, giving to those in need. Pray for guidance in doing both.

"For you know the grace of our Lord Jesus Christ, that though he was rich, yet for your sake he became poor, so that you through his poverty might become rich."   2 Corinthians 8:9