Currently the US has an "official" national debt of just under 16.5 trillion dollars. (source). Not the word "official". I will get back to it later.
The first question is: "Is that a lot?"
It seems like a lot. But it might not be. If the US tax revenue was 500 trillion, then debt of 16.5 is not that much.
So lets figure out is it a lot by comparing it to other things
- If you break it down per person, 16.5 trillion is more than $50,000 per citizen.
- The Federal government earns about 2.9 trillion a year (source)
- The Federal government spends about 3.8 trillion a year (source)
- The current (2013 estimate) US deficit is about 1 trillion a year (source)
- It's a little bit over our National GDP, which puts us (just barely) in the top ten debtor nations (source)
So each year we add another 6% to the debt. That is not horrible. Obama has done a pretty good job of reducing the huge deficits that he inherited from Bush (the last budget GW Bush created was for 2009 - which he passed during 20008 - was 1.4 trillion.)
The debt is about 6 times what we earn. That's not good. If you earn 100k a year, then you should not get a 600k home(Mortgage Calculator), not unless you have more than 200k in down-payment.
But on the other hand, interest rates are incredibly low. It costs the US less than 2% for 10 year, and just over 3% for 30 year. At those rates it is almost stupid not to borrow,
But lets get back to the beginning. Remember when I talked about "official"? Guess why. Because a dirty little secret is that about 1/3 of that debt is debt the government itself owns. (source) Yes, we sell ourselves treasuries.
Specifically. the Fed itself owns $1.66 trillion. It holds the bonds to trade. We use it to control the interest rates. Right now they are below 2% for 10 years and around 3% for thirty years. The Fed is allowed to sell when it wants, or buy more.
That isn't real debt in any way, shape or form. It's basically part of a cash advance from our credit cart that we keep in our wallet because the bank gave us a better rate if we took out more than we actually need. Drop that 16.5 trillion down to 14.84
But wait, I'm not done. Lots of federal agencies have extra cash and guess what they hold it in before they use it? Yup, US Treasuries. Effectively, these are loans from our retirement plan currently being kept in our bank accounts till we actually pay the contractors that are working on our home. Yeah, eventually we will pay them out, but the contractor is taking decades to finish the work he said would be done in two weeks.
Social Security is the big one at 2.72 trillion, but if you add up all the "Intragovernmental debt", it comes to another 4.9 trillion on top of the 1.66 held by the Fed. That debt is kind of like Dad borrowing fro his own 401K to put in his own bank account labelled 'vacation'. It's not real debt, it's just a way to track which agencies are owed money by the federal government. The whole "Lock Box" idea for social security.
Subtract out the 4.9 trillion from the 14.84 and you get the real debt of just under 10 trillion dollars.
The real debt each person owes is about 33 thousand dollars, not 50k. That's a big difference.
The real debt is about 3.4 times what we earn, not 6 times. A person can borrow 3.4 times their salary to buy a home. It's totally reasonable.
Is it a great situation? No. But given the incredibly low interest rates, it's OK. In my opinion the federal government should be converting short term debt to 30 year treasuries as fast as it can, then let inflation go a bit. If we did it just right, then in 5 years, our national debt would be gone.