The National Debt Matters; But Not For The Reason You Might Think.

$20,599,336,131,868.

As of the time of this writing, that is the current United States national debt. In the time it took me to write that sentence, that number grew by about $100,000. To many people, this number is an abstract figure, that is of no real value or importance; and while often discussed casually, our nation’s debt is an immensely complicated and opaque subject.

For so long, the public has been continually beaten over the head by their elected officials with grave warnings about the size of the national debt. Interestingly, these same elected officials seem to forget these teachings once their party is in the majority; and since there are only two parties to choose from, you can see how easy it is to point out this hypocrisy.

Just because neither party actually wants to address the national debt does not mean it is without consequence. So if you’ve ever asked if the national debt actually matters, you can rest assured that it does. Here’s why:
Interest(ing)

When you take a loan out at a bank, what is one of the first things you (should) look at? I would say that the interest rate on the loan is pretty high on that list, as it should be. Interest rates are obviously the incentive issuers of debt have to lend you money. This is true for a personal loan as it is a federal one. In other words, each one of those 20 plus trillion dollars of debt currently accrued by our government has interest on it. So, follow along here, what do you think happens when you introduce a tax bill that adds over 1 trillion to the debt? Do you think that you’ll have to end up paying more interest on your loan?

The answer is yes, you will.

Even if we never pay down the principal amount of our debt, we will always have to pay the interest it accrues. If we do not, we will default on our loan; and much like defaulting on a personal loan will deeply impact your personal credit score, defaulting on a federal loan will do the same thing the United States’ credit rating. This would force the United States to lend and borrow money at less favorable terms and cause significant economic pain for everybody. AKA, this is not an option. That is one of the few things both political parties agree on.

Entitlements

Millennials recently passed Baby Boomers as the largest generation in America, but Baby Boomers are set to be the largest generation of retiring Americans in our nation’s history. This means that we will soon be paying out this generations retirement benefits by way of Social Security and in some cases Medicare. Already, entitlements make up for 25% of our nation’s tax expenditures, and the amount of money we will pay into entitlements is projected to surge by over 70% by 2024.

So, when you add these increased expenditures from entitlements to the ever growing interest payment obligations on our national debt, how can one possibly expect to live in a country with lower taxes in the year 2040?

But forget taxes, just think about the year 2040 for a brief moment.

At this rate, is there anybody who can give the honest assessment that the United States will be stronger globally in 2040 than we are now?

Our Future

The United States currently faces an existential threat that comes from within, and its name is short-sightedness. This tax bill is perhaps the worst example of it. Just today, Republicans admitted that they would need to introduce legislation to fix mistakes they made in the initial tax bill, which has already become law. Additionally, Bank of America has stated that they believe there is a possibility that tax reform will become a drag on corporate profits by 2019. As I’ve written about before, this tax bill is about nothing more than giving Republicans something to sell to their base in 2018.

But a bad tax reform bill is more a symptom of our political short-sightedness than the cause of it.

For too long, “political-careerism” in the United States has caused our elected officials from both sides kick difficult issues down the road. For all the talk about how bad our deficit is to the wellbeing of our nation, one would expect some action to have been taken on it already.

Do you know why this hasn’t happened?

Because it would require a short-term sacrifice for a long-term gain. It would require some brave public officials losing their seats because they did what was right for the country in the long run, at the expense of their political career.

But this is nothing more than sheer fantasy, because we live in a hyper-partisan country whose political climate is dictated by two-year election cycles. We have taken our eye off the ball, and our national debt may soon become the least of our worries if we continue down this path.

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