Tuesday, October 8, 2013

National Debt

One thing you'll be hearing about soon, if you haven't already, is debt the US government owes and the fact they want to increase the debt limit. It's a huge amount, $17 trillion and counting. Most of us could never spend that amount no matter how hard we tried, however, the US government has.
Now, that number isn't quite so large when you consider the debt to GDP ratio. That’s actually a little more in the reasonable range. GDP stands for Gross Domestic Product. That number is 73%. It was higher. But since we've started coming out of the Great Recession the economy has grown which has reduced that ratio. Theoretically, the percentage should keep going down as the economy continues to improve.
Basically the smaller the ratio is the easier it should be to pay off the total debt. With a larger GDP there are more taxes collected and so on. Unfortunately we have Congress that's in charge of it and I doubt much will be done to actually decrease the total debt. It's kind of like a credit card that you've charged some things on. Instead of paying it off you allow the interest to keep accumulating which is what Congress has basically done. Now, you go buy more stuff on the same credit card. You can see where this is headed.

As a rule, you and I are limited to what our credit limit is. Congress however isn't. Could you imagine having the ability to set your own credit limit? It would never get paid by most of us. That's part of why the US governments debt is now $17 trillion.

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